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Investment Research Weekly Roundup including Deltex Medical, Park Group, Comptel, SkyePharma
Update - Q112 market share 27 April 2012
Share plc has announced its Q112 revenue market share was 6.46% (against 6.1% for Q111). While this gain is encouraging, market conditions have been tough and actual revenue was down 4.7%. This compares with an 8% increase in our current year forecast. As in previous years, we will wait for Q2 before changing our estimates but, despite gaining market share, the earnings risk is on the downside.
Greenwich Loan Income Fund (LON:GLIF)
Flash note - Q112 NAV, div and CLO 27 April 2012
Greenwich Loan Income Fund (GLIF) has announced its Q112 NAV (47.8p vs 48.3p end December), which has fallen modestly with a 3% adverse dollar/sterling exchange rate swing over the period. The basis of the NAV is conservative, marking assets to market and liabilities at par. As a going concern, we believe this is unduly harsh as many loans that are expected to fully repay have a market price below par. It is more appropriate to consider the value of assets realisable over time (franchise value), which we estimate at 51.5p.
Update - The end of the beginning 27 April 2012
“This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.” The words of Sir Winston Churchill could well be applied to Flutiform’s tortuous regulatory process which, with the CHMP’s positive opinion, has at last met with a positive outcome. Assuming that Flutiform is approved – effectively a formality – and launched, £83m of convertible bonds must be refinanced without unduly diluting equity holders. If Skyepharma were to achieve this, focus would at last revert to its operating activities, which the market cap should begin to reflect.
Update - Recovery continues in Q1 26 April 2012
A positive IMS noted that Q1 trading was profitable and in line with management’s expectations. While still early in the year, the group looks on track to meet our full-year estimates. The launch of the LiveGear branded product range addresses the incremental high growth opportunity in IP video broadcast, a key component of management’s longer-term growth and margin expansion ambitions.
Golden Prospect Precious Metals (LON:GPM)
Review - Back to fundamentals? 26 April 2012
The gold price has increased by 11% over the past 12 months but is now 20% below its high and has shown greater volatility in recent months. The rise over the last two to three years appears to reflect investor fears over other financial assets and of a return to higher levels of inflation. In recent months that fear has abated and, with it, the gold price. If financial markets are to be more settled, fundamental non-investment demand for gold will need to play a larger part in setting the price. But that remains a big ‘if’, amid concerns over sovereign debt and low growth. For Golden Prospect Precious Metals (GPM), fundamental value in stocks (already de-rated vs the gold price) seems the more certain support. Over 12 months GPM is down 30.0% and 31.9%, in terms of price and NAV total return. The Philadelphia Gold and Silver Index (sterling adjusted) is down 25.6%. Performa nce has seen a very strong improvement since New City Investment Managers (NCIM) took over the management of GPM, which can be seen in the three-year figures.
Flash note - Maiden resource estimate 26 April 2012
On 25 April Regency released its maiden JORC compliant resource estimate for the 50% owned Mambare nickel laterite project in Papua New Guinea. The announced indicated and inferred resource of 95m tonnes of ore grading 0.96% Ni and 0.08% cobalt contains 912,595t Ni was based on 3,790m of drilling over as little as 3% of the target plateau. Given the landholding left to be tested, we believe there is significant potential for upside in future resource estimates; historic non-JORC compliant resources point to a potential 400Mt resource that, at current grades, would equate to 3.8Mt of contained nickel.
Park Group (LON:PKG)
Flash note - flexecode introduction 26 April 2012
Park Group has announced the latest product extension to its Love2reward suite, flexecodes, based on its fast growing and innovative flexecash prepaid card platform. flexecodes extends the multi-retailer offering to online transmission via email. The group’s continued investment in web-based and mobile solutions is attractive in that it extends customer reach and improves the customer experience while cutting the cost of distribution. We recently published an Outlook note on the group in which we discuss this transformation at length. More
Zeltia (MCE:ZEL)
QuickView - US plans on track 26 April 2012
Zeltia’s Pharma Mar subsidiary has received a second $25m milestone payment from Yondelis (trabectedin) ex-Europe partner Janssen (J&J). This follows the December 2011 receipt of $25m paid on agreement of the new US development plan. A further $60m of milestones may fall due in 2013/2015, in addition to the economics agreed at the time of the original license. Zeltia is also approaching key pipeline catalysts, with an interim analysis of the ADMYRE study of Aplidin in relapsed/refractory multiple myeloma expected soon, an interim analysis of the Phase II PM01183 trial in resistant ovarian cancer and results of its 309-pt Phase II study of Nypta (tideglusib) in Alzheimer’s disease, both due at the end of the year.
Motive Television (LON:MTV)
Update - Contracts, please 25 April 2012
Last year saw good operational progress, but also delays in progressing contracts and in payments. No new contracts were signed. Motive is confident about 2012, expecting delayed and new contracts to come through. It sees growing interest in its products in many markets. Growth continues to require cash resources, but once contracts are signed this pressure should ease and investor confidence will grow. More
Mwana Africa (LON:MWA)
Outlook - Like the Trojan 25 April 2012
In the 21st century reorganisation of African mining assets, Mwana has assembled a unique portfolio comprising two old warhorses in Zimbabwe combined with two of the most exciting exploration prospects on the continent in the Democratic Republic of the Congo. Mwana has already returned one old warhorse (the Freda Rebecca Gold Mine) to production and is poised to do the same with the second, Trojan, such that, within two years, it could be generating US$50m in gross profits. In the wake of equity raising earlier this month, Edison estimates that Mwana has no immediate external funding requirement.
