EDISON INSIGHT Strategic perspective | Company profiles - May 2021 Published by Edison Investment Research
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EDISON INSIGHT Strategic perspective | Company profiles May 2021 Published by Edison Investment Research
Contents
Global perspectives 2
Company profiles 9
Edison dividend list 68
Stock coverage 69
Prices at 21 May 2021 Published 27 May 2021
US$/£ exchange rate: 0.7131 NOK/£ exchange rate: 0.0860
€/£ exchange rate: 0.8644 CHF/£ exchange rate: 0.7877
C$/£ exchange rate: 0.5854 ZAR/£ exchange rate: 0.0503
A$/£ exchange rate: 0.5537 HUF/£ exchange rate: 0.0024
NZ$/£ exchange rate: 0.5143 KZT/£ exchange rate: 0017
SEK/£ exchange rate: 0.0852 JPY/£ exchange rate: 0.0065
Welcome to the May edition of Edison Insight. We now have c 400 companies under coverage, of which
117 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 there has been a
remarkable recovery in equity markets over the past six months and investors should take care not to
develop expectations of both having their cake and eating it. If COVID-19 opened the floodgates on
both monetary and fiscal stimulus, then as vaccines draw the episode to a close the floodgates will also
close once economic pressures and risks have ebbed. He believes investors should distinguish
between share price performance driven by earnings recovery and that driven by declining risk premia.
In the case of the former, which applies to the cyclical and value segments of the market, improving
fundamentals are likely to offset the higher discount rates expected over the next two years. Despite the
depth of the COVID-19 recession, credit market spreads are now close to 20-year lows. Credit spreads
are tightly linked to the equity risk premium and demonstrate how favourable financial market conditions
are for issuers rather than investors. Investors should therefore remain focused on sectors and
companies which trade at least within sight of historical valuation norms and which stand to benefit from
upgrades provided the COVID-19 recovery remains on track. Growth stocks are likely to continue to
suffer from weaker earnings momentum and the expectation of rising discount rates.
A steady rather than sharp convergence between growth and value sector valuations, due to the
commitment to gradualism and predictability by the world’s central banks is likely in our view. While
recent high inflation figures bear watching, they are not at present a cause for concern. We remain
neutral on global equities in aggregate. The opportunities on offer within the value segment of the
market remain offset by the relatively extended valuations of growth stocks. In accordance with our view
that government bond yields are on a rising trajectory, and corporate debt spreads are close to 20-year
lows, we remain underweight both government and corporate bonds.
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 | 27 May 2021 1Global perspectives: A temporarily high plateau
Analyst
There has been a remarkable recovery in equity markets over the past six Alastair George
months. However, investors should take care not to develop expectations of both +44 (0)20 3077 5700
having their cake and eating it, in our view. If COVID-19 opened the floodgates on institutional@edisongroup.com
both monetary and fiscal stimulus, then as vaccines draw the episode to a close
the floodgates will also close once economic pressures and risks have ebbed.
We believe investors should distinguish between share price performance
driven by earnings recovery and that driven by declining risk premia. In the
case of the former, which applies to the cyclical and value segments of the market,
improving fundamentals are likely to offset the higher discount rates expected over
the next two years.
Despite the depth of the COVID-19 recession, credit market spreads are now
close to 20-year lows. This is a remarkable outturn given the fact that GDP in
developed markets remains so far below trend and is a testament to the extensive
policy support for the corporate sector. Nevertheless, credit spreads are tightly
linked to the equity risk premium and demonstrate how favourable financial market
conditions are for issuers rather than investors.
Continuing with the value theme. We believe investors should remain focused
on sectors and companies which trade at least within sight of historical valuation
norms and which stand to benefit from upgrades provided the COVID-19 recovery
remains on track. In our view, growth stocks are likely to continue to suffer from
weaker earnings momentum and the expectation of rising discount rates.
Letting air out of the bubble slowly – a temporarily high plateau rather than
peak in valuations. We expect a gradual convergence between growth and value
sector valuations due to the commitment to gradualism and predictability by the
world’s central banks. While recent high inflation figures bear watching, they are
not at present a cause for concern, in our view.
We remain neutral on global equities in aggregate. The opportunities on offer
within the value segment of the market remain offset by the relatively extended
valuations of growth stocks. In accordance with our view that government bond
yields are on a rising trajectory, and corporate debt spreads are close to 20-year
lows, we remain underweight these asset classes.
Edison Insight | 27 May 2021 2A temporarily high plateau
Amid strongly bullish sentiment in asset markets, we believe investors should take care not to
develop expectations of both having their cake and eating it. If COVID-19 opened the floodgates on
both monetary and fiscal stimulus, then as vaccines draw the episode to a close the floodgates
should also close once economic pressures and risks have ebbed. The continued progress of
vaccination programmes in developed markets brings forward the advent of a return to relative
normality, including a more ‘normal’ regime for monetary policy.
We believe investors should therefore distinguish between share price performance driven by
earnings recovery and that driven by declining risk premia and temporarily low interest rates. In the
case of the earnings recovery, which applies to the cyclical and value segments of the market,
improving fundamentals are likely to offset the higher discount rates expected over the next two
years. In the case of the latter, while macroeconomic policies are supportive for now, a faster than
expected economic recovery should also give rise to expectations that over time expansionary
policies will be normalised – and at least no later than previously envisaged.
Exhibit 1: Market performance since first results of the Pfizer COVID-19 vaccine trial
35%
30%
2020
November 2021
25%
from 99 November
20%
15%
10%
gain since
5%
% gain
%
0%
Japan China Brazil US Germany France UK Italy Spain India Netherlands
Source: Refinitiv. Note: Returns in USD 9 November 2020 to 25 May 2021
While there are still significant restrictions on international movement of travellers from an economic
perspective an end appears to be in sight in the war on COVID-19. The virus may remain endemic
within the global population, but the advent of effective vaccination programmes, in those
developed nations fortunate enough to have them, has enabled the release of lockdowns. Many
developed nations will soon follow the lead of the UK and Israel in having a large proportion of the
adult population vaccinated. The ending of lockdowns allows the full impact of previously
announced fiscal and monetary stimulus programmes to be delivered. Provided unemployment
fears are minimised, there is additional economic support from the release of accumulated savings
among consumers.
