The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Lenders to Strix Group have agreed to temporarily ease its key banking covenant, and CFO announces retirement. Our forecasts are unchanged, but fair value adjusts to 167p per share.
Read / hear summary of new note below:
https://www.equitydevelopment.co.uk/research/temporary-relaxation-of-covenants
For anyone who missed yesterday's webinar live, here is the recording of CEO and CFO covering FY results / strategic progress / outlook, then taking broad range of questions from private investors. 50 mins running time, click here to see full video:
https://www.equitydevelopment.co.uk/research/gattaca-investor-presentation-fy-results-october-2023
The implementation of the ‘four pillars’ of Gattaca’s new strategy resulted in adj. EBIT rising significantly, as did conversion rates too (up to 5.4% vs 0.2%). Impressively, this was achieved despite the Group’s markets turning more challenging during H2. NFI fell by 8.5% yoy, down by 1.8% in FY23, with a targeted exiting of lower margin contracts a factor.
Progress has been driven by self-help: on cost control, marketing, an improved culture, exiting low margin contracts and improved productivity levels. We think there is more to come as the new hires bear fruit and additional cost savings emerge (particularly in property).
Looking ahead there should be some recovery visible in recruitment markets over the next 12 months and at Gattaca we expect further improvement in the conversion rate. The £23.4m net cash at year-end also opens up many opportunities for the Group.
Based on a discounted cash flow model we raise our Fair Value to 175p per share.
Link to research note & audio summary: https://www.equitydevelopment.co.uk/research/robust-foundations-in-place
XF-73 is the Phase 3-ready drug developed by DEST and next up for partnering: recent positive study results and XF Pipeline Update showcased its strengths and huge potential.
This is detailed in Equity Dev's new research note below, free access to read it here:
https://www.equitydevelopment.co.uk/research/xf-73-is-the-real-deal
AUM grew 8% over H1-24 (to 30 Sep 23) from £12.7bn to £13.7bn. Net inflows totalled £910m (7% of opening AUM), showing remarkable strength and consistency (H1-23: £907m, H2-23: £887m). This is even more impressive given the difficult economic and market environment which has hurt the growth of most sector peers, with some experiencing substantial outflows. Market and investment performance contributed £100m to AUM over the half-year.
‘Assets under influence’ (AUI), which includes the AUM of 8AM Global Limited (£1.1bn) in which Tatton owns a 50% stake, also grew 7% to £14.8bn. This brings the group within touching distance of its medium-term strategic AUI target of £15bn which it set out to achieve by March 2024.
Over H1-24, 51% of our forecast full-year AUM growth has been achieved (flows ahead, markets weaker) and we have left our forecasts unchanged, as well as our fundamental valuation of 580p, which is 22% above the current share price. We also flag that sector valuations have declined extremely sharply, and there is potential for a significant sector re-rating (see page 3).
New research report with audio summary: https://www.equitydevelopment.co.uk/research/growth-rate-head-and-shoulders-above-peers-again
New note & audio summary here: https://www.equitydevelopment.co.uk/research/positive-trading-update-and-vaping-safety-measures
In a Trading Update for the six months to 30 September 2023, Supreme reports strong performance in line with a consensus market (adj.) FY24 EBITDA outlook of £29.0m; matching our estimates. The Group expects H1 24 revenue of above £100.0m (+55%YoY) and (adj.) EBITDA of at least £15.0m (H1 23: £8.1m). Previously, to accompany the 26th September AGM, the Group indicated FY24 revenue of £195m-£205m, and (adj.) EBITDA of £28m-£30m, leading to an increase in our (adj.) EBITDA outlook of 13%. Supreme reports that the Elf distribution agreement has exceeded initial expectations, contributing c.50% of H1 revenue and gross profit growth, whilst all of the other four Business Categories have reported both revenue and profits growth. The Group has guided to FY24 revenue from the Elf opportunity of c.£40.0m and a contribution to (adj.) EBITDA of c.£4.0m.
