Banco Latinoamericano (BLX:BUY) Successful reduction in the credit portfolio exposure to Brazil

 

24-AUG-16 – Banco Latinoamericano (BLX:BUY) Successful reduction in the credit portfolio exposure to Brazil (<20% target set in Q4:15) coupled with increasing credit share of growing economies (Peru, Argentina, Colombia and the Central American region) are expected to drive business to BLX and enhance its prospects over the coming quarters. We reiterate our last BUY rating with an increased price target of $33.00.

  • Q2:16 HIGHLIGHTS • Net interest income increased 10% to $38.2 million in Q2:16 from $34.7 million in Q2:15, primarily due to higher lending spreads and increased market rates.
  • Net interest margin came in at 2.06% versus 1.79% in Q2:15. Fees and commissions rose 43% to $4.4 million in the quarter, compared to $3.1 million in Q2:15 as the company completed five transactions in the loan structuring and syndication business.
  • Net profit surged 10% to $22.3 million in Q2:16 or $0.60 per diluted share from $20.2 million or $0.52 per diluted share in the year earlier quarter, as the company witnessed a healthy growth of 10% and 43% in its net interest income and fees & commissions respectively.
  • The average interest earning assets under Commercial Loan Portfolio segment fell 8.7% over Q2:15 levels to $6.8 billion.
  • Brazil represented 18% of the overall (Commercial & Treasury) outstanding credit loan portfolio, down from 27% in Q2:15.

Century Casinos, Inc. (CNTY:BUY) Continued execution on a growth strategy based on new gaming venues and expanded capacity appears to be delivering continued growth

Century Casinos, Inc. (CNTY:BUY) Continued execution on a growth strategy based on new gaming venues and expanded capacity appears to be delivering continued growth

22-AUG-16 – Century Casinos, Inc. (CNTY:BUY) Continued execution on a growth strategy based on new gaming venues and expanded capacity appears to be delivering continued growth in sales. We reiterate our Buy rating and $9.25 price target for Century Casinos.

HIGHLIGHTS

  • Sales in 2Q:16 declined 7.1% compared to the same quarter last year, due to extraordinary items, namely, termination of concession agreements. Excluding these items, sales grew 2%.
  • Profit margins improved 2.5 percentage points over the prior quarter on better coverage of fixed costs by higher sales levels. We believe this bodes well for overall earnings in the balance of the year and beyond.
  • Our earnings model has been updated to reflect 2Q:16 results. The model still reflects top-line growth of 5.7% in FY:16 and 12.5% in FY:17, but we now anticipate earnings in FY:16 down to $0.42, and then strong growth in FY:17 to $0.57.
  • The second quarter reflected good local currency revenue performances from the Company’s three operating segments. Canada was up 4%, Poland was up 10% and the U.S. was up 7%,
    reflecting underlying strength and stability in its geographically diverse portfolio of casino assets.
  • Century Casinos successfully converted 16% of sales in 2Q:16 to operating cash flow. We expect continue strong cash flow generation in FY:16.
  • Total debt outstanding was $37 million at the end of June 2016, a reduction of $7.7 million from 12 months earlier.
  • In June 2016, the Company entered into an agreement to acquire the Apex casino in St. Albert, Edmonton, Canada. Apex is a 34,500 square foot facility that includes 382 slot machines and 11 live table games. The acquisition is expected to close in the fourth quarter of 2016.
  • We continue to view CNTY as undervalued based on valuation of the stock through comparisons to a large group of casino managers. Our price target remains $9.25.

Avid Technology (AVID:DROP) We are TERMINATING coverage in order to re-focus resources.

 

22-AUG-16 – Avid Technology (AVID:DROP) We are TERMINATING coverage in order to re-focus resources. We note that AVID stock has reached our previously announced price target of $8.50 per share.

  • Notes • We are terminating coverage in order to focus resources elsewhere.
  • We note that AVID stock has reached our previously issued price target of $8.50 per share.