However, even as developed market economies appear set for a recovery to previous GDP trends
over the next 18 months, we are becoming increasingly mindful of the relatively narrow opportunity
set for long-term investors. At the lower end of the risk spectrum to the highest, expected returns
appear compressed by central bank policy and the return to bullish investor sentiment.
Short-term interest rates remain close to record low levels. We expect this to remain the case until
at least 2023 in the United States and eurozone. Furthermore, long-term bond yields still offer scant
reward for the prospect of higher inflation in future years, let alone inflation risk. There may be a
debate about the degree of extra inflation risk at present, but the switch to synchronised fiscal
easing and average inflation targeting in the United States means the upside risk to inflation in the
medium term is clearly higher than it was prior to COVID-19.
Edison Insight | 27 May 2021 3The extra yield available for taking on corporate credit risk has narrowed to lows not seen since pre
COVID-19, leaving slim pickings for credit investors at this time. This would not normally be the
case so close to such a deep recession, demonstrating again the impact of perceived and actual
central bank support. Similarly, in aggregate global equity markets are now trading above long-term
valuation norms following the rally from the lows of March 2020.
Exhibit 2: Corporate credit spreads now at 20-year lows
16.0
14.0
12.0
10.0
Spread %
8.0
6.0
4.0
2.0
0.0
2004 2007 2010 2013 2016 2019
Source: Refinitiv, Edison Investment Research calculations
Therefore, following a spectacular rally in both equities and credit it is becoming increasingly
difficult to see the pace of gains in equity markets continuing. Markets exist to discount and
anticipate future developments and by the end of the summer, we believe attention will turn to the
inconvenient truth that a normalising economy should be synonymous with progress towards
normalising monetary and fiscal policy settings.
Exhibit 3: US and European forward price/book close to peak levels
30%
20%
Premium to P/bk average
10%
0%
-10%
-20%
-30%
-40%
2013 2014 2015 2016 2017 2018 2019 2020
Europe ex UK US UK
Source: Refinitiv, Edison Investment Research calculations. Note: Median premium to seven-year average FY2 price/book.
On the monetary side, we believe the debate will start in earnest in Q3 in the United States. We
continue to expect a steady tapering of QE over the course of 2022 from the current level of
US$120bn per month, with a ‘lift-off’ in US rates shortly thereafter. If we are correct, US yields may
already be on a rising track. In Europe, the timing may be delayed relative to the United States, as
recently confirmed by comments made by European Central Bank Governing Council member
Villeroy, but the direction of travel is the same. Inflation in the UK is somewhat higher and given the
recent pace of expansion interest rates may start to rise by Q122.
For fiscal policy, there is by necessity a significantly greater degree of uncertainty in modelling the
timing of what are essentially political decisions, rather than the technocratic monetary mandates
adhered to by central banks.
Nevertheless, we note the discussions between G7 nations on a global minimum corporate tax rate
of 15%. This now appears to be linked to the recognition that digital transactions are taxed closer to
where consumers reside rather than where the supplying corporation is tax resident. This would
Edison Insight | 27 May 2021 4address a key fiscal policy objective for European governments which have in many cases
benefited very little in terms of tax revenue from the growth of US e-commerce giants.
The Biden administration and the UK’s Chancellor have also been clear that US and UK
corporation tax rates will be increasing in coming years, breaking a multi-decade trend in ever-lower
corporate tax rates. This obviously has a direct impact on net earnings per share and P/E multiples.
However, combined with a minimum tax rate, the greatest impact may be on international
corporations with carefully optimised tax planning. Outside the corporate sector, although
governments will be looking to repair the damage to balance sheets from COVID-19, over time we
believe a policy of gradualism will be adopted. A sudden and unforced turn towards austerity seems
unlikely now that governments have crossed the fiscal Rubicon towards expansionary policy.
One tail risk that we believe remains ‘live’ is the incomplete nature of the fiscal and monetary union
within the eurozone. This may yet cause further ructions as we note the spread between Italian and
German government bonds has been on a rising trend during the past three months, although not
to levels indicating any kind of panic at this stage. We believe investors should however maintain a
careful watch for any evolving stress within the eurozone as now that the acute phase of the
COVID-19 crisis has passed the political will for European solidarity may be weakening, even as
southern European states remain hard-hit by the restrictions on travel within the bloc.
Exhibit 4: 10-year Italian government bond spread to German bunds
1.25
1.2
1.15
Spread % to bunds
1.1
1.05
1
0.95
0.9
0.85
0.8
Jan-21 Feb-21 Mar-21 Apr-21 May-21
Source: Refinitiv
Strong short-term data pushes 2021 earnings forecasts higher
In the short term, bullish investor sentiment is consistent with the immediate risks to the global
economy being balanced to the upside. Purchasing managers’ indices remain in expansionary
territory; in Europe new order inflows have surged at their fastest rate for 15 years during May while
in the UK, the PMI survey indicates the private sector is delivering the fastest output growth for
more than 20 years. UK PMI indices for both manufacturing and services were over 60 in May. At
66.1 the UK’s manufacturing index is at the highest since the early 1990s. In the US, the composite
flash PMI index has just made a new record of 68.1 supported by record levels for both services
and manufacturing.
Edison Insight | 27 May 2021 5Exhibit 5: 2021 consensus profits forecasts for global markets march higher
150.0
140.0
130.0
120.0
Index level
110.0
100.0
90.0
80.0
Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21
UK US Europe ex UK Emerging
Source: Refinitiv, Edison Investment Research calculations
Consensus earnings forecasts for 2021 have maintained their positive momentum in all the markets
we follow. The more cyclical sector weighting of the UK is evident in the fact that despite including
Brexit the UK has offered the strongest total upgrade over the past 12 months of over 40%. Refinitiv
consensus now calls for earnings growth of over 75% for the UK in 2021. Europe ex-UK has also
benefited from an improving outlook and a similar level of earnings growth expected for 2021.
