ClearStar (CLSU) : Corp

Trading update

Key data

  • Share price (p) 61.5
  • Target price (p) 90.0
  • Market cap (£m) 22.3
  • Enterprise value (£m) 23.1

ClearStar has announced that it expects FY19 revenue to be in line as Medical Information Services (MIS) revenue is stronger than expected, while revenue from a financial services client has shifted into FY20. This impacts the FY19 profit margin as MIS revenue is lower margin, and, alongside continued investment in systems and infrastructure, we lower FY19 EBITDA to $0.3m from $1.0m. We maintain our FY20 forecasts as ClearStar continues to have a healthy pipeline and its highest ever order book from which to convert new orders, the shifted revenue from the financial institution client, and plans to improve the efficiency of its cost base. We consequently see the potential for ClearStar to continue to grow and upsell in MIS while expanding into new verticals like financial institutions, and we look forward to FY19 results in March.

Lorne Daniel 020 7220 0545

Destiny Pharma (DEST) : Corp

Asian Pacific guidelines support XF-73 future use

Key data

  • Share price (p) 41.5
  • Target price (p) 250.0
  • Market cap (£m) 18.1
  • Enterprise value (£m) 9.0

The publication of the Asia Pacific Society for Infection Control (APSIC) guidelines, in the peer-reviewed journal, Antimicrobial Resistance and Infection Control, points to the potential use of Destiny’s lead product, XF-73. The preventative pre-surgical decolonisation of S. aureus should support the future use of XF-73, given its advantages over existing decolonisation strategies. Phase IIb trial data are due to report in mid-2020. With a cash runway into 2021, we point to the risk-reward profile and reiterate our target price of 250p.

Mark Brewer 020 7220 0556

Tristel (TSTL) : Corp

AGM and trading update

Key data

  • Share price (p) 347.5
  • Target price (p) 325.0
  • Market cap (£m) 154.9
  • Enterprise value (£m) 150.7

To accompany the AGM, Tristel provided a trading update for the six months to 31 December 2019, which suggests a strong first half that underpins our full-year expectations. Adjusted pre-tax profit (before share based payments) is expected to be at least £2.8m – an increase of at least 17%. This includes the consolidation of its Benelux/French and Italian operations. We leave forecasts unchanged, rather waiting until interim results on 24 February before making any adjustments, if warranted, and reiterate our target price, which is underpinned by current forecasts.

Mark Brewer 020 7220 0556

City of London Group (CIN) : Corp

Ready steady go

Key data

  • Share price (p) 140.0
  • Target price (p) 300.0
  • Market cap (£m) 55.7
  • Enterprise value (£m) 39.9

City of London Group’s (COLG) interim results underlines that the current group forms a solid base for the banking operations, Recognise, which is expected to start operations in H2 2020. We see COLG as an attractive way to get exposure to the UK SME banking market, where a large market share is up for grabs as the current market leaders struggle to provide the service the customers want. We maintain our 300p target price.

Kim Bergoe 020 7220 0550

Evgen Pharma (EVG) : Corp

Interims – cash to Q3 2021

Key data

  • Share price (p) 7.8
  • Target price (p) 25.0
  • Market cap (£m) 10.2
  • Enterprise value (£m) 5.2

Evgen reported interim results to 30 September that are in line with our full-year expectations. Despite the recent set back with SFX-01 in sub-arachnoid haemorrhage (SAH), the company continues to plan for a Phase IIb trial in metastatic breast cancer (mBC). Evgen is continuing to develop the CMC and toxicology data that will extend the dosing of SFX-01 in non-terminal diseases beyond 28 days, thereby opening up the potential of Phase II trials in autism and NASH, which are subject to non-dilutive funding by leading academic groups and in which Evgen will retain commercial rights. The decision to risk-share the future development of SFX-01, rather than funding future trials alone and monetising SFX-01 as a sulforaphane delivery platform, is a prudent and sensible approach. We reiterate our target price of 25p, which excludes any value attributable to other indications such as in autism or NASH.

Mark Brewer 020 7220 0556

SDI Group (SDI) : Corp

Interims on track for strong FY 2020

Key data

  • Share price (p) 73.0
  • Target price (p) 75.0
  • Market cap (£m) 71.0
  • Enterprise value (£m) 71.6

Interim results to 31 October provide a solid platform for FY 2020 and beyond, marked by c.6% organic growth, which compares with c.11% in H1 FY 2019 and reflects the increased investments made in the business during the period. Revenues increased 42% to £11.45m with adjusted pre-tax profit up 27% to £1.52m and adjusted EPS growth of 28% to 1.70p. The results were characterised by strong operational cashflows, rising 32% (c.£0.5m) to £2.0m, with net debt falling during the period by £1.0m to £0.6m. We make only minor changes to our forecasts that reflect the adoption of IFRS 16 (leases) with EPS rising by 2% due to a lower FY 2020 tax rate. We reiterate our target price of 75p.

Mark Brewer 020 7220 0556

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