Hvivo Plc

Hvivo Plc (HVO) is a UK based biopharma company having clinical testing capabilities. The company is a pioneer in developing a human-based analytical platform to increase the discovery and development to drug-related to respiratory and infectious diseases. The company’s platform is based on disease models in influenza (flu), RSV (respiratory syncytial virus) and other indications related to respiratory.

Financial Highlights (for the six months ended 30 June 2019, £’000)

(Source: Interim Reports, Company Website)

For the six-month period ended 30 June 2019, the revenue surged by 22 per cent to £5.9 millionas compared with the corresponding period of the last year. In H1 FY19, the adjusted loss from operations decreased by 27 per cent to £3.7 million against the loss of £5.0 million in H1 FY18, reflecting the ongoing rationalisation of the group’s cost base combined with increase in revenues. Similarly, the adjusted EBITDA loss declined by 29 per cent to £3.1 million against the loss of £4.4 million in H1 FY18. The loss for the year was £3.8 million in the first half of 2019 versus £4.4 million in the first half of 2018. Net cash generated from investing activities decreased to £0.03 million, due to declined capital expenditure. Cash and cash equivalents as at 30th June 2019 stood at £4.0 million.

Share Price Performance

Daily Chart as at October-14-19, before the market closed (Source: Thomson Reuters)

On 14th October 2019, Hvivo PLC shares were trading at GBX 16.1001 at the time of writing before the market close (at 2:05 PM GMT), down by 2.42% against the previous day closing price. Stock's 52 weeks High and Low are GBX 55/GBX 13.20. The company’s stock beta stood at negative 0.36, reflecting the negative movement of the stock as compared to the benchmark index.

Valuation Methodology


Key Risks
If the company does not keep pace with rapid technological change in the biopharmaceutical industry, services may become less competitive or obsolete. Other risks - macroeconomic uncertainty following the UK’s decision to exit from the EU (Brexit), and failure to protect the company’s financial performance and stewardship of assets against financial risk.

Conclusion
The company’s strong base of revenue is driven by increased demand for services. The costs were in line with service revenue due to operational improvements. The company has made a good progress to turnaround the business with refocussed services business model. The company’s research and development expenses were reduced to focus on opportunities to support the development of services related to new virus manufacturing etc.

The cost savings introduced by management since 2018 are anticipated to deliver declines to the operating cost base of £11 million by the year 2020 with further efficiency opportunities identified that can additionally decrease the operating cost base. The company’s pipeline of opportunities for the year 2020 looks extremely robust. The company is mainly focusing on its service business and is closing certain areas which are not worthwhile.

Therefore, based on above discussion and valuation done using above methodology, we have given a “Speculative Buy” recommendation at the current price of GBX 16.10 (as on October 14, 2019, before the market close), with lower double-digit upside potential, based on 1x NTM Industry Median EV/Sales (approx.) on the FY19E Sales (approx.).

CentralNic Group Plc

CentralNic Group Plc (CNIC) is a London, the United Kingdom-based developer and operator of software platforms, which owns one of the world's pioneering registry service providers, CentralNic Ltd. The company’s operations are differentiated in three operating segments: Reseller, Small Business and Corporations. Benjamin Crawford is the Chief Executive Officer of the group.

Recent News
On 30^th September 2019, the company announced that its senior secured bond of €50 million was admitted to trading on the Oslo Stock Exchange on 27th September 2019.

Financial Highlights (for the six months ended 30 June 2019, US$’000)

(Source: Interim Report, Company Website)

Led by the successful acquisition of the three companies, and strong performance recorded by KeyDrive which was acquired in the previous financial year, took the company’s revenue to $49.7m and recorded a massive surge of 225% against $15.3m reported in the year-ago period. Gross profit surged by 127% to $19.73m on a YoY basis. Adjusted EBITDA surged by 203 per cent on a YoY basis, driven by a combination of progress with the acquisition, and underlying organic growth of 6 per cent. However, loss after tax jumped by 100% to $2.99m from $1.49m reported in the H1 FY18, on account of steep escalation of net finance cost to $4.02m from $0.47m in the year-ago period. Basic loss per share expanded by 13% to 1.75c.

Share Price Performance

Daily Chart as at October-14-19, before the market closed (Source: Thomson Reuters)

On 14th October 2019, CentralNic Group Plc shares were trading at GBX 40 at the time of writing before the market close (at 2:40 PM GMT), down by 1.235% against the previous day closing price. Stock's 52 weeks High and Low are GBX 68.50/GBX 39. The company’s stock beta stood at negative 1.11, reflecting the negative movement of the stock as compared to the benchmark index.

Conclusion
The company recorded strong growth in the first half of the FY19, which was largely driven by the successful acquisitions the group had in the past, which reflects the successful execution of the company's buy and build strategy. Also, gross margin and adjusted EBITDA margin of the lately acquired businesses are improving, and management is confident of achieving a full-year growth as it was achieved in the first half of FY19. The pipeline of future strategic deals of the group remains strong. High debt burden might impact on the company’s balance sheet.

Based on the above factors, we have given a “Speculative Buy” recommendation at the current price of GBX 40 (as on 14th October 2019, before the market close).
 
*All forecasted figures and peer information have been taken from Thomson Reuters.

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