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Insight 021210 Lowres
Insight 021210 Lowres
Table of contents
Market overview 2
Sector focus 15
Company profiles 19
Events diary 123
Stock coverage 125
Welcome to the December edition of the Edison Insight. We now have over 250 companies under
coverage, of which 208 are profiled in this edition.
The book opens with a market overview from Alex Gunz, where we discuss prospects for 2011. We
believe many of the problems that have characterised the past year (ongoing deleveraging, moribund
growth, rising inflation) look set to persist at least for the coming months. As a result, equities are likely to
continue to experience volatile movements. Against this background, our equity allocation process remains
unchanged for now, favouring diversified growth and high cash returns. In this month’s sector focus
section, Elaine Reynolds talks about little victories in oil & gas and Katherine Thompson gives a summary of
our cloud computing report.
4SC, Endace and Evolva have been added to the Edison Insight this month. Readers wishing greater detail
should visit our website (www.edisoninvestmentresearch.co.uk), where reports are available for download.
Edison is Europe’s leading investment research company. It has won industry recognition, with awards in
both the UK and internationally. The team of more than 50 includes over 30 analysts supported by a
department of supervisory analysts, editors and assistants. Edison writes on more than 250 companies
across every sector and works directly with corporates, investment banks, brokers and fund managers.
Edison’s research is read by major institutional investors in the UK and abroad, as well as by the private
client broker and international investor communities. Edison was founded in 2003 and is authorised and
regulated by the Financial Services Authority.
Neil Shah
Director of Research
December 2010 1
Edison Insight
3200 50
3000 40
28 00
30
2600
20
2400
2200 10
2000 0
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
All-Share VIX
Source: Bloomberg, Edison Investment Research
Looking ahead, it is hard to see how the next 12 months will be markedly different. We continue to expect
equities to trade within a relatively narrow band, with pronounced swings both to the downside and upside. As
we have written previously, volatility (measured by the VIX index), while down almost fourfold from its Lehman
spike, is still more than double where it has traded for much of the mid-2000s. Until we see a consistent and
coherent approach to debt reduction (excess leverage is still the biggest issue plaguing the financial system)
and/or sustainable top-line growth from corporates, it may be difficult for equities to break out of their relatively
range-bound trading patterns. In reality, what this may imply is more pain: fiscal austerity needs to be
combined with monetary loosening, labour markets need more structural reform and the euro probably needs
to go. Further volatile dislocations may have to come before confidence can return fully.
How long such a process may take remains fully to be seen, and surprises/disappointments along the way will
undoubtedly create investment opportunities. At present, the auguries are not good: GDP growth is slowing in
2 2 December 2010
Edison Insight
Germany and France, the main engines of the eurozone; industrial output has shown signs of stalling in China
and India; and inflation seems to be on the rise almost everywhere.
However, the biggest issue (which matters particularly in markets that are being driven more by psychology
than fundamentals) is simply one of confidence: investors do not seem to believe either in the potentially
restorative powers of further quantitative easing or in the EU’s latest bail-out – more may be needed of both.
Furthermore, concern over these matters has also clearly overlaid emerging signs of slowly improving
corporate earnings.
Trading patterns in the last month demonstrate just how quickly sentiment can change. The day after
America’s second round of quantitative easing was announced (4 November), the All-Share crossed the 3,000
mark, a level last seen before the collapse of Lehman Brothers in September 2008. Optimists asserted that the
path to recovery was clearer and the UK market hence moved to a peak of 3033 on 9 November, up 22%
from its July low and with a rise of c 10% from the start of the year. However, there has been no consolidation
of these gains, with the All-Share having since declined by 2.6% and November having seen more ‘down’
trading days than the inverse.
These oscillations (a repetition of the trends seen for most of 2010) have been a function of several factors, but
most crucially relate to sentiment/ reality centred on quantitative easing and the future of the Eurozone. After
the initial excitement of QE II, the gloss seems to have worn off remarkably quickly, as evidenced not only by
investors’ reactions, but also by the high degrees of scepticism voiced by central bankers from a number of
nations. Not only is QE II an untried policy that “smacks of desperation” (according to the Lex column in The
Financial Times, 2 November), but also most economists appear in agreement that they have little idea whether
a second round of quantitative easing will actually work.
At the most basic level, the Fed alone cannot do everything to turn around the global economy and a notable
lack of consensual support (more the opposite) from other nations suggests the challenge will be significant.
Putting this factor to one side, our more specific concerns relate to the fact that the Fed may be over-
estimating by how much and how fast unemployment can fall, a risk that will only be exacerbated by
unresponsive policy-making from other recalcitrant nations. According to economic analysis by the IMF, it may
take as long as four years following the end of a recession for unemployment to return to pre-recession levels,
suggesting that the US (and much of Western Europe) is still on a long and painful journey. Given the
challenges that QE II may face combined with the possible stagnation of the global economy, we do not
discount the possible launch of QE III at some stage in 2011. As we have written previously, increasing policy
(re)application also runs the inevitable risk of suffering from diminishing returns.
With regard to the eurozone, it has taken just over six months for all (and more) of the vociferous concerns over
its stability cited at the time of Greece’s bail-out to resurface. An eventual IMF/EU €85bn bail-out for Ireland
combined with at least €15bn of domestic spending cuts and tax rises is unlikely to mark the end of the
eurozone saga. It is interesting to note how little investor euphoria has been apparent over the conclusion of
Ireland’s rescue – in stark contrast to the reaction following the confirmation of the Greek support package –
and movements in bond yields (see Exhibit 2) suggest that more bail-outs may now been an unfortunate
inevitability. Spanish (as well as Italian, and even Belgian) spreads relative to the Bund have continued to
widen.
At heart is the question of for how long German voters (even with unemployment at a 20-year low and
business confidence at a 20-year high) remain willing to support failing peripheral eurozone nations. Recent
history suggests there is a strong element of moral hazard attached to failing-nation behaviour and the
eurozone’s problems are arguably increasing rather than diminishing. Greece recently announced that its
2 December 2010 3
Edison Insight
public debt (at 15.4% of GDP) was higher than previously disclosed (13.6%) and it has already begun to fall
behind with its repayments to the EU/IMF. The stark reality is that at present only two of the eurozone’s states
(Luxembourg and Finland) meet both the deficit (not more than 3% of GDP) and debt (no more than 60% of
GDP) criteria for EU membership.
While it is hard to predict how events will ultimately play out, it is fair to contend that investors will likely have to
endure further bouts of substantial volatility. There remains a clear confusion between the political and
economic ends of the EU and there is a clear risk not only of contagion (from Greece and Ireland), but also that
failure becomes a self-fulfilling prophecy. In the interim, spreads on bond yields continue to rise and the euro
weakens.
Exhibit 2: Eurozone crisis as ‘periphery’ nation bond spreads widen and the euro weakens
10-year govt bond spreads over German bunds EUR/USD rate
10 1.55
Percentage points
1.50
8 1.45
6 1.40
1.35
4 1.30
2 1.25
1.20
0 1.15
Sep/10
Jan/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Aug/10
Nov/10
Oct/10
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Spain Portugal Ireland Greece
If a second round of quantitative easing and the bail-out of Ireland both have their antecedents in events of the
previous 18 months – and so ought not to have constituted a major ‘surprise’ to investors given the challenges
facing the global economy – one source of revelation, particularly in the face of weak growth, has been the
strength in recent corporate earnings. Over 75% of US companies reporting in Q3 exceeded consensus
expectations, while the gap between those firms raising guidance relative to those cutting stands at its highest
since 1999 according to Bloomberg. In the UK, a similar picture has occurred with firms as diverse as
Barclays, Burberry and BT all having recently surpassed expectations when reporting results. As positive as
this trend is surprising, we are forced to question the sustainability of such recent strength. Even if we are
incorrect in this thesis, it appears that investors have had some tendency to overlook better performance amid
macroeconomic tumult.
Our strategy pertains to one of stock selection, favouring undervalued growth with emerging markets exposure
and/or highly cash generative (and shareholder-returning) businesses and against this background it is possible
to identify a strong range of candidates – in the UK, for example, Aggreko, Compass Group, GSK, Reckitt
Benckiser and Vodafone to name but a few. Investors in these five names have been rewarded by an average
share price return of 20.2% year-to-date (some 14 points ahead of the All-Share), combined with a mean
dividend yield of 3.4%.
Beyond such best-in-class businesses, as mentioned previously, our concerns relate to sustainability. There is
only a finite amount of cost-cutting and leverage gains companies can bring to bear in the absence of top-line
growth. Revenue improvement, such as it is, may also be likely further undermined going forward by rising
inflation. A number of consumer-facing businesses in particular (e.g. Marks & Spencer, Next) as well as some
global industrial players (e.g. ArcelorMittal) are already warning of this risk and whether cash-constrained
consumers and corporates will accept input-cost pass-through and continue to spend remains highly
uncertain.
4 2 December 2010
Edison Insight
After the robustness of the Q3 reporting season, we are also concerned that there may perhaps be undue
optimism levels ahead of the impending fourth-quarter reporting season. With internal planning and budgeting
likely to complete soon, the next two months will also likely see companies issuing guidance for 2011 for the
first time. Again, we see here some risk for disappointment.
As a result, we see limited reason for changing our theoretical asset allocation strategy, particularly since our
central thesis is for further volatility, at least for the early part of 2011. We therefore continue to advocate the
adoption of a ‘bar-bell’ approach, combining some sectors/stocks that would benefit from any move towards
the risk trade, while also continuing to keep a high focus on defensives. Put simply, we favour emerging over
domestic growth and place a high emphasis on free cashflow/dividend generation. As we discuss in more
detail below, this leads us to an overweight stance in basic materials, telcos, utilities and healthcare, balanced
with underweights in the consumer and financial space.
Additionally, at the risk of repetition (from previous editions of Insight), we continue to stress the merits of gold.
We reiterate our view that this remains an attractive asset class with no counterparty risk, inherent scarcity
value and a hedge against either inflationary or deflationary scenarios. World Bank President, Robert Zoellick,
has also recently suggested the return to a modified gold standard, further stoking positive sentiment. The
precious metal hit a 52-week high on 9 November while it has outperformed the MSCI Global equity index by
20.9% on a year-to-date basis. On a three-year view, we believe it could reach $2,000/oz, some 40% above
current levels.
Exhibit 3: Gold has been a significantly better investment than equities in the last 12 months
Note: Rebased to 100.
130
120
110
100
90
80
Dec/09
Aug/10
Sep/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Nov/09
While the UK’s performance can hardly be described as satisfying, domestic investors can at least take
comfort from the fact that the FTSE-100 and the All-Share have comfortably outperformed their European
counterparts, with the relative gains between these indices having widened in the last month. On a year-to-
date basis, the All-Share has outperformed the Euro Stoxx by 8.7 percentage points, up from 6.5 points a
month ago, with a similar pattern repeated between the FTSE-100 and the Euro Stoxx 50.
In the last month, the disparity in index performance has, however, been most notable between perceived
‘safe’ and ‘failing’ eurozone nations, with the German market (DAX30) having outperformed the Spanish
2 December 2010 5
Edison Insight
bourse (IBEX35) by over 15 percentage points. On a 12-month basis, the spread between these two indices
has exceeded 40 points. We see good reason for such trends to continue and, were it not for the strength of
the DAX, then the Euro Stoxx’s performance would likely be notably worse.
The robustness of the DAX is notable, having gained 15.0% year-to-date, over 10 points better than the All-
Share. This has been helped by a favourable macro picture in Germany (discussed earlier) and stimulated by a
large number of well-performing export-led businesses. Returning to the UK, it is also clear to see that those
sectors that have delivered the most impressive gains year-to-date – namely industrials and basic materials –
have a strong non-domestic bias. As we discuss in more detail below, the health of the global economy will be
crucial to these gains being maintained going into 2011.
Policymakers and investors in 2011 will have to contend with a world where GDP growth in almost every nation
– both developed and emerging – will decelerate relative to 2010. While this does not suggest that the global
economy will return to recession any time soon, we remain sceptical about whether a slowing growth scenario
is fully discounted; and with output set to decelerate, risks logically seem weighted on the downside. Current
data points from around the world are also far from encouraging.
In the US (still the world’s largest economy, and where The Economist forecasts a slowdown in 2011 GDP to
2.3% relative to the estimated 2.6% for 2010), durable goods orders have declined for two of the last three
months, with October’s 3.3% drop comparing to a 5.5% rise the previous month. The ISM index remains
above 50, but has fallen in the last month, with inventories rising faster than new orders, a negative indicator.
Meanwhile, the unemployment rate remains stuck at 9.6% despite 151,000 jobs having been created in the
last month, the largest increase since May. Moreover, recently rising consumer confidence (up in November for
the first time in three months) masks the fact that the US Conference Board’s gauge is still almost 20 points
below its five-year average.
The picture is little different elsewhere in the developed world. Data released by Eurostat since the last edition
of Insight highlighted a slowdown in eurozone GDP growth in Q3 to 0.4% (against a 1.0% reading for Q2).
Despite record post-reunification confidence levels and employment rates in Germany, the rate of GDP growth
6 2 December 2010
Edison Insight
over the last quarter shrank by more than threefold (2.3% to 0.7%) and Germany’s relative success cannot
mask the broader challenges besetting the eurozone. Industrial new orders are dropping (September’s 3.8%
decline compares to a 5.1% rise for the previous month) and, most notably, unemployment stands at over
10.1%, higher than it has been in 12 years and also above levels in either the US or the UK. It is still rising in 19
of the EU’s member states and stands at above 20% in Spain.
Despite robust manufacturing growth (at its fastest in the last 16 years according to figures released on 1
December), the UK can draw little comfort from its 7.7% unemployment rate. The current rate of growth in
manufacturing may not be sustained, a view endorsed by the Bank of England’s latest report (10 November)
which states that “growth may slow in the near-term”. The OBR has also recently (29 November) trimmed its
UK GDP estimates both for 2011 and 2012.
Optimists premise their better-growth outlook on two factors: first, that significant unused capacity exists in the
economies of the developed world (see output gap data in Exhibit 5 below); and second, that deteriorating
western world growth trends may be offset by robust emerging market patterns. Both assumptions may be
called into question. With regard to the output gap, closing it requires efficient and coordinated policy stimulus.
Even if QE II in the US does bring better growth (the expectation), then it will also likely result in higher inflation,
which would logically eat-away at improved production. Furthermore, QE II alone may not deliver an improved
performance; it needs to be combined with fiscal reform. How this can be enacted in the US, with a now
divided legislature, remains to be seen.
More broadly, even if there will likely be political stability in the world’s major developed economies in 2011 (no
general elections are scheduled), it seems unlikely that a consensus will emerge regarding coordinated fiscal
and monetary policy, combined with an absence of aggressive exchange rate devaluations. With
unemployment rates still stubbornly high, there is also a strong case for labour market reform. The developing
world may be able to help the western world through some of its transition, but assuming that growth rates
here will continue at their current pace also seems debatable – and hence implies some additional risks – as
we discuss in more detail below.
Exhibit 5: 2011 GDP estimates point to a slowdown; the developed world’s output gap remains significant
GDP es timates : for 2010 and 2011 Output gap as a % of GDP
US UK
UK
Japan OECD
EU
US
Germany
France France
Brazil
Rus s ia Germany
India
China Japan
0 2 4 6 8 10 12 0 2 4 6 8
Few doubt the structural case, as the economies of Brazil, Russia, India and China necessarily continue to
industrialise and modernise. However, the reality is more complicated: first, there is the issue of timing – how
quickly will it happen; next, will all countries benefit equally; and, finally what comes after BRIC? Investors also
need to be selective in how they seek to gain exposure to this theme either through domestically listed plays or
2 December 2010 7
Edison Insight
with, for example, the Shanghai Composite Index down 13.2% year-to-date, but the Sensex Index in India up
14.3% since 1 January.
In the near-term, growth rates will likely slow, but remain significantly above developed market levels (see
Exhibit 5 above) and, in India, industrial output has now shrunk for two consecutive months. More significantly,
inflation has emerged as an incipient threat, both here and in China. The challenge is how to manage robust
growth without the risk of over-heating and how to implement interest rate rises without choking growth.
Visibility on these factors is low.
We do not expect the BRIC bubble to burst any time soon, but investors should be mindful of assuming that
these economies alone can drive the world back to prosperity, especially with growth also currently slowing in
a number of peripheral Asian economies such as the Philippines and Thailand. Analysis from the IMF
(reproduced in The Economist, 30 October) suggests that every percentage point of incremental GDP growth
in China takes at least five years to feed through to a 0.4 point rise in global GDP.
A relative slowdown in growth (China should see its c 10% GDP rate come down to close 7%) combined with
rising inflation remain near-term risks. Diversified basic materials stocks remain our favoured strategy for
gaining exposure to emerging economies (and investors following this approach have gained >25% in the last
year). However, we would also advocate thinking beyond this tactic, considering other geographies (especially
Africa) and also sectors.
The question of global growth is inextricably bound up with that of inflation, which we see as an additional risk
for investors. Beyond Japan, which has seen structural downward pricing pressures for the last 20 years, the
US economy seems an exception in being preoccupied with deflationary concerns, with consumer price
inflation currently at its lowest level (0.6% for October) since 1957. Critics of Chairman Bernanke’s policies are
wide of the mark in asserting that QE II can both not work and that it will result in inflation. The concomitant of
one is the other, but even putting this to one side, we believe inflation is more likely than not to grow in force
during 2011, eating into already slowing growth. Stagflation is a plausible scenario in our view; gold a clear
beneficiary.
Inflation is emerging in two distinct areas. First, the UN Food & Agriculture Organisation is already warning that
the world should “be prepared” for higher food prices next year. Its index is close to peak levels witnessed
during early 2008 and has risen by five percentage points in the last month. According to the UN, levels are
“dangerously close” to creating a crisis. This view has been reiterated by a number of industry bellwethers, with
the CEO of Unilever, for example, stating on 4 November than food inflation is “returning in force”. The other
concern relates to Chinese (and other BRIC) demands for raw materials combined with the growing power of
the consumer in these economies. In China, inflation hit a two-year high in October of 4.4%, up 0.8 points
relative to the previous month.
Some steps have been taken to cool inflation, with interest rate rises implemented over the last month in
China, India (for the sixth time in 2010), South Korea and Australia. However, the bigger concern relates to the
rate at which rising input prices will feed into the economies of the developed world, where the rhetoric also
currently and firmly remains one of keeping interest rates in check.
The UK constitutes an interesting (and potentially worrying) case study. Here, the inflation rate stands at 3.2%
for October, up slightly relative to the previous month and still rising on a 12-month rolling basis. The Bank of
England warns that it is likely to “remain elevated throughout 2011” and cites a “highly uncertain” outlook
(comments from 16 November Inflation Report). Factory gate inflation – ie producer prices – rose 4.0% in the
last month and input price inflation is running at 8.0%, its highest in two years according to the Office for
8 2 December 2010
Edison Insight
National Statistics. VAT rises on 1 January will also only likely exacerbate matters. Among the retailers, Marks &
Spencer, Next and Sainsbury’s are already warning of the consequences.
Stagflation remains the worst of all possible worlds, rising prices and high unemployment, with the output gap
failing to close. A more optimistic consideration would suggest that judicious policy-making (via interest rate
rises) can help ward off inflation, but it will take time for the evidence on this to become clear. In the meantime
– and also, even of a scenario where deflation were to come to pass – then we reiterate our view that investors
can benefit most through retaining their exposure to gold.
Inflation Unemployment
4.0% 8 .5%
8 .0%
3.0%
7.5%
2.0% 7.0%
6.5%
1.0% 6.0%
5.5%
0.0% 5.0%
Jun/10
Feb/10
Apr/10
Dec/08
Aug/09
Dec/09
Aug/10
Oct/09
Oct/10
Jun/09
Feb/09
Apr/09
Jun/10
Feb/10
Apr/10
Dec/08
Aug/09
Dec/09
Aug/10
Oct/09
Jun/09
Feb/09
Apr/09
Value 12M rolling Value 12M rolling
The consumer matters, being responsible for more than 60% of GDP in the UK and over 70% in the US. How
the economy performs is, therefore, highly contingent on the strength of domestic consumption. In the UK
specifically, with the full impact of October’s spending cuts (and job losses) still to come combined with
January’s increase in VAT, risks seem heavily weighted towards the downside. The indicators are negative,
with retail sales growth currently slowing (according to the ONS), and the Nationwide’s consumer confidence
index at 53 for October, its lowest in 18 months and down from a recent peak of 120 in February.
From an investment perspective, domestically-oriented consumer plays would logically be the biggest potential
losers from a moribund consumer, reinforcing our negative stance on these sectors. Additionally, we see
negative implications for other sectors under the consumer umbrella, particularly airlines and media. With
regard to the former, our concerns relate not only to consumer exposure, but also to the effect from a high oil
price combined with ongoing capital intensity requirements. Turning to media, 2011 will be see the negative
impact of a lack of super-quadrennial events and therefore limited scope for upside potential to estimates.
Will there be light at the end of the tunnel for the financial sector?
Our other major negative sector stance for the past year (in contrast to our consistently positive stance on
basic materials, discussed earlier) has been the financial sector. In this respect, and in common with the
consumer space, we find it hard to construct a positive case for the year ahead. Our concerns relate to excess
leverage and insufficient liquidity within the financial system, both factors that will likely be compounded by the
still-unknown consequences on ongoing eurozone sovereign debt exposure. The implementation of Basel III
regulation is another risk factor. We find little cause for comfort within the financial sector.
Investors faced with a slowing growth-rising inflation scenario may be able to find some scope for optimism
from potential deal-making. Even if the current environment does favour M&A (companies might logically look
to ‘buy’ growth if they are unable to generate it organically), it is unlikely to be a panacea for equity markets in
our view.
2 December 2010 9
Edison Insight
Deals have happened for much of the last year, but at a noticeably slower rate than in the past. Risk aversion
levels remain high and not all companies have the requisite balance sheet strength. As we have written in
previous editions of Insight, the current distressed debt cycle still has much further to run (estimates suggest
that $450-500bn of debt will need to be refinanced in the next three years).
Moreover, present appetite for M&A is low, perhaps unsurprising, given an uncertain macro environment.
According to a recent survey by Ernst & Young fewer than 25% of global companies say they are now seeking
acquisition targets, relative to 38% six months ago. The IPO market is also subdued. With more than 150
transactions cancelled this year (note the recent postponements of the proposed floats of First Wind in the US
and Bluestar Adiesso Nutrition in Hong Kong), equivalent to a combined total of $55bn, risk aversion levels
clearly remain high. Market volatility/ uncertainty have been typically cited as the reason for deferral. We
therefore suggest choosing carefully. Mid-cap UK equities may provide fertile ground for stock-picking, with
over 20 FTSE-250 companies having succumbed to deals in the past year, but we expect this to be a selective
rather than broad trend for 2011.