However, on a relative basis the United States has lagged, with a larger weighting towards the less
cyclical technology sector.
We would highlight that the UK market still trades at only a modest premium to historic valuation
norms, unlike continental European and US markets which are at significant premiums. As the
relatively better recent earnings momentum shows, the UK’s more traditional energy, mining and
financials sector weighting is ideally positioned for the COVID recovery trade. Despite this, the
FTSE 100 is still well below its pre COVID-19 high.
Rising inflation yet to impinge on the outlook for monetary policy
Recent weeks have seen investors almost develop an obsession with a narrative whereby inflation
concerns might impinge on the current outlook for monetary policy. There is no doubt that price
inflation for a variety of hard, soft and industrial commodities has surged following the initial stages
of recovery from COVID-19. There have also been specific issues of product availability in certain
segments such as automotive semiconductors. Commentators have raised concerns that monetary
policy may have to be tightened sooner rather than later.
We believe this inflation narrative is convenient but represents an example of the easiest
explanation for some limited market volatility or noise in recent weeks, rather than the correct one.
The stop-start in global supply chains was bound to cause significant disruption in the acute phases
of both the slowdown and the recovery.
A year ago, short-dated oil futures briefly traded at negative prices, reflecting fears of over-supply
and full-to-capacity storage facilities. In hindsight, this was an overshoot with an element of panic
selling by investors. Similarly, the recent increases in commodity prices contain both elements of an
underlying shortage of demand and short-term supply disruptions, which could easily prove that in
hindsight the recent surge in measured inflation may also be an overshoot. For now, the US Fed’s
policymakers appear to share a benign interpretation of the recent US inflation data as recent
comments re-affirmed the view that short-term supply chain issues were at the root of the recent
move higher in US inflation.
Edison Insight | 27 May 2021 6Exhibit 6: US inflation rising but still consistent with US Fed projections
3.5%
3.0%
2.5%
2.0%
%
1.5%
1.0%
0.5%
0.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Source: Refinitiv, US personal consumption expenditures year-on-year change
US CPI inflation reached 4.2% year-on-year during April although energy costs contributed
significantly to the rise in the headline index, up 25% year-on-year. For us, the question is not rising
inflation, which is clearly not a surprise as the world gets back to work post COVID-19, but the
impact on policy. For the US, the Fed’s March 2021 Statement of Economic Projections disclosed
that it expects inflation to average 2.4% during 2021, before falling closer to target at 2.2% in 2022.
If we adjust for the base effects from last year and assume the current high monthly rate of inflation
continues unchanged from the April data, then we estimate US inflation would average 2.6% this
year. This is not so different from the Fed’s projections in March. We believe that unless current
inflation trends accelerate to the upside, they are unlikely to materially change the current outlook
for Fed policy. We believe investors will be (or at least should be) aware that the ‘peak’ in
developed market monetary stimulus was last year and in effect central banks are effectively on a
long pause in the first part of 2021, waiting for the economic recovery to broaden before carefully
signalling a slow and gradual tightening of policy from the beginning of 2022.
Therefore, provided the economic recovery continues to progress, outside liquidity-driven names,
where valuations have been pushed well above historic norms, the recovery in earnings forecasts is
likely to continue to support equity prices despite the modest increases expected in discount rates
over the next 12 months. Value-oriented sectors should have little to fear – US inflation at current
rates should not materially change the outlook for Fed monetary policy. Investors should instead be
firmly focused on the robustness or otherwise of earnings forecasts – and for now, vaccines are
delivering on their promise of enabling the relaxation of lockdowns.
Conclusion
We remain neutral on equities, balancing a degree of overvaluation for developed markets in
aggregate against the prospect of several years of very low interest rates and ongoing strong
earnings momentum which should be expected in the post-pandemic recovery. As each month
elapses however, the normalisation of monetary policy draws closer.
The underperformance of growth versus value indices since the first vaccines became available
late last year highlights that the liquidity floodgates are already on the turn. Yet for many investors, it
is often too difficult to act on valuations alone as the reasons for their historical tendency towards
mean-reversion tend to be more obvious in hindsight.
This time however, the theme of a concentration of upward earnings revisions in cyclical sectors,
together with the prospect of steadily tighter monetary policy, are relatively clear and evident in the
most recent data. We continue to expect value sectors to outperform growth with the primary risk to
this view not being any temporary rise in inflation but any re-introduction of social restrictions if
Edison Insight | 27 May 2021 7COVID-19 case numbers pass critical thresholds in nations where the majority of the population
has been vaccinated.
In accordance with our view that government bond yields are on a rising trajectory and corporate
debt spreads are close to 20-year lows, we remain underweight government bonds and corporate
credit.
Edison Insight | 27 May 2021 8Sector: Technology 1Spatial (SPA)
Price: 43.5p
Market cap: £48m INVESTMENT SUMMARY
Market AIM
Following a slew of recent contract wins in both the UK and United States so far this year,
May saw 1Spatial granted a UK patent for the modification and validation of spatial data,
Share price graph (p)
effectively protecting the use of its rules engine technology which lies at the heart of its
1Integrate and 1Data Gateway products. FY21 reported results (28 April) were comfortably
above the baseline set out in its trading statement with a positive outlook statement
referencing a growing pipeline and an 'accelerated win rate'. As a result we lifted our FY22
adjusted EPS forecast by 20% but see scope for further increases if current momentum
continues.
INDUSTRY OUTLOOK
The GIS industry is large and growing. P&S Market Research estimates the global GIS
Company description software, services and hardware market generates sales of US$9.0bn annually and will
1Spatial’s core technology validates, grow at a 10% CAGR to reach annual sales of US$17.5bn by 2023.
