EDISON INSIGHT Strategic perspective | Company profiles - September 2021 Published by Edison Investment Research
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EDISON INSIGHT Strategic perspective | Company profiles September 2021 Published by Edison Investment Research
Contents
Global perspectives 2
Company profiles 7
Edison dividend list 64
Stock coverage 65
Prices at 24 September 2021 Published 30 September 2021
US$/£ exchange rate: 0.7260 NOK/£ exchange rate: 0.0838
€/£ exchange rate: 0.8559 CHF/£ exchange rate: 0.7885
C$/£ exchange rate: 0.5735 ZAR/£ exchange rate: 0.0499
A$/£ exchange rate: 0.5320 HUF/£ exchange rate: 0.0024
NZ$/£ exchange rate: 0.5133 KZT/£ exchange rate: 0017
SEK/£ exchange rate: 0.0841 JPY/£ exchange rate: 0.0066
Welcome to the September edition of Edison Insight. We now have c 400 companies under coverage, of which 113
are profiled in this edition. Healthcare companies are covered separately in Edison Healthcare Insight. Click here to
view the latest edition.
This month we open with a strategy piece by Alastair George, who believes that the economic cycle continues to
evolve and investors should position portfolios accordingly. The advent of mass COVID-19 vaccination programmes
in developed nations combined with enormous monetary and stimulus packages have created the conditions for a
sharp closing of output gaps and a slower pace of GDP growth should now be expected. Purchasing managers’
indices (PMI) have peaked over the summer in both Europe and the United States. Financial markets are
contending with both fiscal and monetary headwinds. Developed market fiscal policy will be progressively tightened
during 2022 having remained loose for the duration of 2021 at the same time as monetary policy is tightened.
Market volatility has risen in recent weeks as policymakers negotiate their first steps away from COVID-19 support
towards more neutral settings. Rising earnings forecasts for 2021 have been the fundamental support behind the
market rally. However, during the past month momentum in profits forecasts has come to a near-standstill with
many global sectors seeing no increase in forecasts. Inflation and inflation uncertainty are key to the outlook for
asset prices. With the notable exception of Japan, developed market core consumer price indices have surged
above long-term trends. Anecdotal evidence of shortages has become endemic, affecting industries as diverse as
shipping, semiconductors and agriculture. Rising survey based inflation will need to be reconciled with currently
benign market-implied inflation measures.
Equity investors may be of the view that they are they are partially hedged against higher inflation as equity
represents a claim on the nominal future profits stream. This is true but should not give rise to complacency. At
times of high inflation equity valuations have historically tended to suffer from higher inflation uncertainty, which
increases the required rate of return due to an increase in the equity risk premium. Since last month we have
moved to a cautious position on global equities as high valuations are now inconsistent with evidence of a slowing
of economic momentum and the imminent prospect of tighter monetary conditions. On a global basis both corporate
credit spreads and our estimate of the global equity risk premium are close to 17-year lows.
Readers wishing for more detail should visit our website, where reports are freely available for download
(www.edisongroup.com). All profit and earnings figures shown are normalised, excluding amortisation of acquired
intangibles, exceptional items and share-based payments.
Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East
and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise.
At Edison Investment Research, our research is widely read by international investors, advisors and stakeholders.
Edison Advisors leverages our core research platform to provide differentiated services including investor relations
and strategic consulting.
Edison is authorised and regulated by the Financial Conduct Authority. Edison is a registered investment adviser
regulated by the state of New York.
We welcome any comments/suggestions our readers may have.
Neil Shah
Director of research
Edison Insight | 30 September 2021 1Global perspectives: Cautious on equities
Analyst
The economic cycle continues to evolve and investors should position Alastair George
portfolios accordingly. The advent of mass COVID-19 vaccination programmes +44 (0)20 3077 5700
in developed nations combined with enormous monetary and stimulus packages institutional@edisongroup.com
dating from 2020 have created the conditions for a sharp closing of output gaps. A
slower pace of GDP growth should now be expected. We note purchasing
managers’ indices (PMI) have peaked over the summer in both the eurozone and
the United States.
Financial markets are contending with both fiscal and monetary headwinds.
Developed market fiscal policy will be progressively tightened during 2022 having
remained loose for the duration of 2021 at the same time as monetary policy is
tightened. Market volatility has risen in recent weeks as policymakers negotiate
their first steps away from COVID-19 support towards more neutral settings,
consistent with the closing of output gaps in developed market economies.
Rising earnings forecasts for 2021 have been the fundamental support
behind the market rally. However, during the past month momentum in profits
forecasts has come to a near-standstill with most global sectors seeing no
increase in forecasts during the past four weeks.
Inflation and inflation uncertainty are key to the outlook for asset prices. With
the notable exception of Japan, developed market core consumer price indices
have surged above long-term trends. Anecdotal evidence of shortages has
become endemic, affecting industries as diverse as shipping, semiconductors and
agriculture. Rising survey based inflation will need to be reconciled with currently
benign market-implied inflation measures.
Equity investors may be of the view that they are partially hedged against
higher inflation as equity represents a claim on the nominal future profits
stream. This is true but should not give rise to complacency. At times of high
inflation equity valuations have historically tended to suffer from higher inflation
uncertainty, which increases the required rate of return due to an increase in the
equity risk premium.
Since last month we have moved to a cautious position on global equities as
high valuations are now inconsistent with evidence of a slowing of economic
momentum and the imminent prospect of tighter monetary conditions. On a
global basis both corporate credit spreads and our estimate of the global equity
risk premium are close to 17-year lows.
Edison Insight | 30 September 2021 2Slowing growth and high valuations drive cautious view
The economic decoupling from the COVID-19 pandemic has been re-emphasised in recent weeks.
Vaccinations have remained effective in maintaining a relatively low level of hospital admissions,
even as daily case numbers indicate ‘delta’ continues to spread. However, epidemiologists in the
UK at least are struggling to explain why case numbers are not accelerating as autumn
approaches. It may be that the combination of vaccinations for older adults plus evidence from
Public Health England of natural infection for up to 30% of those aged between 18–29 means the
long-sought status of herd immunity is close.
In developed markets, the advent of vaccines in combination with earlier monetary and fiscal
stimulus has created the conditions for an exceptionally strong period of GDP growth. This
welcome development also implies that the anticipated ‘scarring’ of the global economy due to
COVID-19 shutdowns appears to have been largely avoided. Nevertheless, the rapid closing of
output gaps in recent quarters means that this intense period of growth will soon come to an end.