At the AGM, Supreme had reiterated its awareness of concerns surrounding youth vaping in the UK. The Group has now announced an eight-point series of measures and recommendations designed to “ensure its owned brands do not create any interest from underage vapers” (full details in the body of the note).
Following our recent AGM upgrade, our estimates remain unchanged and Fair Value remains at 200p/share, indicative of a FY24 EV/EBITDA of 8.2x.
A positive year-end update from Hercules confirms a strong conclusion to FY23, ahead of expectations. It has been another year of excellent organic revenue growth (+60% at Group level), with progress in all three divisions. This continues an impressive track record (average revenue growth over past three years >50%) and Hercules enters FY24 with momentum.
Hercules expects both its revenue and adjusted EBITDA for FY23 to be ahead of market expectations. Revenue is expected to be > £80m, representing an upgrade of at least 8% to previous expectations. We assume a similar uplift to our EBITDA forecast of +8% to £3.7m.
The overall performance has again been driven by the core Labour Supply business, which benefited from the ramp-up of the multi-year HS2 Phase 1 contract (London to Birmingham). In Civils, the Group is benefiting from increasing investment in the water sector, as illustrated by the £3.1m of contract awards announced on 20th September. Meanwhile, the Suction Excavator business continues to see solid utilisation rates, having expanded by 14 vehicles over the period to create one of the largest fleets in the country.
To us, the Group’s strong growth trajectory and forecast free cash flow (double digit FCF yield) suggest significant value in the shares. Our Fair Value per share of 60p represents a 7.5% FCY yield on prudently positioned FY25 forecasts.
https://www.equitydevelopment.co.uk/research/positive-year-end-update-ahead-of-expectations
ECO Animal Health Group plc (AIM: EAH), a leader in the development, registration and marketing of pharmaceutical products for global animal health markets, is pleased to conduct a Capital Markets Day presentation for investors focusing on progress and developments in their Research & Development portfolio.
The event will take place from 2.30pm-4.30pm on Thursday 9th November.
The online presentation will be hosted by key members of the ECO Animal Health management team. Questions can be submitted during the presentation and will be addressed at the end.
Link to register: https://www.equitydevelopment.co.uk/news-and-events/eco-cmd-investor-presentation-9nov2023
Ultimate Products, the owner of a number of leading homeware brands including Salter (the UK's oldest houseware brand, est.1760) and Beldray (est.1872), will be conducting a live presentation following the release of their Full Year Results for the period to 31st July 2023.
The event will take place at 11.00am on Monday 6th November.
The online presentation will be hosting by Simon Showman (CEO), Andrew Gossage (Managing Director) and Chris Dent (CFO) and is open to all existing & potential shareholders. Questions can be submitted during the presentation and will be addressed at the end.
Link to register: https://www.equitydevelopment.co.uk/news-and-events/upgs-investor-presentation-6nov2023
Springfield has announced the sale of c.9.5 acres of land for £5.2m in cash (£0.5m to be received in the coming days, £4.7m on completion). This is a profitable land sale, which is in keeping with the Group’s focus on debt reduction in an uncertain housing market. This again illustrates the value within the Group’s large landbank and discussions are ongoing with other housebuilders and affordable housing providers about a number of sites.
Springfield has one of the largest landbanks in Scotland. As of 31st May, the Group had 6,712 owned plots and strategic options over a further 3,255 acres (equivalent of a further 33,000 plots). The gross development of the owned landbank is c.£1.9bn, providing firm underpinning for long term shareholder value. We recently initiated coverage - see link here: https://www.equitydevelopment.co.uk/research/an-undervalued-high-quality-growth-story - and continue to see scope for a material re-rating of the shares.
Our Fair Value / share is 110p, based on an undemanding rating of 0.9x Price/ Book.
Link to research report: https://www.equitydevelopment.co.uk/research/land-sale-delivering-on-cash-generation-strategy
Gattaca plc, the specialist staffing business, will be conducting a live presentation following the release of their Preliminary Results for the year ended 31st July 2023.
The event will take place at 11.15am on Tuesday 24th October.