Singular Research Director’s Letter August 2016: Strong Q2 Earnings Rejuvenates Equity Markets

Singular Research Director’s Letter: August 2016

Strong Q2 Earnings Rejuvenates Equity Markets

After focusing on the potential negative impact of Brexit in June, the equity markets focus shifted to the Q2 earnings season and political conventions. Low expectations on Q2 earnings set the equity markets up for a positive outcome with the predominance of earnings beats. And Q3 is now looking to be the first quarter for aggregate annual earnings growth in over a year. The earnings view into 2017 is also rosy, buoyed by an improved outlook for energy and a peak in currency headwinds. Future concerns may arise over Fed tightening, but we anticipate this will occur after the US election. The political convention season, which is usually filled with patriotic optimism, albeit political, has taken on a different tone with such unique and different presidential candidates. But the equity markets are voting that both candidates are either an improvement or will not derail the current expansion.

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For the companies on the Singular Research coverage list, Emergent BioSolutions (EBS) and Haynes International (HAYN) were the strongest performers in July. Both companies rebounded from deeply oversold territory, and our analysts maintain Buy ratings on these two stocks. ACU had a strong Q2 report with revenues and earnings above expectations. ACET has been beating estimates for several quarters and is finally being rewarded with higher valuations. LAKE has had very strong fundamental performance in its turnaround, and the company announced a stock re-purchase recently.

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Most of the stocks in the worst performing group of the Singular coverage list during July had good fundamental performance and are creating good buying opportunities in our opinion. The two worst performing stocks, STMP and GTN, both reported Q2 after the end of July, and both had strong fundamental reports and their stock prices have responded. SA was weak on an equity raise, but we still view the company as the most attractive acquisition or partner candidate in the gold mining industry. ANIK reported an exceptionally strong Q2, but the stock had also performed well prior to the earnings release. CTRP was down as a Short recommendation, and we still view the company as over-loved by Wall Street analysts that display no discernment that the company’s valuation is several years ahead of itself, and is susceptible in any market weakness.

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At Singular Research, we continue to seek out investment ideas that have minimal to no Wall Street coverage. We are tracking several names that we anticipate to launch coverage. We thank our clients for your support of independent equity research.

We remind our readers that the 11th Annual Singular Research Conference, the Best of the Uncovered’s, is in September. We anticipate a number of interesting and relatively unknown companies to present. Please plan to attend this insight-packed one-day event in Los Angeles. There is more information on the Singular Research website, or contact your Singular Research representative for details. We look forward to seeing you in Los Angeles on September 22, 2016.

Sincerely,
Singular Research

JMP Group (JMP:BUY) With the equity capital markets still at very depressed levels through Q2:16, JMP’s diversified business model delivered operating earnings of $0.10

JMP Group (JMP:BUY) With the equity capital markets still at very depressed levels through Q2:16, JMP’s diversified business model delivered operating earnings of $0.10

12-AUG-16 JMP Group (JMP:BUY) With the equity capital markets still at very depressed levels through Q2:16, JMP’s diversified business model delivered operating earnings of $0.10, in line with our expectations, while GAAP earnings showed a loss of $0.02 for the quarter. We maintain our BUY rating, and update our price target to $7.50.

Q2:16 Summary

  • While IPO and follow on activity at JMP Securities remained extraordinarily depressed for the quarter, with JMP Securities delivering an operating loss, JMP was able to deliver meaningful operating earnings through principal transaction activity.
  • Our outlook for the balance of FY:16 anticipates an uptick in the equity markets later in the year. While the major equity indices have recovered, and we have seen the start of a turnaround in IPOs and follow on equity offerings, it is yet to be seen whether this part of the business will return to normal levels by the end of the year.
  • While the industry is in a cyclical downturn, JMP has been able to capitalize on this type of situation by gaining market share in similar market cycles in the past. We see this being carried out by hiring talent and developing these new areas organically, and also possibly through M&A activities if the price of a potential target is attractive. While these types of growth initiatives will likely not have an immediate impact on earnings,
    they should increase the value of the company over time.
  • We maintain our BUY rating and adjust our price target to $7.50.

Emergent BioSolutions (EBS:BUY) BioThrax sales disappoint in Q2:16, leading to revenue decline and net loss.

Emergent BioSolutions (EBS:BUY) BioThrax sales disappoint in Q2:16, leading to revenue decline and net loss.

12-AUG-16 – Emergent BioSolutions (EBS:BUY) BioThrax sales disappoint in Q2:16, leading to revenue decline and net loss. Current BioThrax contract expires in September and CDC confirms intent to award EBS follow-on five-year contract for 29.4 million doses. EBS completes spin-off of bioscience business, thus making company the only large pure play in biodefense. We reiterate our BUY rating and $40 price target.