Exhibit 7: Edison sector rankings and rationale for December; and how they compare to a year ago
Pos ition D e c - 10 R a tiona le D e c - 09
Bes t Basic materials M-term fundamentals, global exposure, valuation Telecoms
Telecoms Valuation, cash returns; some global exposure, M&A potential Basic materials
Utilities Valuation, cash returns; some global exposure, M&A potential Healthcare
Healthcare Defensive profile; underperformance creates opportunity Utilities
Industrials Earnings momentum positive but slowing; risks emerging Industrials
Oil & gas Poor macro prognosis; recent gains unjustified Technology
Technology M&A potential, but valuation demanding; US trends also negative Oil & gas
Financials Risk aversion levels rising; valuation not supportive Consumer services
Consumer services Structural concerns given outlook; heavy domestic bias Consumer goods
Wors t Consumer goods Structural concerns given outlook; heavy domestic bias Financials
Source: Edison Investment Research
As exhibits 7 and 8 highlight, our views have remained highly consistent over the last 12 months. While there
have clearly been variations, the basic materials sector has persistently sat in either first or second place within
our conceptual framework of sector rankings, while the consumer sectors have also been among our least
favoured for all of 2010.
Our conviction in basic materials has been vindicated by a 27.2% gain in the last 12 months, a performance
bettered among the UK sectors only by technology (29.8%), although this latter sector has a but 1.5%
weighting in the All-Share relative to 13.4% for the former. On telecoms, which began 2010 as our most
favoured sector and has been our second most preferred (after basic materials) for the last three months, we
have also been rewarded with a market-beating gain. The sector us up 17.7% in the last 12 months, some
seven points ahead of the All-Share benchmark.
10 2 December 2010
Edison Insight
On the negative side, we began 2010 being most cautious on the financial sector, and while we turned more
optimistic during the summer (July through to September, which coincided with a brief period of
outperformance), we downgraded the sector again in October and have been cautious since. This strategy has
worked, with financials having been the second worst performing sector (up just 2.5%) in the last 12 months.
Only oil and gas – compounded by BP – has performed worse. Despite our caution on the consumer, the
performance of these sectors has been somewhat more robust, with consumer services performing in line with
the market and consumer goods gaining 680 basis points on a market relative basis. This performance,
however, only serves to reinforce our negative conviction for the year ahead.
Exhibit 8: How our rankings have changed in the last 12 months; consistency in core sector calls
Note: sectors ranked from 10 to 1, with 10 being the most preferred and 1 the least.
10
0
Dec/09
Aug/10
Sep/10
Nov/10
Dec/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Exhibit 9 below shows our current sector strategy, which we caution is strictly illustrative since it only relates to
hypothetical positioning across UK equities whereas, in reality, investors will likely take into consideration a
much broader range of factors. We have made no changes relative to the previous month.
As discussed earlier, we have been encouraged by positive recent and more medium-term (one year)
performance and believe there is substantially more to go for given structural long-term growth trends and also
2 December 2010 11
Edison Insight
currently supportive (c 11x 2011 P/E) valuation. We favour this sector owing to its global characteristics, and
particularly its exposure to the BRIC economies.
The appeals of defensive sectors are broadly understood; in particular, their combination of attractive dividend
yield and value, combined with relatively low economic risk. Despite strong performances over the last six
months – particularly from the telco and utility sectors – we see substantial valuation attractions (reinforced by
recent strong results, for example, from BT, National Grid and Vodafone) and also upside potential from
possible M&A. All three sectors currently trade on sub-market multiples with above-average dividend yields.
Some of the larger sector names also offer global exposure (especially in the form of Vodafone, GSK and
Astra).
Our relative preference for telco over utility and pharma is a function of valuation (8.1x 2011 P/E), and cash
returns (4.9% sector yield). Relatively, healthcare looks the most expensive of the three defensive sectors and
offers less scope for near-term M&A potential, hence its relative undperformance. Elsewhere, Vodafone is in
the process of disposing of assets and unlocking value, while Cable & Wireless, United Utilities and
Northumbrian Water have all attracted bid speculation in the past months.
0 5 10 15 20 25 0 2 4 6
The performance of the industrial sector has been robust year-to-date (up 18.0% since 1 January) and investors
may also welcome some of the increased clarity that was provided by the Strategic Defence & Security Review
and Comprehensive Spending Review. However, we believe that a headline P/E of more than 18x and a
premium of greater than 20% relative to the UK market implies that much future upside potential has already
been discounted. Meanwhile, cost-cutting and operating leverage benefits may have begun to run their course;
the Q3 reporting season may represent an apogee for the sector.
Looking ahead, we have concerns about potentially deteriorating earnings momentum and rising input costs
(see, for example, Arcelor’s last earnings release) may constitute an additional risk. Other UK industrials that
have also referenced greater caution regarding the outlook in their recent releases include Cobham, Hill & Smith,
Rolls Royce and Smiths Industries. Given the heterogeneous nature of the sector, within industrials we favour
those stocks that offer global, and particularly emerging market exposure.
With the oil price close to a six-month high, and BP’s well-documented problems now seemingly having
passed, the sector has rallied 13.8% in the last three months, a performance only bettered by the basic
12 2 December 2010
Edison Insight
materials sector. That the sector remains in negative territory (down 1.2%) on a 12-month view appears to
create an opportunity, while valuation (c 13x 2011 earnings) is also supportive.
While these factors may help drive some further near-term performance (and the Saudi Oil Minister has said on
record that he sees oil in a “comfort zone” of $70-90/barrel), we are concerned that the macro prognosis
appears to be deteriorating. Our team discussed the outlook in a recent note (see “The market remains well
supplied”, 15 October), but supply and demand remain imbalanced, while inventories stand at close to record
levels.
As discussed earlier, the tech sector’s weighting in the UK market (at 1.5%) is small, but it remains the best
performer in the All-Share since 1 January. As a result, we see its market relative underperformance on both a
one- and three-month view as being as welcome as it is overdue, especially given the sector’s rating of more
than 22x forward earnings.
Beyond valuation and performance, fundamentals give us cause for concern. Despite recent rises to guidance
from Dell and HP, Apple and Cisco have recently warned. Moreover, October’s US durable goods figures were
particularly weak for electronics (down 7.7%) and communications equipment (down 12.3%), while chip
industry forecasts (from SIA, iSuppli) have also recently been trimmed. On the positive side, for UK investors
some further M&A activity may materialise, but we expect this to be concentrated towards the lower end of the
market cap spectrum.
First, new Basel regulations may force banks (in particular) into another round of capital rising. Standard
Chartered, BBVA, BNP Paribas and Société Generale have all recently come to the market; more may follow.
Next, results from the recent reporting season have been highly mixed with Barclays citing a subdued
economic environment and slowing new business growth, Lloyds citing weak mortgage demand and RBS
highlighting increasing losses. Among the UK majors, only HSBC sounded an upbeat note, and one driven
largely by overseas exposure. Finally, sector valuation, on a headline multiple of more than 18x forward P/E is
not supportive in our view.
Both the consumer services and consumer goods sectors have underperformed on a market relative basis in
the last three months, but have gained more than the All-Share on a one-year view. As discussed earlier, we
see risks weighted to the downside and expect recent underperformance to continue into 2011. Our concerns
are driven by poor consumer confidence and declining retail growth, both which may likely be compounded by
VAT hikes and potentially higher unemployment.
Companies including Debenhams, Home Retail, Kingfisher, Next, Marks & Spencer and Sainsbury’s have all
highlighted increasing notes of caution in recent releases and interviews (Next, for example, sees “a very
sluggish, low to no-growth consumer environment for some time to come”). Even if sales do receive a
temporary fillip in the run-up to Christmas and ahead of January’s VAT increase, 2011 looks set to be a
considerably more difficult year, an outcome not fully reflected in current valuation levels in our view.
2 December 2010 13
Edison Insight
Conclusions
Equities may have risen more than 15% from their July lows, but events from the last month serve as a more
appropriate indicator of current sentiment. Global indices continue to exhibit profound swings both to the
upside and downside as investor psychology appears to be gaining the upper hand over fundamentals. An
assessment of the latter suggests that the same familiar problems beset the global economy, namely a lack of
suitable policy instruments to manage the ongoing painful process of deleveraging across the developed
world. Stagnating growth and rising inflation represent other concerns.
Looking ahead to 2011, we believe that until there is a consistent and coordinated approach to monetary and
fiscal policy, equities may likely remain volatile. Lack of future visibility may also cloud the outlook for corporate
earnings growth, which has shown a recent improvement, but may not prove sustainable in our view. It is
against this background that our strategy for equities stays centred around favouring diversified growth (basic
materials) and high cash returns (telcos, utilities) principally at the expense of the consumer sectors. Gold also
remains highly attractive in our view.
14 2 December 2010
Edison Insight
Focus on:
Technology
Oil & gas
2 December 2010 15
Edison Insight
For more information, see our sector report “Cloud computing: Managing the
transition” available on the Edison website.
2,500
700 No of profitable companies 89
600
2,000 500
1,500 400
1,000
300 Significant price changes one month Significant deall flow/catalysts
200
500 100
(%) Holiday season trading
0 0
Nasstar 54
Apr/10
Oct/10
Nov/09
Dec/09
Aug/10
Sep/10
Nov/10
Jan/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Focus Solutions 34
FTSE ALL SHARE - PRICE INDEX Endace 33
FTSE ALL SHARE S/W &COMP SVS £ - PRICE INDEX
Belgravium Technologies 32
Scotty Group (24)
16 2 December 2010
Edison Insight
The immediate threat of a suspension of EU Oil & Gas licences has been avoided for
now, with the proposal being voted down in October and Europe-wide oil and gas
safety regulations being strongly resisted, with UK energy minister Charles Hendry
stating that the UK sets the gold standard for safety in the EU. Clearly the issue of
how small companies can handle a Macondo-style blowout needs to be addressed,
however. The main concerns regard high-pressure wells and deepwater drilling on the
Atlantic Margin – where such a blowout is most likely to occur – and ensuring that
smaller operators have both the technical backup facilities and access to funding to
cover an extended operation, as seen on Macondo. There are suggestions that the
government is looking to change the qualification criteria to become an operator in the
North Sea, which could significantly affect small companies. Here we arrive at a
serious dilemma: how to allow the smaller players to continue the activities that have
been so crucial in the revival of fortunes in the North Sea and still maintain the ability
to respond to a worst-case scenario? Without their involvement, the government will
not be able to extract as much as possible of the estimated 20mmboe left in the
North Sea.
Whatever solution is found, let’s make sure we don’t throw the baby out with the
bathwater.
2,000 6,000
5,000
1,500 4,000
Significant price changes one month Significant deal flow/catalysts
1,000 3,000
2,000
(%) Bentley well results for Xcite December
500
0
1,000
0
Haike Chemical GP 214 Commence drilling at Catcher December
Bahamas Ptl. Co. 137 discovery
Dec/09
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
Feb/10
May/10
Mar/10
Apr/10
Nov/09
2 December 2010 17
Edison Insight
Forecast changes
The table below details stocks where we have changed our forecasts to 2 December.
18 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
The RA and IBD markets are expected to be worth $14bn and $5bn respectively by around
Company description
2017-18. The major TNFĩ inhibitors already generate sales already in aggregate of c
4SC is a drug discovery/development
company with four compounds in $18bn across all indications (RA and other autoimmune diseases), with three products Enbrel
clinical trials. These include vidofludimus
for rheumatoid arthritis and inflammatory (etanercept, Pfizer/Amgen), Humira (adalimumab, Abbott) and Remicade (infliximab,
bowel disease and resminostat for liver J&J/Merck & Co) all achieving sales of over $5bn/year.
cancer and Hodgkin’s lymphoma.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 3.0 (10.8) (10.7) (45.87) N/A N/A
Actual 16.0 15.2 (2.0)
Relative* 12.0 (3.2) (19.6) 2009A 1.9 (15.0) (15.2) (51.17) N/A N/A
* % Relative to local index
2010E 1.0 (18.6) (18.9) (48.89) N/A N/A
Analyst
2011E 1.0 (22.0) (22.3) (58.01) N/A N/A
Robin Davison
INDUSTRY OUTLOOK
Company description
Antibodies are an essential and fundamental tool of life sciences research. There are millions of
Abcam is focused on making, sourcing,
and selling antibodies online for such antibodies and the market is fragmented, providing Abcam enough growth potential.
research use. Its main operations are in
the UK, the US and Japan, with a global Abcam and Santa Cruz Biotechnology are market leaders, although Abcam is a smaller niche
customer base. supplier compared with wider peer group.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 56.8 17.7 17.0 36.9 9.1 8.0
Actual (0.3) 8.7 82.7
Relative* 0.4 17.6 65.1 2010A 71.1 28.0 26.8 56.6 5.9 6.1
* % Relative to local index
2011E N/A N/A N/A N/A N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Robin Davison
2 December 2010 19
Edison Insight
INDUSTRY OUTLOOK
Ablon holds 14 completed schemes and 19 development projects, well diversified by sector.
Company description
These were built to meet an identified need for modern commercial space, but local recession
Ablon Group is a leading developer and
investor in commercial and residential cut demand and increased competition for tenants, so key markets face oversupply. A
property in Central and Eastern Europe.
It holds a portfolio of 33 assets, 14 shortage of debt finance and lack of well-developed investment markets may delay recovery,
income producing investments and 19 but a diminishing development pipeline will help.
development projects.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 23.9 7.0 (17.1) (9.2) N/A 27.2
Actual (10.4) 15.2 (12.9)
Relative* (9.7) (14.2) (21.3) 2009A 25.3 12.1 (2.1) 2.5 28.2 14.8
* % Relative to local index
2010E 28.0 12.2 (4.4) (1.1) N/A 8.8
Analyst
2011E N/A N/A N/A N/A N/A N/A
Roger Leboff
INDUSTRY OUTLOOK
Company description
There is a strong demand for novel pharmaceutical products for either unmet medical needs or
Ablynx is a drug discovery company
with a proprietary technology platform. It to improve on current treatments. The characteristics of Ablynx's Nanobodies, together with
is developing a novel class of
therapeutic proteins called Nanobodies the initial results from clinical trials, mean they have considerable commercial potential across
to treat a range of indications. It has four many indications.
products in clinical development.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 16.8 (18.5) (15.0) (41.3) N/A N/A
Actual (3.0) 10.3 5.3
Relative* 1.2 (6.7) (1.0) 2009A 29.7 (19.6) (19.8) (53.7) N/A N/A
* % Relative to local index
2010E 29.6 (30.2) (29.3) (69.2) N/A N/A
Analyst
2011E 32.0 (43.1) (41.4) (94.9) N/A N/A
Mick Cooper
20 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
The shift in manufacturing capacity towards lower-cost areas has irreversibly transformed the
Company description
underlying potential for shipping. The global recession has created volatility in freight rates, but
ACM is a shipbroker with a focus on the
global oil tanker market. It arranges spot rising oil consumption is stabilising wet freight rates. The larger shipbrokers are better
and time charters, and also handles
ship sale and purchase to an equipped to provide advice to customers which, combined with the cash-generative nature of
international customer base. the businesses, suggests a quality of earnings that is not recognised in the City.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 30.1 8.9 8.7 36.7 6.0 4.3
Actual 3.3 23.3 7.8
Relative* 4.1 0.9 (2.6) 2010A 25.9 6.9 6.6 26.8 8.3 15.1
* % Relative to local index
2011E 31.0 7.1 6.8 25.9 8.6 6.7
Analyst
2012E 35.0 8.3 8.0 29.8 7.4 5.4
Nigel Harrison
INDUSTRY OUTLOOK
The demand outlook for voltage optimisation equipment looks compelling, with rising electricity
prices likely to speed the return on investment, and carbon reduction initiatives also boosting
Company description
demand. Current market penetration is estimated at c 0.5% in the UK, and overseas markets
Active Energy's origins are in supplying
various components to manufacturers are even more nascent. Competition is present, however, and Active Energy's success will
of gas appliances. The investment case
is now centred around a UK-based hinge on its ability to further establish itself as one of the UK's leading suppliers while finding
subsidiary that designs and sells power appropriate channels to exploit opportunities overseas.
optimising transformers under the brand
VoltageMaster. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 2.0 (0.3) (0.3) (1.03) N/A N/A
Actual (32.5) (41.3) (69.2)
Relative* (32.0) (72.1) (72.2) 2009A 2.9 (0.9) (1.0) (1.52) N/A N/A
* % Relative to local index
2010E 5.1 (1.3) (1.3) (1.34) N/A N/A
Analyst
2011E 6.4 0.2 0.2 0.19 17.9 N/A
Dan Ridsdale
2 December 2010 21
Edison Insight
INDUSTRY OUTLOOK
Addex has established a world-leading position in the identification of allosteric modulators,
Company description
compounds which offer significant potential advantages over classical agonist/antagonists.
Addex is engaged in the adaptation and
expansion of its allosteric modulator Novartis's decision to undertake pivotal/Phase III studies of its mGluR5 NAM, AFQ056, in
discovery platform for targets in central
nervous system (CNS), metabolic Fragile X and PD-LID further endorses the potential of the platform.
disorders and inflammation.
INDUSTRY OUTLOOK
With oil prices remaining in the $70/bbl to $80/bbl range, the economics of a number of
Company description
exploration plays remain attractive. Along with strong farm-in partners and stable operating
ADX Energy (formerly AuDAX
Resources) is an oil and gas exploration regimes, ADX has every chance of success if it finds commercial quantities of hydrocarbons in
business listed in Australia with
exploration activities in Tunisia, offshore its prospects.
Italy, Romania and Australia. The group
also has mining interests which are in
the process of being demerged. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m 2009A 0.0 (2.7) (2.7) (1.4) N/A N/A
Actual (1.0) (34.0) 4.5
Relative* 0.5 (39.1) 5.3 2010A 0.0 (2.2) (2.1) (0.9) N/A N/A
* % Relative to local index
2011E 0.0 (4.1) (9.9) (2.7) N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Ian McLelland
22 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Efficacious oncology and sepsis products can enjoy premium pricing and be sold by relatively
Company description
small sales forces, but there is significant competition in oncology and sepsis is difficult to
Agennix is a drug development
company based in Germany and the treat. Talactoferrin has the potential to become a complementary treatment in oncology to the
US. Its lead product talactoferrin is
being developed for the treatment of current treatments without competing directly against other drugs, and to be widely used in
cancer and sepsis. the treatment of sepsis.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 12.4 (19.6) (18.8) (254.7) N/A N/A
Actual (1.9) (7.6) (1.3)
Relative* (5.2) (27.1) (19.1) 2009A 7.7 (10.8) (9.5) (91.9) N/A N/A
* % Relative to local index
2010E 0.0 (29.4) (30.3) (109.6) N/A N/A
Analyst
2011E 0.0 (48.5) (48.9) (132.3) N/A N/A
Mick Cooper
INDUSTRY OUTLOOK
The industry remains in considerable turmoil as motor insurers seek ways to control claims
Company description
costs and restore their own profitability. Typically, the insurers have been slow to pay and have
Ai Claims Solutions provides credit hire
and credit repair as well as other challenged claims, starving the industry of cash. In this environment, Ai Claims' lower cost,
accident management solutions
nationally. It represents non-fault drivers more insurer-aligned offering is serving it well.
and insurers of at-fault drivers.
2 December 2010 23
Edison Insight
INDUSTRY OUTLOOK
Company description
Algeta is the world leader in the development of alpha-pharmaceuticals for cancer. Alpharadin
Algeta is a Norwegian listed biotech
company. is enjoying good visibility, helped by growing interest in potential new therapeutics for prostate
cancer following the approvals of Dendreon's Provenge and Sanofi-Aventis's Jevtana and the
positive results in Phase III for J&J/BTG's abiraterone.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (NOKm) (NOKm) (NOKm) (øre) (x) (x)
% 1m 3m 12m 2008A 0.1 (180.9) (170.8) (1034.7) N/A N/A
Actual 25.3 45.0 75.9
Relative* 26.6 31.0 57.7 2009A 30.7 (154.9) (164.3) (475.1) N/A 30.1
* % Relative to local index
2010E 202.3 6.5 16.9 42.9 289.0 N/A
Analyst
2011E 202.3 0.6 8.4 21.4 579.4 N/A
Robin Davison
24 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Pollinex Quattro (representing roughly 50% of Allergy's revenues) is an ultra-short course
Company description
allergy vaccine given as four shots over three weeks. This compares favourably with existing
Allergy Therapeutics is a
European-based speciality vaccines (typically requiring 16-50 injections under specialist supervision pre-hay fever season)
pharmaceutical company focused on
the treatment and prevention of allergy. and with comparable efficacy.
INDUSTRY OUTLOOK
Alliance Pharma markets and distributes a range of branded pharmaceuticals with
Company description
well-established, off-patent sales. Its products usually have few direct competitors and are low
Alliance Pharma is a speciality
pharmaceutical company that develops, priced to encourage high prescription take-up. The company achieves growth by a
markets and distributes pharmaceutical
products. combination of product in-licensing and organic sales.
2 December 2010 25
Edison Insight
INDUSTRY OUTLOOK
Company description
UK public sector spending concerns still cannot be ignored, but the CSR was about as
Allocate Software is the leading provider
of software applications designed for positive as it could be and projects that generate nearer-term financial savings should be more
workforce optimisation within global
organisations employing large, shielded from cuts. A growing proportion of international and SaaS revenues also adds
multi-skilled workforces. robustness to Allocate’s revenue profile.
Y/E May Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 15.8 2.7 2.6 5.4 14.2 18.9
Actual 3.0 5.5 31.9
Relative* 3.8 (1.0) 19.2 2010A 22.0 3.7 3.5 6.3 12.1 8.1
* % Relative to local index
2011E 28.6 5.3 5.0 5.9 13.0 8.8
Analyst
2012E N/A N/A N/A N/A N/A N/A
Dan Ridsdale
26 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
The hedge-fund industry has nearly recovered from all its investment losses sustained during
the credit crunch. The HFN Hedge Fund Aggregate Index was +2.1% in October 2010 and
Company description
+7.9% year to date at the end of October 2010.
Alpha Strategic plans to pool a portion
of the revenue streams from several
single strategy hedge funds.
INDUSTRY OUTLOOK
Company description
In addition to supplying local demand for fuel and power (including potentially BHP Billiton’s
Altona holds a 49% interest in three
exploration licences covering 2,500km nearby Olympic Dam project), the JV is also looking to export fuel and possibly coal to the
square in the north of the Permian
Arckaringa Basin, South Australia. Its Asian markets. The BFS commenced last month and is expected to take around two years.
immediate focus is completing a
bankable feasibility study for a coal to
liquids plus co-generation facility. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 0.0 (1.3) (1.3) (0.31) N/A N/A
Actual 9.8 36.4 116.3
Relative* 10.6 (13.3) 95.5 2010A 0.0 (2.6) (2.6) (0.64) N/A N/A
* % Relative to local index
2011E 0.0 (1.6) (1.5) (0.38) N/A N/A
Analyst
2012E 0.0 (1.7) (1.7) (0.41) N/A N/A
Michael Starke
2 December 2010 27
Edison Insight
INDUSTRY OUTLOOK
The most important factor is variation in the price of iron ore. A 10% rise in the ore price from
$68/t 65%Fe fines would result in a 21% rise in net earnings from C$42m to C$50m and a
Company description
25% rise in earnings for Anglesey from 6.3p per share to 7.9p per share. A 10% fall would see
Anglesey has a 41% interest in
TSX-listed Labrador Iron Mines, which a drop of around 27%. Current comparable spot prices are strong at U$160/t (62% fines CFR
has resources of 150 Mt of
direct-shipping hematite iron ore. It is Chinese ports). With shipping rates at $40/t, this equates to around U$120/t FOB.
about to commence production. It also
owns 100% of the Parys Mountain
zinc-copper-lead deposit, Wales. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 0.0 (0.5) (0.8) (0.5) N/A N/A
Actual 54.7 90.5 196.7
Relative* 55.9 39.5 168.2 2010A 0.0 (0.3) (0.6) (0.4) N/A N/A
* % Relative to local index
2011E 0.0 (0.3) (0.6) (0.4) N/A N/A
Analyst
2012E 0.0 (0.3) 4.4 2.9 15.6 26.2
Anthony Wagg
INDUSTRY OUTLOOK
Company description
The companion animal market in the UK grew by 8.2% in 2009, which highlights its resilience.