For investors, it is the rate of change or direction of growth rather than the level which is arguably
the more relevant factor for portfolios in the short-term. We believe we are coming to the end of the
period of supercharged growth, even as current activity indicators remain strong. We note the
softening of PMI indices in both the United States and eurozone over the summer, which indicate
that a slowdown may already be underway. We believe this may be the start of a new, more
subdued trend which will persist into 2022.
Exhibit 1: Narrowing output gaps close the window for extraordinary policies
4.00
2.00
0.00
-2.00
% GDP
-4.00
-6.00
-8.00
-10.00
-12.00
-14.00
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
United States OECD - Total Germany Japan United Kingdom
Source: OECD Economic Outlook May 2021, 30 September 2021
The extent of COVID-19 fiscal support has been in some respects a ‘surprise’ in comparison to the
relatively tight fiscal policy which followed the global financial crisis of 2008. ‘Austerity’ policies in
hindsight appeared to achieve little except slower growth and lower interest rates.
Regardless of the relative merits of this more expansionary fiscal support, IMF forecasts show that
the remarkable level of fiscal spending growth during 2020 which has been maintained during 2021
is due to contract sharply next year in G7 nations. These forecasts highlight the challenge in front of
national economies to maintain growth while weaning themselves from emergency COVID-19 fiscal
support.
Edison Insight | 30 September 2021 3Exhibit 2: G7 fiscal contraction forecast during 2022
30%
25%
Y-on-Y growth in government
20%
15%
expenditure
10%
5%
0%
-5%
-10%
2011 2014 2017 2020 2023 2026
Canada France Germany Italy Japan United Kingdom United States Average
Source: International Monetary Fund
Earnings estimates have been a key fundamental support for rising equity markets during 2021 and
the increase in expectations for profits has now exceeded the initial COVID-19 related decline in
2020. 2021 earnings estimates are now at new record levels and 7% above those prevailing prior to
the pandemic. We believe few investors would have been so bold to predict that a pandemic, which
created one of the sharpest declines in economic output ever recorded, would have proved to be a
net positive for the corporate sector.
Nevertheless, it is the rate of change of forecasts to which markets are more sensitive and we have
observed that most global sectors have seen no upgrades in the past month, compared to near-
universal upgrades over the prior three months. This loss of earnings momentum is consistent with
the lack of progress made by global markets and increase in volatility seen towards the end of the
summer period.
Inflation and inflation uncertainty are a risk to the outlook
While the period of supercharged growth is proving to be transient, we are becoming increasingly
concerned that inflation is rising rather faster than monetary policymakers might have originally
wished. The US Fed has for example raised the forecast for 2021 US core inflation in its Summary
of Economic Projections three times so far this year, from 1.8% to 3.7%. As a result, Fed
policymakers’ interest rate expectations are now on a rising trend for 2022 and 2023, suggesting
that any ‘slack’ in policy resulting from the concept of average inflation targeting has now been
taken up. The risk is that further upside surprises to inflation will now lead to a one-for-one policy
response.
Exhibit 3: Rising US inflation and survey-based inflation expectations not yet reflected in US bond yields
5.50
5.00
Expected inflation rate %
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21
1 year ahead 3 years ahead
Source: Refinitiv, Federal Reserve Bank of New York
While central banks have pointed to market-based implied measures of inflation being well-
contained, consumer-based surveys in both the United States and the eurozone do not suggest
that consumers are as sanguine. Survey-based inflation measures have been rising rapidly during
Edison Insight | 30 September 2021 42021, especially among lower-income consumers which are likely to have been affected to a
greater extent by rising food and energy costs. Political risks are rising, as evidenced by the recent
panic buying of fuel in the UK but also by the relatively larger number of voters affected by rising
living costs. Anecdotal evidence of inflation is also widely spread across industries, with reports of
actual shortages or rapidly rising prices for semiconductors, foodstuffs, building products, shipping,
natural gas and fertiliser.
Equity investors may be of the view that compared to government bonds they are partially hedged
against higher inflation as equity represents a claim on the nominal future profits stream. This is
true but should not give rise to complacency. At times of high inflation equity valuations have
historically tended to suffer from higher inflation uncertainty which increases the required rate of
return due to an increase in the equity risk premium.
Global risk premium close to 17-year lows
We have previously observed that global equity valuations are at levels not seen since immediately
prior to the 2008 financial crisis on a price/book basis. To add to the weight of evidence on
valuations we have now estimated the global equity risk premium based on aggregating
contemporaneous forecasts for medium-term growth for each stock in the world index.
We find that at present the risk premium for global equities has been relatively stable at 3% for
much of this century but has recently fallen to close to a 17-year low. The estimated equity risk
premium is closely correlated to corporate credit spreads, which are similarly close to their lows for
the same period.
Unlike P/E or price/book measures, estimating the equity risk premium using forward-looking data
accounts for the very benign period of revenue growth forecast over the coming three years.
Globally, revenue growth is currently forecast to be several percentage points above its longer-term
average of 5–6%. While this could be considered comforting, to the contrary in our view it raises
questions about the level of optimism currently embedded in consensus earnings forecasts. At the
very least, this level of confidence in the future would appear to reduce the scope for further
positive surprises from the corporate sector. We would be more comfortable if aggregate forecast
revenue growth was closer to consensus forecast nominal world GDP growth over the longer-term.
Exhibit 4: Both global equity risk premium and corporate credit spreads close to 17-year lows
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2004 2007 2010 2013 2016 2019
Equity risk premium US investment grade credit spread
Source: Refinitiv, Edison models and calculations
Central banks on the road to policy tightening
Therefore, should central banks become pushed to act against rising inflation expectations, there is
clearly potential for markets to move lower based on currently high valuations and the currently low
equity risk premium. We note that the ECB has started to taper its Pandemic Emergency Purchase
Programme (PEPP) with several policymakers becoming increasingly vocal on the upside risks to
inflation.
Edison Insight | 30 September 2021 5Despite the increased ‘policy space’ created by average inflation targeting, the US Fed appears to
be reaching the limits of its new policy already. It has signalled the start of the tapering of its
quantitative easing programme later in the year, a process that Fed Chair Powell believes will be
complete by mid-2022.The first US interest rate increase is now projected to be in place by the end
of 2022 rather than some time in 2023. The steady rise in long-term government bond yields during
September suggests that central banks are perhaps on modestly more hawkish tracks than
investors originally expected. Furthermore, in our view the risk remains that any further
unanticipated increase in US inflation could accelerate this pace of policy normalisation.