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 (5.4) 40.3 129.0 2020 23.4 3.2 0.8 0.58 75.0 83.8
Relative* (7.0) 32.2 89.4 2021 24.6 3.6 0.3 0.18 241.7 12.5
* % Relative to local index
Analyst 2022e 25.6 3.7 0.4 0.26 167.3 9.8
Dan Gardiner 2023e 27.2 4.2 0.8 0.53 82.1 9.6
Sector: Technology 4iG (4IG)
Price: HUF604.00
Market cap: HUF56776m INVESTMENT SUMMARY
Market Budapest stock exchange
4iG has continued to execute at pace, with a series of acquisitions that will transform the
group, culminating with DIGI Group, a leading telecoms services provider, set to close in
Share price graph (HUF)
Q321. The group continues to scale focused on three pillars: IT services; telecoms services;
and space and defence. On top of 39% FY20 revenue growth, management is guiding to c
39% growth in FY21 before the contribution from DIGI Group (FY20 revenues HUF70bn,
EBITDA HUF19bn). 4iG is fast growing, with a step-up in margins post DIGI Group and
offers an attractive dividend yield, yet trades on an FY21e P/E of c 11.4x, a 40%+ discount
to its peer group.
INDUSTRY OUTLOOK
Management anticipates continuing consolidation-driven growth, with organic growth
Company description supplemented by market share gains and accelerating market consolidation. It is positioning
4iG is one of the leading IT services the group to benefit from high-demand new technologies including digitalisation, blockchain,
and systems integrators in Hungary,
working with public sector clients, large deep learning, artificial intelligence, industry 4.0, cyber security and fintech.
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.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (HUFm) (HUFm) (HUFm) (HUF) (x) (x)
% 1m 3m 12m
Actual (4.1) (6.4) (9.6) 2019 41129.0 4075.0 3314.0 30.77 19.6 13.6
Relative* (11.7) (11.1) (30.8) 2020 57284.0 5051.0 4155.0 35.54 17.0 11.0
* % Relative to local index
Analyst 2021e 62076.0 5614.0 4632.0 42.38 14.3 9.9
Richard Williamson 2022e 70261.0 6955.0 5883.0 53.20 11.4 8.0
Edison Insight | 27 May 2021 9Sector: Media 4imprint Group (FOUR)
Price: 2875.0p
Market cap: £807m INVESTMENT SUMMARY
Market LSE
4imprint’s AGM statement indicated improving momentum in its order intake as the US
economy reopens. Having lifted our forecast numbers initially in March, we are now raising
Share price graph (p)
our FY21 revenue projection from $645m to $700m and our FY22e revenue by 6% to
$765m. The operating margin is also on a recovering trend. In FY21, we would expect the
group to put further funds into marketing spend to benefit from a strengthening trading
backdrop, constraining the recovery in operating margin. Thereafter we anticipate margins
reverting towards historical levels. The balance sheet remains strong, with end April net
cash of $44m.
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$6bn of PPE sales, without which sales would have fallen by 43% year-on-year.
FY20, 98% of revenues were Notwithstanding its market-leading position, 4imprint’s share is therefore less than 3%
generated in the United States and
Canada. (3.6% excluding PPE).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 24.7 20.3 31.0 2019 860.8 59.1 55.6 157.2 25.6 20.1
Relative* 22.6 13.3 8.4 2020 560.0 8.4 5.0 13.8 292.2 154.2
* % Relative to local index
Analyst 2021e 700.0 24.9 21.1 58.5 68.9 49.3
Fiona Orford-Williams 2022e 765.0 35.1 31.4 86.9 46.4 36.8
Sector: General industrials AAC Clyde Space (AAC)
Price: SEK2.48
Market cap: SEK469m 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 enhanced by growing services revenue.
Management is navigating the growth phase and targeting opportunities in New Space. The
acquisition of Hyperion, SpaceQuest and Omnisys extend the company's reach, capabilities
and technologies. These augment the drive to profit and cash generation and the 2024
revenue goal of SEK500m.
INDUSTRY OUTLOOK
Of over 1,000 nanosatellites launched since 1998, AAC Clyde Space is represented on
30–40%. Over the next five years around 3,000 nanosatellites should be launched as
Company description technology development extends the applications for low earth orbit (LEO) constellations,
Headquartered in Sweden, AAC Clyde especially for communications. AAC Clyde Space has operations in Glasgow, Sweden,
Space is a world leader in nanosatellite
end-to-end solutions, subsystems, Holland and the United States and is developing its 'Satellite as a Service' offering, as well
platforms, services and components, as sales of subsystems to third-party satellite providers.
including supply to third parties. It has
production and development
operations in Sweden, Scotland, the
Netherlands and the United States.
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 (2.2) (31.2) (28.9) 2019 66.4 (27.3) (38.2) (44.55) N/A N/A
Relative* (2.3) (37.3) (52.4) 2020 98.4 (17.5) (26.7) (25.79) N/A N/A
* % Relative to local index
Analyst 2021e 217.8 7.2 (3.8) 0.0 N/A 127.9
Andy Chambers 2022e 293.0 25.6 16.5 0.0 N/A 18.2
Edison Insight | 27 May 2021 10Sector: General industrials Accsys Technologies (AXS)
Price: 158.0p
Market cap: £271m INVESTMENT SUMMARY
Market LSE
A year end update noted strong H2 sales growth – after a small H1 COVID-19 related dip –
resulting in FY21 revenue progress of c 9%. Accoya wood volumes (+ c4%) and associated
Share price graph (p)
revenues have been firm with the Arnhem plant operating at capacity, supporting a
sustained gross margin improvement. Expansion via a fourth reactor at Arnhem is on track
for delivery by the end of FY22 while the new Hull/Tricoya plant is in the final stages of
construction and management expects full operational ramp-up to commence in H222.
Accsys ended FY21 with €12.5m net debt. On 5 May an equity raise of up to €37m was
announced, substantially to fund the company’s JV share of establishing a new Accoya
facility in the United States. 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 8.7 10.4 106.7 2019 75.2 0.9 (6.2) (0.38) N/A N/A
Relative* 6.9 4.0 71.0 2020 90.9 7.0 (2.2) (0.08) N/A 109.6
* % 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$0.87
Market cap: A$518m INVESTMENT SUMMARY
Market ASX
Production at Tomingley in Q221 and Q321 were both materially above our expectations
and caused Alkane to increase its guidance (for the second time this year) for FY21 from
Share price graph (A$)
47–52koz to 50–55koz at a reduced AISC of A$1,400–1,550/oz (cf A$1,450–1,600/oz
previously). At the same time, Alkane has more than replenished reserves and resources as
well as intersecting grades as high as 104g/t at Tomingley's San Antonio and Roswell
extensions. To date, this has resulted in an increase in Roswell's resource of 50% and the
promotion of substantially all of San Antonio's inferred resource into the indicated category
(NB: Feasibility studies for both are expected this quarter).