The online presentation will be hosted by Matthew Wragg (Chief Executive Officer) and Oliver Whittaker (Chief Financial Officer) and is open to all existing & potential shareholders. Questions can be submitted during the presentation and will be addressed at the end.
Link to register: https://www.equitydevelopment.co.uk/news-and-events/gattaca-investor-presentation-24october2023
New content out on Corero Network Security below that's worth a look!
In a double-header, we're pleased to publish our latest note from Simon Strong on the detail & ramifications of the Akamai deal announced last month.
And in a short 4 minute interview, Ashley Stephenson (Chief Technology Officer) takes viewers through key questions around DDoS attacks and how progress Corero are making on several fronts is translating into financial success.
The video is here: https://youtu.be/Nz_NnysgKds?si=xLTgGCPIB690ucjs
Research note: https://www.equitydevelopment.co.uk/research/parsing-the-akamai-deal-cto-interview
New report & audio summary here: https://www.equitydevelopment.co.uk/research/well-flagged-sluggish-quarter-but-price-fall-looks-over-done
FUM increased marginally over Q1 of FY24 from £16.85bn on 30 Jun 23 to £16.86bn on 30 Sep 23. As flagged in the FY23 results release of 14th Sep 23, net flows were slightly negative for the quarter at -£70m, although BM has indicated it expects positive flows for the whole of FY24.
It’s important to keep this small negative quarterly net flow number in context: it follows nine consecutive quarters of positive flows (achieved despite difficult market conditions) and a period where BM recorded a higher organic growth rate than peers for 6 out of 8 quarters.
We leave our forecasts and our fundamental valuation unchanged at 3,000p per share which, following the recent share price fall of BM (as well as the sector more generally), is now 89% above the current share price.
It is also worth zooming out to look at sector valuations in light of recent falls. Since the end of the bull market at the end of 2021, investment/wealth managers and platforms have ‘de-rated’ significantly with the median PER of a tracked peer group declining 54% from 27.6 to 12.6.
While valuations may well have ‘over-run’ to a degree at the end of the bull market, we certainly see the current median PER of 12.6 as very low (noting that this has dropped 25% in just one month from 17.0 when we published our most recent note on 14th September 2023).
New note & audio summary here: https://www.equitydevelopment.co.uk/research/solid-h1-amidst-sharp-sector-share-price-falls
AUM was slightly down (-0.4%) to £19.14bn over H1-24 (to 30 Sep 23), with a -2.9% fall in Q2 (Jul-Sep) following the +2.6% gain of Q1 (Apr-Jun). Investment performance was positive at +£546m (-£154m in Q2, and +£700m in Q1), net flows negative at -£581m (Q2: -£380m; Q1: -£201m), while fund closures reduced AUM by £50m.
We reduce our FY24 & FY25 forecasts due to AUM and marked-to-market performance fees being lower than prior forecast: end-FY24 AUM forecast is now £19.4bn (prev. £20.7bn), FY24 revenue £169.2m (£178.4m), and core operating profit £40.7m (£44.1m). We reduce our fundamental valuation from 625p per share to 575p, although this is still 31% above the current share price.
Additionally, on page 2 of the report we elaborate on why the recent sharp falls in asset management valuations look over-done to us, especially in light of recent M&A activity in the sector.
New note & audio summary here: https://www.equitydevelopment.co.uk/research/service-uplift-sparks-25-sales-growth
Marks Electrical Group’s sales revenue advanced by 24.8% in the first half of its 2024 financial year, according to a trading update released today, as the company made further market share gains in its core categories. Notably strong advances by category included +71% for televisions, +74% for washer-dryers and +36% for American fridge-freezers. These gains were achieved against relatively flat domestic markets for both Major Domestic Appliances (MDAs) and Consumer Electronics (CEs). An improved service offering, which now includes integrated installation services, made a notable impact: not only in a strong sales growth rate, but also a best-in-class 4.8 Trustpilot score.
