Northland Capital Partners View on the City - Evgen Pharma & Techfinancials

LATHAM (JAMES) (LON:LTHM)

SECTOR – SUPPORT SERVICES

RATING – BUY*

MARKET CAP – £133m

CURRENT PRICE – 675p^#

TARGET PRICE – 980p

ANALYST – MIKE JEREMY

Year-end March

2016A

2017A

2018A

2019E

Revenue (£m)

185.9

198.8

214.9

228.0

EBITDA (£m)

14.8

16.1

16.4

17.1

Adj. pre-tax Profit (£m)

12.9

13.9

14.0

14.6

Adj. EPS (p)

53.5

56.1

58.1

59.4

DPS (p)

14.3

15.4

16.6

17.6

Net Cash/(Debt) (£m)

15.8

16.3

13.0

15.3

P/E (x)

12.6

12.0

11.6

11.4

Dividend yield (%)

2.1

2.3

2.5

2.6

EV/EBITDA (x)

8.1

7.4

7.3

7.0

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited acts as Nomad and Broker to James Latham, and therefore this information should be viewed as a Marketing Communication.

FY19 Interim revenue +10%Y/Y, dividend increased from 4.5p to 5.0p

(Note attached)

NORTHLAND VIEW

• For the six months to 30th September 2018 James Latham reported revenue of £118.2m, +10.2% Y/Y, on underlying volume growth of 1.5% Y/Y, with product prices increasing 7.8%. Gross profit was £20.2m, +9.0%YoY, with gross margin at 17.1%, compared to 17.3% in H118, resulting from increased lower-margin direct sales. Operating profit (reported) was £7.7m, +10.0% Y/Y, a 6.5% margin, matching H118. PBT (reported) was £8.7m inclusive of a £1.1m contribution from the sale of the Yate site, £7.7m on an adjusted basis, +13.2% Y/Y.  Consequently, Interim (reported) EPS was 36.9p; 31.7p adjusted (H118: 27.9p). The proposed interim dividend is 5.0p, compared to 4.5p in H118, payable on 25 January 2019 to shareholders as of 4 January 2019.  The period-end cash balance was £12.9m compared to £13.9m at FY18.  
• The company reports that H219 has “started well with revenues continuing to grow” and customers active with good order books. However, there is some pressure on margins due to “price rises being more difficult to absorb by the market”. James Latham is aware of uncertainties surrounding Brexit negotiations, the outcome to which it is not immune, but has reviewed its key European suppliers and has plans in place to hold more stock in early 2019 to help mitigate supply issues. Investment in improved efficiency continues, notably at Purfleet and Thurrock, and planned redevelopment of the Gateshead site.

H119 performance is as we expected, with underlying demand remaining firm and product pricing reflecting industry trends charted in government materials prices data. James Latham continues to invest in improved efficiency following the relocation of its Yate site and, as noted, is planning for Brexit eventualities. The stock trades at 6% PE discount to its peers and remains in our view a ‘Buy’.

COMPANY DESCRIPTION

Founded in the late eighteenth century, the Group specialises in import and distribution of wood-based sheet materials and joinery quality hardwoods and softwoods and other products, with national coverage from ten locations.

Evgen Pharma (LON:EVG)

SECTOR – HEALTHCARE

RATING – BUY*

MARKET CAP – £17.8m

CURRENT PRICE – 18p^#

ANALYST – LIAM GASCOIGNE-COHEN

Year-end March

2017A

2018E

2019E

2020E

Revenue (£m)

-

EBITDA (£m)

(3.64)

Adj. pre-tax Profit (£m)

(3.64)

Adj. EPS (p)

(4.19)

Under review

DPS (p)

-

Net Cash/(Debt) (£m)

3.91

P/E (x)

-

Dividend yield (%)

-

EV/EBITDA (x)

-

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited acts as Nomad and Broker to Evgen Pharma and therefore this information should be viewed as a Marketing Communication.

Poster presentation of SFX-01 and clinical trial update

NORTHLAND VIEW

• Evgen intends to present a poster at the San Antonio Breast Cancer Symposium regarding its Phase II ‘STEM’ trial testing SFX-01, the Company’s lead drug candidate, in metastatic breast cancer.
• The STEM trial completed recruitment in July 2018 following a favourable interim read-out announced on 11^th June 2018. At the time, the Company indicated there was sufficient evidence to conclude that the main goals of the trial (safety, tolerability, evidence of clinical benefit) were met.
• The final patient on the trial will take her last dose of SFX-01 before the end of 2018, with the final trial readout expected by March 2019.
• The next step is likely to be a placebo-controlled trial, testing SFX-01 in combination with second-line hormone therapy in patients that have failed on CDK4/6 inhibitors.

The San Antonio Breast Cancer Symposium brings together leading experts from academia and industry making it a good arena to showcase SFX-01’s data in metastatic breast cancer.  The Company is also testing SFX-01 in a Phase II trial for subarachnoid haemorrhage, a form of stroke.

COMPANY DESCRIPTION

Evgen Pharma is a clinical stage drug development company focused on the treatment of cancer and neurological conditions.

TECHFINANCIALS (LON:TECH)

SECTOR – SOFTWARE & SERVICES

RATING – CORP*

MARKET CAP – £6.0

CURRENT PRICE – 7.0p^#

ANALYST – MIKE JEREMY

Year-end Dec

2016A

2017A

Revenue (US$m)

21.325

13.362

EBITDA  (US$m)

5.290

1.000

Pre-tax Profit (US$m)

4.204

0.194

EPS (US$c)

1.7

(3.6)

No forecasts provided

DPS (US$c)

-

-

Net Cash/(Debt) (US$m)

7.651

3.499

P/E (x)

5.3

N.M.

Dividend yield (%)

-

-