Conclusion
We believe investors should be maintaining a cautious approach to equities at present, especially in
those sectors and markets which are trading well above long-term valuation averages. Globally,
equity valuations remain extended on a price/book and forward P/E basis. Furthermore, our
estimates of the global equity risk premium suggest investors are currently tolerating a meaningfully
lower rate of return on equity portfolios than usual, even after accounting for above-average
forecast growth for the three-year period immediately ahead.
We remain underweight on global bonds despite the recent increase in yields. Current yields still do
not appear to reflect rising inflation or inflation uncertainty, nor the Fed’s new-found determination to
ensure an average rate of inflation close to target in the medium term. These factors suggest that at
current yields global bonds could offer limited or even no protection as the global economy slows as
we expect during the autumn. With corporate credit spreads still tight, the optimal shift in portfolios
may be to ‘none of the above’ which is a tactical allocation to cash and to reduce portfolio ‘beta’. We
expect for many investors this may be emotionally the hardest move to consider, after such a strong
run in risk assets.
Edison Insight | 30 September 2021 6Sector: Technology 1Spatial (SPA)
Price: 41.0p
Market cap: £45m INVESTMENT SUMMARY
Market AIM
Soon after reporting two large multiyear contract wins, 1Spatial’s H122 results did not
disappoint. Headline revenue grew 8% y-o-y to £12.6m, with all global regions contributing,
Share price graph (p)
while adjusted EBITDA was up 10% to £1.8m, with relatively steady margins. We have
raised our FY22 and FY23 revenue and earnings forecasts to reflect these recent contracts
and trends from H122 performance. We remain encouraged by the long-term potential of
the geospatial market, recent contract momentum and growth of recurring higher margin
license revenue, and see scope for further acceleration.
INDUSTRY OUTLOOK
The GIS industry is large and growing. P&S Market Research estimates the total market
size at US$7.5bn in 2019 and should grow at 12.1%, reaching US$13.3bn by 2024.
Company description
1Spatial’s core technology validates,
rectifies and enhances customers’
geospatial data. The combination of its
software and advisory services
reduces the need for costly manual
checking and correcting of data.
Y/E Jan Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m
Actual 13.9 (3.5) 32.3 2020 23.4 3.2 0.8 0.58 70.7 79.0
Relative* 15.1 (3.8) 5.7 2021 24.6 3.6 0.2 0.17 241.2 11.8
* % Relative to local index
Analyst 2022e 26.0 3.8 0.4 0.31 132.3 11.8
Kenneth Mestemacher 2023e 28.5 4.5 0.9 0.80 51.3 10.0
Sector: Technology 4iG (4IG)
Price: HUF984.00
Market cap: HUF97621m INVESTMENT SUMMARY
Market Budapest stock exchange
Driven by a combination of organic growth and M&A, 4iG reported H121 net revenues of
HUF32.1bn, 59% y-o-y growth. Gross profit rose by 65% y-o-y to HUF10.2bn with EBITDA
Share price graph (HUF)
rising 30% y-o-y to HUF1.8bn, as EBITDA margins fell to 5.5%. However, the market is
really waiting for clarification on the impact of a series of acquisitions announced in H121,
with five deals expected to complete in H221: DIGI Group; Spacecom; Antenna Hungária;
Telenor Montenegro; and Invitech. We estimate that, collectively, these deals will deliver
run-rate EBITDA in excess of c HUF88bn (c US$300m) but are not yet able to update our
estimates for these acquisitions.
INDUSTRY OUTLOOK
4iG’s strategy is focused on three pillars: IT services; telecoms & infrastructure; and space
Company description & defence. The group is targeting market leadership in Hungary, but we also expect 4iG to
4iG is one of the leading IT services develop a more diversified regional footprint in FY21 and FY22. Organic growth will be
and systems integrators in Hungary,
working with public sector clients, large supplemented by M&A.
corporates and SMEs. Management is
focused on becoming the market
leader in Hungary by FY22 as well as
targeting expansion in Central and
Eastern Europe (CEE).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (HUFbn) (HUFbn) (HUFbn) (HUF) (x) (x)
% 1m 3m 12m
Actual 52.3 58.7 62.9 2019 41.1 4.1 3.3 31.54 31.2 N/A
Relative* 52.9 49.9 1.0 2020 57.3 5.0 4.2 37.17 26.5 N/A
* % Relative to local index
Analyst 2021e 82.7 8.9 7.3 59.16 16.6 N/A
Richard Williamson 2022e 93.0 9.9 8.9 72.41 13.6 N/A
Edison Insight | 30 September 2021 7Sector: Media 4imprint Group (FOUR)
Price: 3170.0p
Market cap: £890m INVESTMENT SUMMARY
Market LSE
4imprint’s interim results showed a strong pick-up in demand from both existing and new
customers. Management’s decisions taken early in the onset of the pandemic to retain the
Share price graph (p)
staff base and maintain a market presence through advertising have put the group in a
strong position to capitalise on the rebound in the US economy. A return to paying dividends
is a clear indication of confidence and we increased our revenue forecasts for FY21 and
FY22 by 11% in both years. The step-up in projections at an earnings level are lower, given
the higher US tax charges. 4imprint’s balance sheet remains strong, with end-June net cash
of $53m.
INDUSTRY OUTLOOK
The Advertising Specialty Institute (ASI), an industry body, estimated the value of the US
Company description promotional products distribution market in 2020 at US$20.7bn, down 20% on prior year,
4imprint is the leading direct marketer after an extended period of growth at a 10-year CAGR of 5.0%. However, the FY20 figure
of promotional products in the United
States, Canada, the UK and Ireland. In includes US$6bn of PPE sales, without which sales would have fallen by 43% year-on-year.
FY20, 98% of revenues were 4imprint has dipped from the top of table but had negligible PPE sales.
generated in the United States and
Canada.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 9.1 15.3 67.7 2019 860.8 59.1 55.6 157.2 27.8 21.7
Relative* 10.3 15.0 34.0 2020 560.0 8.4 5.0 13.8 316.4 167.0
* % Relative to local index
Analyst 2021e 775.0 26.6 22.6 62.6 69.8 48.9
Fiona Orford-Williams 2022e 850.0 36.1 32.0 88.6 49.3 40.0
Sector: General industrials AAC Clyde Space (AAC)
Price: SEK2.90
Market cap: SEK541m INVESTMENT SUMMARY
Market Nasdaq FN Premier
AAC Clyde Space is at the forefront of the rapidly growing and innovative market for small
satellites. As nanosatellite build rates and deployments rise sharply over the next decade,
Share price graph (SEK)
increasing systems and platform sales should be surpassed by growing services revenue.