INDUSTRY OUTLOOK
Post the de-merger of ASM, our most recent valuation of Alkane attributes 21c/share in
Company description value to Tomingley plus net cash (A$30.1m as at end-Q321). To this should then be added
Alkane Resources is an Australian up to 27c for its Roswell and San Antonio resources plus up to a further 67c from contingent
production and development company.
It previously produced 70,000oz of assets such as Boda and 10c from other investments.
gold per year from the open-pit
operations at its Tomingley gold mine,
but is transitioning to underground
operations and expects to produce c
47,500oz in FY21.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m
Actual 13.7 20.8 4.8 2019 94.0 33.0 25.4 4.57 19.0 12.1
Relative* 13.6 17.5 (18.3) 2020 72.5 29.4 20.6 2.56 34.0 16.9
* % Relative to local index
Analyst 2021e 104.2 34.8 22.9 2.89 30.1 22.8
Charles Gibson 2022e 125.3 41.4 26.3 3.31 26.3 15.5
Edison Insight | 27 May 2021 11Sector: Technology Allied Minds (ALM)
Price: 23.0p
Market cap: £56m INVESTMENT SUMMARY
Market LSE
The April capital markets day provided further visibility on Allied Minds’ portfolio. OcuTerra
subsequently confirmed a successful funding round (adding c 2p to NAV/s), but FY21
Share price graph (p)
funding rounds are also anticipated for Federated Wireless, BridgeComm, Spin Memory and
Spark Insights. Given limited cash resources (FY20: US$22.3m parent-level net cash),
Allied Minds will need to be cautious about its level of funding support for future rounds.
Pending positive funding news, we maintained the value of Spin Memory and Spark Insights
at zero in our latest estimated adjusted NAV per share of 42.5p as at 31 December 2020.
INDUSTRY OUTLOOK
COVID-19 fears have abated, with sustained tech valuations and amidst a robust funding
environment. Investors have preferred stocks that demonstrate portfolio progress and offer
Company description the potential for meaningful exits in a realistic timeframe and upside potential. Consistency
Allied Minds is a technology of NAV performance, capital preservation, realisations and exits are the key metrics by
investment company with a
concentrated portfolio focused on which to judge success.
early-stage spin-outs from US federal
government laboratories and
universities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 0.0 (17.1) (37.8) 2019 2.7 (47.2) 49.5 20.97 1.5 N/A
Relative* (1.7) (21.9) (48.6) 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$0.73
Market cap: C$867m INVESTMENT SUMMARY
Market JSE , TSX-V
Alphamin offers rare exposure to immediate positive cash flow from a metal that both Rio
Tinto and MIT regard as being the most likely to benefit from the widespread electrification
Share price graph (C$)
of the world economy. Fortuitously, its Bisie tin mine in the north-eastern 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 even consider making distributions
to shareholders as early as next year.
INDUSTRY OUTLOOK
At the current tin price of US$29,815/t, we estimate a value for Alphamin of 61.5 US (or 74.3
Canadian) cents per share. At a long-term tin price of US$23,425/t, we estimate a value for
Alphamin of 42.4 US (or 51.2 Canadian) cents per share. However, this rises to as high as
Company description C$1.162/share in the event that exploration expands and/or extends the life of operations
Alphamin Resources owns (84.14%) (see 12 March and 14 May exploration updates). NB Q121 results were absolutely
and operates the Mpama North tin
mine in the North Kivu province of the consistent with these expectations.
Democratic Republic of the Congo with
a grade of c 4.5% Sn (the world’s
highest). Accounting for c 4% of the
world’s mined supply, it is the second
largest tin mine in the world outside
China and Indonesia. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 23.7 21.7 484.0 2019 27.2 8.5 (5.8) 0.8 74.9 N/A
Relative* 21.3 14.5 345.2 2020 187.4 58.3 15.7 (1.1) N/A 35.1
* % Relative to local index
Analyst 2021e 318.0 180.7 148.6 8.9 6.7 6.5
Charles Gibson 2022e 271.0 140.9 114.9 7.4 8.1 6.0
Edison Insight | 27 May 2021 12Sector: Technology Applied Graphene Materials (AGM)
Price: 32.5p
Market cap: £21m INVESTMENT SUMMARY
Market AIM
Applied Graphene’s (AGM’s) H121 results show the beneficial impact of the management’s
decision announced in October 2019 to focus on supplying customers in the protective
Share price graph (p)
coatings market with graphene in easy-to-use dispersions. Revenues grew by 20%
year-on-year, albeit from a low base, and adjusted EBITDA losses narrowed by £0.3m to
£1.6m. Management estimates that the £5.5m (net) raised in January has extended the
company’s cash runway well into calendar 2023, enabling it to convert the current
opportunity pipeline totalling £3.7m (after applying a probability of success factor) into
meaningful annual revenues during the period.
INDUSTRY OUTLOOK
UK-based Tru-Tension has recently launched a bike detailing spray enhanced with AGM's
Company description graphene nanoplatelet technology. Following a programme of in-house research and
Applied Graphene Materials (AGM) testing, Tru-Tension states that its new spray offers a high gloss finish that acts as a
develops graphene dispersions that
customers use to enhance the protective layer to leave paintwork glistening and reduces dirt build-up to make future
properties of coatings, composites and cleaning easier. This latest product launch represents another example of how the
functional materials. It also
manufactures high-purity graphene incorporation of AGM's unique graphene dispersion technology can transform customers'
nanoplatelets using a proprietary products and help manufacturers to stand out in the car and bike care market.