Manz (ETR:M5Z)
QuickView - Diversification successful 25 April 2012
2011’s record €241m revenues showed that Manz is no longer dependent on the fortunes of the European or even the global solar market, but can grow despite continued weakness in this sector. Crucially, it emphasises Manz’s unique position as a German company making equipment in Asia for automation, metrology, laser processing, vacuum coating, wet chemistry and metallisation used to manufacture flat panel displays for tablets and smartphones. This makes it a beneficiary of the drive to higher levels of automation as customers such as AU Optronics and Chimei Innolux adapt to higher labour rates, demands for better working conditions, pricing pressures and the requirement for higher product quality.
Carr's Milling Industries (LON:CRM)
QuickView - Growth from innovation 25 April 2012
Carr’s Milling Industries’ innovations such as Crystalyx feed-blocks and the AminoMax process for more efficient utilisation of protein in feed have taken it into the global agricultural market, where farmers are meeting the requirements of rising populations by boosting productivity. It is also an active integrator in the UK agricultural supply sector, making it a beneficiary of concerns about food security. The Engineering division is well placed to benefit from the global decommissioning of older nuclear power stations and construction of new ones. The balance sheet gives a strong platform to accelerate growth through further acquisitions.
Dillistone Group (LON:DSG)
Outlook - Readying for new growth 25 April 2012
Dillistone produced a highly respectable performance in FY11 despite the weak backdrop, with revenues and profits ahead of our expectations. Voyager, acquired in September, has been trading slightly ahead of expectations. Synergies of £0.2m have already been established, including from merging offices in Australia and shared procurement; further benefits are planned from R&D synergies. However, we have cut our forecasts due to continuing economic uncertainties and on the view that Voyagers’ customers will hold back for its new product – Infinity. The business continues to be highly cash generative and our model suggests fair value of c 97p.
Oil & Gas
Macro Outlook: Supply concerns wane 24 April 2012
Oil supply concerns have waned significantly since early 2012, as political tension over Iran has eased and evidence has surfaced of rising OECD inventories. Meanwhile, demand globally is subdued. As the IEA has recently alluded, the oil market is probably moving into surplus. Prices could soften noticeably in the coming months in the absence of an upsurge in tension between the West and Iran over the latter’s nuclear programme.
Comptel (FRA:CKP)
Update - Transformation continues 24 April 2012
Comptel’s Q1 sales performance suggests its revised sales structure and focus on building service sales are bearing fruit. Licensing sales were below par, but new product launches over the course of this year should help on this front. Given the importance of licensing to the margin expansion story, we see evidence of new product uptake, driving a licensing recovery as key to share price appreciation.
IQE (LON:IQE)
Update - Encouraging signs 24 April 2012
IQE again showed its ability to flex its model to retain profitability in 2011. Significant investments in capacity depress near-term cash flows, but our analysis suggests the return on investment (ROI) should be strong. Strong underlying demand and market share gains in wireless have the potential to drive near-term upgrades while developments in solar and logic give potential for significant expansion longer term.
Park Group (LON:PKG)
Outlook - Innovation delivering 24 April 2012
Park has issued a trading update on its full year results (to 31 March 2012), due for release on 12 June 2012. The progress that could be seen in key performance indicators in H1 appears to have continued through the second half despite the tough economic environment, and we confirm our forecasts. Christmas 2011 sales volumes were ahead 5% and 2012 orders (FY13) are up c 6%. The Corporate division has increased billings by 15%, confirming the H1 order delay as just that, and demonstrating the impact of product development and innovation, focused on flexecash, of which more to come. Cash flow is strong; seasonal cash balances peaked at £152m (FY11: £140m) and continue to run well ahead of last year.
Next Fifteen Communications (LON:NFC)
Update - Strong digital showing 24 April 2012
Next Fifteen’s interim results showed good revenue growth of 11%, with adjusted pre-tax up 15% and EPS up 12%. As anticipated, digital marketing is leading the way with organic growth of 39%. Overall organic growth of 4% reflects the strong growth in a number of the group’s agencies, offset by weakness in Europe and the group’s UK consumer business. Management is addressing the latter by accelerating digital capabilities across the UK consumer activities, which should reap benefit in FY13 and beyond. The balance sheet is modestly geared at 12% and, excluding any further acquisitions, the group should return to a net cash position in FY13.
Cytec Industries (NYSE:CYT)
QuickView - Boosting growth focus 23 April 2012
Cytec’s Q1 demonstrated that 2012 got off to a good start, with progress being made across large swathes of the business and guidance increased for the full year. As witnessed by last week’s announcement of a recommended offer for Umeco Plc, Cytec’s strategy is developing quickly to continue to address the highest growth opportunities available. With Cyctec also analysing the potential separation of its entire Coating Resins business, a decision on which is expected during Q2, 2012 is set to be an exciting year of change and development.
Deltex Medical (LON:DEMG)
Update - NHS sales up 40% 23 April 2012
The £1.5m raised by Deltex provides additional working capital given the 40% rise in NHS orders experienced in Q1. NHS hospitals are under significant NHS executive and financial pressure to adopt surgical fluid management by March 2013. This is likely to drive an acceleration in probe and monitor sales, particularly over autumn and winter. Q1 sales continued the 40% growth trend of late 2011. However, NHS trusts may hoard cash in H1 of their FY13 year. CardioQ has strong evidence of effectiveness and is the only NICE-recommended product.
Update - Investing for growth 23 April 2012
Eckoh expects to report in line FY12 results. The company continues to invest to drive revenue growth and we reduce our FY13 EPS forecast by 10% to reflect slightly higher expenditure. Eckoh has also expanded its customer base with its first local authority contract, won in conjunction with new reselling partner Azzurri. On an ex-cash basis, Eckoh trades at a discount to the market.
