Real Good Food (RGD) : Corp

COVID-19 and trading update

Key data

  • Share price (p) 2.8
  • Target price (p) U/R
  • Market cap (£m) 2.7
  • Enterprise value (£m) 42.7

The year-end trading update confirms that revenue and adjusted EBITDA were broadly in line with expectations, despite performance being affected in March due to COVID-19. The statement also confirms that the Board expects a material impact on sales due to COVID-19 in Q1 of the current year.

Mark Paddon 020 7220 0541

D4T4 Solutions (D4T4) : Corp

More Q4 contract wins reveal a switch to SaaS

Key data

  • Share price (p) 154.0
  • Target price (p) 310.0
  • Market cap (£m) 62.0
  • Enterprise value (£m) 49.3

The YE trading update reveals that management has actioned its proposed switch from a perpetual licence to a SaaS business during FY 2020. We therefore adjust our forecasts as moving customers from one-off perpetual licence contracts to recurring revenue contracts takes longer to implement and revenue is recognised over a longer period. Despite COVID-19, D4t4 made good progress in Q4 since the January update (with its own raft of contract wins), and several more contracts have been secured on a multi-year ‘as-a-service’ basis, providing additional recurring revenue visibility (now 46% of total sales) over the next three years. Management does not expect any significant interruptions in customer service or its distribution channels. However, actions taken to mitigate the impact of the virus include home working; preserving cash; and securing additional liquidity from the bank if required. The final dividend and FY 2021 forecasts are under review, however the £0.5m share buyback programme continues.

Lorne Daniel 020 7220 0545

SRT Marine Systems (SRT) : Corp

Balance sheet strengthened to deal with COVID delays

Key data

  • Share price (p) 26.0
  • Target price (p) 75.0
  • Market cap (£m) 40.2
  • Enterprise value (£m) 42.8

FY Mar 2020 results appear to be ahead of expectations with revenue of £18.8m against our £17.5m forecast (as revised last month); we adjust our expectations accordingly. COVID-19 restrictions are of course imposing delays on both existing projects and the imminent signing of the new contracts due in the Middle East. To deal with this, SRT has implemented an operating plan to reduce costs and has significantly strengthened its cash position, raising between £2.8m and £7.3m. This is being done through a £1.8m equity raise; a £1.0m issue under the existing Secured Medium Term Note Programme; and an application to its main bankers for a facility of up to £4.5m under the Coronavirus Business Interruption Loan Scheme. The funding will enable SRT to maintain the required levels of development and deployment through the current period of restrictions. We are withdrawing our FY Mar 2021 forecasts pending greater visibility.

Lorne Daniel 020 7220 0545

Avacta (AVCT) : Corp

COVID-19 rapid POC test for population screening

Key data

  • Share price (p) 24.0
  • Target price (p) 76.0
  • Market cap (£m) 49.9
  • Enterprise value (£m) 41.2

Avacta announced that it has entered into a collaboration with Cytiva, formerly known as GE Healthcare Life Sciences, to develop and manufacture an Affimer-based point-of-care (POC) rapid test to diagnose COVID-19 infection, with the intention of screening large populations and addressing the current hurdles and bottlenecks that exist for scaling such tests globally. Drawing on the global scale of Cytiva, which will ultimately be needed to bring such a test rapidly to the market, this collaboration highlights Avacta’s diagnostics capabilities as well as the potential to unlock significant near-term value. We are making no changes to forecasts or target price, preferring instead to monitor progress in the rapidly changing competitive landscape. Suffice to say, the market opportunity for a cost-effective high volume test is significant (>$1bn). The upside, if successful is substantial, as illustrated by the c£150m value created by Novacyt’s COVID test.

Mark Brewer 020 7220 0556

Pelatro (PTRO) : Corp

Deepening the connections

Key data

  • Share price (p) 53.0
  • Target price (p) 125.0
  • Market cap (£m) 17.2
  • Enterprise value (£m) 16.8

The delayed FY 2019 results are a slight beat on YE guidance, but more importantly they reflect a change in the business model as the maturing PTRO is able to persuade customers to sign recurring revenue contracts rather than buying one-off licences; deepening its relationship with its customers as it deepens their connections to their subscribers. By changing its model, PTRO is sacrificing the growth from upfront revenue and cash, in return for much greater quality and security and in fact more revenue over the full lifespan of the contracts. In the long term, this is an excellent and necessary shift; however, it does have that near-term impact on growth and cashflow. Otherwise, PTRO is reporting ‘business as usual’ for its customers despite COVID-19. PTRO is operating home working and benefits as its USD-denominated revenue rises, travel costs are curtailed and mobile telecom usage increases across the world. We adjust FY 2020 forecasts for the results but continue to expect revenue and earnings growth.

Lorne Daniel 020 7220 0545

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