Management is navigating the growth phase and targeting opportunities in New Space to
extend AAC's reach, capabilities and technologies. Recent deals enhance profit and cash
generation and support the SEK500m 2024 revenue goal. H121 results showed strong
progress but supplier issues are deferring some projects and FY21 revenues are expected
to be limited to c SEK200m, which is still strong growth.
INDUSTRY OUTLOOK
AAC Clyde Space has a strong space heritage in small and nanosatellites. Over the next
Company description five years around 3,000 nanosatellites should be launched as technology development
Headquartered in Sweden, AAC Clyde extends the applications for low earth orbit (LEO) constellations, especially for
Space is a world leader in nanosatellite
end-to-end solutions, subsystems, communications. Its growing capabilities bring together three divisions: Space Data as a
platforms, services and components, Service, Space Missions and Space Products & Components. AAC Clyde Space aims to
including supply to third parties. It has
production and development become a world leader in commercial small satellites and services from space.
operations in Sweden, Scotland, the
Netherlands, the US and a start-up in
Africa. Y/E Dec Net Sales EBITDA PBT EPS (fd) P/E P/CF
Price performance (SEKm) (SEKm) (SEKm) (öre) (x) (x)
% 1m 3m 12m
Actual (9.4) 11.1 5.8 2019 66.4 (27.3) (38.2) (44.55) N/A N/A
Relative* (6.2) 6.5 (21.9) 2020 98.4 (17.5) (26.7) (25.79) N/A N/A
* % Relative to local index
Analyst 2021e 202.1 (2.0) (13.9) (8.00) N/A N/A
Andy Chambers 2022e 292.7 25.4 16.2 8.00 36.3 20.8
Edison Insight | 30 September 2021 8Sector: General industrials Accsys Technologies (AXS)
Price: 166.5p
Market cap: £320m INVESTMENT SUMMARY
Market LSE
FY21 results included group revenue of c €100m (+10%) with Accoya wood volumes up
4.5% (to c 60,500 m3) feeding into a 44% EBITDA uplift to €10.1m and positive EBIT and
Share price graph (p)
PBT contributions for the year as a whole after some COVID-19 disruption in Q1. The
addition of a fourth reactor at capacity constrained Arnhem is on track for completion by the
end of FY22 and a US JV with Eastman Chemicals is making progress with evaluating a
new greenfield Accoya facility with a decision expected this summer. The new Hull/Tricoya
facility is now expected to be commissioned and operational by July 2022. AGM comments
noted good revenue progress in the first five months of FY22 driven by a combination of
higher volumes, pricing and mix. Our estimates are under review.
INDUSTRY OUTLOOK
Company description Accsys has a technically proven process and wide international market acceptance for its
Accsys Technologies is a chemical modified wood output. As well as successful capex execution, the sales and marketing
technology company focused on the
development and commercialisation of challenge is to pull through demand to absorb newly available capacity and develop licence
a range of transformational partners. Management has previously stated long-term market potential of 1m m3 pa of
technologies based on the acetylation
of solid wood and wood elements for Accoya wood and 1.6m+ m3 of Tricoya panel products.
use as high performance,
environmentally sustainable
construction materials. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m
Actual 8.8 (7.5) 77.5 2019 75.2 0.9 (6.2) (0.38) N/A N/A
Relative* 10.0 (7.8) 41.8 2020 90.9 7.0 (2.2) (0.08) N/A 116.6
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Toby Thorrington 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Alkane Resources (ALK)
Price: A$0.81
Market cap: A$482m INVESTMENT SUMMARY
Market ASX
Alkane exceeded its (already twice increased) production guidance of 50–55koz for FY21
by 1,958oz, at an AISC of A$1,320/oz (cf guidance of A$1,400–1,550/oz). At the same time,
Share price graph (A$)
exploration at Tomingley's San Antonio and Roswell extensions has led to an extension of
the mine's life from CY23 until at least CY31 at higher levels of production (eg up to 115koz
pa) and lower levels of cost (eg AISC of A$1,350–1,450/oz) than currently.
INDUSTRY OUTLOOK
Our most recent valuation of Alkane attributes 35c/share in value to Tomingley plus net
cash. To this may then be added 1) 6c for the eventual development of the Roswell
underground extension, 2) 12c given the current level of the gold price, 3) 4c for residual
resources, 4) 3c for ongoing exploration success, 5) 9c for ALK's investments in Calidus
Company description and Genesis and 6) up to 61c for exploration at Boda (where drilling has recently identified
Alkane Resources has two main shallow, high grade cemented breccia plus a potential feeder structure to the porphyry
assets in Central West New South
Wales: 1) the Tomingley gold mine, system).
where recent exploration has
increased the mine life by at least eight
years, from FY23 to FY31, and 2) its
Boda prospect at Northern Molong,
which is shaping up to be a tier 1
alkalic porphyry district. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m
Actual (17.3) (29.3) (41.3) 2020 72.5 29.4 20.6 2.56 31.6 N/A
Relative* (16.0) (30.3) (53.5) 2021 127.8 70.5 46.3 5.35 15.1 N/A
* % Relative to local index
Analyst 2022e 134.3 52.9 28.4 3.34 24.3 N/A
Charles Gibson 2023e 130.8 59.9 34.1 4.01 20.2 N/A
Edison Insight | 30 September 2021 9Sector: Technology Allied Minds (ALM)
Price: 24.9p
Market cap: £60m INVESTMENT SUMMARY
Market LSE
Having settled around 25p, ALM's shares trade at a signficant discount to our FY20
adjusted NAV per share of 42.5p. Despite this, Allied Minds’ board is increasingly confident
Share price graph (p)
of delivering VC-like returns. In particular, management continues to believe in the potential
for significant further value uplift from Federated Wireless as it continues to make good
progress. Management continues its share buyback programme and expects to announce
its H121 results on 6 October 2021. In a narrowing portfolio, funding rounds are still
anticipated for Federated Wireless and BridgeComm. Given limited cash resources (H121:
US$17.8m parent net cash), management will need to be cautious about its level of support
for future rounds.