Animalcare markets and sells licensed
veterinary pharmaceuticals, animal The growth is being sustained by the public continuing to care deeply for their pets, and the
identification products and animal
welfare goods for the companion animal increasing numbers of new treatments and products.
market across the UK. Its products are
sold in Europe through distributors.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 17.6 2.6 2.0 6.5 19.0 7.5
Actual 0.8 24.8 23.5
Relative* 1.6 (5.6) 11.6 2010A 19.9 3.6 3.2 13.4 9.2 8.9
* % Relative to local index
2011E 12.3 3.4 3.2 11.5 10.7 7.6
Analyst
2012E 13.5 3.9 3.8 13.9 8.9 6.8
Mick Cooper
28 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
The investment case is heavily geared to success of the AS1413 Phase III ACCEDE study and
Antisoma is a UK biotech company
specialising in the development of drugs the partnering of this programme, which could bring in a substantial sum. Market research
for the treatment of cancer. It has a
broad R&D pipeline with a lead product indicates global AS1413 sales potential of $440-580m in secondary AML, or up to $670m
licensed to Novartis. It has ambitions to including de novo AML. Positive ASA404 news from Novartis would represent upside.
establish a US sales franchise in
oncology products. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 25.2 (22.6) (18.2) (2.5) N/A N/A
Actual 0.3 0.0 (80.5)
Relative* 1.1 7.7 (82.4) 2010A 20.3 (19.4) (18.4) (2.5) N/A N/A
* % Relative to local index
2011E 0.6 (28.3) (28.1) (3.9) N/A N/A
Analyst
2012E 0.6 (28.3) (29.6) (4.3) N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
Company description
We remain cautiously optimistic about the current outlook following recent positive US
Aquarius is the world's fourth largest
PGM producer, with five mines in automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to
southern Africa: Kroondal (50%),
Marikana (50%), Blue Ridge (50%) mid-2011 as auto producers restock ahead of forecast increases in vehicle production in
Everest (100%) and Mimosa (50%) as 2012.
well as tailings retreatment operations
and exploration projects. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 298.9 (0.2) (34.7) (1.0) N/A 65.2
Actual (13.3) 24.4 (2.6)
Relative* (12.6) (20.1) (12.0) 2010A 457.9 135.9 110.9 16.8 31.3 19.8
* % Relative to local index
2011E 592.3 141.5 111.6 17.5 30.1 16.7
Analyst
2012E 683.0 133.2 101.1 15.5 33.9 19.9
Michael Starke
2 December 2010 29
Edison Insight
INDUSTRY OUTLOOK
Retail lending margins continue to benefit from competitors having limited appetite to lend, and
Company description
credit conditions appear to have stabilised. For those with good funding, it is an excellent time
Arbuthnot Banking Group is engaged in
retail, investment and private banking to lend. Market conditions for investment banking remained tough through the summer and
and other financial services.
into Q3, which will adversely affect the results. Private banking remains competitive with low
interest rates limiting the value of deposits.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 41.9 N/A (2.2) 3.5 111.7 N/A
Actual (1.6) (5.2) 2.9
Relative* (0.9) (12.8) (7.0) 2009A 52.1 N/A 5.1 23.4 16.7 N/A
* % Relative to local index
2010E 55.7 N/A 6.4 30.2 12.9 N/A
Analyst
2011E 60.4 N/A 8.7 38.0 10.3 N/A
Mark Thomas
INDUSTRY OUTLOOK
Company description
Lorcaserin is one of three FDA-filed obesity drugs. In Phase III it showed the least impressive
Arena's lead project, lorcaserin
(partnered with Eisai), is pending FDA efficacy (placebo-adjusted weight loss of 3.6% vs 9.4% for Vivus’s Qnexa and 5.2% for
approval for the treatment of obesity. It
has a development pipeline of late Orexigen’s Contrave) but had the best cardiovascular and CNS safety profile. Qnexa also
preclinical and early clinical received a negative 10-6 AdCom vote in July and a Complete Response Letter.
programmes, including one partnered
with Ortho-McNeil-Janssen (J&J). 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 2008A 9.8 (213.5) (226.8) (309.69) N/A N/A
Actual (10.2) (78.6) (61.3)
Relative* (10.5) (54.8) (63.8) 2009A 10.4 (113.4) (139.2) (165.07) N/A N/A
* % Relative to local index
2010E 15.5 (78.7) (95.1) (309.69) N/A N/A
Analyst
2011E 7.0 (60.7) (74.4) (309.69) N/A N/A
Lala Gregorek
30 2 December 2010
Edison Insight
2 December 2010 31
Edison Insight
INDUSTRY OUTLOOK
Important clinical validation of NRP-1 antagonism (EG014) may come from Genentech’s
Company description
human IgG1 antibody, MNRP1685A. Competitor therapies to EG011 for refractory angina are
Ark Therapeutics specialises in
developing products for treating mainly stem cell therapies, while EG016 is a novel approach in peripheral vascular disease.
vascular disease, cancer and wound
care. The company is a leader in the Large pharma interest in foetal growth restriction (EG013) is evidenced by Pfizer's Phase II/III
field of gene-based therapies, and has sildenafil trial.
in-house manufacturing capabilities.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.9 (18.0) N/A (6.9) N/A N/A
Actual (15.1) (19.1) (88.0)
Relative* (14.4) (56.2) (89.2) 2009A 3.0 (18.3) N/A (9.0) N/A N/A
* % Relative to local index
2010E 3.0 (15.3) N/A (7.6) N/A N/A
Analyst
2011E 6.1 (8.2) N/A (4.4) N/A N/A
Robin Davison
INDUSTRY OUTLOOK
There has been some improvement in the macro environment, although the situation remains
fragile; more significantly, confidence seems likely to remain low following the government
Company description
spending review. However, experience shows that businesses which invest in innovation and
Armour Home designs and distributes a
comprehensive upmarket range of quality consistently outperform their peers. Estimates have been lowered across the sector,
home entertainment products, and
Armour Auto supplies in-car but we remain optimistic that Armour can deliver meaningful recovery over the medium term.
communications and entertainment
components and systems.
Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 51.6 3.0 1.2 1.44 5.9 0.8
Actual (2.9) (27.7) (45.2)
Relative* (2.1) (43.1) (50.4) 2010A 56.6 2.8 1.0 1.38 6.2 3.0
* % Relative to local index
2011E 57.0 2.5 0.3 0.32 26.6 3.1
Analyst
2012E 59.0 3.0 0.6 0.74 11.5 2.1
Nigel Harrison
32 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
There is no shortage of demand for modern healthcare facilities, but clients have been more
Ashley House supplies project
management and consultancy services. reticent to commit to new projects until the government's NHS spending plans are clearer. In
These are primarily allied to the delivery
of new medical facilities for NHS-led that respect, more detail on budgets and responsibility for investment decisions awaits
primary care, the management of assets publication of the healthcare bill.
and clinical services.
Y/E Apr Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 23.8 5.5 5.5 10.0 3.0 N/A
Actual 0.0 (6.3) (63.6)
Relative* 0.8 (30.9) (67.1) 2010A 24.9 4.2 4.1 7.0 4.3 N/A
* % Relative to local index
2011E 29.0 5.4 5.0 6.7 4.5 3.0
Analyst
2012E N/A N/A N/A N/A N/A N/A
Roger Leboff
INDUSTRY OUTLOOK
AGP's developments aim to capitalise on the growing demand for residential property in
Company description
mainland China. The drivers for the group's schemes remain sound, despite recent moves by
Asian Growth Properties is an investor
and developer of commercial and the PRC government to discourage speculation in residential property and similarly motivated
residential property in Hong Kong and
mainland China, ie Chengdu, Nanjing moves in Hong Kong. Each project is phased and budgeted to achieve satisfactory returns at
and Guangzhou. prices supported by occupational demand.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (HK$m) (HK$m) (HK$m) (c) (x) (x)
% 1m 3m 12m 2008A 1508.0 303.0 247.0 0.0 N/A 3.0
Actual 0.0 0.0 13.3
Relative* 0.8 (17.8) 2.4 2009A 517.0 151.0 89.0 0.0 N/A 39.7
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Roger Leboff
2 December 2010 33
Edison Insight
INDUSTRY OUTLOOK
There is an increasing trend towards treatment, recovery and recycling within the waste
hierarchy as highlighted in the government's Strategy for Hazardous Waste Management.
Company description
While new regulations since 2004 initially caused confusion, we believe that as the industry
Augean is a United Kingdom-based
waste and resource management understands what is required and enforcement improves, volumes will become increasingly
company. It provides a range of
services to the hazardous waste sector, predictable.
including hazardous landfill and
treatment services.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 40.1 10.4 4.0 7.1 3.7 1.5
Actual 1.9 (1.9) (30.3)
Relative* 2.7 (4.1) (37.0) 2009A 31.5 6.0 1.3 1.8 14.7 4.8
* % Relative to local index
2010E 31.4 5.0 0.0 0.0 N/A 5.5
Analyst
2011E 32.9 5.6 1.0 1.0 26.5 4.6
Roger Johnston
INDUSTRY OUTLOOK
Company description
The current gold price of US$1,350/oz is consistent with the US's additional QE2 stimulus,
Aurizon is a Canadian gold company
with three major assets in Canada's while upward pressure on prices will continue to be exerted by geopolitical (eg Korea) and
Abitibi region. Its aims to become an
intermediate producer focused on economic (eg Ireland, Spain, Portugal) tensions.
favourable geological trends, close to
infrastructure, in politically stable,
pro-mining jurisdictions. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (C$m) (C$m) (C$m) (c) (x) (x)
% 1m 3m 12m 2008A 144.5 59.3 21.1 9.8 75.9 15.4
Actual 11.0 13.9 42.3
Relative* 9.3 28.9 26.2 2009A 175.6 91.9 54.9 20.8 35.8 11.8
* % Relative to local index
2010E 182.6 68.6 31.1 10.2 72.9 17.9
Analyst
2011E 234.9 134.5 92.6 33.0 22.5 9.2
Charles Gibson
34 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Despite the pressures on defence budgets, the protective nature of Avon's products provides
resilience. In addition, the US DoD contract supports demand over the long term, providing a
Company description
base to target buyers including other security and safety agencies and international militaries.
Avon Rubber designs, develops and
manufactures products in the While the timing of such inroads is difficult to predict, the emerging portfolio effect should
respiratory protection, defence and
dairy sectors. Its major contract enable continued growth.
partners are defence and national
security and safety organisations.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 100.9 9.7 6.2 14.5 13.8 18.1
Actual 19.4 70.2 113.9
Relative* 20.3 62.7 93.3 2010A 117.6 13.6 9.0 21.9 9.1 4.8
* % Relative to local index
2011E 125.9 15.0 10.8 27.0 7.4 4.1
Analyst
2012E 134.8 16.4 12.3 31.0 6.5 3.9
Roger Johnston
INDUSTRY OUTLOOK
The UK defence market is set to undergo a period of pressure with budget cuts and a strict
Company description
focus on supporting operations. However, this provides opportunities for outsourcing and,
Babcock is a primarily UK-based
support service company with when combined with growth in international and recovery in non-defence markets, leaves
operations in Marine (34%),
Defence(18%), Support Services (33%) Babcock well placed to benefit in a cost down environment.
and International (15%).
2 December 2010 35
Edison Insight
INDUSTRY OUTLOOK
The UK's Strategic Defence and Security Review re-prioritised BAE's programmes, including
Company description
the cancellation of Nimrod MRA4, retirement of the Harrier fleet and the decommissioning of
BAE Systems is a global defence
company with activities spanning HMS Ark Royal. However, this has been offset to a large extent by the positives of the
production and support across air, land,
sea and security markets. The group confirmation of the aircraft carrier build and the full complement of seven Astute submarines.
has operations in the UK, US, Kingdom
of Saudi Arabia, Sweden, Australia and
now India. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 18543.0 2096.0 1795.0 37.1 9.2 6.0
Actual (2.2) 13.3 3.8
Relative* (1.4) (4.4) (6.2) 2009A 21990.0 2328.0 2004.0 40.1 8.5 5.4
* % Relative to local index
2010E 22929.0 2467.0 2077.0 42.8 7.9 6.4
Analyst
2011E 23119.0 2509.0 2179.0 45.4 7.5 5.9
Roger Johnston
36 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
In recent days, benchmark prices of iron ore have hit six-month highs (of around US$170/t) on
BZM is focused on developing its Kalia
iron ore deposit in Guinea, West Africa. the back of healthy demand from Asian steel mills and lower iron ore exports from India.
Its estimates suggest Kalia hosts an
attributable iron ore resource of 10.0bt Meanwhile, the outlook for 2011 remains positive.
of magnetite and 2.55bt of oxide. It was
founded in November 2007 and listed
on AIM in April 2010. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 0.0 (14.5) (15.1) (3.6) N/A N/A
Actual (0.8) 22.0 N/A
Relative* 0.0 25.4 N/A 2009A 0.0 (14.4) (16.5) (3.9) N/A N/A
* % Relative to local index
2010E 0.0 (21.7) (22.4) (4.2) N/A N/A
Analyst
2011E 0.0 (21.7) (24.5) (4.7) N/A N/A
Michael Starke
INDUSTRY OUTLOOK
Company description
Declining Chinese copper imports and lower global inventories of the metal highlight the
BZT has a 40% stake in the Mankayan
copper-gold project on the Philippine impact of higher prices on restocking. Nevertheless, we believe the longer-term fundamentals
island of Luzon and an option to acquire
the remaining 60% for ~US$40,000. In remain robust.
Tanzania, it has a 46% stake in a joint
venture with AngloGold Ashanti, and
other exploration tenements. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 0.0 (1.2) (1.1) (2.8) N/A N/A
Actual (13.3) 63.2 0.8
Relative* (12.6) (2.7) (8.9) 2010A 0.0 (1.4) (1.4) (3.2) N/A N/A
* % Relative to local index
2011E 0.0 (0.9) (0.8) (1.8) N/A N/A
Analyst
2012E 0.0 (0.9) (0.9) (1.8) N/A N/A
Michael Starke
2 December 2010 37
Edison Insight
INDUSTRY OUTLOOK
Market reaction has generally been negative, with Biocompatibles' shares trading at 370p
Company description
compared to a theoretical bid price of 430p (based on the BTG share price prior to the
Biocompatibles is a leading medical
technology company in the field of bid).Edison is a connected party in the transaction.
drug-device combination products,
operating via two divisions: Oncology
Products, including Bead Products and
BrachySciences; and Licensing,
including CellMed and PC Licensing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 17.7 (2.1) (0.4) 0.9 411.1 N/A
Actual 22.3 39.6 56.5
Relative* 23.3 36.7 41.4 2009A 26.6 (3.2) (3.1) (4.7) N/A 1079.2
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
John Savin
INDUSTRY OUTLOOK
Around Europe, plants with capacities between 5-60mt are now in place as the consumer and
regulatory drive to move away from petroleum-based plastics gathers momentum. Bioplastics
are still more expensive than petroleum-based products. However, growth is being achieved
Company description
by targeting niches where packaging is a small proportion of the overall cost of a product, and
Biome Technologies (previously
Stanelco) is focused on two areas: the consumer appeal of being eco-friendly adds enough differentiation. A range of third-party
bioplastics and radio frequency (RF).
The bioplastics division produces an estimates indicates CAGRs of 12% to 20% in the coming years for the industry.
organic-based resin (rather than oil
based) for use in the production of
plastics. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 14.8 (2.4) (2.5) (0.1) N/A N/A
Actual (23.1) 53.8 (42.9)
Relative* (22.5) (3.9) (48.4) 2009A 17.9 (1.7) (2.7) (0.1) N/A N/A
* % Relative to local index
2010E 12.5 (1.8) (2.3) (0.1) N/A N/A
Analyst
2011E 16.2 (1.0) (1.5) 0.0 N/A N/A
Toby Thorrington
38 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
BNC105 is one of the leading agents in the putative vascular disrupting agent class and has an
Company description
attractive profile with a possible direct anti-tumour effect as a single agent. The anti-anxiety
Bionomics is an Australian biotech
company focused on developing small drug BNC210 could have a competitive advantage over existing anxiety treatments in terms of
molecule products for cancer, anxiety,
epilepsy and multiple sclerosis. Its lead speed of onset, the absence of sedative, memory or motor impairment and risk of habituation.
programmes are a VDA and an
anxiolytic compound.
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 2009A 4.3 (5.6) (6.2) (2.5) N/A N/A
Actual 16.1 20.4 (12.2)
Relative* 17.8 (4.7) (11.5) 2010A 3.4 (7.2) (7.4) (2.5) N/A N/A
* % Relative to local index
2011E 3.8 (6.1) (6.5) (2.0) N/A N/A
Analyst
2012E 3.8 (6.1) (6.7) (2.1) N/A N/A
Robin Davison
INDUSTRY OUTLOOK
If Phase III trials are successful, nalmefene would enter a potentially large, although almost
completely undeveloped, market with little competition on the horizon. There are >50m alcohol
Company description
misusers in the major markets, of which only a very small proportion is currently treated with
Biotie Therapies is a Finnish biotech
company with a focus on clinical the available treatment options. The product could become a very significant advance in this
programmes in CNS and inflammatory
disease. Its lead project, nalmefene, for area.
the treatment of alcohol dependency, is
partnered with Lundbeck.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 5.1 (4.9) (5.6) (5.6) N/A N/A
Actual (2.6) (19.6) (27.4)
Relative* (0.8) (35.3) (38.8) 2009A 5.6 (12.2) (12.5) (7.3) N/A N/A
* % Relative to local index
2010E 3.2 (12.5) (13.4) (8.1) N/A N/A
Analyst
2011E 1.4 (7.9) (8.8) (5.0) N/A N/A
Lala Gregorek
2 December 2010 39
Edison Insight
INDUSTRY OUTLOOK
Homeland security is a large but highly fragmented market, where contacts within end-users
Company description
are vital. With constantly developing technology and a growth profile that is expected to
Blue Star Capital invests primarily in
unquoted homeland security companies continue, this provides unique investment opportunities. This was highlighted within the UK's
with significant dual-use commercial
market opportunities. National Security Strategy and the SDSR with £650m of additional funding in the area.
40 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Brady provides trading, risk and connectivity software solutions to the global commodity
Company description
market – miners, fabricators, banks etc. Volatile commodity prices and potential general delays
Brady plc provides trading and risk
management software for global in clients’ decision making add some short-term uncertainty to the sales cycle. However, the
commodity markets. It has more than
20 years of expertise and more than target market is underinvested in IT and auditors, and regulators are seeking increased
500 users worldwide, including some of reporting and accountability across the industry.
the largest financial institutions and
mining corporations. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 6.2 0.9 1.1 3.1 19.7 7.1
Actual (5.8) (8.3) (12.2)
Relative* (5.0) (9.1) (20.7) 2009A 8.2 1.5 1.3 4.8 12.7 18.5
* % Relative to local index
2010E 10.6 1.9 1.8 4.7 13.0 39.7
Analyst
2011E 18.7 3.6 3.2 4.7 13.0 8.9
Richard Jeans
INDUSTRY OUTLOOK
Trading updates from industry majors have had a more positive tone lately, helped by
Company description
comparatives being poor. GfK and Synovate's Q3 revenues both made double-figure gains.
BrainJuicer carries out quantitative
online research using innovative, BrainJuicer continues to differentiate itself and to challenge traditional market research
bespoke software to produce insightful
market research for large, multinational approaches and methodologies, particularly with its tools designed to garner emotional as well
companies. as rational reactions.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 9.3 1.4 1.4 7.4 26.9 22.0
Actual (5.0) 13.7 55.5
Relative* (4.3) 1.4 40.5 2009A 11.8 1.9 1.7 9.0 22.1 15.6
* % Relative to local index
2010E 15.9 2.1 1.9 10.1 19.7 11.8
Analyst
2011E 20.0 2.5 2.3 12.5 15.9 9.7
Fiona Orford-Williams
2 December 2010 41
Edison Insight
INDUSTRY OUTLOOK
Tax increases in the post-election budget are likely to help move customers to higher-margin,
advice-rich products, especially with an announcement of a review of pension contributions.
Company description
Equity markets remain volatile with sovereign risk concerns on top of stock-specific issues
Brewin Dolphin is one of the largest
independent private client investment such as BP. Investors may be more cautious on high-margin equity-related products as a
managers in the UK and manages
around £23bn. It provides a complete result, although it could also stimulate greater demand for advice.
service for private investors, charities
and pensions and has an investment
banking division. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 212.3 N/A 32.1 10.9 12.8 N/A
Actual 1.8 17.7 (12.5)
Relative* 2.6 (2.2) (21.0) 2010A 250.9 N/A 37.7 12.6 11.1 N/A
* % Relative to local index
2011E 276.2 N/A 50.9 16.5 8.5 N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Mark Thomas
INDUSTRY OUTLOOK
Motor industry premiums continue to rise, with underwriters becoming more selective in their
risk profiles and some withdrawing from specific lines of business. Online competition remains
Company description
fierce, although Brightside continues to expand market share, due to its widening product
Brightside Group’s principal activities
are insurance broking; the provision of range and competitive pricing. Rising premium rates translate directly into higher commission
premium finance and medical reports;
lead generation; and the provision of levels in cash terms.
debt management solutions.
42 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Market polymer prices (input costs) rose sharply in H1, representing a sustained (near peak)
level. The weight of supply-side evidence suggests this should reverse but slower
commissioning of new capacity together with outages at European producers has prevented
this widely anticipated re-tracement from occurring. That said, plateauing/softening was been
Company description
seen in some resin grades in the early part of H2, with small increases more recently.
BPI is the largest manufacturer of
polythene film products in Europe. It is
also Europe's largest recycler of waste
polythene film.
INDUSTRY OUTLOOK
BTG has a mixed speciality pharma/biotech model with direct sales and internal R&D
programmes. It also has a number of partnered programmes, including Campath for MS
Company description
(Genzyme), abiraterone (J&J), CytoFab (AstraZeneca), otelixizumab (Tolerx/GlaxoSmithKline)
BTG is a UK company specialising in
developing and commercialising and ONYX-0801 (Onyx Pharmaceuticals).
pharmaceutical products, particularly in
the areas of neuroscience and
oncology.
2 December 2010 43
Edison Insight
INDUSTRY OUTLOOK
Audience fragmentation underpins the need for ad networks to deliver the reach sought by
advertisers with varying needs, budgets and timescales. Publishers, meanwhile, need to
Company description
maximise revenues while ensuring they display no inappropriate content. DSPs and real-time
Burst is a global provider of media,
technology and professional services to bidding have emerged to provide a less ‘clunky’ mechanism for placing inventory, leaving less
online advertisers, publishers and ad
networks. unsold and driving up publishers' revenues. Good technology and exclusive relationships are
the 'must haves' for ad networks, otherwise threatened by the market changes.