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 (13.3) (18.8) 242.1 2019 0.1 (4.6) (4.8) (7.9) N/A N/A
Relative* (14.8) (23.5) 183.0 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: Financials Appreciate Group (APP)
Price: 38.5p
Market cap: £72m INVESTMENT SUMMARY
Market AIM
In a recent trading update ahead of results due 29 June, APP said that FY21 underlying
PBT will be in line with market expectations of £4.1–£4.8m (and above our previous
Share price graph (p)
forecast), excluding c £3.0m of non-recurring costs related to the ongoing strategic
repositioning. The resilient H221 performance was driven by strong corporate demand,
increased sales of higher margin digital product, and previous restructuring actions. Total
group billings for the year were £406.5m (FY20: £419.9m), including £23m generated by the
low margin, non-recurring free school meal initiative. 'Underlying billings' within the
corporate business and HSV continued to stabilise, down 8% for the year (H121: down
40%). Less positively, the current year Christmas Savings order book is expected to be c
11% lower, primarily due to restricted face-to-face agent activity during the lockdown. The
in-line results come despite the pandemic slowing customer redemptions, deferring c £3m
Company description of profits for the year but supporting the healthy end-year free cash position of £32.9m.
Appreciate Group is a specialised
financial services business and is the INDUSTRY OUTLOOK
UK’s leading provider of multi-retailer
redemption products. Consumers can The market is estimated at c £6bn by the UK Gift Card & Voucher Association, and is
access products directly through its
market-leading Christmas Savings fragmented, providing significant opportunities for market share growth.
offering while corporate customers use
these products to supply a range of
incentive and reward products. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m
Actual (8.3) (6.6) 10.0 2019 110.4 12.3 12.5 5.4 7.1 10.4
Relative* (9.9) (12.0) (9.0) 2020 112.7 11.7 11.4 4.9 7.9 10.4
* % Relative to local index
Analyst 2021e 93.9 6.4 4.5 2.3 16.7 11.0
Martyn King 2022e 103.4 9.2 7.2 3.1 12.4 N/A
Edison Insight | 27 May 2021 13Sector: General industrials ArborGen Holdings (ARB)
Price: NZ$0.18
Market cap: NZ$87m INVESTMENT SUMMARY
Market NZSX
ArborGen’s underlying H1 trading performance was robust with good control of opex leading
to a reduced seasonal EBITDA loss despite market challenges. The US selling season
Share price graph (NZ$)
started well in H2 and although the 13 January update noted that sales had been slower
than previously anticipated at that time higher than anticipated COVID-19 grant income has
recently led to full year US GAAP EBITDA guidance being raised by c US$1m to
US$11.0–11.5m. An increase in supply of higher-value seedlings in the US remains on track
and is expected to drive group earnings higher from FY22. We will review our estimates
once FY21 results are announced in late May.
INDUSTRY OUTLOOK
Prior to the COVID-19 outbreak, the economic growth outlook in each of its core countries,
Company description the US, Brazil, New Zealand and Australia, was either good or improving, according to
ArborGen Holdings (formerly Rubicon) OECD data. At this point, the primary end-markets served by its plantation forestry
is an NZX-listed investment company.
Its subsidiary ArborGen is the world’s customer base (ie construction and the pulp and paper industries) were in a positive cyclical
largest integrated developer, phase.
commercial manufacturer and supplier
of advanced forestry seedlings with
operations in the United States, Brazil
and Australasia.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 1.2 (2.8) (5.4) 2019 49.1 4.6 4.7 1.0 13.0 15.7
Relative* 1.9 (1.3) (16.7) 2020 56.9 7.7 6.0 1.4 9.3 13.5
* % Relative to local index
Analyst 2021e 54.7 7.1 9.4 2.0 6.5 5.7
Toby Thorrington 2022e 65.3 12.1 12.3 2.5 5.2 5.4
Sector: Travel & leisure Aspire Global (ASPIRE)
Price: SEK62.80
Market cap: SEK2918m INVESTMENT SUMMARY
Market Nasdaq FN Premier
Aspire Global’s Q121 results highlighted strong broad-based organic revenue growth
(+35.6% y-o-y) complemented by improving sequential growth from recent M&A, which led
Share price graph (SEK)
to an impressive expansion in EBITDA margin (+230bp y-o-y to 17.8%). Through Q121,
AG’s enhanced and more integrated offering enabled it to execute well on its strategy of
expanding to more regulated markets, attracting new customers and growing sales to
existing partners. We upgraded our FY21 and FY22 revenue and EBITDA forecasts by 4%.
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
Company description gross gaming revenue (GGR; ie customer wagers less their winnings) from US$37.6bn in
Aspire Global is a leading B2B 2019 to US$69.1bn by 2025 (source: H2 Gambling Capital). Secondly, online gaming
provider of iGaming solutions, offering
partners all relevant products to markets are highly competitive with differing levels of regulation. These combine to make
operate a successful iGaming brand. It the operation of an online gaming brand challenging, particularly when working across many
also owns/offers B2C online gaming
brands, including Karamba. Aspire geographies.
operates in 26 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 (5.6) 3.6 176.7 2019 131.4 21.7 17.9 32.7 18.9 63.3
Relative* (5.7) (5.6) 85.4 2020 161.9 27.1 18.4 32.6 19.0 9.7
* % Relative to local index
Analyst 2021e 195.6 34.1 30.1 55.3 11.2 8.3
Russell Pointon 2022e 220.4 40.1 33.2 63.7 9.7 7.3
Edison Insight | 27 May 2021 14Sector: Mining Auriant Mining (AUR)
Price: SEK4.98
Market cap: SEK491m INVESTMENT SUMMARY
Market NASDAQ OMX First North
Auriant’s Tardan plant has now been re-modelled to a single carbon-in-leach process. This
has resulted in a c 40pp increase in metallurgical recoveries and a c 25% reduction in cash
Share price graph (SEK)
costs to US$676/oz cf its previous heap leach operation, which resulted 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
Assuming that it raises US$20m in equity (NB Subject to the gold price and cash flows and
Company description could be less) at a share price of SEK5.08, we value Auriant at US$1.76/share. In the
Auriant Mining is a Swedish junior gold meantime, it is trading on a multiple of only c 6x FY21 earnings. Q121 production of 209.7kg
mining company focused on Russia. It
has two producing mines (Tardan and was above our prior expectation and financial results are scheduled for 31 May.