INDUSTRY OUTLOOK
Company description COVID-19 fears have largely abated, with sustained tech valuations and amidst a robust
Allied Minds is a technology funding environment. Investors have preferred stocks that demonstrate portfolio progress
investment company with a
concentrated portfolio focused on and offer the opportunity for meaningful exits in a realistic timeframe and upside potential.
early-stage spin-outs from US federal
government laboratories and
universities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (2.4) 21.5 (21.0) 2019 2.7 (47.2) 49.5 20.97 1.6 N/A
Relative* (1.3) 21.1 (36.9) 2020 0.5 (12.9) (54.5) (21.49) N/A N/A
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Richard Williamson 2022e N/A N/A N/A N/A N/A N/A
Sector: Mining Alphamin Resources (AFM)
Price: C$0.89
Market cap: C$1063m INVESTMENT SUMMARY
Market JSE , TSX-V
Alphamin offers rare exposure to a metal that both Rio Tinto and MIT regard as being the
most likely to benefit from the electrification of the world economy. Moreover, its Bisie mine
Share price graph (C$)
in the DRC is hitting its stride at just the moment that the tin price is experiencing its biggest
squeeze in decades, providing it with a golden opportunity to repay debt and potentially
make distributions to shareholders from as early as next year. Production from Q221-Q222
will be temporarily affected by lower mined grades. EBITDA for Q221 was nevertheless
almost three times last year's level on account of the strong tin price.
INDUSTRY OUTLOOK
Prior to Q221 results, we estimated a value for Alphamin of US$0.615 (or C$0.743) per
share at a tin price of US$29,815/t. At a long-term tin price of US$23,425/t however, we
Company description estimated a value of US$0.424 (C$0.512) per share, rising to as high as C$1.162/share in
Alphamin Resources owns (84.14%) the event of successful exploration expanding and/or extending the life of operations (see
and operates the Mpama North tin
mine in the North Kivu province of the recent exploration updates).
DRC with a grade of c 4.5% Sn (the
world’s highest). Accounting for c 4%
of the world’s mined supply, it is the
second largest tin mine in the world
outside China and Indonesia.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 21.9 34.9 295.6 2019 27.2 8.5 (5.8) 0.8 87.9 N/A
Relative* 22.8 33.6 208.5 2020 187.4 58.3 15.7 (1.1) N/A 41.2
* % Relative to local index
Analyst 2021e 318.0 180.7 148.6 8.9 7.9 7.7
Charles Gibson 2022e 271.0 140.9 114.9 7.4 9.5 7.0
Edison Insight | 30 September 2021 10Sector: Technology Applied Graphene Materials (AGM)
Price: 27.9p
Market cap: £18m INVESTMENT SUMMARY
Market AIM
Applied Graphene (AGM) has announced that its ongoing customer engagements have
resulted in the launch of four further customer products enhanced with AGM's graphene
Share price graph (p)
nanoplatelets. While these customers do not wish to be named for commercial reasons, the
customer product launches provide further evidence of increasing acceptance of AGM's
dispersion-based products and of the effectiveness of the company's approach of close
technical collaboration with customers to help them capture the unique benefits of graphene
in their end products.
INDUSTRY OUTLOOK
AGM commenced trading on the US OTCQX Best Market with the ticker APGMF at the end
of July. The listing, which was not a capital raise, provides AGM with exposure to a wider
Company description audience of potential investors by easing cross-border trading for those based in the United
Applied Graphene Materials (AGM) States.
develops graphene dispersions that
customers use to enhance the
properties of coatings, composites and
functional materials. It also
manufactures high-purity graphene
nanoplatelets using a proprietary
process based on sustainable, readily
available raw materials instead of Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF
graphite.
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m
Actual (0.4) (5.4) (19.1) 2019 0.1 (4.6) (4.8) (7.9) N/A N/A
Relative* 0.7 (5.7) (35.4) 2020 0.1 (3.1) (3.5) (6.1) N/A N/A
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Sector: General industrials ArborGen Holdings (ARB)
Price: NZ$0.30
Market cap: NZ$150m INVESTMENT SUMMARY
Market NZSX
ArborGen’s FY21 results were US$1m ahead of our expectations at the US GAAP EBITDA
level (at US$8.1m after central costs, which was above FY20’s US$7.7m comparable) but
Share price graph (NZ$)
slightly lower at the PBT level including lower R&D and other adjustments. The US in
particular – and South America to a lesser extent – showed some revenue impact from the
COVID-19 pandemic but underlying operations are strengthening through investment,
self-help actions and growing availability of higher value seeds which are expected to
facilitate a ramp up in seedling sales and revenue growth in future periods. The August
ASM included FY22 US GAAP EBITDA (pre central costs) of US$13–14m and the
previously announced strategic review is ongoing.
INDUSTRY OUTLOOK
Company description Prior to the COVID-19 outbreak, the economic growth outlook in each of its core countries,
ArborGen Holdings (formerly Rubicon) the United States, Brazil, New Zealand and Australia, was either good or improving,
is an NZX-listed investment company.
Its subsidiary ArborGen is the world’s according to OECD data. At this point, the primary end-markets served by its plantation
largest integrated developer, forestry customer base (ie construction and the pulp and paper industries) were in a positive
commercial manufacturer and supplier
of advanced forestry seedlings with cyclical phase.
operations in the United States, Brazil
and Australasia.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (7.7) 36.4 114.3 2020 56.9 7.7 6.0 1.4 15.2 22.0
Relative* (8.3) 30.5 93.5 2021 52.7 8.1 8.9 1.9 11.2 10.7
* % Relative to local index
Analyst 2022e 62.1 12.0 12.1 2.4 8.8 8.2
Toby Thorrington 2023e 69.3 13.4 12.9 2.6 8.2 8.0
Edison Insight | 30 September 2021 11Sector: Travel & leisure Aspire Global (ASPIRE)
Price: SEK77.60
Market cap: SEK3609m INVESTMENT SUMMARY
Market Nasdaq FN Premier
Aspire Global's (AG's) Q221 strong organic revenue growth of 21.6% y-o-y and the
contribution of Sports (consolidated from the start of Q420) produced another all-time high
Share price graph (SEK)
in quarterly revenue and EBITDA, with an enhanced margin of 17.7% versus 16.1% in
Q220. There was quarter-on-quarter revenue growth across all divisions. We upgraded our
EBITDA forecasts for FY21 and FY22 by 7%.
INDUSTRY OUTLOOK
AG is exposed to favourable growth trends. First, the online gaming market is enjoying
structural growth due to increasing global wealth, internet/mobile penetration and regulation.