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 2008A 27.3 0.1 (0.2) (0.3) N/A N/A
Actual 0.0 (2.3) (40.0)
Relative* 0.8 (35.8) (45.8) 2009A 31.4 (0.2) (0.6) (0.9) N/A N/A
* % Relative to local index
2010E 41.4 0.2 (0.3) (0.3) N/A N/A
Analyst
2011E 44.6 0.6 0.1 0.1 84.7 N/A
Fiona Orford-Williams
INDUSTRY OUTLOOK
The global market for specialist antimicrobial technology is enormous, as awareness of new
infections and diseases continues to increase. While many products tend to promise chemical
Company description
solutions (sometimes solving one problem to create another), a product that can damage the
Byotrol has developed and patented
specialist technology for the safe reproductive capacity of various types of bacteria offers considerable attractions to the user.
eradication of harmful microbes. These
include a variety of bacteria, algae, fungi The main challenge for such innovators is to convince major industry players of the efficacy of
and virulent diseases such as MRSA their technology.
and C-difficile.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 0.9 (2.7) (2.7) (4.4) N/A N/A
Actual (18.8) (12.5) (55.6)
Relative* (18.2) (4.5) (59.8) 2010A 3.1 (1.5) (1.5) (1.8) N/A N/A
* % Relative to local index
2011E 2.3 (1.9) (2.0) (1.9) N/A N/A
Analyst
2012E 5.0 0.1 (0.1) 0.0 N/A N/A
Nigel Harrison
44 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Many investors still view Chemring as a pure war stock and that, as hostilities in the Middle
East wind down, revenues will simply plummet. We believe there are some counters to such
Company description
an argument: timescales of withdrawal are difficult to predict; the group’s balance between
Chemring Group is a global leader in
aircraft and naval countermeasures and front-line and training; and acquisitions provide new opportunities (Mecar – non NATO and
other energetic materials for military use
in training, peacekeeping and conflict. It Roke – counter-terrorism and electronics, which completed on 30 September).
has activities in the US, UK, Italy and
Australia, primarily supplying home
governments and NATO forces. Y/E Oct Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 354.2 94.6 74.2 160.1 18.4 11.9
Actual (5.2) 11.9 9.0
Relative* (4.5) (16.6) (1.5) 2009A 503.9 128.0 102.6 212.7 13.8 9.7
* % Relative to local index
2010E 597.0 153.1 119.1 245.8 12.0 8.8
Analyst
2011E 804.0 190.9 151.4 308.0 9.5 6.4
Roger Johnston
INDUSTRY OUTLOOK
Company description
Co-labelled peripheral products are sold by Cordis (SLEEK and Savvy range and Bard
ClearStream Technologies is a
developer, manufacturer and supplier of (UltraVerse range, launched March 2010). Co-labelling growth in H2 was 65% and this is
medical devices.
expected to continue. Cardiac products are also doing well; the SatinFlex alloy stent saw good
growth in Brazil.
Y/E Jul Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2009A 13.9 2.6 1.9 6.5 4.8 8.2
Actual (3.6) 8.0 5.9
Relative* (2.8) (20.2) (4.3) 2010A 15.1 1.1 0.5 1.1 28.6 24.3
* % Relative to local index
2011E 19.1 2.0 1.4 3.1 10.2 13.7
Analyst
2012E 24.3 3.1 2.5 5.4 5.8 5.0
John Savin
2 December 2010 45
Edison Insight
INDUSTRY OUTLOOK
Company description
The steel and power generation industries are driving M&A in the sector as both look to secure
CZA's Mooiplaats Mine began
production in 2008. Earlier in 2010, CZA supply of key raw materials. Thanks to robust demand from Asia's steel mills, coking coal
acquired NuCoal’s producing mines for
ZAR650m. It is also developing its Vele prices are expected to increase c 10% in Q111 from current levels of around US$210/t.
and Makhado coking coal projects, Meanwhile, thermal coal leaving Richard Bay is currently priced at c US$100/t.
which should start production in H111
and H113, respectively. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m 2009A 23.1 (20.5) (12.0) (3.0) N/A N/A
Actual (15.9) (1.7) (22.4)
Relative* (15.3) (38.3) (29.8) 2010A 111.0 (12.7) (113.8) (22.2) N/A N/A
* % Relative to local index
2011E 350.8 113.8 82.3 11.2 10.6 11.6
Analyst
2012E 417.2 151.5 118.0 15.3 7.8 4.6
Michael Starke
INDUSTRY OUTLOOK
With 78% of Cobham’s business related to defence and over 60% derived from the US, we
Company description
feel the business will remain resilient to slowing defence spend, although the timing of orders
Cobham is an international aerospace &
defence equipment supplier with has been slower than anticipated. In other areas underlying growth is expected to be slower.
businesses across avionics &
surveillance, defence systems, mission Where this is the case, management has indicated active portfolio management relating to c
systems and aviation services. 10-15% of the technology division's revenues.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 1467.0 283.0 244.0 15.4 12.9 7.2
Actual (17.0) (4.5) (11.8)
Relative* (16.4) (22.0) (20.3) 2009A 1880.0 389.0 295.0 18.8 10.6 6.1
* % Relative to local index
2010E 1982.0 423.0 311.0 19.9 10.0 5.8
Analyst
2011E 2108.0 453.0 338.0 21.6 9.2 5.4
Roger Johnston
46 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
With 73% of revenues derived from the UK MoD, we are concerned by the eventual impact of
Company description
cuts. While management has indicated 40% of its MoD revenue is not subject to spending
Cohort is a UK-based provider of
services and products into the defence constraints, that still leaves 60% under pressure. With a growing focus on export and
industry. The business operates through
three divisions: SCS (34% of FY10 non-defence opportunities across space and transportation, there are signs of hope.
sales); Mass (27%); and SEA (39%).
2 December 2010 47
Edison Insight
INDUSTRY OUTLOOK
The MCU market is dominated by large players. However, the growth and profitability
dynamics of the market, stable market shares and often low performance requirements mean
Company description
R&D investment in the industry is relatively low. Cyan's solutions offer very high performance.
Cyan is a fabless semiconductor
company delivering flexible wireless Importantly, they also offer a configuration and software tool set and a module strategy that
solutions for lighting control, utility
metering and industrial telemetry. enables the rapid development of customer applications.
INDUSTRY OUTLOOK
Ofcom estimates that SMEs spent £4bn on telecoms services in 2008; although admittedly the
industry is highly fragmented with not only low entry barriers but also ongoing price deflation. In
Company description
the SME space, there are over 600 voice product resellers and over 1,800 data resellers - a
Daisy provides unified communications
to the SME and mid-market sectors and key opportunity for Daisy as consolidator. Furthermore, Daisy itself sees an incremental £500m
offers a full suite of network services,
mobile, systems services and data opportunity to cross-sell additional services to its existing base. Opportunities abound.
solutions. It does not own any network
infrastructure and resells services over
other operators’ networks. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A N/A N/A N/A N/A N/A N/A
Actual (6.7) (8.5) (4.6)
Relative* (6.0) (6.1) (13.8) 2010A 134.4 11.0 9.8 4.1 22.9 8.4
* % Relative to local index
2011E 272.0 39.7 34.9 9.5 9.9 5.5
Analyst
2012E 313.7 49.1 44.6 12.3 7.6 N/A
Neil K Shah
48 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
IMS Research estimates that over 218m 3D TVs will ship by 2015. In October Toshiba
DDD develops and sells software and
services for the generation of unveiled a range of glasses-free 3D TV models at CEATEC 2010, scheduled for launch by
three-dimensional (3D) pictures and
video for PC, TV and mobile handset year-end, while Movidius launched a video processing chip in its Myriad 3D range, which has
screens. real time 2D to 3D capability.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.6 (1.4) (1.4) (1.9) N/A N/A
Actual (3.9) (1.3) 25.0
Relative* (3.1) (41.2) 13.0 2009A 1.4 (0.8) (0.9) (1.0) N/A N/A
* % Relative to local index
2010E 1.4 (1.2) (1.2) (1.0) N/A N/A
Analyst
2011E 3.5 0.0 0.0 0.0 N/A 71.8
Martin Lister
INDUSTRY OUTLOOK
There is solid evidence, confirmed by NICE, that doppler monitoring improves recovery from
major surgery. This supports NHS adoption. However, purchasing is subject to budget factors.
Competing devices have not been fully clinically proven in surgery and could cause
Company description
sub-optimal intra-operative fluid management. Evidence is emerging that competing arterial
Deltex Medical manufactures and sells
medical monitors that are used by pulse pressure monitors may not reliably track the haemodynamic status of patients in surgery.
doctors and nurses to help patients
recover more fully and more quickly The 3 November R&D day showed impressive results from the combined arterial pressure and
from the effects of major surgery. doppler monitor in initial Beta testing.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 5.2 (1.5) (1.5) (1.6) N/A N/A
Actual (4.5) 56.1 48.8
Relative* (3.7) 26.1 34.5 2009A 5.6 (0.4) (0.6) (0.4) N/A N/A
* % Relative to local index
2010E 6.2 (0.1) (0.3) (0.2) N/A N/A
Analyst
2011E 7.0 0.5 0.4 0.3 53.3 494.9
John Savin
2 December 2010 49
Edison Insight
INDUSTRY OUTLOOK
Dillistone is a developer and vendor of software to the executive recruitment sector. It is a
single-product company but its FILEFINDER software – now in its ninth revision – has a very
Company description
strong following among the largest executive recruitment firms across the globe. We note that
Dillistone’s core product is
‘FILEFINDER’, an integrated client Bond International's recent acquisition of VCG is likely to mark a trend of further consolidation
management tool that delivers major
productivity gains. It is used by 12 of the in the space.
world’s 20 largest executive search
practices.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 4.6 1.5 1.4 17.5 10.0 4.9
Actual 12.9 20.7 48.9
Relative* 13.8 3.4 34.6 2009A 3.7 1.2 1.1 14.7 11.9 11.2
* % Relative to local index
2010E 4.0 1.3 1.2 15.1 11.6 7.9
Analyst
2011E 4.1 1.5 1.2 16.4 10.7 6.8
Neil K Shah
INDUSTRY OUTLOOK
Company description
We have removed forecasts after the current year. The bulk of DBAY assets will shortly be
DouglasBay Capital (formerly LIT) is a
holding company for investments in turned into cash and there is no visibility regarding contribution from new operating
quoted and unquoted small to
medium-sized businesses. companies. TDG has demonstrated management’s skills and provided a platform for future
fundraisings and gradual dilution of Laxey’s dominant shareholding.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 176.1 10.2 6.7 0.3 26.7 8.1
Actual (5.9) (15.8) 28.0
Relative* (5.1) (23.3) 15.7 2009A 662.1 39.0 13.7 1.0 8.0 11.8
* % Relative to local index
2010E 690.0 37.0 19.0 1.2 6.7 2.9
Analyst
2011E N/A N/A N/A N/A N/A N/A
Roger Leboff
50 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
We remain 'cautiously optimistic' about the current outlook following recent positive US
automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to
mid-2011 as auto producers restock ahead of forecast increases in vehicle production in
Company description
2012.
Eastplats is a mid-tier producer of
platinum group metals. It has an 87.5%
interest in the Crocodile River Mine in
South Africa. It also has four
development projects, Mareesburg
(75.5%), Spitzkop (93.4%), DGV
(87.5%) and Kennedy’s Vale (87.5%). 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 2008A 114.7 (286.6) (298.2) (30.9) N/A N/A
Actual (3.2) 55.1 87.3
Relative* (2.4) 23.1 69.2 2009A 111.4 17.4 (0.4) 0.8 198.4 N/A
* % Relative to local index
2010E 152.1 29.2 8.7 0.6 264.5 26.0
Analyst
2011E 232.9 72.3 53.0 3.5 45.3 15.6
Michael Starke
INDUSTRY OUTLOOK
Advertisers continue to increase their focus on achieving better returns on their marketing
Company description
investment. Warc has recently increased its international adspend forecast for the 12 major
Ebiquity is the leading provider of a
range of business-critical data, analysis markets to 4.8% in 2010 and 4.5% in 2011. IDC estimates that business analytics could see
and consulting services to advertisers,
media owners and PR professionals in compound annual growth of 7% between 2009 and 2014.
the UK and is growing these services in
both Europe and the US.
Y/E Apr Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 18.4 2.3 2.1 5.3 16.0 N/A
Actual 18.9 33.9 47.8
Relative* 19.8 16.8 33.6 2010A 21.2 1.2 2.5 5.6 15.2 N/A
* % Relative to local index
2011E 42.0 2.2 4.2 5.6 15.2 N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Martin Lister
2 December 2010 51
Edison Insight
INDUSTRY OUTLOOK
London's 22,000 licensed taxis carry 1.8 million people every week. While the recession
continues to undermine the market for new vehicles in the short term, there is a growing
Company description
pent-up medium-term demand related to environmental/political pressures and preparation for
Eco City Vehicles has exclusive
distribution rights to the Mercedes Vito the 2012 Olympics. Plans for strategic group moves into adjacent markets will involve a
in the London market. The group
provides a one-stop new car, used car combination of accurately assessing market needs and sustaining relationships with OEM
and after sales service through its partners.
subsidiary KPM Taxis in the London
market. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 19.0 (0.4) (0.7) (0.23) N/A N/A
Actual (13.0) 14.6 (14.6)
Relative* (12.3) 6.8 (22.8) 2009A 24.7 0.2 (0.2) (0.06) N/A 13.6
* % Relative to local index
2010E 26.5 0.5 0.2 0.06 98.3 N/A
Analyst
2011E 30.0 1.1 0.8 0.26 22.7 20.2
Nigel Harrison
52 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Larger staffers are seeing the benefits of operational gearing on a reduced cost base driving
their renewed profitability. Empresaria’s improving performance is driven by different factors
Company description
across its operations: UK, with a pick-up in permanent recruitment, driven by some pockets of
Empresaria is a multi-disciplined
international specialist staffing group, real recovery in the economy; Germany, with a strong rebound on top of continuing structural
operating in 16 countries.
changes increasing the penetration of temporary recruitment; and South-East Asia (the main
element of ROW) benefiting from the maturing of start-ups initiated over the last few years.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 207.7 8.3 6.4 8.6 6.6 3.4
Actual (2.6) 23.9 35.7
Relative* (1.8) 31.3 22.6 2009A 195.2 4.9 3.2 3.1 18.4 5.6
* % Relative to local index
2010E 221.5 7.9 6.2 6.2 9.2 4.2
Analyst
2011E 234.8 8.7 7.3 7.2 7.9 3.9
Fiona Orford-Williams
2 December 2010 53
Edison Insight
INDUSTRY OUTLOOK
There is a disruption in the market as network speeds migrate to 10Gbs and legacy
Company description
architectures start to fall down. This is bringing Endace to the fore and our research suggests
Endace supplies high-end network
traffic monitoring and analysis that major customers are deploying Endace’s technology on a much broader basis. The
technology, with a fundamental
competence and ability to capture all of broader network security market is also one of the most corporately active globally.
the packets flowing through high-speed
data networks.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 30.4 7.5 5.4 20.0 27.6 21.7
Actual 35.3 119.0 39.4
Relative* 36.4 65.3 26.0 2010A 31.0 5.5 1.7 13.7 40.2 16.8
* % Relative to local index
2011E 35.1 6.0 2.0 10.8 51.1 17.4
Analyst
2012E 41.8 7.1 3.0 15.6 35.3 15.0
Dan Ridsdale
INDUSTRY OUTLOOK
Our Review of 13 October included a feature on the implications of the shift to digital in the film
industry. Hollywood has historically profited from technological change and, assuming piracy
Company description
issues can be overcome, the availability of reasonably priced on-demand entertainment
eOne is a leading international
entertainment company specialising in through a variety of new channels should continue to drive market growth and library values.
the acquisition, production and
distribution of film and television content Meanwhile, the box office has remained strong in 2010, helped by the popularity of new 3D
across all media. It is incorporated in films.
Canada and moved from AIM to the
Main Market on 15 July 2010. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 342.6 25.3 16.4 8.6 13.2 4.1
Actual 19.2 53.0 113.7
Relative* 20.1 60.6 93.1 2010A 444.2 34.3 22.1 11.5 9.9 1.9
* % Relative to local index
2011E 480.0 39.5 30.6 12.1 9.4 1.8
Analyst
2012E 490.0 42.0 34.1 13.2 8.6 1.7
Jane Anscombe
54 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Biomarker sales are did well but have not yet broken through into mainstream clinical use. The
Company description
prototype GeneDrive testing instrument may create new growth expectations but the initial
Founded in 2000, Epistem has a
contracts services operation, an markets, particularly sexually transmitted disease testing, are competitive with Roche. The
emerging clinical biomarker technology
and a therapeutics discovery unit. company is seeking an acquisition to help GeneDrive commercialisation.
INDUSTRY OUTLOOK
The pharmaceutical industry is continually searching for novel treatments, and manufacturers
Company description
of nutritional products for cheaper production methods. Evolva's platform has already created
Evolva is a Swiss synthetic biology
company. It has developed a several first-in-class drug candidates. The recent expansion of the collaboration with Abunda
technology platform, which it uses to
develop novel drugs and new methods Nutrition suggests that Evolva will be able to reduce manufacturing costs for its partners in
of making nutritional and consumer health and nutrition.
health products.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x)
% 1m 3m 12m 2008A 11.9 (6.8) (8.4) (38.4) N/A N/A
Actual (14.0) (7.3) 47.5
Relative* (14.1) (19.9) 42.9 2009A 18.9 (6.8) (9.4) (14.7) N/A N/A
* % Relative to local index
2010E 18.8 (25.5) (27.3) (19.7) N/A N/A
Analyst
2011E 19.8 (29.0) (31.2) (22.3) N/A N/A
Mick Cooper
2 December 2010 55
Edison Insight
INDUSTRY OUTLOOK
Pharmaceutical companies are outsourcing their drug discovery activities as they look to
Company description
improve their productivity and decrease the fixed costs associated with them, which is driving
Evotec is a drug discovery business that
provides outsourcing solutions to the the growth of companies that can provide these services. However, Evotec's growth depends
pharmaceutical industry and develops
its own proprietary drugs. on it being able to provide a high quality integrated service that cheaper service providers are
unable to deliver.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 39.6 (40.7) (47.7) (52.1) N/A N/A
Actual 20.3 12.5 34.3
Relative* 16.2 13.5 10.1 2009A 42.7 (15.5) (21.7) (20.6) N/A N/A
* % Relative to local index
2010E 53.4 0.1 (1.4) (1.7) N/A N/A
Analyst
2011E 59.2 2.6 (0.5) (0.9) N/A 44.2
Mick Cooper
56 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
FFastFill’s software enables banks and other financial organisations to trade exchange-traded
derivatives across a number of exchanges, with the potential to add a range of asset classes.
Company description
The SaaS offering and the straight-through processing capability enable customers to achieve
FFastFill provides SaaS solutions for
trading and risk management on significant cost savings. In addition, industry trends towards electronic trading, higher volumes
electronic markets. These services
provide full application functionality, and a growing number of exchanges all contribute to a resilient outlook for the group against a
saving institutions the cost of investing tough economic backdrop.
in and maintaining their own technology
infrastructure and staff department. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 14.4 0.9 0.2 0.1 86.0 35.4
Actual 7.8 15.0 11.3
Relative* 8.7 3.7 0.6 2010A 14.3 1.7 1.2 0.3 28.7 10.2
* % Relative to local index
2011E 15.5 2.8 2.2 0.5 17.2 15.4
Analyst
2012E 16.8 3.5 2.9 0.7 12.3 7.0
Richard Jeans
INDUSTRY OUTLOOK
We continue to expect robust volume growth within the industrials business, helped by
Company description
improving global industrial activity. Hygiene business will benefit from a solid performance in
Fiberweb is engaged in the
development, manufacturing and supply the consumer markets. P&G, Fiberweb's principal customer, continues to see good volume
of nonwoven fabrics. Nonwovens are
used in a range of products, such as growth in its end markets. Margins have been affected by higher raw material (polypropylene)
baby nappies, fabric softeners, filters, costs, although this has relented more recently.
construction products and protective
clothing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 512.8 48.6 10.5 8.6 9.1 1.6
Actual (3.7) 33.3 35.6
Relative* (3.0) 28.1 22.6 2009A 454.2 50.2 14.2 12.2 6.4 1.8
* % Relative to local index
2010E 468.0 49.2 14.4 11.9 6.6 2.4
Analyst
2011E 506.0 56.5 16.0 12.1 6.4 1.7
Toby Thorrington
2 December 2010 57
Edison Insight
INDUSTRY OUTLOOK
The Sampaguita field is a potential company maker for Forum. In the context of the UK sector
Company description
of the North Sea, a 3tcf find would be one of the largest in the last 25 years. Similar to Shell's
Forum Energy, focused exclusively on
the Philippines, is an AIM-quoted adjacent Malampaya field, such a find would be the foundations of an LNG project.
company developing oil and gas assets.
58 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Futura's development pipeline of products based on its proprietary DermaSys delivery platform
Company description
addresses potentially large but underdeveloped OTC markets (eg, erectile dysfunction and
Futura Medical is engaged in
researching and developing topical pain relief). Further development has been constrained by its cash position, but with a
pharmaceutical products and medical
devices, and their commercial commercial deal on TPR100 (GSK) and potentially PET500 in H210, Futura should unlock
exploitation through out-licensing. value through accelerating their development and launch.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.2 (2.2) (2.1) (3.4) N/A N/A
Actual 17.8 59.6 105.4
Relative* 18.7 65.4 85.6 2009A 0.1 (1.5) (1.6) (2.2) N/A N/A
* % Relative to local index
2010E 0.5 (0.8) (0.9) (1.1) N/A N/A
Analyst
2011E 0.5 (0.9) (1.0) (1.2) N/A N/A
Lala Gregorek
2 December 2010 59
Edison Insight
INDUSTRY OUTLOOK
Gasol's original strategy of basing LNG projects around stranded gas assets in the Gulf of
Guinea has been reconsidered in light of weak LNG prices and natural gas prices in mature
Company description
markets. Weakness reflects a combination of soft economic activity, the coming on-stream of
Gasol is an African-focused gas
independent. The company’s prime major LNG projects and the surge in shale gas availability in the US.
focus is on the monetisation of gas
reserves in Sub-Sahara Africa by its
aggregation, liquefaction and shipment
to high-value markets worldwide.
Y/E Feb / Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 0.0 (6.4) (6.4) (1.0) N/A N/A
Actual (7.5) (15.9) (63.0)
Relative* (6.8) (50.3) (66.6) 2010A 0.0 (4.5) (5.1) (0.5) N/A N/A
* % Relative to local index
2011E 0.0 (4.9) (5.3) (0.5) N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Ian McLelland
INDUSTRY OUTLOOK
Growth in internet trading, regulatory pressure and the need for money-laundering checks, age
Company description
checks and anti-fraud checks are behind growing interest in increasingly complex and
GB Group has complementary identity
management offerings of verification, comprehensive verification of personal data. The encouragement of the FSA and the cost and
capture, maintenance and analysis
enabling companies to identify and payback attractions mean the shift to making these checks electronically is accelerating.
understand their customers.