Solcocon), one advanced exploration
property (Kara-Beldyr) and one early
stage exploration property
(Uzhunzhul).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual 7.1 4.2 20.0 2019 29.8 7.2 (2.2) (1.3) N/A 6.4
Relative* 7.0 (5.1) (19.6) 2020 53.4 31.2 17.5 13.9 4.3 2.3
* % Relative to local index
Analyst 2021e 51.5 25.9 12.4 9.0 6.6 2.8
Charles Gibson 2022e 55.6 35.2 22.0 12.3 4.8 2.3
Sector: Aerospace & defence Avon Rubber (AVON)
Price: 3270.0p
Market cap: £1014m INVESTMENT SUMMARY
Market LSE
Avon is delivering on its growth strategy focused on organically growing its core, supported
by selective product development and value-enhancing M&A. It is renaming to Avon
Share price graph (p)
Protection in H221, now the sole focus. The US acquisitions in 2020 extended the product
portfolio and deepened customer engagement. Despite lockdowns, adverse FX and ballistic
protection contract delays, H121 revenues grew 41%. Military (+17%) and First Responder
(+19%) were driven by respiratory products and Team Wendy added $20.5m. Order intake
was strong and H121 net debt was just $13m. Management expects to meet FY21 analyst
consensus and we maintain our estimates for FY21 and FY22.
INDUSTRY OUTLOOK
Avon's long-standing, multi-level relationship with the US DoD is important to the group and
Company description the end market backdrop is supportive. The focus on higher-price sophisticated mask
Avon Rubber designs, develops and systems is proving successful, with M50 mask system replenishment and the addition of
manufactures personal protection
products for Military and First helmets and body armour provides further opportunities. We believe that Avon has the
Responder markets. Its main market position, product portfolio and strategic ambition to continue its growth through
customers are national security
agencies such as the US DOD and c organic and inorganic means.
90% of sales are from the United
States.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (5.7) 8.1 4.3 2019 162.0 36.2 28.3 84.9 54.0 158.9
Relative* (7.2) 1.8 (13.7) 2020 213.6 52.3 36.0 96.2 47.7 N/A
* % Relative to local index
Analyst 2021e 284.9 63.2 48.1 125.6 36.5 41.5
Andy Chambers 2022e 362.0 88.2 69.4 181.1 25.3 16.7
Edison Insight | 27 May 2021 15Sector: Travel & leisure bet-at-home (ACXX)
Price: €40.25
Market cap: €282m INVESTMENT SUMMARY
Market Xetra
The Q121 results were strong in the context of management guidance for FY21. Trading in
the early part of FY21 is likely to be as bad as it gets for BAH. The initial (negative) effects
Share price graph (€)
of regulatory changes in Germany will be followed by a more favourable sporting calendar
and management’s belief that increased legal certainty from Q321 will help the company to
better plan and develop its business. We upgraded our FY21 EBITDA forecast by 11%,
taking it above management’s re-iterated guidance.
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'
markets (no formal regulation but not illegal), which are characterised by strong cash flow,
Company description but also carry commensurately higher regulatory risks. Its main market, Germany is
Founded in 1999, bet-at-home is an becoming fully regulated in FY21.
online sports betting and gaming
company with c 300 employees. It is
licensed in Malta and headquartered in
Dusseldorf, Germany. Since 2009
bet-at-home has been part of Betclic
Everest, a privately owned French
online 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 (10.1) (3.5) (2.1) 2019 143.3 35.2 33.1 425.53 9.5 9.4
Relative* (11.5) (12.5) (29.8) 2020 126.9 30.9 28.8 331.92 12.1 15.6
* % Relative to local index
Analyst 2021e 118.0 23.5 21.4 248.01 16.2 14.7
Russell Pointon 2022e 129.8 28.8 26.7 309.60 13.0 11.8
Sector: Technology Boku (BOKU)
Price: 161.5p
Market cap: £475m INVESTMENT SUMMARY
Market AIM
Boku reported strong results for FY20, with adjusted revenue and EBITDA growth of 20%
and 106% respectively. Trading year to date has been strong for both businesses and
Share price graph (p)
management is confident of meeting expectations for FY21. The evolution of the platform to
address the wider alternative payments market provides upside potential to our forecasts
and the share price. Boku recently announced a mobile identity partnership with French
carriers, increasing the addressable market for its identity services.
INDUSTRY OUTLOOK
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 is the dominant DCB
player, serving the largest merchants such as Apple, Sony, Facebook, Spotify and Netflix,
Company description and is expanding into alternative payment methods such as digital wallets. Boku's identity
Boku operates a billing and identity verification service enables merchants to sign up and transact with users while meeting
verification platform that connects
merchants with mobile network regulatory requirements and avoiding fraud.
operators in more than 80 countries. It
has c 300 employees, with its main
offices in the US, UK, Estonia,
Germany and India.
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 (10.5) 4.2 85.6 2019 50.1 10.7 4.1 1.20 188.7 N/A
Relative* (12.0) (1.9) 53.6 2020 56.4 15.3 11.0 3.21 70.6 N/A
* % Relative to local index
Analyst 2021e 66.5 17.7 12.2 3.15 71.9 N/A
Katherine Thompson 2022e 77.8 21.0 15.1 3.87 58.5 N/A
Edison Insight | 27 May 2021 16Sector: Travel & leisure Borussia Dortmund (BVB)
Price: €6.33
Market cap: €582m INVESTMENT SUMMARY
Market FRA
For Q321 the company reported a loss before tax of €18.8m taking the ytd figure to a loss of
€45m. With no tax in the quarter the cumulative net loss ytd of €45m compares with
Share price graph (€)
guidance for the full year of a net loss of €70–75m, therefore the old guidance implies a net
loss for Q421 of €25–30m. Revenue (excluding transfer proceeds) were modestly up in the
period at c €80m, as a strong 50% increase in TV and a more modest 2% increase in
Advertising (ie sponsorship) revenues offset declines in Match Operations, Merchandising
and Conference, Catering and Miscellaneous, which are naturally linked to attendance at
games. Operating costs were broadly flat as higher staff costs were offset by declines in
other expenses and D&A. Post the release of the results the team qualified for the
Champions League in the 2021/22 season. Our forecasts are under review.
