Avacta (AVCT) : Corp

Cell therapy JV with Daewoong Pharmaceutical

Key data

  • Share price (p) 17.5
  • Target price (p) 76.0
  • Market cap (£m) 30.8
  • Enterprise value (£m) 24.3

Avacta announced the formation of a joint venture in South Korea with Daewoong Pharmaceutical in which it will have a 45% equity interest. Avacta will provide Affimers against a number of targets, which will be incorporated into Daewoong’s stem cells. The JV will open up a new opportunity for Avacta in immunotherapeutic engineered cell therapy, an area of intense M&A activity and focus, whilst Avacta retains the rights to commercialise these Affimer proteins outside of the stem cell therapy field. This provides further validation of Avacta’s proprietary Affimer technology. No change to forecasts or 76p target price.

Mark Brewer 020 7220 0556 mbrewer@finncap.com

Lok’nStore (LOK) : Corp

Second collaboration with Lidl

Key data

  • Share price (p) 715.0
  • Target price (p) 697.0
  • Market cap (£m) 210.2
  • Enterprise value (£m) 239.5

In a positive update, Lok’nStore has announced it has exchanged contracts with Lidl (subject to planning) on the shared use of the group’s freehold site in Cheshunt. A new Lok’nStore self-storage centre and Lidl retail store are expected to open in 2021 and will be a second collaboration following the successful first project in Maidenhead, which opened in 2013. In addition, the group has secured two new pipeline sites, bringing the total new store pipeline to 15 sites (vs. 34 open). We reiterate our view that with the UK market still undersupplied, the outlook for value creation from both the existing stores and potential new ones remains very strong.

Guy Hewett 020 7220 0549 ghewett@finncap.com

Shield Therapeutics (STX) : Corp

China licence – $62.8m bio-dollar deal

Key data

  • Share price (p) 173.0
  • Target price (p) 350.0
  • Market cap (£m) 202.6
  • Enterprise value (£m) 195.1

Shield Therapeutics announced that it has licensed Ferracru/Accrufer to Beijing Aosaikang Pharmaceutical Co (ASK Pharm) in China, Hong Kong, Macau and Taiwan – in line with the company’s earlier comment that it was seeking to partner in the US and China around the year end. Shield will receive an $11.4m upfront payment with up to $51.4m in future development and sales milestones and tiered double-digit royalties. This is a good deal, considering that ASK has to fund a clinical trial in China. It removes any vestiges of financing risk (2020 year-end cash of c.£7.5m) and with the prospect of a much larger US licence deal, given that Feraccru/Accrufer is approved by the FDA, there is substantial upside to the current share price in our opinion. Shield implied discussions for US rights to Feraccru/Accrufer are ongoing, with the priority being to secure a highly motivated partner on attractive commercial terms rather than completing the process to a particular deadline, which we fully endorse. We reiterate 350p target.

Mark Brewer 020 7220 0556 mbrewer@finncap.com

Shoe Zone (SHOE) : Corp

FY19 better than expected; reinvigorated focus evident

Key data

  • Share price (p) 162.0
  • Target price (p) 220.0
  • Market cap (£m) 81.0
  • Enterprise value (£m) 79.3

FY19 results represent a mild, but important for rebuilding investor confidence, positive profits surprise (adj PBT of £9.6m vs our expectations of £9.5m). Even more encouragingly, FY19’s total dividend of 11.5p (maintained at FY18’s level) is significantly ahead of our expectations of 9.2p, reflecting SHOE’s strong cashflow generation credentials, management’s confidence in the future, and demonstration of its recognition of the importance of the dividend. A refreshed executive team (with the previous CEO returning to the role and the COO moving to the Interim Executive Chairman role – together, they own 50.01% of SHOE), has significantly stepped-up the pace and vigour of executing the operational strategy. Management revitalisation therefore looks an interesting juncture in the SHOE equity story. We believe that the restored positive trading momentum of the last few weeks of FY19 and the encouraging FY20 outlook statement provide evidence to support our view of a reinvigorated focus already delivering benefits.

Peter Smedley 020 7220 0548 psmedley@finncap.com

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