The geographic markets to which AG currently has some exposure are forecast to grow
gross gaming revenue (GGR; ie customer wagers less their winnings) from US$37.6bn in
Company description 2019 to US$69.1bn by 2025 (source: H2 Gambling Capital). Secondly, online gaming
Aspire Global is a leading B2B markets are highly competitive with differing levels of regulation. These combine to make
provider of iGaming solutions, offering
partners all relevant products to the operation of an online gaming brand challenging, particularly when working across many
operate a successful iGaming brand. It geographies.
also owns/offers B2C online gaming
brands, including Karamba. Aspire
operates in 30 regulated markets
across Europe, the US, South America
and Africa. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m
Actual 5.3 27.0 104.5 2019 131.4 21.7 17.9 32.7 23.3 77.9
Relative* 9.0 21.7 50.9 2020 161.9 27.1 18.4 32.6 23.4 12.0
* % Relative to local index
Analyst 2021e 214.9 36.5 32.4 59.8 12.8 9.1
Russell Pointon 2022e 241.4 42.7 35.7 68.5 11.1 8.5
Sector: Financials Attica Bank (TATT)
Price: €4.80
Market cap: €37m INVESTMENT SUMMARY
Market Athens Stock Exchange
There were some encouraging signs in Attica’s Q221 results, with good momentum in core
revenue while impairments have now been at relatively low levels for two quarters. But
Share price graph (€)
Attica needs to gain scale before it can be profitable and needs more equity: Attica’s
statutory CET1 is now only 3.1% (3.7% in Q121). Attica is pushing forward with its capital
strategy. The DTA to DTC conversion has been activated, which will result in €151m (about
500bp of H121 risk-weighted assets, RWA) of equity being injected while equity raising of
up €240m for this year has been approved.
INDUSTRY OUTLOOK
Attica has a market cap of c €40m and although the shares do reflect the ongoing
restructuring risk, we believe there is a risk of much shareholder dilution. However, if the
Company description securitisations and capital raisings are successful, Attica will likely have a healthy balance
Attica Bank is the fifth-largest bank in sheet that would allow it to pursue its strategy of doubling the loan book in three years by
Greece, with assets of €3.5bn and 55
branches centred around Athens. It focusing on the energy, green and infrastructure business loan segments. We are
has a 2% market share of business suspending our forecasts and valuation until there is greater clarity on the outcomes of
banking and around 2% market share
of most retail banking products. these capital actions.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m
Actual (52.9) (51.6) (52.5) 2019 71.6 N/A (23.6) 1.08 444.4 N/A
Relative* (51.1) (49.6) (66.3) 2020 69.2 N/A (284.7) (66.18) N/A N/A
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Pedro Fonseca 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 30 September 2021 12Sector: Mining Auriant Mining (AUR)
Price: SEK3.81
Market cap: SEK376m INVESTMENT SUMMARY
Market NASDAQ OMX First North
Relative to its earlier heap leach operation, Auriant's new Tardan CIL plant has increased
metallurgical recoveries by c 40pp and reduced cash costs by c 25% (to c US$700/oz) to
Share price graph (SEK)
result in a c 4x increase in EBITDA and a c 3x increase in operational cash flows in FY20 cf
FY19. Currently, it is in the process of completing a definitive feasibility study on
Kara-Beldyr and, combined, the two mines are expected to achieve management’s goal of
3t (96.5koz) of gold output pa in c FY25. Confirmatory drilling is also underway with a view
to accelerating the development of Solcocon.
INDUSTRY OUTLOOK
After adjusting for an under-sale of gold relative to production during the period, we estimate
that underlying pre-tax profits were 3% above our prior forecast in Q221. Auriant has now
Company description repaid all of its high cost debt and, assuming that it raises US$20m in equity (NB Subject to
Auriant Mining is a Swedish junior gold the gold price, cash flows etc and could be less) at SEK3.84/share within the next year, we
mining company focused on Russia. It
has two producing mines (Tardan and value the company at US$1.59/share (SEK13.61/share).
Solcocon), one advanced exploration
property (Kara-Beldyr) and one early
stage exploration property
(Uzhunzhul).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (7.5) (13.2) (34.8) 2019 29.8 7.2 (2.2) (1.3) N/A 4.7
Relative* (4.3) (16.8) (51.9) 2020 53.4 31.2 16.6 13.7 3.2 1.6
* % Relative to local index
Analyst 2021e 50.4 24.2 12.4 10.3 4.3 1.9
Charles Gibson 2022e 55.6 34.9 22.5 11.7 3.8 1.9
Sector: Aerospace & defence Avon Protection (AVON)
Price: 2106.0p
Market cap: £653m INVESTMENT SUMMARY
Market LSE
The more focused Avon Protection has an unchanged strategy to grow the core organically,
supported by selective product development and value-enhancing M&A. The US
Share price graph (p)
acquisitions in 2020 extended the product portfolio and deepened customer engagement.
H121 revenues grew 41% but H221 has seen DoD infill order deferrals and supply chain
disruption that led management to cut FY21 and FY22 revenue guidance to $245–260m
and $320–340m respectively, with adjusted EBITDA margins of 17–18% in FY21. The latest
body armour contract updates indicate the company is on track for stronger organic growth
in FY22.
INDUSTRY OUTLOOK
Avon's long-standing, multi-level relationship with the US DoD is important to the group and
Company description the end market backdrop is supportive. The focus on higher-price sophisticated mask
Avon Protection designs, develops and systems is proving successful, with M50 mask system replenishment and the addition of
manufactures personal protection
products for Military and First helmets and body armour provides further opportunities. We believe that Avon has the
Responder markets. Its main market position, product portfolio and strategic ambition to continue its growth through
customers are national security
agencies such as the US DOD and c organic and inorganic means.
90% of sales are from the United
States.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 10.6 (21.1) (49.1) 2019 162.0 36.2 28.3 84.9 34.2 100.5
Relative* 11.7 (21.3) (59.4) 2020 213.6 52.3 36.0 96.2 30.2 N/A
* % Relative to local index
Analyst 2021e 248.0 43.5 25.6 66.7 43.5 261.1
Andy Chambers 2022e 328.9 71.5 46.8 122.2 23.7 10.5
Edison Insight | 30 September 2021 13Sector: Travel & leisure bet-at-home (ACXX)
Price: €24.95
Market cap: €175m INVESTMENT SUMMARY
Market Xetra
Q221 results (revenue declined by c 12%) reflected the first signs of the revenue weakness
in Germany that led to the recent downgrade to management’s guidance for FY21. H221
Share price graph (€)
will bring further declines as the lower revenues in Germany are compounded by no
revenue from Poland. FY22 should see improving operational momentum in Germany and
potential new licences in the Netherlands and Poland may improve the growth outlook. The
balance sheet remains strong but the legal position in Austria creates near-term uncertainty
for the level of potential shareholder returns. We no longer provide estimates for BAH.