Q2:16 Highlights

  • Biodefense revenues down 36% to $48.3 million due to lower BioThrax sales. CDC indicates it will procure less than the 4.2 million doses remaining (approximate value of $122 million) on the current BioThrax contract expiring this September.
  • New follow-on BioThrax contract commencing in September covers procurement of 29.4 million doses over a five year period.
  • HHS issues RFP for next-generation anthrax vaccine, calling for purchase of initial 2.0 million doses and potential additional procurement of 12 million up to 25 million doses.
  • Bioscience business spin-off positions EBS for significant EBITDA pick-up from elimination of G&A, R&D and marketing costs related to this business.
  • EBS has approximately $333 million cash and recently authorized a $50 million share repurchase.
  • We reduced our estimates due to poor near-term visibility for BioThrax sales, but maintain our BUY rating and $40 price target.

PRIMARY RISKS

  • EBS has relied on its anthrax vaccine BioThrax for more than 50% of sales and derives nearly all of its Biodefense revenues from U.S. government contracts.

Trecora Resources (TREC:BUY) TREC revenues plummeted as the drop in South Hampton Resources revenues more than offset those of Trecora Chemical gains

Trecora Resources (TREC:BUY) TREC revenues plummeted as the drop in South Hampton Resources revenues more than offset those of Trecora Chemical gains

12-AUG-16 – Trecora Resources (TREC:BUY) TREC revenues plummeted as the drop in South Hampton Resources revenues more than offset those of Trecora Chemical gains. However, income related to bargain purchase acquisition and AMAK helped earnings to reach a record high of $12.1 million. We are maintaining our last BUY rating and $18.00 price target, which will be updated following our review of the 10-Q.

Q2:16 HIGHLIGHTS

  • Total revenues fell 17.7% to $48.9 million in Q2:16 from $59.4 million in the same quarter of previous year, as the South Hampton Resources segment net revenues plunged 22.7% (more than offsetting 31.8% gain in revenues of TC segment) due to reduction in both petrochemical sales volume and average sales price of petrochemical products which declined 13.3% and 13.1% respectively.
  • Gross profit margin deteriorated to 22.5% for the quarter compared to 25.6% in Q2:15, following the slump in revenues. But it remained flat with respect to Q1:16.
  • Adjusted EBITDA (excluding equity in AMAK earnings/losses, share based compensation and bargain purchase gain) dropped to $8.8 million in Q2:16 from $12.3 million in the year earlier quarter.
  • TREC net income jumped 89.6% to $12.1 million or $0.48 per diluted share in Q2:16 from $6.4 million or $0.25 per diluted share, primarily attributable to the benefit realized from bargain purchase acquisition (BASF) and equity income from earnings of Al Masane Al Kobra Mining Company (AMAK).
  • Cash & equivalents decreased to $9.4 million at the quarter end compared to $14.2 million in Q1:16.
  • Book value per common share increased to $6.65 in Q2:16 from $6.14 in Q1:16.

Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA.

Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA.

12-AUG-16 – Newtek Business Services (NEWT:BUY) Loan funding up 40.7% in Q2:16. NEWT closes acquisition of bank-serv Partners for 4.3x forecasted EBITDA. Company increases FY:16 dividend guidance by one cent to $1.53. We maintain our BUY rating and $16 price target.

Q2:16 HIGHLIGHTS

  • Investment portfolio grew 14.6% in H2:16 to $305.8 million.
  • SBA 7 (A) loan funding increased 40.7% in Q2:16 to $75.8 million. NEWT reaffirmed its guidance for 32% funding growth and loans totaling $320 million in FY:16.
  • Loan referrals rose 62% in Q2:16 to $3.7 billion and the loan pipeline grew 78.4% to $228.3 million, signaling the continuing strength of this business.
  • Acquisition of bank-serv Partners expected to add $30 million to SBA loan funding in FY:17. Bank-serv has relationships with 350 lending institutions and extends NEWT’s footprint in the Midwest.
  • Average net premium on loan sales improved to 12.28% from 11.72% one year earlier, contributing to stronger gains on sales.
  • NEWT originated 100 loans totaling $75.8 million and solds 90 loans for $51.2 million in Q2:16, resulting in realized gain on sale of $7.5 million.
  • G&A increased 40% to $4.2 million as a result of $1.5 million loss on lease liability from old office space and $400k of audit and stock valuation charges that won’t be repeated in H2:16.