60 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Of the 76 anomalies identified by Earthscan as being prospective in H110, seven will be
Company description
pursued with a drilling campaign, while results from GMA's 162 hole RC drilling campaign are
GMA Resources is involved in gold
mining, exploration and mine expected in December. Given the density, grade and continuity of its veins, it is conceivable
development in Algeria.
that GMA’s land position represents a new world-class gold camp akin to Kirkland Lake or
Ashanti, with which it shares many characteristics.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 7.8 (0.9) (6.5) (1.8) N/A N/A
Actual 47.3 217.3 0.0
Relative* 48.5 192.5 (9.6) 2009A 20.4 1.4 (5.6) (0.5) N/A 138.6
* % Relative to local index
2010E 22.2 7.6 0.4 0.0 N/A 1.5
Analyst
2011E 30.4 19.1 11.7 0.9 4.6 1.2
Charles Gibson
INDUSTRY OUTLOOK
FY11 estimates assume US$1,350/oz Au and ZAR7.20/USD. At US$1,177/oz and
Company description
ZAR7.3114/US$ a sum of the parts analysis values GDO at 63.99pps (inc Ventersburg) to
Formed from the takeover of Aflease by
BMA Gold in 2009, Gold One is an which an immediate 3.82Acps needs to be added for GDO's interest in Goliath Gold
emerging mid-tier gold producer with
significant assets in the Witwatersrand (potentially rising 11-fold).
basin and growing ones outside.
2 December 2010 61
Edison Insight
INDUSTRY OUTLOOK
In Burkina Faso, drilling at Nyieme has returned grades up to 19.1g/t and confirmed the
Company description
extension of the quartz payshoots in accordance with the company's geological model.
Goldplat is a gold producer focused on
Africa with three primary assets: Nyieme will now be the subject of an extensive exploration programme. NB, our forecasts are
Goldplat Recovery (Pty) - South African
gold recovery plant; Gold Recovery conducted at a long-term gold price of US$1,350/oz and a cable rate of US$1.65/£.
Ghana – Ghanaian gold recovery plant;
and Kilimapesa Gold - mining project in
Kenya. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 11.1 2.0 2.0 1.32 9.7 9.2
Actual (7.3) 34.2 4.1
Relative* (6.5) 13.0 (5.9) 2010A 10.7 2.4 2.3 1.40 9.1 10.0
* % Relative to local index
2011E 18.8 4.3 4.0 2.35 5.4 4.4
Analyst
2012E 23.9 8.3 7.9 5.92 2.2 2.4
Charles Gibson
INDUSTRY OUTLOOK
The recent analyst visit to Syria gave us an opportunity to get an update on Gulfsands’ key
Company description
Syrian operations. Low-cost production continues to provide strong cash flow and, with
Gulfsands Petroleum is involved in the
production, exploration and management confirming better well performance than expected, a reserves review in early
development of oil and gas reserves in
the US, Syria and Iraq. It recently 2011 points to a potential reserves upgrade.
agreed to acquire working interest
positions in two exploration permits in
Tunisia and Southern Italy. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 53.6 7.9 (0.9) 0.9 651.7 40.1
Actual 12.5 26.1 58.2
Relative* 13.4 26.6 43.0 2009A 84.4 47.3 33.7 28.3 20.7 16.8
* % Relative to local index
2010E 115.5 69.6 50.4 41.3 14.2 9.7
Analyst
2011E 138.4 94.7 73.1 60.0 9.8 7.6
Ian McLelland
62 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
GW Pharmaceuticals is a leader in the field of cannabinoids (there are >70 in cannabis), which
Company description
have the potential to treat a broad range of indications and to become novel pharmaceutical
GWP is a UK pharmaceutical company
focused on development of products. We estimate that Sativex will achieve 5-10% in the indications that it has been
cannabinoids. Its lead product, Sativex,
has been approved in some countries approved (spasticity in MS [UK, Spain, Canada, New Zealand] and neuropathic pain in MS
for the treatment of neuropathic pain [Canada only]).
and spasticity associated with MS, and
is in development for cancer pain. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 24.1 2.1 1.8 125.0 0.8 N/A
Actual 8.3 1.5 15.4
Relative* 9.1 (19.8) 4.3 2010A 30.7 5.9 5.2 129.5 0.8 N/A
* % Relative to local index
2011E 26.0 (1.8) (2.4) 129.6 0.8 N/A
Analyst
2012E 26.7 (3.7) (4.4) 129.6 0.8 N/A
Lala Gregorek
INDUSTRY OUTLOOK
City sentiment towards the motor distribution sector remains cautious, as fears about
recession are seen to have greater prominence than the positive action taken by retailers to
Company description
build their downstream activities. SMMT forecasts on new vehicle registrations are still looking
Following major restructuring, HR Owen
principally comprises its luxury cars optimistic, but used car values have recently started to drift downwards. Nevertheless,
business involving franchises for
Bentley, Rolls-Royce, Ferrari, Maserati, indications from most leading groups suggest they will deliver profits progress in both 2010
Lamborghini, Bugatti and Alfa Romeo. It and 2011.
also operates aftersales franchises for
Audi, BMW/Mini and Lotus. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 144.5 2.3 0.6 2.5 36.8 N/A
Actual 1.7 10.2 68.8
Relative* 2.5 3.2 52.5 2009A 125.4 0.1 (1.3) (4.4) N/A 1.2
* % Relative to local index
2010E 148.0 3.0 1.4 4.1 22.4 10.0
Analyst
2011E 155.0 3.4 1.8 5.3 17.4 6.9
Nigel Harrison
2 December 2010 63
Edison Insight
INDUSTRY OUTLOOK
Since 2004, Hampson has built up the leading player in the fragmented composite tooling
market through acquisitions. This market is set to grow significantly once production of the
Company description
B787 and A350 truly start and we believe that Hampson was unlucky with timing rather than
Hampson is the largest manufacturer of
composite tooling and assembly strategic direction. The acquisitions, however, left the group over-exposed to the high debt
systems for global aerospace. It
manufactures highly engineered levels and delays in this high value capital spend once the financial crisis hit and programmes
components and assemblies for moved to the right.
airframe and engine applications using
advanced lightweight materials. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 256.6 53.5 37.6 18.5 1.5 1.8
Actual (4.2) 39.0 (57.5)
Relative* (3.5) (52.1) (61.6) 2010A 178.3 37.2 24.9 10.6 2.7 2.0
* % Relative to local index
2011E 170.4 28.4 12.9 3.4 8.4 3.2
Analyst
2012E 189.5 36.5 20.5 5.4 5.3 2.6
Roger Johnston
INDUSTRY OUTLOOK
Company description
The UK has a significant requirement for renewable energy to meet the twin challenges of
Helius Energy identifies, develops, owns
and builds biomass generation projects reducing greenhouse gas emissions and ensuring security of energy supply. As a proven
in the UK.
technology, we expect biomass generation to play a significant role in helping the UK meet
these challenges.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.0 31.4 30.7 42.6 0.6 0.5
Actual (8.7) (5.9) (10.4)
Relative* (7.9) (18.2) (19.0) 2009A 0.6 (4.4) (3.7) (4.4) N/A N/A
* % Relative to local index
2010E 0.0 (2.4) (2.4) (2.8) N/A N/A
Analyst
2011E 0.0 (2.5) (3.1) (3.7) N/A N/A
Graeme Moyse
64 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Management estimates that the target membrane market (excluding China) is currently worth
€150-200m, split 28% US, 22% Europe and 50% ROW. The key market sectors are sporting
Company description
stadia/arenas; transportation; retail; commercial; governmental; entertainment and leisure. We
Hightex, operating worldwide, designs
and installs large area architectural estimate that the stadia/arenas segment is the largest, with a market share of around 30%.
tensile polymer membrane structures for
roofs and facades.
INDUSTRY OUTLOOK
Although HRG’s mainly managed travel income prevents close correlation with air travel
volumes, the strong pick-up on economic recovery in key markets continues to be broadly
Company description
encouraging. According to IATA, a 10% year-on-year rise in international traffic in October
Hogg Robinson is a major global player
in corporate travel services. sustained the trend rate of growth since the low point of mid-2009, while a 12% gain in
business travel in September shows August weakness to have been a blip. It would seem that
this recovery can be maintained during Q4.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 351.3 42.3 24.7 4.67 7.3 1.6
Actual 14.2 15.1 (11.0)
Relative* 15.1 5.6 (19.6) 2010A 326.8 44.5 28.4 6.33 5.4 2.9
* % Relative to local index
2011E 352.0 51.0 31.0 6.72 5.1 2.4
Analyst
2012E 370.0 55.8 33.0 7.15 4.8 2.2
Richard Finch
2 December 2010 65
Edison Insight
INDUSTRY OUTLOOK
Company description
Although the banking sector remains under the spotlight both politically and economically,
i-design is a specialist provider of self
service devices, primarily ATM, software network owners are increasingly looking for alternative ways to generate revenues from their
and services.
ATMs and advertisers are always searching for new avenues to reach customers for the most
effective impact.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 2.1 (0.6) (0.5) (3.8) N/A N/A
Actual 43.5 144.4 37.5
Relative* 44.6 109.0 24.3 2009A 2.4 (1.1) (1.1) (7.9) N/A N/A
* % Relative to local index
2010E 2.2 (0.9) (1.0) (5.7) N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Martin Lister
INDUSTRY OUTLOOK
Company description
IdaTech has patented fuel reforming and processing technology that is market leading. It has
IdaTech develops fuel cells technologies
and related applications. Through its integrated this capability with fuel cell stacks to make a working system for use in stationary
technology, IdaTech seeks to address
the growing demand for clean, and portable electric power generation.
convenient, dependable and scalable
sources of power.
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 2008A 5.9 (19.3) (19.6) (38.0) N/A N/A
Actual 0.0 0.0 (24.1)
Relative* 0.8 (11.3) (31.4) 2009A 6.6 (19.2) (21.1) (36.0) N/A N/A
* % Relative to local index
2010E 5.1 (21.4) (24.2) (46.0) N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Graeme Moyse
66 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
The UK SIPP market should have mid-teens growth with an ageing population, greater
Company description
self-provision, and higher tax rates encouraging tax-efficient saving. There is a possible drag
IFG provides financial services
comprising a pension administration on growth of tax restraint on the highest earners affecting bespoke SIPPs. The trustee and
and personal advisory business
operating in Ireland and the UK, and savings is driven by regulatory and tax management opportunities and some competition is
international corporate and trustee reducing as they face conflicts of interest.
administration services.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 105.1 20.6 13.2 24.29 5.4 7.6
Actual 1.5 14.8 10.8
Relative* 2.6 42.5 16.0 2009A 94.4 15.9 7.5 19.25 6.9 6.0
* % Relative to local index
2010E 126.5 17.2 8.2 18.75 7.0 10.1
Analyst
2011E 141.3 29.5 21.1 21.28 6.2 5.6
Mark Thomas
2 December 2010 67
Edison Insight
INDUSTRY OUTLOOK
While growth of the global insurance industry is marginal, the entry of consumer brands and
comparison engines is supporting the shift towards BPO, through driving the need to improve
Company description
flexibility and efficiency. Innovation's revenue model is predominantly tied to claims volumes so
Innovation Group is one of the leading
solution providers to the global financial performance is influenced by economic activity levels.
insurance industry through the
development of a flexible combination of
business process outsourcing, supply
chain management and technology
solutions. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 139.9 12.8 10.1 0.5 27.0 5.3
Actual (1.8) 28.6 19.3
Relative* (1.0) 6.4 7.8 2009A 155.9 15.8 11.3 1.0 13.5 7.2
* % Relative to local index
2010E 160.9 16.6 9.4 0.4 33.8 16.3
Analyst
2011E 173.2 24.4 15.9 0.9 15.0 5.2
Dan Ridsdale
INDUSTRY OUTLOOK
We are cautious over semiconductor demand into Q4 and 2011, but the strength of the smart
Company description
phone and tablet adoption cycles are undeniable. The opportunity in optical networking (eg
IQE has established itself as a one-stop
shop for the compound semiconductor Lightpeak) looks significant and is drawing closer. Developments in CPV solar cells and solid
wafer needs of the world’s leading
semiconductor device manufacturers. state lighting are earlier stage but could also yield significant incremental revenue streams.
68 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier
Ironwood Gold is a US-listed gold
exploration company with three projects this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by
in Nevada, US. Together the projects
have the potential to host between demand-side concerns.
2.3Moz and 10.7Moz of gold.
INDUSTRY OUTLOOK
Company description
The cash pile, estimated at c £15m, is available for growth-enhancing acquisitions as indicated
IS Pharma is a speciality pharmaceutical
and medical devices firm focused on the by management. The bank loan is £4.5m and could be extended by £2.5m if an acquisition
specialist hospital sector. It aims to
grow organically and through product needed additional cash.
and company acquisitions.
2 December 2010 69
Edison Insight
INDUSTRY OUTLOOK
Ratings agency Fitch revised its outlook on Turkey long-term from stable to positive, affirming it
as BB+ and saying "the revision... reflects Turkey’s strong economic recovery, improving
Company description
public finances and increasing confidence that a lasting transformation in the country's
Is Yatirim Menkul Degerler offers
brokerage, corporate finance, economic prospects". However, it noted the key issue was whether Turkey could grow without
investment advisory services and
portfolio management services. The excessive deficits. Fitch forecast a current account deficit of $44bn (5.9% of GDP) by year end.
company also advises on IPOs.
70 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
The enterprise resource planning market for SMEs is consolidating, and evidence suggests MS
K3 provides Microsoft-based supply
chain management solutions to SMEs in Dynamics is growing market share during the current downturn. K3 has become MS's biggest
the retail and manufacturing sectors.
Dynamics partner in the UK and the provision of solutions with a growing proportion of K3's
own IP differentiates it from other IT service companies and resellers.
Y/E Dec / Jun Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 39.5 7.8 6.0 18.2 8.1 4.0
Actual 3.5 26.0 72.6
Relative* 4.3 14.1 56.0 2010A 59.8 10.3 7.6 23.4 6.3 5.0
* % Relative to local index
2011E 53.8 9.5 8.0 23.2 6.4 5.3
Analyst
2012E 58.9 10.4 9.0 26.1 5.7 4.3
Katherine Thompson
INDUSTRY OUTLOOK
KBC is an independent provider of consultancy services and software tools to the energy and
refining industry. While the current uncertain economic environment will result in a decline in
capital investment work, to some degree this will be offset by a swing towards an operational
Company description
focus as clients seek improvements in flat or negative refining margins.
KBC is a leading independent
consulting and technology group
delivering competitive advantage to
owners and operators in the oil refining,
petrochemical, and other processing
industries worldwide.
Y/E Dec / Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 52.8 6.6 5.9 7.0 8.1 4.7
Actual 1.3 34.3 40.1
Relative* 2.1 24.2 26.6 2009A 52.6 6.8 5.8 6.8 8.4 12.5
* % Relative to local index
2010E 52.7 6.3 5.2 5.5 10.3 6.1
Analyst
2011E 56.7 7.8 6.3 6.9 8.2 5.2
Dan Ridsdale
2 December 2010 71
Edison Insight
INDUSTRY OUTLOOK
Two trends are occurring within the UK fixed-line telecoms industry. First, call volumes among
domestic customers continue their secular decline, driven by a range of competing services.
Second, there remains strong growth potential on the corporate side, as the managed
Company description
services market continues to expand. Growth is being driven by corporate cost-savings plans
KCOM Group provides a range of
integrated IT and communications and an increasing appetite for simple and flexible solutions.
services to businesses, and internet and
telecommunications services to
selected consumer markets, within the
UK.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 472.3 65.1 32.7 7.3 7.0 4.2
Actual 3.0 12.7 24.4
Relative* 3.8 (5.3) 12.4 2010A 412.8 69.8 42.3 7.8 6.5 4.1
* % Relative to local index
2011E 396.1 74.2 40.5 5.5 9.3 3.6
Analyst
2012E 405.2 75.8 44.8 6.2 8.2 3.3
Alex Gunz
INDUSTRY OUTLOOK
Kedco is using two tried-and-tested technologies for converting biomass into energy:
gasification and anaerobic digestion (AD) in the form of dry fermentation. Both receive high
support from the UK and Irish regulatory regimes. Disposal of waste also entails a cost under
the EU Landfill directive, which encourages waste producers to seek alternative methods of
Company description
disposal. The October 2010 approval of the Renewable Heat Incentive (similar to a feed-in
Kedco is a leading bioscience energy
company taking a professional tariff) is a further sign of commitment to the sector.
approach to green energy production. It
helps companies throughout the UK
and Ireland to convert waste into clean
energy.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2009A 5.9 (4.1) (5.3) N/A N/A N/A
Actual 41.2 0.0 (66.7)
Relative* 42.3 (29.1) (69.9) 2010A 9.0 (1.6) (3.2) N/A N/A N/A
* % Relative to local index
2011E N/A N/A N/A N/A N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Neil Shah
72 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier
Kopylovskoye is a gold exploration
company focused on the development this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by
of its six licences in Russia. Together
these cover 225km2 and have C1, C2 demand-side concerns.
and P1 reserves/resources of 2.0Moz.
Currently listed in Stockholm, it is also
considering a secondary listing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (SEKm) (SEKm) (SEKm) (öre) (x) (x)
% 1m 3m 12m 2008A 0.4 (11.8) (13.6) (2.2) N/A 1633.7
Actual (17.6) N/A N/A
Relative* (17.8) N/A N/A 2009A 0.5 (4.5) (5.6) (16.2) N/A N/A
* % Relative to local index
2010E 0.4 (9.5) (10.8) (442.7) N/A N/A
Analyst
2011E 0.4 (9.5) (10.4) (281.9) N/A N/A
Michael Starke
INDUSTRY OUTLOOK
Company description
The rich arable land in Ukraine combined with low local costs offer the opportunity to produce
Landkom International is involved in
arable farming in Ukraine. crops to satisfy the expanding demands of the worlds food and bio-fuels industries.
2 December 2010 73
Edison Insight
INDUSTRY OUTLOOK
Leni's strategy emphasises low-risk development opportunities in proven production provinces
Company description
rather than frontier exploration. The strategy applied by Leni can perhaps be best described as
Leni Gas & Oil is an E&P junior focused
on development opportunities in low a 'vulture' approach and is broadly analogous to that applied by a number of E&P concerns
political risk countries. There are
producing assets in Spain, Trinidad and such as Apache in the North Sea.
the US GoM and an exploration project
offshore Malta.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 2.1 0.2 0.1 0.0 N/A N/A
Actual (15.0) 48.8 (16.7)
Relative* (14.3) 35.1 (24.7) 2009A 2.1 0.2 (0.2) 0.0 N/A 16.0
* % Relative to local index
2010E 6.0 3.3 2.3 0.4 7.8 6.7
Analyst
2011E 43.9 30.9 24.1 3.2 1.0 0.9
Peter Dupont
INDUSTRY OUTLOOK
The 2009 clinical study showed improved clinical outcomes from use of LifePort. Other papers
have shown overall cost savings. LifePort units are already used by 45 of the 56 US organ
procurement organisations but for c 26% of US deceased donor kidneys. Higher use rates
Company description
should steadily boost growth; there may be up to $25m of additional US potential. EU
Lifeline is a Chicago-based global
medical technology company. It has reimbursement is set at national levels and should generate higher sales levels from 2012.
developed innovative proprietary
technologies to improve the quality, and Lifeline has a high share of the organ static preservation market with its SPS-1 solution.
increase the availability, of vital organs,
tissues and cells for transplantation and
medical research. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 8.3 (4.2) (4.6) (29.3) N/A N/A
Actual 13.8 35.8 213.8
Relative* 14.7 10.5 183.6 2009A 18.3 3.3 3.0 18.2 20.0 38.6
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
John Savin
74 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
Despite official figures that the UK is now out of the recession, the underlying reality is still
Lincat manufactures and supplies
commercial catering equipment for unclear. The scale of cuts by the new government is now in the open. However, the impact on
professional kitchens.
suppliers like Lincat is unclear and instability in the eurozone sustains uncertainty.
INDUSTRY OUTLOOK
Company description
While Cook is the global market share leader, Medtronic is thought to control around 50% of
Lombard Medical Technologies is
developing a range of cardiovascular the US market and has been eroding Gore’s dominance there. Lombard will compete to
devices, principally the Aorfix stent graft
system for the treatment of abdominal achieve further penetration in $1bn global AAA market on the basis of its high angle approval
aortic aneurysm (AAA). for Aorfix.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 2.0 (10.8) (11.0) (6.8) N/A N/A
Actual (0.5) 9.1 (15.1)
Relative* 0.3 (17.4) (23.3) 2009A 2.4 (7.3) (7.6) (0.8) N/A N/A
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Robin Davison
2 December 2010 75
Edison Insight
INDUSTRY OUTLOOK
Lonrho is a play on African development. Operating in 17 countries, the company comprises
Company description
five divisions that spread both operational and geopolitical risk. With impressive recent revenue
Lonrho is a pan-African company with a
diverse portfolio of investments. It growth, the group is moving towards profitability. Short-term growth drivers involve expansion
focuses on servicing Western
investment and African business by plans focusing on developing tried and proven businesses across the continent, although
investing in emerging sectors across capital will be required to meet these objectives.
Africa, creating hubs of business
through key investments. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 43.1 (36.6) (36.9) (8.5) N/A N/A
Actual 3.2 47.7 58.5
Relative* 4.0 31.0 43.3 2009A 90.9 (6.6) (7.1) (1.3) N/A N/A
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Roger Johnston
INDUSTRY OUTLOOK
City sentiment towards the motor distribution sector remains cautious, as fears about
recession are seen to have greater prominence than the positive action taken by retailers to
Company description
build their downstream activities. SMMT forecasts on new vehicle registrations are still looking
Lookers is one of the leading UK motor
vehicle distributors operating 111 optimistic, but used car values have recently started to drift downwards. Nevertheless,
outlets covering 28 marques.
Management is ambitious and the indications from most leading groups suggest they will deliver profits progress in both 2010
group is set to grow strongly over the and 2011.
medium term.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 1776.0 42.9 14.0 4.7 12.6 5.2
Actual (1.7) 8.7 2.6
Relative* (0.9) (2.3) (7.3) 2009A 1749.0 53.4 28.3 7.1 8.4 8.4
* % Relative to local index
2010E 1770.0 49.0 31.0 5.9 10.1 4.8
Analyst
2011E 1800.0 51.5 33.5 6.4 9.3 5.0
Nigel Harrison
76 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Management aims to double earnings within five years representing organic growth of c 15%
pa, derived from a flagged 10% return on sales and an implied revenue uplift in excess of GDP
growth. With sector diversity, some of this will come from the cycle and company initiatives
Company description
with new products and markets are also expected to be key drivers.
Low & Bonar produces yarns and
fabrics for a variety of end markets of
end markets by combining polymers
with specialty additives and pigments. It
operates as two divisions: Performance
Technical Textiles (70% FY09 revenues)
and Technical Coated Fabrics (30%). Y/E Nov Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 335.2 41.7 16.4 7.7 5.6 1.7
Actual (7.0) 10.3 29.3
Relative* (6.3) 27.1 16.9 2009A 304.8 35.7 17.3 5.0 8.6 2.5
* % Relative to local index
2010E 329.5 39.2 20.2 5.1 8.4 4.4
Analyst
2011E 345.0 42.8 23.0 5.8 7.4 3.8
Toby Thorrington
INDUSTRY OUTLOOK
Company description
The outlook for the UK housing market remains weak, with broad expectations of slippage in
LSL Property Services is one of the
UK’s leading residential property house prices during 2011. The level of mortgage approvals hit a 19-month low in October,
services companies and second biggest
estate agency chain. It provides a broad reflecting tougher requirements for first-time buyers' deposits. Remortgages were however,
range of services to corporate above their six-month average.