INDUSTRY OUTLOOK
According to H2 Gambling Capital, the European online sports betting and gaming market is
expected to grow 7.4% CAGR between 2019 and 2024. BAH operates mainly in 'grey'
Company description markets (no formal regulation but not illegal), which are characterised by strong cash flow,
Founded in 1999, bet-at-home is an but also carry commensurately higher regulatory risks. Its main market, Germany, is
online sports betting and gaming
company with c 300 employees. It is becoming fully regulated in FY21.
licensed in Malta and headquartered in
Dusseldorf, Germany. Since 2009
bet-at-home has been part of Betclic
Everest, a privately owned gaming
company.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m
Actual (8.6) (35.2) (29.3) 2019 143.3 35.2 33.1 425.53 5.9 5.8
Relative* (6.4) (35.0) (42.6) 2020 126.9 30.9 28.8 331.92 7.5 9.6
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Russell Pointon 2022e N/A N/A N/A N/A N/A N/A
Sector: Technology BluGlass (BLG)
Price: A$0.03
Market cap: A$33m INVESTMENT SUMMARY
Market ASX
BluGlass has pivoted its innovative compound semiconductor manufacturing technology
onto the development of high performance laser diodes which it intends to start shipping at
Share price graph (A$)
scale over the coming year. Entering the laser diode market represents a route for BluGlass
to grow revenues much more rapidly. Based on industry sources, management estimates
that the global laser diode market will grow from A$369m in CY21 to A$849m in CY26,
driven by demand for lasers in industrial, display, biotech, scientific and lighting markets.
Management’s goal is to capture 8% of the laser diode market by calendar year 2026,
potentially generating almost A$75m revenues annually.
INDUSTRY OUTLOOK
BluGlass recently appointed laser diode executive Jim Haden as president. Jim has held
Company description senior executive and advisory roles at several of BluGlass’s prospective customers and
BluGlass is an Australian technology competitors, including Kyocera SLD, nLight, Coherent and JDS Uniphase. His operational
company that is developing and
commercialising a breakthrough and technical leadership expertise, together with a track record of solving technical
compound semiconductor technology challenges, delivering products to market and driving transformational revenue growth, will
for the production of high efficiency
devices such as laser diodes, light be invaluable as BluGlass transitions from R&D to commercialisation.
emitting diodes (LEDs) and
micro-LEDs.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m
Actual 6.5 0.0 (56.6) 2019 0.4 (5.1) (5.1) (1.21) N/A N/A
Relative* 8.2 (1.4) (65.6) 2020 0.7 (3.6) (4.8) (1.01) N/A N/A
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Anne Margaret Crow 2022e N/A N/A N/A N/A N/A N/A
Edison Insight | 30 September 2021 14Sector: Technology Boku (BOKU)
Price: 202.0p
Market cap: £597m INVESTMENT SUMMARY
Market AIM
Boku reported H121 results in line with its recent trading update and management believes
the company is on track to meet recently raised expectations for FY21. Building on the
Share price graph (p)
success of helping merchants gain mobile-centric customers through its direct carrier billing
service, Boku has launched its Mobile First (M1ST) network to provide a single integration
to multiple mobile payment methods. With mobile-based payments already outpacing
traditional card-based payments in Asia, and growing fast elsewhere, this provides a simple
and efficient way for merchants to address the widest range of customers.
INDUSTRY OUTLOOK
Direct carrier billing (DCB) is an alternative payment method that uses a consumer’s mobile
bill as the means to pay for digital content or services such as games, music or apps. Boku
Company description is the dominant DCB player, serving the largest merchants such as Apple, Sony, Facebook,
Boku operates a billing and identity Spotify and Netflix, and is expanding into alternative payment methods such as digital
verification platform that connects
merchants with mobile network wallets. Boku's identity verification service enables merchants to sign up and transact with
operators in more than 80 countries. It users while meeting regulatory requirements and avoiding fraud.
has c 300 employees, with its main
offices in the United States, the UK,
Estonia, Germany and India.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 4.1 20.6 120.8 2019 50.1 10.7 4.1 1.31 212.4 N/A
Relative* 5.2 20.3 76.4 2020 56.4 15.3 11.0 3.21 86.7 N/A
* % Relative to local index
Analyst 2021e 68.9 19.6 14.5 3.95 70.4 N/A
Katherine Thompson 2022e 79.0 22.0 15.3 4.10 67.9 N/A
Sector: Travel & leisure Borussia Dortmund (BVB)
Price: €5.16
Market cap: €569m INVESTMENT SUMMARY
Market FRA
Borussia Dortmund announced an equity increase in order to repay financial debt and
provide financial stability in the event of further losses that may arise from COVID-related
Share price graph (€)
restrictions. Estimated gross proceeds are €86.5m from c 18.4m new shares (currently 92m
shares in issue) at a price of €4.70, with an initial subscription ratio for existing shareholders
of one new share for five existing shares. Any unsubscribed shares will be offered in a
private placement and the offer is fully underwritten. Prior to the announcement the shares
were trading at c €6.20. The company published its full financial statements on 28
September.
INDUSTRY OUTLOOK
Unsustainable spend on wages and transfers is increasingly being penalised by UEFA
Company description Financial Fair Play requirements. A 'break-even requirement' obliges clubs to spend no
The group operates Borussia more than they generate over a rolling three-year period. Sanctions vary from a warning to a
Dortmund, a leading football club,
placed third in the Bundesliga in ban from UEFA competition, fines and a cap on wages and squad size.
2020/21, DFB Super Cup winners in
2019/20, and DFB-Pokal winners in
2020/21. The club has qualified for the
Champions League in nine of the last
10 seasons.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m
Actual (11.8) (15.1) (5.2) 2019 370.3 116.0 101.5 87.95 5.9 15.7
Relative* (9.6) (14.8) (23.1) 2020 370.2 63.0 45.6 46.77 11.0 160.2
* % Relative to local index
Analyst 2021e 335.2 32.3 16.1 17.50 29.5 107.7
Russell Pointon 2022e 369.9 80.8 63.9 62.47 8.3 23.9
Edison Insight | 30 September 2021 15Sector: Oil & gas Brooge Energy (BROG)
Price: US$9.50
Market cap: US$1041m INVESTMENT SUMMARY
Market NASDAQ
Brooge Energy is an independent oil and refined oil products storage and service provider
located in the Port of Fujairah, in the UAE. The company is developing its terminal’s storage
Share price graph (US$)
capacity in phases and differentiates itself from competitors by providing fast order
processing times and high accuracy blending services with low oil losses using the latest
technology. Phase I has been operational since 2017 and Phase II started operations in
September 2021. Additionally, Brooge is moving towards Phase III with a positive feasibility
study (preparing to secure project funding and contracts for storage capacity); this will
increase oil storage capacity by 2.5x once operational (2023/24). In Q221 Brooge renewed
contracts for 58% of its Phase I storage capacity at a 70% premium to the starting fixed
lease storage price of H120 contracts, as it benefitted from high oil storage demand. We
expect further increases in storage fees, that would support margin increase. Our valuation
Company description stands at $10.3/share (currently under revision post H121 results).
