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Read on to see an article posted on the OMG blog on 17 March 2019:

Distant Horizon

The FTSE100 improved 1.8% to 7,228, while the AIM All Share followed with a 1.5% increase. For the FTSE 100 the cause maybe, the higher pound and for Aim the political fire beneath the bellowing smoke of a no deal crash-out on the 29th was nearly extinguished. The under reported Chancellor’s Budget Statement recorded a robust economy with growth higher than forecast, 3.5m jobs created, Inflation on target and improved Public Finances.

This Tuesday the warm economic glow could continue if Average Earnings and Employment are reported to be unchanged at 3.4% and 4%, given that CPI (Consumer Price Inflation) remains flat at 1.8%. There should be no surprise that the Interest Rate Decision on Thursday should be unchanged at 0.75%.

There is plenty of US news on Wednesday and our forward indication is that US Interest Rate raises will be push into the distance which we rather suspect will be the same for Brexit.

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Previews

BHRD – 1.05p Unmitigated risk
BRY – 59.25p Slowly Transforming

 

Reviews

MANX – 215.5p – Ungenerous bid
PEN – 121p – Strong second half anticipated for 2019
EMR – 72.5p – Germany and Japan set to improve
SYM – 2.6p – Middle East prospects
TRT – 61p – Cash for working capital
AMO – 84p – Important contract
STL – 2.6p – Cash in the bank
NAR – 29p – Big NAV discount
MWE – 19.5p – Strong prospects for 2019
EYE – 172p – Subscription growth

 

Previews

Be Heard (LSE: BHRD)
1.05p (1p-1.1p)
Mkt Cap £10.8m
Next Results: Finals Monday 25th

Those sceptics of the advertising and marketing sector digital transformation to allow the ‘astute’ management of this acquisition vehicle ‘worth-while’ opportunities, have been right as a new team are in place.

BHRD raised £10m at 3.25p in late 2015 at 3.25p with a further £14m plus at higher prices to complete five acquisitions in two years, the latest was the £7.4m (cash, share and debt) purchase in November 2017 of The Corner, an award-winning, integrated creative agency acquired for a maximum consideration of £12m. Digital technology has transformed the marketing sector and value of e-commerce is set to double to $3.4trillion by 2020 with the internet already overtaking broadcast TV as the largest advertising medium in the UK and soon around the worldwide.

January’s Trading update ahead of these finals reported that second half trading was ‘good’ and in line with more realistic expectations. The new management team is led by CEO, Simon Pyper with Ben Rudman as the COO and are focused on cost control and integration and a marked improvement in anticipated. Both have brought shares at higher than the current price. The interims losses of £3.5m on £14.2m turnover does realistically leaves plenty of room to improve cashflow, margins and profitability!

Financials
The net debt was £0.5m after earn-out payments.

Trading Strategy
The improvements are likely to help a moderate rerating, but the real excitement will be the likelihood of corporate actions where the track record has not been good. Be nimble or wait.

Last Omg! Price 2p

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Brady (LSE: BRY)
59.25p (59-60p)
Mkt Cap: £49.4m
Next Results: Finals Monday 25th

Brady is a highly rated global provider of trading, risk management and settlement solutions to the energy and commodities sectors. It is in the process of transforming its business model from one-off licence sales to reoccurring fees. Turnover for the Dec 2018 year end are expected to be around the same as last year’s £23m and with an increased EBITDA to £2.6m, which is in line with reset market expectations and recurring revenue is expected to be 70%. It was reported that “substantial progress” in evolving its technology solutions and has extended the scope of its value proposition. The forecast PBT of £0.5m is an improvement from losses and gives a recovery P/E in the 100s before falling to 50x a further year-out. As ‘short-term’ profits growth is likely to be led by cost cutting. There is a strong shareholder base with Kestral 25.4%, ColtraneAm 17.9%, Herald and broker, Canaccord hold around 10% each.

Financials
The disposal of a US recycling business should give net cash of around £8m so the business is well funded to continue its strategy of moving to a recurring revenue model and investing in products.

Trading Strategy
The rating discounts faster growth prospects than seem likely.


Reviews

Manx Telecom (LSE: MANX)
215.5p (215p/216p)
Mkt Cap: £248m
Next results: Interims, September

The 207.1p a share bid for Manx Telecom (LSE:MANX) came as a surprise and it does not appear particularly generous. A gain of around one-third in a few months is not bad, but investors will lose out on the dividend income and the potential upside for Vannin Ventures and the Goshawk hearing technology in particular.

Investors will also receive the 7.9p a share dividend, so the total value of the bid by Basalt Infrastructure Partners is 215p a share or £255.9m. Basalt still has to win round the shareholders.

The board has recommended the bid. Peel Hunt reckons the core business is worth 220p a share – based on a 5.7% yield – with the potential for the Vannin Ventures business worth at least 25p a share and potentially much more. Short-term profit growth, though, is likely to be slow.

Trading strategy
Hold on for the time being.

Original recommendation: 162p/167p

 

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