(mortgage lenders) and retail clients.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 162.5 20.5 14.3 14.2 15.1 17.9
Actual (2.5) (14.3) (21.6)
Relative* (1.7) (31.0) (29.2) 2009A 158.2 29.7 26.2 20.7 10.4 7.2
* % Relative to local index
2010E 211.0 32.5 29.2 19.9 10.8 7.4
Analyst
2011E 225.0 36.5 34.6 23.5 9.1 5.6
Roger Leboff
2 December 2010 77
Edison Insight
INDUSTRY OUTLOOK
October's REC/KPMG Report on Jobs showed the weakest growth in 14 months for both
Company description
permanent staff appointments and temporary/contract staff billings. Vacancies are also on a
Matchtech Group has grown into one of
the UK's leading technical, professional downward trend of weakening growth. Public sector redundancies are starting to step up and
and outsourcing recruitment groups.
Split into four business units, each a confidence is fragile, but qualified candidates with scarcer skill sets, such as many of those
solutions specialist in its area of supplied by Matchtech, remain in good demand.
recruitment in providing contract,
temporary and permanent staff. Y/E Jul Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 269.6 12.3 11.3 34.6 6.4 5.2
Actual 0.0 15.4 (14.0)
Relative* 0.8 (16.3) (22.3) 2010A 264.4 9.3 8.6 26.3 8.4 13.5
* % Relative to local index
2011E 290.9 9.7 8.8 26.7 8.3 7.9
Analyst
2012E 311.1 11.1 10.3 31.4 7.0 6.1
Fiona Orford-Williams
INDUSTRY OUTLOOK
We expect overall IT spending in the UK to improve modestly in 2010, given the historic
Company description
relationship to GDP, political uncertainties and the likely ongoing deferral of investment
Maxima is an IT business systems and
managed services company. decisions in the short term. However, Maxima has a high bias to managed services
(maintenance and service revenues) rather than new IT spend, as well as a diverse customer
spread and a broad platform.
Y/E May Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 56.6 8.6 6.9 20.3 4.3 3.0
Actual 4.2 15.1 1.2
Relative* 5.0 (24.3) (8.6) 2010A 51.0 5.9 4.5 12.2 7.2 3.8
* % Relative to local index
2011E 52.0 6.1 4.8 13.5 6.5 4.6
Analyst
2012E 53.8 6.6 5.3 15.0 5.8 3.6
Richard Jeans
78 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
Our forecasts assume the award of the Goldfields project from August 2011, on which basis
MDM Engineering is a metallurgical
engineering company established in MDM's Y2 EV/EBITDA ratio of 7.6x is at a discount to the average of its three principal
February 2006. It undertakes mineral
resources projects of varying size and international peers (Lycopodium, Ausenco and Outotec) of 7.8x.
concentrates on the gold, base metals,
industrial metals and diamond sectors.
Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 35.9 10.6 11.6 21.1 9.6 7.4
Actual (0.8) 22.1 (25.3)
Relative* 0.0 (36.2) (32.5) 2010A 33.2 4.2 5.0 9.3 21.8 N/A
* % Relative to local index
2011E 14.5 (3.0) (2.7) (7.2) N/A 130.1
Analyst
2012E 35.3 8.4 8.8 16.1 12.6 11.0
Charles Gibson
INDUSTRY OUTLOOK
Company description
The Spanish orthopaedic market was estimated to be worth €350m in 2008. We had been
Medcom Tech distributes a wide range
of innovative orthopaedic products expecting it to grow at c 5% pa, but it will now probably decline slightly because of austerity
across Spain and Portugal. Its portfolio
includes knee and hip implants, plates measures. The growth drivers offsetting budget constraints are the ageing population, political
and screws to repair bone and spine pressure and technical innovations.
fractures, and advanced types of bone
cement. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 6.8 1.1 0.7 7.0 45.7 N/A
Actual N/A N/A N/A
Relative* N/A N/A N/A 2009A 10.1 2.8 2.1 24.1 13.3 N/A
* % Relative to local index
2010E 14.7 4.0 3.3 27.0 11.9 N/A
Analyst
2011E 20.5 4.7 4.0 32.1 10.0 15.6
Mick Cooper
2 December 2010 79
Edison Insight
INDUSTRY OUTLOOK
The government's Comprehensive Spending Review confirmed real increases in healthcare
spending in each year of the current parliament. The detail of new budget responsibility for
Company description
GPs should be clarified when the healthcare bill is published, but the outlook remains positive
The MedicX Fund is a specialist investor
in primary healthcare property in the for investment in primary care facilities, with a new focus on greater efficiency within the NHS.
United Kingdom.
A March 2010 BMA report stated that 60% of GPs still work from unsuitable premises, with
75% unhappy with their premises.
Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 8.2 4.3 1.1 1.4 51.6 24.0
Actual (3.0) 1.1 (9.1)
Relative* (2.3) (12.9) (17.9) 2009A 9.4 6.1 1.4 1.5 48.2 12.0
* % Relative to local index
2010E 11.3 7.8 2.8 2.3 31.4 17.3
Analyst
2011E 13.3 10.0 4.4 3.1 23.3 10.6
Roger Leboff
INDUSTRY OUTLOOK
In our view, the key to a resumption of growth is a return of the high margin civil aftermarket
Company description
business, which accounts for 30% of revenues. With Meggitt’s internal assumptions based on
Meggitt is a global manufacturer of
aerospace equipment, sensing and 1% air traffic growth, we feel there is room for upgrades with current traffic growth up 3.6%
defence systems. Its end markets are
civil aerospace (43%), military (43%) and year-to-date. H2 should also see improved military revenues with orders now released in the
energy & other (14%). US.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 1163.0 341.0 243.0 26.5 12.7 8.0
Actual 3.6 26.1 42.1
Relative* 4.4 5.2 28.4 2009A 1151.0 340.0 234.0 25.3 13.3 7.1
* % Relative to local index
2010E 1156.0 326.0 238.0 25.3 13.3 7.3
Analyst
2011E 1213.0 352.0 265.0 28.3 11.9 7.2
Roger Johnston
80 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
ABCSG-12, a 1,800 patient study, showed that zoledronic acid (ZA) reduced risk of
progression by 36%. ZA might help immune attacks on cancer stem cells. The Z-FAST and
Zo-FAST studies showed that ZA plus hormone therapy increased bone density in cancer
Company description
patients. Markers (VEGF) show that low-dose weekly ZA impacts tumour growth. In 2009,
Merrion is an Irish company that uses
technology acquired from Elan to 254,650 US women were diagnosed with breast cancer; some 40,170 women died. If
reformulate injectable drugs into oral
formulations. Its lead projects are approved, many patients could use Orazol for five years; survival is over 98% with localised
Orazol, insulin and GLP-1 (in disease which is c 60% of cases. Another adjuvant indication could be prostate cancer.
collaboration with Novo Nordisk).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 1.3 (5.1) (5.1) (0.3) N/A N/A
Actual (6.6) (18.3) (4.4)
Relative* (5.6) (9.0) 0.1 2009A 6.3 (1.3) (1.6) (0.1) N/A N/A
* % Relative to local index
2010E 4.6 (1.5) (2.0) (0.1) N/A N/A
Analyst
2011E 2.5 (3.1) (3.7) (0.2) N/A N/A
John Savin
INDUSTRY OUTLOOK
The UK capital goods market has changed materially in recent years, with the more successful
Company description
businesses anticipating and responding to specific customer problems. Many companies,
Molins is a specialist engineering group
supplying processing and packaging including Molins, have transferred their manufacturing operations to lower-cost countries in an
machinery, and scientific services to the
global tobacco, pharmaceutical and attempt to maintain competitiveness. The tobacco products industry is under political pressure
FMCG industries. in many developed markets, but worldwide consumption continues to rise.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 91.5 6.2 2.3 10.3 5.7 N/A
Actual 6.4 5.4 10.4
Relative* 7.2 (22.6) (0.3) 2009A 83.8 6.6 3.4 10.6 5.5 1.4
* % Relative to local index
2010E 85.0 6.0 2.5 8.4 7.0 1.8
Analyst
2011E 88.0 6.5 3.0 9.9 5.9 1.5
Nigel Harrison
2 December 2010 81
Edison Insight
INDUSTRY OUTLOOK
Company description
The broadcast market remains very difficult, with programme budgets under considerable
Mondo TV is a leading Italian producer
and distributor of animated TV series pressure. However, successful animations and children's characters have long-lasting global
and feature-length cartoons. It also
licenses and merchandises its rights appeal and Mondo TV is now trying to grow its licensing and merchandising revenue streams,
through home video, music, multimedia working with established toy manufacturers as well as broadcasters.
productions and publishing.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 38.0 0.8 (18.0) (265.1) N/A N/A
Actual (20.3) (28.9) (36.3)
Relative* (14.7) (24.6) (30.5) 2009A 10.3 2.2 (1.1) (24.1) N/A 3.4
* % Relative to local index
2010E 19.0 8.0 1.7 38.6 13.2 6.4
Analyst
2011E 24.0 10.5 3.9 88.6 5.8 2.2
Jane Anscombe
INDUSTRY OUTLOOK
Company description
With the number of mobile phone connections topping five billion globally, handset-based
Monitise provides a mass market
technology platform that enables banks, services such as mobile banking continue to show strong growth. For example, mobile
card schemes and other financial
providers to offer mobile banking and banking in the UK is showing fast adoption, with over three million users. Further growth is
payment services. likely from the use of mobile phones for retail payments.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 2.7 (11.8) (11.4) (3.5) N/A N/A
Actual (8.7) (3.5) 64.7
Relative* (8.0) (23.2) 48.9 2010A 6.0 (13.2) (14.0) (3.0) N/A N/A
* % Relative to local index
2011E 12.3 (13.8) (14.2) (2.1) N/A N/A
Analyst
2012E 21.7 (9.4) (9.8) (1.4) N/A N/A
Katherine Thompson
82 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
To reflect the strong start to Q4 and dollar weakness we have raised our 2010 and 2011 WTI
forecasts from $77.6/barrel to $78.0/barrel and $77.0/barrel to $79.3/barrel, respectively.
Company description
Nautical Petroleum was established in
2005 to secure, develop and add value
to heavy oil discoveries, initially on the
UKCS and continental Europe.
INDUSTRY OUTLOOK
Lundbeck/Biovail’s Xenazine (tetrabenazine) is the only approved drug for Huntingdon's,
Company description
indicated for treatment of chorea (involuntary movement). Tesofensine licensing is interlinked
NeuroSearch is a Scandinavian
biopharmaceutical company. Its core with the fate of three competing anti-obesity drugs, Vivus's Qnexa, Orexigen's Contrave and
business covers the development of
novel drugs, based on a broad and Arena's lorcaserin, which are filed with the FDA.
well-established drug discovery platform
focusing on ion channels and CNS
disorders. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (DKKm) (DKKm) (DKKm) (DKK) (x) (x)
% 1m 3m 12m 2008A 66.8 (324.7) (390.8) (22.86) N/A N/A
Actual (9.3) (0.6) 23.9
Relative* (11.1) (8.9) (5.6) 2009A 84.6 (307.4) (298.4) (14.52) N/A N/A
* % Relative to local index
2010E 70.0 (302.9) (328.4) (12.17) N/A N/A
Analyst
2011E 49.2 (269.0) (294.5) (9.71) N/A N/A
Lala Gregorek
2 December 2010 83
Edison Insight
INDUSTRY OUTLOOK
The demand for Safetell’s security screens is typically driven by risk assessments or branch
remodelling. Public sector cost-cutting is likely to dampen demand for Safetell products in
Company description
FY11. Grosvenor benefits from the need for businesses and public sector organisations to
Newmark Security is a leading provider
of electronic and physical security track assets and monitor employee time and attendance.
systems that focus on personal security
and the safety of assets.
84 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
The PR industry is ideally placed to protect and enhance clients’ products and businesses and
Next Fifteen Communications is an
international PR consultancy group with is benefiting from changing client demands, particularly in respect of social media. Chime
world-leading and autonomous PR and
marketing subsidiaries predominately reported in November that its PR division is expected to show its strongest divisional organic
addressing the high-tech industry. growth in H210.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 65.4 7.3 5.2 6.5 11.4 6.2
Actual (3.3) 15.6 14.3
Relative* (2.5) (1.4) 3.3 2010A 72.3 8.9 6.6 7.5 9.9 6.1
* % Relative to local index
2011E 80.6 10.7 8.0 8.4 8.8 4.3
Analyst
2012E N/A N/A N/A N/A N/A N/A
Martin Lister
INDUSTRY OUTLOOK
Potential applications for biomarkers include the analysis of disease mechanisms and the
Company description
facilitation of a more cost-effective drug discovery process. Growth of the business is dictated
NextGen Group provides biomarker
services to the pharma industry. It is by pharmaceutical and biotech R&D budgets, likely to experience sustained near-term
using advanced analysis techniques to
develop a portfolio of robust assays for pressure. The biomarker market's estimated value is $21bn by 2013.
biomarkers to be used in testing clinical
samples for drug development and
diagnostics. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 1.2 (2.2) (2.8) (0.16) N/A N/A
Actual (7.7) (7.7) (45.5)
Relative* (7.0) (49.3) (50.7) 2009A 1.2 (4.1) (4.5) (0.11) N/A N/A
* % Relative to local index
2010E 1.2 (2.5) (2.8) (0.06) N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Robin Davison
2 December 2010 85
Edison Insight
INDUSTRY OUTLOOK
Company description
Nighthawk has referred to growing interest by oil companies in leasing land in the vicinity of the
Nighthawk Energy is involved in the
development, appraisal and production Jolly Ranch property. Key companies recently moving into the area include Unit Corporation,
of hydrocarbons, with the area of focus
being onshore US. EOG Resources, Sundance Energy and McElvain Oil&Gas. Additionally, Newfield has
commenced drilling of late.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 0.5 (2.5) (2.1) (0.7) N/A N/A
Actual 1.9 (42.4) (62.4)
Relative* 2.7 (42.7) (66.0) 2010A 2.1 (1.6) (1.4) (0.4) N/A N/A
* % Relative to local index
2011E N/A N/A N/A N/A N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Peter Dupont
INDUSTRY OUTLOOK
We remain cautiously optimistic about the current outlook following recent positive US
Company description
automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to
Nkwe Platinum is a platinum group
metals (PGM) development company mid-2011 as auto producers restock ahead of forecast increases in vehicle production in
with two main projects; Garatau (74%)
and Tubatse (optioned stake of 74%) 2012.
which have total resources of 68.9Moz
(3PGM+Au). Xstrata has an option to
acquire 50% of both projects. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m 2009A 1.7 (12.9) (12.9) (4.6) N/A N/A
Actual (18.5) 6.3 36.5
Relative* (17.3) (23.6) 37.6 2010A 0.6 (9.4) (9.4) (1.7) N/A N/A
* % Relative to local index
2011E 0.0 (4.6) (37.2) (5.7) N/A 76.6
Analyst
2012E 0.0 (4.3) (69.8) (10.3) N/A N/A
Michael Starke
86 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
NOP operates in stable Western European countries where there is very low political risk. The
Northern Petroleum is an oil and gas
production, development, exploration company is well funded with zero debt. Our forecasts are currently under review but with P2
and asset trading company with a
political exposure limited to countries in reserves in excess of 100mmboe, the stock appears good value with an EV/2P of less than
the European Union. $1/boe compared with European peers in the $10/boe range.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 7.0 2.8 2.7 1.5 81.6 1150.6
Actual 16.7 18.0 (29.1)
Relative* 17.6 (19.8) (35.9) 2009A 5.1 (2.3) (3.0) (2.6) N/A 8.8
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Ian McLelland
INDUSTRY OUTLOOK
AllergoPharma tests for IgE, the clinical basis of allergy, rather than IgG, the basis of presumed
food intolerance. Its tests are now manual and on semi-automated open systems. The major
Company description
benefit is its valuable, and tedious to replicate, 600 allergen range. Allergy will be based on
Omega is a UK-based company
focused on developing and marketing three products: an existing general IgE test, a new Genarryt allergy screen and detailed new
in-vitro diagnostic products in infectious
and autoimmune diseases and for food automated tests based on the Immunodiagnostic Systems iSys platform to find the exact
intolerance. Intolerance tests account allergy.
for over 40% of revenues.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 5.4 0.9 0.5 3.2 5.3 3.9
Actual (6.8) 3.0 (53.4)
Relative* (6.1) (42.0) (57.9) 2010A 6.2 0.7 0.6 2.9 5.9 15.5
* % Relative to local index
2011E 8.0 1.0 0.7 1.7 10.0 20.9
Analyst
2012E 12.5 2.2 1.8 1.6 10.6 73.5
John Savin
2 December 2010 87
Edison Insight
INDUSTRY OUTLOOK
Company description
Oncolytics’ current rivals are the companies developing oncology products in the same
Oncolytics Biotech is a Canadian
biotechnology company focused on therapeutic areas, but there are some interesting viral oncolytic companies, including BioVex,
developing Reolysin, a pharmaceutical
formulation of oncolytic reovirus, for the Jennerex, Genelux and Viralytics, suggesting a new era in cancer treatment.
treatment of a wide variety of human
cancers.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (C$m) (C$m) (C$m) (c) (x) (x)
% 1m 3m 12m 2008A 0.0 (17.7) (18.2) (41.6) N/A N/A
Actual (5.1) 50.6 53.6
Relative* (6.6) 49.9 36.3 2009A 0.0 (16.0) (16.1) (26.1) N/A N/A
* % Relative to local index
2010E 0.0 (18.4) (18.4) (28.9) N/A N/A
Analyst
2011E 0.0 (22.0) (22.1) (33.6) N/A N/A
Wang Chong
INDUSTRY OUTLOOK
An Optomap scan can detect 44% more abnormalities than cheaper cameras. However, many
Company description
abnormalities are either benign or very rare. OptoMap had a 30% greater capability for
Optos uses a leasing model to place its
wide-field laser retinal imaging systems detecting retinal lesions than traditional exams in patients under 65. An Icelandic study on 573
with optometrists. Instruments are
leased at $24k per year and may patients aged 72 or older found 56% with AMD-related peripheral changes using OptoMap.
generate additional per-use revenues Optos is moving the right direction but accounting complexity remains.
over a typical 36-month contract.
Vendor finance provides capital. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 97.2 43.9 2.5 0.6 348.9 3.9
Actual 23.6 56.0 47.2
Relative* 24.6 (4.4) 33.0 2010A 106.3 50.3 13.3 21.7 9.6 3.2
* % Relative to local index
2011E N/A N/A N/A N/A N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
John Savin
88 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Company description
Obesity drugs have attracted increased scrutiny from regulators, particularly in view of the high
Orexigen Therapeutics is a
biopharmaceutical company focused on risk profile of the class. Side effects include high rate of birth defects, higher risk of kidney
developing pharmaceutical product
candidates for treating obesity. stones and suicide.
2 December 2010 89
Edison Insight
INDUSTRY OUTLOOK
Company description
Gene therapy can correct dysfunctional cells and/or create endogenous therapeutic protein
Oxford BioMedica is a UK company
with a leading position in cancer factories. Neurologix's Phase II PD therapy NLX-101 uses a similar approach, but ocular
immunotherapy and gene-based
products. It is focusing its efforts on two disease is an area of unmet need. US approval of Dendreon's prostate cancer vaccine
clinical programmes: ProSavin and Provenge bodes well for cancer vaccines.
TroVax.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 18.4 (7.6) (6.3) (0.8) N/A N/A
Actual (7.3) (0.4) (22.4)
Relative* (6.6) (15.8) (29.9) 2009A 19.1 (0.5) (0.2) 0.3 31.7 56.7
* % Relative to local index
2010E 12.8 (7.5) (7.2) (0.9) N/A N/A
Analyst
2011E 10.1 (6.5) (6.4) (0.9) N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
Desmoteplase is one of very few R&D programmes addressing acute ischaemic stroke and
Company description
has the potential to widen the treatment window to up to nine hours (the current treatment
Paion is a biopharmaceutical company
based in Germany, with a presence in alteplase is only indicated for use up to three hours from symptom onset). Only 5% of patients
the UK. It develops drugs for diseases
or interventions for which there is who experience a stroke are eligible for therapy by the time they reach hospital.
substantial unmet medical need.
90 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Demand in emerging markets is offsetting the subdued environment in western economies.
Company description
The outlook benefits from the expected launch of more exchanges and trading platforms, and
Patsystems delivers tailored solutions,
built from modular components, to pressures to shift OTC derivatives to regulated exchanges may also boost the industry. The
enhance derivatives trading
performance and trade processing. ability to offer a one-stop solution for exchanges helped Patsystems win its latest two
Solutions range from plug-and-play exchange deals. Its risk solutions also benefit from strong drivers.
modules to complete high-performance
trading systems. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 19.6 3.7 3.5 1.8 14.3 N/A
Actual (8.0) 6.2 10.8
Relative* (7.3) (8.7) 0.1 2009A 22.1 4.0 3.7 1.9 13.6 N/A
* % Relative to local index
2010E 23.9 5.4 4.8 2.4 10.8 N/A
Analyst
2011E 26.6 6.9 6.3 3.1 8.3 N/A
Richard Jeans
2 December 2010 91
Edison Insight
INDUSTRY OUTLOOK
Company description
Cinryze could be EU marketed from May 2011; there now seem to be c 550 US patients each
Pharming has focused on
Ruconest/Rhucin for angioedema, a taking 1.7 doses per week, a £150m market. Kalbitor US sales in Q3 fell to $2.6m, indicating
rare hereditary disease. Ruconest is
now EU approved and will be marketed stocking orders in Q2 but also showing low patient use: 246 patients have Kalbitor available.
by sobi and Esteve. Kidney transplant Dyax filed an EU MAA for Kalbitor in July so could be EU marketed from H211.
trials could start soon. The DNage 51%
owned subsidiary is being divested. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 0.7 (27.5) (25.6) (28.0) N/A N/A
Actual (15.3) 31.3 (58.2)
Relative* (14.2) (51.4) (61.8) 2009A 1.1 (26.3) (31.1) (27.0) N/A N/A
* % Relative to local index
2010E 7.3 (16.1) (18.5) (7.2) N/A N/A
Analyst
2011E 10.7 (17.8) (20.2) (5.4) N/A N/A
John Savin
INDUSTRY OUTLOOK
Cogane is an orally-active drug that crosses the blood-brain barrier (BBB) and modulates
Company description
expression of neurotrophic factors (ie GNDF and BNDF, respectively glial- and brain-derived
Phytopharm is a UK pharmaceutical firm
focused on the development of neurotrophic factors). GDNF is known to promote neurite out-growth but it has not been
pharmaceuticals and functional foods,
identified as a result of research into successfully delivered to the brain to date (as a protein it cannot be given orally and also does
medicinal plants. not readily cross the BBB).