INDUSTRY OUTLOOK
Company description
The group operates Borussia Unsustainable spend on wages and transfers is increasingly being penalised by UEFA
Dortmund, a leading football club,
Bundesliga runners up in 2019/20, Financial Fair Play requirements. A 'break-even requirement' obliges clubs to spend no
DFB Super Cup winners in 2019/20 more than they generate over a rolling three-year period. Sanctions vary from a warning to a
and DFB Cup winners in 2016/17 and
2020/21. The club has qualified for the ban from UEFA competition, fines and a cap on wages and squad size.
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 11.0 18.3 (1.1) 2019 370.3 116.0 101.5 87.95 7.2 19.3
Relative* 9.2 7.3 (29.1) 2020 370.2 63.0 45.6 46.77 13.5 196.5
* % Relative to local index
Analyst 2021e 331.5 39.4 22.9 24.91 25.4 119.9
Russell Pointon 2022e 346.6 60.8 43.8 42.89 14.8 117.9
Sector: Oil & gas Brooge Energy (BROG)
Price: US$8.91
Market cap: US$976m INVESTMENT SUMMARY
Market NASDAQ
Brooge Energy (BROG) is an independent oil and refined oil products storage and service
provider located in the Port of Fujairah, in the UAE. The company is initially developing its
Share price graph (US$)
terminal’s storage 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 is expected to
start in mid-2021. The company is preparing to raise equity capital for its Phase III, and this
will increase oil storage capacity by 3.5x once operational (2023). In Q420 BROG diversified
its customer base by signing new contracts (for 58% Phase I storage capacity) at premiums
of 50% and 60% on fixed fee, benefiting from high oil storage demand. However, the low
demand for ancillary services among new customers had a negative effect on revenue in
FY20 and may affect revenue in FY21. Our valuation currently stands at $10.3/share.
Company description
INDUSTRY OUTLOOK
Brooge Energy is an oil storage and
service provider strategically located in
the Port of Fujairah in the United Arab The COVID-19 pandemic highlighted the importance of oil storage infrastructure and the
Emirates (UAE). Current storage vital role the business plays in the logistics and trading of crude oil and refined oil products.
capacity stands at 399,324m3 and will
be increased by 602,064m3 once
Phase II is completed.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (3.5) (14.7) (18.6) 2019 44.0 37.0 (75.0) (85.5) N/A 14.8
Relative* (3.1) (19.8) (42.3) 2020 42.0 29.0 17.0 19.5 45.7 21.2
* % Relative to local index
Analyst 2021e 68.0 54.0 29.0 26.4 33.8 25.0
Marta Szudzichowska 2022e 130.0 112.0 88.0 80.0 11.1 9.6
Edison Insight | 27 May 2021 17Sector: Oil & gas Canacol Energy (CNE)
Price: C$3.20
Market cap: C$574m INVESTMENT SUMMARY
Market TSX
Canacol offers investors a pure play on the Colombian natural gas market where it holds a c
20% market share of national demand. With gas export capacity now in place, it is focusing
Share price graph (C$)
on converting its 5.7tcf of net unrisked prospective resource into reserves (up 1tcf vs 2019),
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, nine exploration and
three development, at an estimated cost of c $66m, along with a substantial 655km2 3D
seismic programme. 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. We currently value Canacol at a core NAV of
C$3.62/share and a RENAV of C$5.87/share.
Company description
INDUSTRY OUTLOOK
Canacol Energy is a natural gas
exploration and production company
primarily focused on Colombia. The Colombian, Caribbean Coast gas market is expected to move into gas deficit in the
absence of LNG imports, incremental piped gas or the development of recent deepwater
discoveries. Canacol sells gas under long-term, fixed-price gas contracts, typically of five to
10 years’ duration with inflation clauses to protect cash flows.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m
Actual (9.1) (11.9) (19.6) 2018 204.5 138.6 7.3 (12.32) N/A 5.0
Relative* (10.9) (17.0) (38.7) 2019 219.5 162.8 64.7 19.21 13.7 4.3
* % Relative to local index
Analyst 2020e 234.3 195.1 92.7 42.95 6.1 2.6
Ian McLelland 2021e 228.4 187.2 85.7 29.92 8.8 3.0
Sector: General industrials Carr's Group (CARR)
Price: 148.5p
Market cap: £139m INVESTMENT SUMMARY
Market LSE
Carr’s Group has reported a 5% rise in adjusted operating profit during H121. Strong
performances from both the Speciality Agriculture and Agricultural Supplies divisions more
Share price graph (p)
than compensated for weaker demand from the oil and gas market, which adversely
affected the Engineering division. However, the Engineering order book is strengthening
with contracts from the nuclear and defence markets, so management expects a second
half divisional recovery and its expectations for FY21 group performance are unchanged.
INDUSTRY OUTLOOK
Noting the strong performance from the agricultural activities during H121, which
management expects to continue during the second half, we have raised divisional
estimates slightly but increased central costs, leaving FY21 adjusted PBT and EPS broadly
Company description unchanged. Incoming CEO Hugh Pelham’s strategic review maintains the direction of all
Carr's Group's Agriculture divisions three divisions, while accelerating and intensifying programmes to improve internal
serve farmers in the North of England,
South Wales, the Welsh Borders and processes and thus profitability.
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 1.9 16.0 33.5 2019 403.9 23.8 18.0 14.2 10.5 10.0
Relative* 0.2 9.3 10.4 2020 395.6 23.4 14.9 11.8 12.6 7.0
* % Relative to local index
Analyst 2021e 433.2 23.6 15.4 12.0 12.4 5.7
Anne Margaret Crow 2022e 447.0 24.7 16.5 12.7 11.7 8.3
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