Brooge Energy is an oil storage and
service provider strategically located in INDUSTRY OUTLOOK
the Port of Fujairah in the United Arab
Emirates (UAE). Current storage The COVID-19 pandemic highlighted the importance of oil storage infrastructure and the
capacity stands at 399,324m3 and will
be increased by 602,064m3 once vital role the business plays in the logistics and trading of crude oil and refined oil products.
Phase II is completed.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 12.6 4.4 (5.8) 2019 44.0 37.0 (75.0) (85.5) N/A 15.8
Relative* 13.3 0.0 (31.3) 2020 42.0 29.0 17.0 19.5 48.7 22.6
* % Relative to local index
Analyst 2021e 68.0 54.0 29.0 26.4 36.0 26.7
Marta Szudzichowska 2022e 130.0 112.0 88.0 80.0 11.9 10.2
Sector: Oil & gas Canacol Energy (CNE)
Price: C$3.50
Market cap: C$625m INVESTMENT SUMMARY
Market TSX
Canacol offers investors a pure play on the Colombian natural gas market where it holds a c
20% market share of national demand. A newly secured gas sales contract will connect the
Share price graph (C$)
company to interior markets via a new pipeline to be completed by 2024. It is focusing on
converting its 5.7tcf of net unrisked prospective resource into reserves, with its 2021
exploration capex the largest in its history. In 2020, Canacol replaced 61.9bcf of production
with 75bcf of reserves (a reserves replacement ratio (RRR) of 122%). It is targeting a RRR
of 200% in 2021. Up to 12 wells are planned this year at an estimated cost of c $66m, along
with a substantial 655km2 3D seismic programme. The most recent discovery well, Aguas
Vivas 1, encountered the thickest net pay yet of 412ft. The historical success rate of over
80% underpinned by AVO analysis of 3D seismic keeps risks low, while the planned capex
and cash dividends are covered by Canacol’s existing cash and cash generation.
Company description
INDUSTRY OUTLOOK
Canacol Energy is a natural gas
exploration and production company
primarily focused on Colombia. The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the
absence of LNG imports, incremental piped gas or the development of recent deepwater
discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to
10 years’ duration with inflation clauses to protect cash flows.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 15.5 2.0 (0.9) 2019 219.5 162.8 64.7 19.21 14.4 4.5
Relative* 16.3 1.1 (22.7) 2020 246.8 184.6 79.8 (1.27) N/A 3.3
* % Relative to local index
Analyst 2021e 237.0 193.1 88.9 31.68 8.7 3.1
Ian McLelland 2022e 287.9 240.4 125.9 48.05 5.8 2.5
Edison Insight | 30 September 2021 16Sector: General industrials Carr's Group (CARR)
Price: 153.0p
Market cap: £143m INVESTMENT SUMMARY
Market LSE
Carr’s Group has provided an update for the 20-week period ended 17 July 2021, which
notes that FY21 performance is expected to be moderately ahead of management
Share price graph (p)
expectations. We have raised our FY21 adjusted PBT estimate by 4.5%, leaving FY22 and
FY23 estimates unchanged.
INDUSTRY OUTLOOK
Strong performances from both the Speciality Agriculture and Agricultural Supplies divisions
have continued into H221, supported by buoyant livestock and milk prices and an
improvement in UK farmer confidence generally as the prospect of a no-deal Brexit
disappeared. The H221 Engineering divisional recovery that management expected has
been realised, supported by contracts from the nuclear and defence markets, a recovery in
Company description the oil & gas market, and reduced overhead costs resulting from minor restructuring
Carr's Group's Agriculture divisions programmes at the end of FY20 and during H121 following the appointment of new CEO,
serve farmers in the North of England,
South Wales, the Welsh Borders and Hugh Pelham.
Scotland, the US, Germany, Canada
and New Zealand. The Engineering
division offers remote handling
equipment and fabrications to the
global nuclear and oil and gas
industries. Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m
Actual (5.6) 9.3 45.7 2019 403.9 23.8 18.0 14.2 10.8 10.3
Relative* (4.6) 9.0 16.4 2020 395.6 23.4 14.9 11.8 13.0 7.2
* % Relative to local index
Analyst 2021e 440.0 24.2 16.1 11.4 13.4 6.1
Anne Margaret Crow 2022e 447.0 24.7 16.5 12.7 12.0 8.3
Sector: Financials Cenkos Securities (CNKS)
Price: 84.5p
Market cap: £48m INVESTMENT SUMMARY
Market AIM
H121 saw continued strength in UK equity market activity levels as corporate investment
and M&A activity revived with the progressive easing of lockdown restrictions. Reflecting the
Share price graph (p)
strength of its team, Cenkos was able to expand its client base (by six to 100) and carried
out 16 transactions, raising £0.58bn for clients in the period. It reported H121 revenue of
£18.2m, 37% ahead of H120 and, after a 40% increase in staff and administrative
expenses, underlying operating profit increased by 44% to £2.8m. Lower restructuring and
incentive plan costs left reported pre-tax profit up 124% at £1.7m and diluted EPS 146%
higher at 2.7p. The interim dividend is 1.25p, up from 1.0p for H120.
INDUSTRY OUTLOOK
After a strong first half, Cenkos has remained active with corporate transactions completing
Company description two IPOs and eight other transactions to date. The pipeline of further transactions is good
Cenkos is a leading UK securities although, as always, subject to changing market conditions. Reported earnings in H221
business, which acts as nominated
advisor, sponsor, broker and financial should benefit from the likely absence of restructuring costs. Cenkos is investing selectively
adviser to companies, focusing on in staff and systems, which should support service levels to clients and efforts to increase
entrepreneurial growth companies and
investment trusts. Since inception in the client count further.
2005 it has raised more than £21bn in
equity capital for corporate clients,
which stood at 100 at end June 2021. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m
Actual 6.3 4.3 79.8 2019 25.9 0.4 0.1 0.1 845.0 N/A
Relative* 7.4 4.0 43.6 2020 31.9 2.6 2.3 3.3 25.6 7.6
* % Relative to local index
Analyst 2021e N/A N/A N/A N/A N/A N/A
Andrew Mitchell 2022e N/A N/A N/A N/A N/A N/A
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