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 2.6 (3.4) (3.2) (4.0) N/A N/A
Actual 4.5 (15.9) (41.4)
Relative* 5.3 (25.4) (47.1) 2009A 0.9 (4.0) (3.9) (3.9) N/A N/A
* % Relative to local index
2010E 0.1 (7.2) (7.0) (2.3) N/A N/A
Analyst
2011E 0.0 (9.5) (9.3) (2.5) N/A N/A
Robin Davison
92 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
On 2 November the DCMS announced proposals to increase the stakes on 'B3' machines
Company description
(from £1 to £2, which will improve game play and provide greater differentiation from 'C'
Praesepe's strategy is to build a
diversified gaming group in the UK and machines) and to increase the number permitted (hopefully to 20% of the total, with various
Europe. It currently operates 84 adult
gaming centres (AGCs) including the possible alternatives). The consultation will run to 25 January and there may also be an EU
Crystal Rooms in London, six bingo review period. Meanwhile, high street trading remains very tough.
clubs and four family entertainment
centres (seaside arcades). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 4.5 (1.1) (1.6) (1.34) N/A N/A
Actual 13.6 59.5 1.5
Relative* 14.4 2.4 (8.3) 2009A 11.9 1.1 (0.7) (0.36) N/A 32.3
* % Relative to local index
2010E 37.5 6.4 1.1 0.26 32.3 9.2
Analyst
2011E N/A N/A N/A N/A N/A N/A
Jane Anscombe
INDUSTRY OUTLOOK
The government's Comprehensive Spending Review confirmed its commitment to maintained
Company description
healthcare spending. July's White Paper 'Equity and Excellence: Liberating the NHS' proposed
PHP invests in primary healthcare
property, let to GPs, PCTs and other that GPs take an enhanced role in providing NHS services, which should underpin demand for
NHS entities backed by the UK
government. This tenant profile provides purpose-built premises. More detail should be available with publication of the healthcare bill.
an exceptionally secure revenue
outlook.
Y/E Jun / Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 19.7 15.1 4.6 13.3 24.0 6.8
Actual (3.2) 6.3 13.1
Relative* (2.4) (3.4) 2.2 2009A 21.3 18.0 7.9 19.3 16.5 8.1
* % Relative to local index
2010E 27.4 23.2 11.1 17.8 17.9 5.4
Analyst
2011E 29.5 25.2 12.0 19.2 16.6 7.7
Roger Leboff
2 December 2010 93
Edison Insight
INDUSTRY OUTLOOK
Company description
The FDA is taking a cautious view on abuse/misuse potential and off-label use of rapid-acting
ProStrakan Group plc is a European
specialty pharmaceutical company, with fentanyl drugs. Marketed drugs Actiq and Fentora do not have a risk mitigation and evaluation
a developing US franchise. It is engaged
in the development and strategy (REMS) yet, but Onsolis was approved in 2009 on this basis.
commercialisation of prescription
medicines for the treatment of unmet
therapeutic needs in major markets. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 56.1 (15.4) (19.8) (7.9) N/A N/A
Actual 17.7 13.1 (10.6)
Relative* 18.6 1.2 (19.2) 2009A 79.0 (5.1) (10.6) (5.7) N/A N/A
* % Relative to local index
2010E 91.3 (2.4) (6.1) (3.0) N/A 40.0
Analyst
2011E 112.6 (3.9) (7.0) (3.5) N/A N/A
Lala Gregorek
94 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Through acquisition, Proximagen's pipeline has diversified from five preclinical assets to 14
Company description
programmes across CNS, with the most advanced in Phase II. It seeks to create value through
Proximagen is a UK biotech company
specialising in the development of consolidation and has a medium-term objective of becoming self funding, with a longer-term
treatments for central nervous system
disorders. goal of becoming a fully integrated company.
INDUSTRY OUTLOOK
The market for rugged mobile computers is estimated to be worth $2.1bn but is estimated by
Company description
VDC to be growing at 8-10% per year. Psion holds c 7% market share, but plans to expand
Psion designs and sells ruggedized
mobile computers, which are used by this substantially. These plans revolve around the move towards a modular product
field workers and in supply chain and
logistics functions. architecture and leveraging a network of partners to drive product innovation.
2 December 2010 95
Edison Insight
INDUSTRY OUTLOOK
The care sector outlook is underpinned by demographics and the October spending review
Company description
confirmed the government's commitment to healthcare spending. PSPI has planned and fully
Public Service Properties Investments
Limited is a specialist real estate funded investment to enhance the quality and defensive positioning of the portfolio, also
investment and financing company. Its
main focus until recently has been on increasing its weighting in areas such as dementia care and mental illness. The UK portfolio is
the expansion of its UK portfolio of care let entirely to European Care, one of the industry's leading operators.
homes, which make up the majority of
the value of its portfolio. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 19.3 15.3 5.2 7.1 10.1 4.6
Actual (2.4) 1.4 5.7
Relative* (1.6) (4.0) (4.5) 2009A 20.6 16.6 9.0 9.5 7.6 3.3
* % Relative to local index
2010E 21.4 15.6 10.3 8.4 8.6 5.0
Analyst
2011E 22.5 16.6 11.9 8.8 8.2 4.6
Roger Leboff
INDUSTRY OUTLOOK
44% of QinetiQ’s revenues come from the UK and is underpinned to some extent by some
Company description
good long-term contracts such as the LTPA. However, with MoD R&D in decline and now fully
QinetiQ Group provides technical
advice, services and solutions to competitive, QinetiQ has seen a rapid fall in profitability and order delays have plagued the
customers in the aerospace, defence
and security markets, primarily in the UK wider business. The US appears to have stabilised from last year's delays, although we
and US. anticipate margins to remain subdued.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 1617.3 185.1 130.2 15.9 7.3 4.3
Actual 8.6 8.6 (27.5)
Relative* 9.5 (11.5) (34.5) 2010A 1625.4 155.4 85.7 11.1 10.5 4.5
* % Relative to local index
2011E 1737.4 171.4 110.4 13.9 8.4 3.4
Analyst
2012E 1710.6 174.3 115.7 14.5 8.0 4.9
Roger Johnston
96 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
Book sales in the US continued to be weak in September, down 12.1%, giving a running total
for the year-to-date of -9%, at $14.5bn. As ever, though, this covers a wide range of
Company description
experience and Amazon’s Q3 statement described print and digital sales both being ahead.
Quarto is an international book publisher
specialising in illustrated non-fiction eBooks continue to gain share as penetration of reading devices builds. Barnes & Noble's
books. It publishes under imprints
owned by the group in the US, UK and forecast is for consumer book sales to grow from $23bn in 2010 to $27bn in 2013. However,
Australia, and creates books that are this anticipates print sales falling by $2bn over the period and digital/e-books growing by $6bn.
licensed to other publishers worldwide.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 112.7 22.0 7.7 26.5 5.2 1.2
Actual 5.4 9.6 22.9
Relative* 6.2 32.0 11.0 2009A 106.6 22.8 6.9 26.0 5.3 1.5
* % Relative to local index
2010E 107.9 22.8 7.0 26.0 5.3 1.2
Analyst
2011E 110.4 23.0 7.3 27.2 5.0 1.2
Fiona Orford-Williams
INDUSTRY OUTLOOK
Company description
Run-off portfolio prices remain high, but there are some opportunities in niche markets and in
RQIH is a holding and investment
company. It conducts business in the run-off debt. R&Q has developed a range of new income streams with opportunities for both
UK, Europe, US and Bermuda as
owners and managers of insurance organic and acquisitive growth. Given its modest scale, these are available across market
companies in run-off, as purchasers of conditions.
reinsurance receivables and as
consultants for the insurance market. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 30.8 8.8 8.8 10.8 8.4 N/A
Actual 0.0 0.0 (15.3)
Relative* 0.8 (20.9) (23.5) 2009A 28.0 0.4 0.3 (0.3) N/A N/A
* % Relative to local index
2010E 37.9 7.8 7.4 9.8 9.3 N/A
Analyst
2011E 36.0 7.8 7.3 10.6 8.6 N/A
Mark Thomas
2 December 2010 97
Edison Insight
INDUSTRY OUTLOOK
Range has potentially high impact exploration interests in Puntland-Somalia. They comprise
Company description
20% stakes in two onshore basins, Nogal and Dharoor, which are believed to be analogues of
Range Resources has a portfolio of
early to advanced stage prospective large hydrocarbon basins in the Yemen. The operator of the projects, TSX-V listed Africa Oil,
exploration licences, located in the
autonomous Puntland region of North raised $25m in recent months and also farmed-out some of its equity to Lion Energy and Red
East Somalia, Georgia and West Texas. Emperor Resources.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m 2008A 0.5 (3.9) (3.9) (3.2) N/A N/A
Actual 10.2 8.7 188.9
Relative* 11.1 43.0 161.1 2009A 0.2 (4.7) (4.8) (2.6) N/A N/A
* % Relative to local index
2010E 0.7 (6.2) (6.4) (1.0) N/A N/A
Analyst
2011E 5.9 (5.2) (6.2) (0.5) N/A N/A
Peter Dupont
98 2 December 2010
Edison Insight
INDUSTRY OUTLOOK
While recovery in process industries will be determined by the economy, newsflow in Redhall's
Company description
other end-markets remains positive, with the MoD committing to build all seven Astute boats in
Redhall Group operates seven niche
engineering service businesses. Its main the SDSR. We also feel that the UK's budget highlighted further emphasis on the green
markets are: nuclear, oil and gas, food,
defence, safety and security, and agenda and the longer-term opportunity in nuclear aligns specifically with Redhall's core
transport infrastructure. business model.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 86.7 5.0 4.6 15.4 8.7 4.9
Actual 3.5 (0.4) (2.2)
Relative* 4.3 (18.9) (11.6) 2009A 129.0 6.9 6.5 16.0 8.3 8.1
* % Relative to local index
2010E 141.3 7.7 7.0 16.6 8.0 7.6
Analyst
2011E 148.5 8.4 7.6 17.9 7.5 5.0
Roger Johnston
INDUSTRY OUTLOOK
Company description
Colostrinin is a nutritional supplement used to support healthy brain ageing and cognition in
ReGen Therapeutics is a UK biotech
company focused on the development humans. It is currently marketed in UK, Poland, Turkey, Cyprus, Australia and India.
of products for the prevention and
treatment of diseases associated with
ageing, particularly neurodegenerative
disorders.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.1 (1.2) (1.4) (11.5) N/A N/A
Actual 11.1 (23.1) (61.5)
Relative* 12.0 (59.7) (65.2) 2009A 0.1 (0.4) (0.7) (2.4) N/A N/A
* % Relative to local index
2010E 0.5 (0.5) (0.6) (1.1) N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Robin Davison
2 December 2010 99
Edison Insight
INDUSTRY OUTLOOK
The UK is facing the twin challenges of reducing greenhouse gas emissions and ensuring
Company description
continuity of energy supply. As a proven technology, with stable long-term cash flows and
Renewable Energy Generation’s core
business is the development and benefiting from attractive incentives, wind farms provide a financeable method of meeting
operation of onshore wind farms in the
UK. these challenges. We believe that, as a result, the market for UK wind energy will continue to
grow rapidly.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 5.6 3.9 (1.9) (1.5) N/A N/A
Actual (8.6) 9.0 (30.9)
Relative* (7.9) (15.6) (37.6) 2010A 6.2 (0.6) (2.4) (1.8) N/A N/A
* % Relative to local index
2011E 13.7 4.0 0.7 0.7 64.7 6.4
Analyst
2012E 15.7 5.3 (0.6) (0.5) N/A 18.9
Graeme Moyse
INDUSTRY OUTLOOK
Juvista is a first-in-class scar revision product. It will initially be targeted for use in the one
Company description
million scar revision procedures carried out in the US and Europe each year, with the aim of
Renovo is a biopharmaceutical product
company and is a leader in the being used more broadly in the estimated 42 million surgical procedures performed per year in
discovery and development of drugs to
improve the appearance of scars and each of these regions. We estimate that it will achieve peak sales of $1.0bn.
enhance wound healing.
INDUSTRY OUTLOOK
The oil discovery in the Falklands is positive not only for the Falkland oil explorers, but the
Company description
industry as a whole. The £206m placing days after the CPR announcement is testament to
Rockhopper Exploration is an oil and
gas exploration company focused on investors' trust in RKH management. Diligent financial management has also been
the North Falkland Basin in the southern
Atlantic. demonstrated with the sharing of 3D seismic costs recently announced with Desire.
INDUSTRY OUTLOOK
Company description
With the business well balanced across civil aerospace, defence, marine and energy markets,
Rolls-Royce is a global power systems
business with activities in Civil RR's long-term future is driven by the recovery in the economic climate. With civil air traffic
Aerospace, Defence, Marine and
Energy. The business supplies both recovering, new aircraft build rates set to increase from 2011 and global defence expenditure
original equipment (51%) and relatively stable, we view the outlook as encouraging.
aftermarket services (49%).
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 9147.0 1127.0 880.0 36.7 16.8 9.7
Actual (2.4) 11.4 32.9
Relative* (1.6) (2.3) 20.1 2009A 10108.0 1177.0 915.0 39.7 15.5 10.9
* % Relative to local index
2010E 10795.0 1226.0 946.0 38.4 16.1 9.3
Analyst
2011E 11423.0 1367.0 1082.0 43.7 14.1 8.8
Roger Johnston
INDUSTRY OUTLOOK
Industry data suggests global polymer supply is coming online at the fastest rate in over five
Company description
years. With demand weakening, prices are expected to be depressed. Plastic as a packaging
RPC Group manufactures rigid plastic
packaging containers and related material is the fastest growing of the high volume materials. This appears driven by plastic's
products for a diverse range of
industries. It has manufacturing sites fundamental innovation potential and is a trend we expect to continue, with regulation the
across Europe and is c 60% exposed to biggest risk.
the food industry and related sectors.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 769.1 69.1 23.5 16.5 16.8 2.4
Actual (9.6) 2.7 28.3
Relative* (8.8) 8.6 15.9 2010A 719.9 79.0 39.1 29.1 9.5 3.8
* % Relative to local index
2011E 740.3 83.4 41.0 30.5 9.1 4.8
Analyst
2012E 765.4 88.1 44.8 33.2 8.3 3.4
Toby Thorrington
INDUSTRY OUTLOOK
The recent antenna issues with the iPhone4 have focused attention on the impact of the
human body on radio and hence phone performance, and highlighted the need for
Company description
well-designed antennas in handsets. The wireless market is forecast to show volume growth in
Sarantel develops and manufactures
miniature filtering antennas for mobile, CY10 and penetration of GPS in handsets is forecast to continue as smartphones continue to
wireless and handheld devices.
gain share. Demand for consumer GPS applications is returning to normal levels after a period
of weakness.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 2.8 (1.8) (2.8) (1.4) N/A N/A
Actual (13.3) (27.8) (31.6)
Relative* (12.7) (42.4) (38.2) 2010A 2.9 (1.7) (2.8) (0.9) N/A N/A
* % Relative to local index
2011E N/A N/A N/A N/A N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Katherine Thompson
INDUSTRY OUTLOOK
The amusement machine industry continues to contract and government spending cuts and
Company description
the forthcoming VAT rise will not help consumer spending. The industry is fragmented with 570
Sceptre Leisure is the second largest
supplier of amusement machines to the small operators, many financially stretched, presenting earnings accretive acquisition
UK pub sector. It also supplies lottery
vending machines and other gaming opportunities that can be easily integrated into Sceptre's national depot infrastructure.
products to UK social clubs.
INDUSTRY OUTLOOK
SciSys is specialist provider of high value IT solutions with a focus on four vertical markets
(space, government & defence, environment and media & broadcast). Its fifth division provides
Company description
application support across these markets. Recent growth has been led by the government and
SciSys provides a range of professional
services in support of the planning, Media Broadcast divisions. SciSys now has a more balanced portfolio, with many of the
development and use of computer
systems primarily in the space, group’s public sector contracts in key priority areas where there is less scope for discretionary
government and media/ broadcast spending cuts and roughly half of group revenues now in Europe.
sectors.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 38.1 1.5 0.8 3.9 9.6 7.5
Actual (7.4) (23.9) (13.8)
Relative* (6.7) (30.0) (22.1) 2009A 41.7 2.3 1.6 5.0 7.5 4.1
* % Relative to local index
2010E 42.8 2.4 1.7 4.9 7.7 5.4
Analyst
2011E 44.3 3.1 2.2 6.2 6.0 3.9
Richard Jeans
INDUSTRY OUTLOOK
SM has exposure to a number of industry sectors, including automotive and mining (DSS),
Company description
healthcare (TrueField Analyzer), and computer gaming (faceAPI). While the automotive fleet
Seeing Machines is a technology
company focused on designing opportunity has been deferred by the weak US economy, the mining sector deals have
vision-based human machine interfaces.
diversified the opportunity and we note the market size in both global road transport and
mining operations is substantial.
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 2009A 4.9 (0.5) (0.5) (0.2) N/A 70.4
Actual 3.6 16.0 123.1
Relative* 4.4 (4.8) 101.6 2010A 4.2 (1.7) (1.7) (0.5) N/A N/A
* % Relative to local index
2011E 8.7 1.4 1.3 0.3 19.4 12.7
Analyst
2012E 10.8 2.0 1.9 0.4 14.5 12.1
Richard Jeans
INDUSTRY OUTLOOK
Share plc still has a modest market share (6% excluding the benefit of the hedge), allowing for
Company description
many more years of above market growth. Its record shows the model delivers strong
Share plc owns The Share Centre and
Sharefunds. The Share Centre is a operational gearing. There should be long-term market growth from the demographics of an
self-select retail stockbroker that also
offers share services for corporates and ageing and higher net worth population. The retail market may also see a step change when
employees. A high proportion of income the government 'popularises' its holdings in banks.
is derived from stable fee and interest
based revenues. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 12.0 1.4 2.4 1.07 25.7 33.3
Actual (3.5) 3.8 (3.5)
Relative* (2.8) (8.0) (12.8) 2009A 14.1 2.2 2.7 1.28 21.5 20.5
* % Relative to local index
2010E 15.0 2.8 3.2 1.52 18.1 16.1
Analyst
2011E 14.7 2.4 2.7 1.42 19.4 17.8
Mark Thomas
INDUSTRY OUTLOOK
While the VC market is subject to the health of equity markets and the knock-on effect on exit
strategies, attractive early-stage companies are still able to complete funding rounds. The
Company description
sustainable/renewable energy sector is receiving considerable investor and government
Sigma Capital is a specialist asset
management and advisory group that support. The IPD monthly index of UK commercial property has risen in each of the past 12
focuses on three areas: venture capital
(VC) fund management, property months to October 2010 for a total return of 20.4%, although the rate of increase has begun
investment management and university to slow.
IP commercialisation (IPC).
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 4.7 (0.7) (0.5) (1.5) N/A N/A
Actual (25.0) (29.4) (40.0)
Relative* (24.4) (39.8) (45.8) 2009A 2.4 0.9 0.9 3.7 2.4 2.4
* % Relative to local index
2010E 1.8 (1.4) (1.4) (2.9) N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Martin Lister
INDUSTRY OUTLOOK
Company description
The company aims to build European critical mass in the domains of dermatology and oral
Sinclair Pharma is a UK-based speciality
company with direct marketing health. Industry benefits from demographic growth trends and Sinclair has a mix of OTC and
operations in France, Italy, Spain and
Germany and distributors in c 85 other more specialised brands. However, it must align its costs with the industry average to
countries. It sells 45 products mostly in compete with peers.
dermatology, oral health and wound
care. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 30.4 2.8 1.0 1.5 20.5 N/A
Actual 13.9 14.9 (11.5)
Relative* 14.8 4.8 (20.0) 2010A 27.6 (0.1) (1.8) (0.8) N/A N/A
* % Relative to local index
2011E 32.8 (1.5) (1.9) (0.9) N/A N/A
Analyst
2012E 36.6 0.5 0.4 0.4 77.0 N/A
Mick Cooper
INDUSTRY OUTLOOK
Company description
Sirius's properties are aimed at Germany's SMEs. The local economy has produced the
Sirius Real Estate is engaged in the
investment in and development of strongest eurozone performance, ie 2.2% second quarter growth on the back of resurgent
commercial property to provide flexible
workspace in Germany. export orders, assisted by domestic demand, leading to GDP growth forecasts of around 3%
for the current year.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2009A 43.7 18.8 4.9 1.40 21.4 4.5
Actual (5.5) 20.0 5.3
Relative* (4.8) 2.3 (4.9) 2010A 44.0 18.7 0.7 0.83 36.1 7.9
* % Relative to local index
2011E 44.4 20.8 1.5 0.46 65.2 4.0
Analyst
2012E 45.5 23.1 3.8 1.12 26.8 3.7
Roger Leboff
INDUSTRY OUTLOOK
Company description
Flutiform remains the possible fourth combination ICS/LABA to reach the market in asthma,
SkyePharma is a drug delivery
specialist, using its technologies to after GSK's Advair and AstraZeneca’s Symbicort. Merck & Co is due to launch Dulera after
develop new formulations of established
drugs, bringing clinical and life cycle receiving FDA approval in June.
management benefits.
INDUSTRY OUTLOOK
Company description
Emergency contraceptive SOH-075 may provide further upside as Japanese approval is
Sosei Group Corporation is a
Japan-based biopharma focused on possible in Q111 (NDA filed Sept 2009); Sosei currently generates over ¥130m pa from
R&D and drug re-profiling. It is active in
licensing – both its proprietary Norlevo (SOH-075) sold by Sandoz in Australia.
programmes, and external rights for the
Japanese market.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (¥m) (¥m) (¥m) (¥) (x) (x)
% 1m 3m 12m 2009A 153.0 (2106.0) (2067.0) (19938.8) N/A N/A
Actual (3.3) 33.2 15.2
Relative* (8.7) 5.4 10.3 2010A 919.0 (293.0) (262.0) (1530.8) N/A N/A
* % Relative to local index
2011E 800.0 (294.0) (262.0) (2266.8) N/A N/A
Analyst
2012E N/A N/A N/A N/A N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
Online sports-betting revenues are continuing to grow on the back of rising broadband
penetration and greater consumer trust. An increasing number of countries are planning to
Company description
specifically regulate and license online gambling (including Denmark, Germany, Spain and
Sportingbet is an online sports betting
and gaming operator. Its main markets Greece) and while this may produce a temporary dip in profits (due to tax and marketing
are in Europe and Australia. In October
2006 it sold its US-facing business and costs), rapid market growth should soon offset this, as in Australia. Economies of scale also
stopped accepting bets from US suggest the sector is likely to see continuing M&A activity.
residents.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 164.0 39.7 31.5 6.0 9.9 15.6
Actual (9.1) (3.8) (18.7)
Relative* (8.3) (13.0) (26.5) 2010A 208.0 46.5 35.2 6.2 9.5 6.4
* % Relative to local index
2011E 215.0 49.0 37.0 6.3 9.4 8.6
Analyst
2012E 230.0 52.5 40.0 6.7 8.8 7.1
Jane Anscombe
INDUSTRY OUTLOOK
The fundamental driver behind the demand for independent software testing is the dismal
Company description
failure rate of IT projects. Market surveys suggest that around two-thirds of IT projects either
SQS is the largest independent provider
of software testing and quality fail or fall behind time and budget, partly reflecting that around 90% of testing is carried out
management services. The majority of
its revenues are derived from in-house. As the global market leader in independent testing, SQS is well placed to benefit.
consultancy services to a client base
including a long list of blue-chip
customers. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 142.9 17.3 13.1 43.2 5.2 3.0
Actual 4.1 7.9 (2.8)
Relative* 4.9 (9.2) (12.2) 2009A 134.3 12.5 7.0 21.1 10.6 6.4
* % Relative to local index
2010E 150.1 14.0 8.6 22.6 9.9 4.8
Analyst
2011E 159.7 16.9 11.4 28.8 7.8 4.1
Katherine Thompson
INDUSTRY OUTLOOK
StatPro's products are targeted at the global wealth management industry. While this target
market has clearly suffered a fair amount of turmoil over the last two years, volatility and a
Company description
lower interest rate environment should help underpin retail demand for equities and bonds, and
StatPro Group provides asset
management software and asset pricing therefore the longer-term industry growth profile. In addition, competitive, cost and regulatory
to the global investment industry.
pressures all require asset managers to maintain and upgrade their reporting and risk
management systems.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 27.9 6.8 4.7 7.0 16.7 7.8
Actual (3.7) 6.4 14.7
Relative* (3.0) (4.4) 3.7 2009A 31.6 8.6 6.9 9.0 13.0 6.9
* % Relative to local index
2010E 33.0 8.7 7.0 8.8 13.3 5.7
Analyst
2011E 34.7 9.5 8.0 9.9 11.8 6.0
Richard Jeans
INDUSTRY OUTLOOK
With food, drink and other resistant sectors amounting to 85% of goods carried, Stobart is
Company description
pretty insensitive to the UK slowdown. With a greater focus on more environmental
Stobart Group operates a multimodal
transport business, including Eddie transportation and the creation of a Biomass JV, we believe Stobart's multi-modal model is set
Stobart (road haulage, 82%), Stobart
Rail (14%), Stobart Ports (3%) and to become increasingly attractive, supported by asset developments.