Due to first half sales growth strength, we have revised upwards our sales forecast for FY2024 from £114.5m to £116.0m. However, we reduce our EBITDA forecast from £8.9m to £8.0m as well as making downward adjustments to FY2025. Margins are expected to contract as a result of order growth being faster than revenue, higher driver wages and the integrated installation service addition. Importantly, the company is not willing to make reductions in marketing spend to offset these items. Rather, it continues to invest in brand recognition with a view to sustainable growth.
Given MRK’s strong cash position and clearly articulated strategy for sustainable business expansion, we maintain our 150p fair value for the shares.
New note with audio summary from Equity Development here: https://www.equitydevelopment.co.uk/research/resilient-h1-performance-compelling-valuation
Vp traded resiliently through H1’24 against a backdrop of challenging macro-economic conditions, which impacted general construction and housebuilding activity, as previously communicated. Infrastructure demand remains supportive across water, transmission and rail, which are benefiting from long-term regulatory programmes (AMP7 for water and CP6 for rail). The Group’s overseas businesses have traded well, at levels ahead of H1 2023.
Vp’s medium term prospects look bright under the leadership of new CEO Anna Bielby and we make no changes to our forecasts.
In our view, Vp’s share price weakness over recent months overlooks the Group’s impressive track record of long-term growth, high returns and the successful navigation of previous economic cycles.
With the shares trading at a 50% discount to historic average trading multiples, we maintain our Fair Value estimate of £10.90 per share.
New business wins for both Labour Supply and Civils Projects divisions are encouraging
Equity Development see growth supported by the outlook for infrastructure spend, undersupply of skilled labour, and organic investment: 60p/share is their fair value.
Read new note here, free access:
https://www.equitydevelopment.co.uk/research/recent-newsflow-points-to-strength-in-diversity
The relative growth rate of IPX has been impressive, as has its net flow rate. After the Q4 AUM report Equity Dev's fundamental value/share falls to 800p, still well above a 454p close.
Read full new research note, hear summary at below, free access:
https://www.equitydevelopment.co.uk/research/sector-leading-growth-but-3rd-quartile-valuation
Link: https://www.equitydevelopment.co.uk/research/eenergy-group-investor-presentation-with-qa-september-2023
eEnergy Group (AIM: EAAS) directors Harvey Sinclair (Chief Executive Officer) and Crispin Goldsmith (Chief Financial Officer) took investors through:
- highlights of the period which included continued strong organic growth
- ongoing demand and available capex from the customer base
- the focus on improving cash generation and working capital initiatives,
- the strategic options to strengthen the balance sheet to support further growth.
EAAS is a net zero energy services provider, and this presentation covers its results for the period to 30 June 2023.
The full video recording is available to watch at the above link, divided into chapters as below:
0:00:06 Key highlights
0:01:53 Customer Proposition & Revenue Model
0:06:55 Strong Growth Drivers
0:09:52 Financial highlights
0:12:56 Working Capital
0:16:25 Outlook
0:16:48 Summary
0:18:19 Questions & Answers
Link to research report & audio summary: https://www.equitydevelopment.co.uk/research/driving-net-zero-through-innovation-and-technology
eEnergy is a leading B2B energy services business in the UK, supporting c.2,000 clients with their energy strategies across public and private sectors. We believe the energy crisis has combined with the Net Zero agenda to create a tipping point for action on energy security, costs, consumption and waste. After three years of significant growth and investment since listing on AIM, eEnergy looks ideally placed to play a leading role in the Net Zero transition. This is underpinned by a compelling proposition, which delivers energy efficiency upgrades that are paid for by the savings generated.
Today’s interims to 30th June (12-month period) confirm the continuing strength of demand, which we expect to drive sustained EBITDA growth and an improvement in free cashflow (estimated 10% free cash flow yield from 2025). In our view, medium term growth prospects are highly attractive and are not reflected in a very modest £20m market cap.
A modest P/E ratio (7.7x falling to 6.3x in FY24/FY25) appears to overlook the growth trajectory, with EBITDA expected to increase by 41% in 2023 and 30% in FY24 without factoring in the potential for M&A. A 7.5x EV/EBITDA rating would suggest Fair Value of 13p per share.