Stobart Air (1%).
INDUSTRY OUTLOOK
SuperGen is focused on the development of novel, usually first-in-class anticancers based on
Company description
kinase, cell signalling and DNA methyltransferase inhibitors. Such compounds are attractive as
SuperGen is a NASDAQ-listed biotech
firm focused on the development of licensing candidates to major pharmaceutical companies and can often be licensed at high
kinase, cell signalling and DNA
methyltransferase inhibitors for cancer values at a relative early stage.
indications.
INDUSTRY OUTLOOK
Symphony's main activity is in overseas markets, where environmental conditions and
legislation are creating positive momentum. Products made with Symphony's d2w
eco-compatible technology can be found in many large brands. The d2w droplet logo can also
be found on many magazine covers at UK newsagents. BASF recently moved out of the
oxo-degradable market, leaving further market share opportunities for Symphony.
Company description
Symphony designs and globally markets
a special formulated additive that makes
polythene and polypropylene
oxo-biodegradable. The company also
sells oxo-biodegradable finished
product, such as carrier bags.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 5.4 (0.1) (0.4) 0.3 45.0 N/A
Actual (8.5) (1.8) 14.9
Relative* (7.8) 14.0 3.8 2009A 7.0 0.9 0.6 0.8 16.9 27.6
* % Relative to local index
2010E 8.4 1.1 0.9 0.8 16.9 17.3
Analyst
2011E N/A N/A N/A N/A N/A N/A
Neil Shah
INDUSTRY OUTLOOK
TopoTarget's belinostat belongs to the class of drugs called histone deacetylase inhibitors
Company description
(HDACi), which have considerable potential as oncology products because of their epigenetic
TopoTarget is a Danish drug
development and marketing company effects. Two such drugs have been approved and nine others are in clinical development.
focused on the field of oncology. Its lead
product is belinostat and it has However, belinostat has a favourable safety profile and could be the first HDACi approved for
out-licensed its North American and the treatment of solid tumours.
India rights to Spectrum.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (DKKm) (DKKm) (DKKm) (DKK) (x) (x)
% 1m 3m 12m 2008A 43.9 (192.9) (306.1) (4.68) N/A N/A
Actual (9.5) (4.3) 29.3
Relative* (11.2) (24.1) (1.5) 2009A 44.0 (106.8) (142.7) (1.41) N/A N/A
* % Relative to local index
2010E 128.8 (15.5) (26.3) (0.20) N/A N/A
Analyst
2011E 90.6 (42.2) (50.2) (0.36) N/A N/A
Mick Cooper
INDUSTRY OUTLOOK
Rockhopper's Falklands discovery points to the prospectivity of source rocks laid down in the
Company description
south Atlantic. Arguably, there are positive implications, albeit tentative, for Tower offshore
Tower Resources plc is an AIM-listed,
London-based, independent oil and gas Namibia. More drilling success in the Falklands could stimulate interest in offshore Namibia
exploration company with a regional
focus on sub-Saharan Africa. plays. Significantly, the Brazilian junior HRT has recently raised $1.5bn partly to finance
exploration activity offshore Namibia.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 0.0 (1.3) (1.2) (0.2) N/A N/A
Actual 17.4 33.9 65.3
Relative* 18.3 176.2 49.4 2009A 0.0 (1.1) (1.0) (0.2) N/A N/A
* % Relative to local index
2010E 0.0 (1.0) (1.1) (0.1) N/A N/A
Analyst
2011E 0.0 (2.8) (2.8) (0.3) N/A N/A
Peter Dupont
INDUSTRY OUTLOOK
While Thomas Cook and TUI Travel have blamed a marked slowdown in UK summer 2010
trading on airspace closures, tighter consumer spending, fine weather and the World Cup,
Company description
there is renewed concern that the massive capacity cuts of recent years may not deliver the
Travelzest is an online travel group
offering specialist travel programmes. long-term market stability envisaged at the time of the industry mergers. In Canada, despite
consolidation, the charter market remains highly competitive, which benefits Travelzest's
agency business.
Y/E Oct Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 44.3 5.4 3.9 6.3 2.8 N/A
Actual (18.6) (31.4) 75.0
Relative* (18.0) (12.6) 58.1 2009A 41.5 5.8 4.1 5.8 3.0 11.0
* % Relative to local index
2010E N/A N/A N/A N/A N/A N/A
Analyst
2011E N/A N/A N/A N/A N/A N/A
Richard Finch
INDUSTRY OUTLOOK
Company description
The PRC government's determination to curb inflation pressure and property speculation
TCT's main objective is to maximise
capital growth from a portfolio of prompted its fifth increase in capital reserve requirements this year. This followed October's
properties in China. The focus is on
large scale development opportunities in 0.25% increase in the benchmark interest rate. Much of this is aimed at residential property,
the commercial sector and on income outside of TCT's business model.
producing assets such as office,
logistics and retail properties. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (S$m) (S$m) (S$m) (c) (x) (x)
% 1m 3m 12m 2008A 80.9 4.3 (49.4) (29.0) N/A N/A
Actual 0.0 4.7 N/A
Relative* 0.1 N/A N/A 2009A 77.8 13.3 (29.2) (13.4) N/A 6.4
* % Relative to local index
2010E 77.2 21.0 (23.8) (10.9) N/A 4.4
Analyst
2011E 85.0 26.8 (15.5) (7.7) N/A 11.9
Roger Leboff
INDUSTRY OUTLOOK
Company description
Post the CSR, efficiency in service delivery and intelligent investment in technology remain key
Tribal provides consultancy, support
and delivery services focused on priorities given curtailed budgets. Radical changes to the role of the state in the provision of
improving the delivery of public services,
primarily within the UK. public services could present Tribal with myriad opportunities, such as working with GP
practices in their envisaged commissioning role.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 234.0 24.1 18.6 14.7 2.4 1.2
Actual (42.5) (53.6) (44.3)
Relative* (42.1) (53.5) (49.7) 2009A 193.7 18.0 13.8 10.7 3.3 1.5
* % Relative to local index
2010E 178.0 10.6 6.0 4.6 7.7 N/A
Analyst
2011E 170.1 13.5 9.0 6.8 5.2 2.9
Fiona Orford-Williams
INDUSTRY OUTLOOK
The global industrial fasteners market is valued at more than £20bn. Successful manufacturers
and distributors have responded to the shift in manufacturing capacity to lower-cost regions by
Company description
developing their own local facilities or supply routes. They have also created effective logistical
Trifast is a leading global manufacturer
and distributor of industrial fasteners. services and shifted the emphasis towards more complex products to increase value added.
Principal operations are in Europe and
South-East Asia, with a toehold in the The global recession has caused pain across the sector, but provides consolidation
US. opportunities for stronger businesses.
Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 104.9 4.5 2.5 1.15 44.3 7.3
Actual 23.6 27.5 114.7
Relative* 24.6 64.4 94.1 2010A 85.9 2.1 0.9 0.68 75.0 11.1
* % Relative to local index
2011E 104.0 5.2 3.4 2.93 17.4 26.8
Analyst
2012E 108.0 5.9 4.0 3.40 15.0 9.6
Nigel Harrison
INDUSTRY OUTLOOK
With end-markets across defence moving towards a greater demand for electronic equipment
and information management, Ultra is well positioned to benefit from the trend towards more
Company description
frequent upgrade cycles. In addition, we feel the key themes to come out of the UK's SDSR
Ultra Electronics is a global specialist
aerospace & defence electronics play to Ultra's strengths surrounding Battlespace IT and security. We also feel that Ultra
company with operations across three
divisions: tactical & sonar systems (43% benefits from its geographic strategy with 53% of sales to the US and only 6% direct to the UK
2009 sales); aircraft & vehicle systems MoD.
(24%); and information & power
systems (33%). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 515.3 84.1 72.2 80.1 20.4 11.8
Actual (11.5) 0.9 33.6
Relative* (10.8) (6.1) 20.7 2009A 651.0 105.1 89.5 96.4 17.0 9.2
* % Relative to local index
2010E 713.6 114.3 98.8 103.3 15.9 10.6
Analyst
2011E 765.0 125.7 112.2 116.3 14.1 9.4
Roger Johnston
INDUSTRY OUTLOOK
Company description
60% of the business is in the higher visibility Supply Chain. While 2010 results were hit by
Umeco is an international provider of
supply chain services and advanced lower composite revenues, with delays in aerospace and automotive and wind energy markets
composite materials primarily to
aerospace and defence (70%), wind essentially grinding to a halt. The recent interims highlighted these markets have moved into a
energy (5%), motor sport (7%), marine strong recovery mode.
(4%) and other industries (14%).
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 410.9 39.7 28.5 39.7 11.3 7.9
Actual 3.9 4.7 52.5
Relative* 4.7 13.3 37.9 2010A 409.4 37.4 24.9 36.6 12.3 3.6
* % Relative to local index
2011E 424.2 39.8 26.7 39.3 11.5 5.7
Analyst
2012E 459.3 45.1 31.5 46.3 9.7 5.6
Roger Johnston
INDUSTRY OUTLOOK
Company description
Vectura offers exposure to potential generic ICS/LABA asthma combinations (despite US
Vectura Group is a product
development company focused on the regulatory complexity) and novel LAMA (NVA237) and LABA/LAMA combination (QVA149),
development of a range of inhaled
therapies, principally for the treatment of which could become the first such therapies to reach the blockbuster COPD market.
respiratory diseases. Its goal is to
improve patients’ lives and generate
value for its stakeholders. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 31.2 (7.2) (7.5) (1.4) N/A N/A
Actual 10.5 38.4 (6.4)
Relative* 11.3 57.7 (15.4) 2010A 50.1 8.3 8.2 3.7 18.5 N/A
* % Relative to local index
2011E 30.6 (10.3) (10.9) (1.4) N/A N/A
Analyst
2012E 23.4 (18.8) (19.6) (5.0) N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
The next 12 months should see Phase II start for V85546 (possibly with a partner), and clinical
Company description
entry of in-house programmes, V158866 and V158411 plus Biogen’s A2A antagonist back-up.
Vernalis is a UK company with an early
to mid-stage development pipeline of AUY922 proof of concept and full recruitment of the V3381CC chronic cough Phase II is
projects targeting indications in the CNS
area and cancer. expected by end-2010. Additional projects could be generated from the Cambridge research
facility.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 54.8 (9.3) (19.5) (128.0) N/A 1.0
Actual (33.0) (3.1) (61.7)
Relative* (32.5) (24.5) (65.4) 2009A 13.0 (6.5) (10.9) (19.2) N/A N/A
* % Relative to local index
2010E 13.4 (4.4) (12.4) (10.7) N/A N/A
Analyst
2011E 8.9 (6.5) (6.6) (4.9) N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
City sentiment towards the motor distribution sector remains cautious, as fears about
recession are seen to have greater prominence than the positive action taken by retailers to
Company description
build their downstream activities. SMMT forecasts on new vehicle registrations are still looking
Vertu was established to build a major
motor vehicle distribution group. This is optimistic, but used car values have recently started to drift downwards. Nevertheless,
being achieved through the completion
and subsequent improved performance indications from most leading groups suggest they will deliver profits progress in both 2010
of a series of acquisitions. and 2011.
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 760.8 7.9 3.5 3.3 8.6 1.4
Actual (12.3) 8.6 (26.0)
Relative* (11.6) (27.8) (33.1) 2010A 818.9 10.5 6.9 3.2 8.9 3.0
* % Relative to local index
2011E 930.0 11.1 7.2 2.6 11.0 7.6
Analyst
2012E 1000.0 12.0 8.1 3.0 9.5 4.2
Nigel Harrison
INDUSTRY OUTLOOK
Qnexa is one of three FDA-filed obesity drugs, but unlike Arena's lorcaserin and Orexigen's
Company description
Contrave, it is currently unpartnered. In Phase III it showed the most impressive efficacy
Vivus, Inc is a pharmaceutical company
dedicated to the development and (placebo-adjusted weight loss of 9.4% vs 5.2% for Contrave and 3.6% for lorcaserin).
commercialisation of next-generation
therapeutic products addressing Lorcaserin also received a CRL, while Contrave will face the FDA AdCom on 7 December.
obesity, diabetes and sexual health.
INDUSTRY OUTLOOK
A sharp downturn in consumer demand subsequently yielded some healthy year-on-year
percentage increases for electronics companies in the early stages of recovery. These rates
are flattening out and the rate of progress is also less uniform going into Q4. Consequently,
investors may need to be more selective on stocks and sub-sectors going forward. Asia
Company description
remains the most active region.
Volex Group is a leading global provider
of power products and interconnect
cable assemblies. It supplies data and
telecom equipment and healthcare and
industrial products to large OEMs of
consumer electrical and electronic
devices. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 265.1 14.0 8.3 10.9 28.7 10.3
Actual (2.8) 34.6 233.0
Relative* (2.0) 115.9 200.9 2010A 229.0 15.6 10.3 14.5 21.6 11.2
* % Relative to local index
2011E 302.0 18.7 14.1 18.3 17.1 24.5
Analyst
2012E 322.0 21.3 17.5 22.4 14.0 10.0
Toby Thorrington
INDUSTRY OUTLOOK
The $150k SmartCycler RT-PCR system and SmartChip tests for 5,184 genes in one sample
Company description
enabling high-throughput quantitative analysis. Multi-sample 384-well capabilities are now
WaferGen Biosystems Inc. is a leader in
the development, manufacture and sale available (at an extra $75k). Two gene expression profiling SmartChips were launched on 10
of state-of-the-art systems for gene
expression, genotyping, cell biology and June: a cancer pathway chip and a miRNA chip (miRNA are gene regulatory molecules). Each
stem cell research for the life science chip tests 1,000 genes using sensitive quantitative PCR.
and pharmaceutical industries.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2008A 0.6 (7.7) (8.0) (33.0) N/A N/A
Actual 2.9 10.2 (21.7)
Relative* 2.6 (20.9) (26.9) 2009A 0.4 (9.5) (10.0) (37.2) N/A N/A
* % Relative to local index
2010E 1.9 (10.5) (11.0) (33.1) N/A N/A
Analyst
2011E 5.4 (9.8) (10.4) (31.2) N/A N/A
John Savin
INDUSTRY OUTLOOK
The UK interior furnishing industry has experienced uncertain times for many years under the
influence of fashion changes. Many brands have failed to grow, while several specialist
Company description
manufacturing facilities have closed down. Manufacture for the volume segment of the market
Walker Greenbank is a vertically
integrated producer and distributor of has largely moved overseas. However, success is being delivered delivered by operators able
high-quality wallcoverings and furnishing
fabrics. Leading brands include Zoffany, to differentiate themselves from competition by consistently offering innovative and high-quality
Harlequin, Morris and Sanderson. design and products.
Y/E Jan Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 63.7 5.8 3.2 4.29 9.4 6.2
Actual (5.8) 36.4 117.6
Relative* (5.1) 12.4 96.6 2010A 60.4 4.4 2.4 3.07 13.1 4.9
* % Relative to local index
2011E 68.0 6.5 4.5 5.79 7.0 6.4
Analyst
2012E 71.5 7.0 5.0 6.43 6.3 5.8
Nigel Harrison
INDUSTRY OUTLOOK
Westminster is an established niche player providing advanced technical security solutions to
Company description
UK and overseas customers, a core activity that represents two-thirds of turnover, which we
Westminster is predominantly an
established niche player in the provision believe will remain robust. The balance comprises the provision of close protection services
of advanced technical security solutions,
along with close protection services and and training, as well as a 24/7 alarm receiving centre and control room.
training.
INDUSTRY OUTLOOK
Mesupron is an orally-available anti-metastatic drug, with development potential in most solid
Company description
tumours. Rencarex is targeted at adjuvant treatment of non-metastatic kidney cancer,
WILEX is a biopharmaceutical company
listed on the Frankfurt Stock Exchange. following surgical removal of the kidney. Rencarex is the leading product in development for
Its aim is to develop drugs and
diagnostic agents with a low side effect this specific indication, for which no product is currently approved.
profile and targeted treatment of
different types of cancer as well as for
early detection of tumours. Y/E Nov Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 3.2 (20.9) (20.0) (167.4) N/A N/A
Actual 2.9 16.7 14.1
Relative* (0.6) 1.2 (6.4) 2009A 13.0 (12.5) (12.5) (93.4) N/A N/A
* % Relative to local index
2010E 1.5 (24.5) (24.6) (133.5) N/A N/A
Analyst
2011E 1.5 (25.0) (25.2) (137.1) N/A N/A
Robin Davison
INDUSTRY OUTLOOK
The market for Xaar's P1 printheads (used in outdoor advertising and case coding) looks
relatively stable. The opportunity for the P3 products looks significant. Demand from the
Company description
ceramics market is the primary driver, where manufacturers are looking to make significant
Xaar designs and manufactures inkjet
printheads. Its Platform 1 products are investments in expanding their digital production capacity. This opens up significant
used primarily for outdoor advertising.
Platform 3 widens the addressable incremental revenue streams for Xaar.
market to include industrial, labelling
and other applications.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 42.0 6.8 2.8 3.0 75.3 26.7
Actual (3.6) 52.0 145.7
Relative* (2.9) 72.2 122.0 2009A 42.1 7.2 2.5 5.0 45.2 18.9
* % Relative to local index
2010E 52.0 10.2 5.1 5.8 39.0 24.5
Analyst
2011E 57.5 14.6 8.2 8.6 26.3 12.9
Dan Ridsdale
INDUSTRY OUTLOOK
Company description
Xcite plans a unique alliance financing structure to both incentivise partners while retaining a
Xcite Energy is an oil exploration and
development company, which is 100% WI. Success with Bentley could make it one of the North Sea’s largest independent
focused on the exploration and
development of heavy oil resources in players.
the North Sea on the United Kingdom
Continental Shelf.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 0.0 (0.9) (0.5) (0.9) N/A N/A
Actual 70.5 302.2 603.9
Relative* 71.8 248.9 536.1 2009A 0.0 (0.8) (0.8) (1.4) N/A N/A
* % Relative to local index
2010E 0.0 (0.9) (0.9) (0.6) N/A N/A
Analyst
2011E 66.4 30.6 30.8 20.8 13.2 17.5
Ian McLelland
INDUSTRY OUTLOOK
Company description
The three end-markets supplied by XP are showing differing rates of recovery. Healthcare
XP Power is a developer and designer
and manufacturer of power control equipment manufacturers are reporting bookings growth and improving book-to-bill ratios after
solutions with a production facility in
China and design, service and sales many quarters of weak bookings. Technology customers have rebounded strongly after a
teams across the US, Europe and Asia. dismal 2009, while the industrial sector is starting to show signs of improved activity.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2008A 69.3 10.9 8.0 34.8 28.8 20.0
Actual (2.1) 30.3 157.2
Relative* (1.4) 49.7 132.4 2009A 67.3 11.2 8.7 40.8 24.6 11.2
* % Relative to local index
2010E 87.6 18.6 15.6 66.5 15.1 14.6
Analyst
2011E 95.0 20.8 17.5 74.6 13.4 9.8
Katherine Thompson
INDUSTRY OUTLOOK
Anti-EGFR MAb Vectibix failed in first-line head and neck cancer, an indication dominated by
Company description
Erbitux. Nimotuzumab has shown a reduced incidence of side effects common to Erbitux and
YM BioSciences is an oncology-focused
business developing compounds Vectibix: a potential competitive advantage. Phase I/II data from Incyte/Novartis’s twice-daily
licensed from academia and acquired
through company takeovers. Its stock is JAK1/2 inhibitor INCB18424 is promising; although preclinical data review suggests CYT387
listed on Amex and the Toronto stock has comparative potency but with potentially an improved therapeutic window and dosing.
exchange.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (C$m) (C$m) (C$m) (c) (x) (x)
% 1m 3m 12m 2009A 4.5 (12.6) (11.6) (20.1) N/A N/A
Actual (14.9) 35.8 46.8
Relative* (16.3) 15.6 30.2 2010A 2.6 (17.3) (17.3) (26.8) N/A N/A
* % Relative to local index
2011E 3.5 (20.2) (20.0) (24.9) N/A N/A
Analyst
2012E 0.4 (23.9) (23.7) (28.1) N/A N/A
Lala Gregorek
INDUSTRY OUTLOOK
After discovering that it was not, in fact, immune from economic factors, the industry is
showing gentle recovery, with both GfK and Synovate reporting revenues over 10% ahead.
Company description
Buyers’ and providers’ confidence, though improving, is still brittle. There has been a little
YouGov is a professional research and
consulting organisation, pioneering the M&A, mostly earlier in the year (Ipsos/OTX, IMS) and much noise around the development of
use of the internet and information
technology to collect high quality, opportunities in social networking. WPP's Q3 statement also talks of the need to focus on "the
in-depth data for market research and application of technology and analysis of data, to the benefit of our clients and people".
stakeholder consultation.
Y/E Jul Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 44.3 3.5 3.5 2.3 19.9 8.3
Actual 11.6 15.8 (10.7)
Relative* 12.5 4.0 (19.3) 2010A 44.2 4.4 3.8 2.3 19.9 9.1
* % Relative to local index
2011E 52.5 6.0 5.4 3.8 12.1 8.1
Analyst
2012E 57.1 6.7 6.1 3.9 11.7 6.6
Fiona Orford-Williams
Events diary
Listed below are the expected dates of forthcoming events commencing Monday 6 December 2010.
If you would like to attend an Edison investor event, please contact Celine Saikali on 020 3077 5702.
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