Caledonia Mining
Flash note - Indigenisation update 02 September 2011
Caledonia has released frequent and clear press releases on its progress with the Zimbabwean government regarding the issue of indigenisation. Caledonia met with the Ministry for Indigenisation on 22 August and together with the ministry released a joint statement detailing that both parties had ‘agreed on a process that will result in a revised indigenisation implementation plan’. Caledonia Mining has not had its operating licence revoked for its Blanket Mine as has been incorrectly reported elsewhere. On the contrary, the Blanket mine has been increasing production steadily, and without interruption, with gold production on target for c 36,000 ounces sold for FY11.
Consort Medical
Update - Diversifying delivery 02 September 2011
Bespak’s Innovation centre has secured a second deal, a contract with a major pharma to develop a nasal drug delivery device for an undisclosed application. This deal further diversifies Consort’s portfolio and leverages its core design, and high volume, high precision manufacturing competencies in a new medical device area. Consort’s core business is cash generative and provides a solid foundation for future growth; this growth is anticipated to be organic and also come from diversification into new markets or higher value products/services – eg entry into point-of care (PoC) diagnostics through Atlas Genetics, and this new nasal delivery contract.
Ablon Group
Review - Debt & portfolio progress 02 September 2011
Although recent stock market volatility has triggered weaker share performance, the period post the successful rights issue in April did see a justified re-evaluation of the underlying value in the group assets. Ablon has received support from investors and lenders, with a €9.9m rights issue in May and a series of agreed extensions to short-term debt facilities in the last six months. The latter will remain a feature of the story over the next 18 months but the announcement, in July, that it had secured €24.1m of new senior debt from 24.5% shareholder Volksbank was positive. It both finances a new office development in Warsaw and provides some confirmation that one of the group’s major lenders remains keen to build its relationship with the group.
Fiberweb
Update - Industrial to lead growth 01 September 2011
A mixed H1 trading performance resulted in a 10% reduction in FY11 estimates. This has been more than reflected in a weak share price in the last six months. Operationally, Fiberweb appears to be in good shape and the drivers and expectation of a pickup in H2 profitability are pretty clear. In particular, Industrial should gather momentum and lead growth in future periods.
IFG Group
Update - Bid update and interims 01 September 2011
IFG has announced it has received a cash offer from Bregal Capital LLP which, if concluded, at €1.8 per share would value the company at €231.2m. The offer is conditional on further due diligence (an exclusivity agreement has been signed expiring 10 October 2011) and conclusion of banking facilities. It also announced resilient interim results with adjusted operating profit up 21%.
Ark Therapeutics Group
Update - Focus on 2011 delivery 01 September 2011
Ark Therapeutics’ interims highlighted the progress it has made since its 2010 strategic review. The sale of woundcare in March was the first of three steps in its recovery plan. Recent news in H211 (US grant of Ark’s angiotensin-inhibitor use patents and the award of European grants) will boost end-June cash of £5.4m, securing Ark’s funding into 2013. However, Ark’s investment case continues to rest on the execution of its remaining business development objectives: securing one (or more) long-term contracts for its Finnish GMP manufacturing facility and partnering its NRP-1 antagonist programme, EG014.
SeaEnergy
Outlook - Value and growth 01 September 2011
SeaEnergy (SEA) is trading below the value of its cash and existing oil and gas assets and its share price fails to reflect any of the potential growth in its marine services business or upside in its oil assets. We believe this approach is overly cautious.
Panmure Gordon
Update - Estimates update 01 September 2011
Given recent market conditions, we have further trimmed our estimates for Panmure Gordon (PG) despite a relatively encouraging trading statement on 28 July on its US operations. The latter was driven by relatively robust interest in US technology stocks, and some competitor withdrawals, both of which bode well for its investment banking business. However, commissions, remain under pressure in both the US and UK, and UK investment banking is tough. We cut our statutory pre-tax profits to a nominal break-even in 2011 and £1m in 2012 (previously £2.9m and £4.8m respectively). Our adjusted pre-tax profits drop to £0.8m and £2m respectively.
British Polythene Industries
Update - Profits ahead in Europe 01 September 2011
BPI successfully navigated variations in regional demand and input prices to deliver a good uplift in H1 profitability on comparable volumes to last year. Outlook comments are cautious, but the H1 performance is sufficient to warrant a FY PBT upgrade in our view. Ongoing investment across the business is taking place to further strengthen the company’s competitive offering.
Madagascar Oil
Outlook - One for the oil price bulls 01 September 2011
Madagascar Oil’s licence dispute has hit its share price hard. However, with its flagship Tsimiroro project now back on track there is substantial potential here for those with the risk appetite. Key to underpinning a four-times current share price valuation is MOIL delivering its steam flooding pilot. Economics geared to the oil price means this is not one for the faint-hearted, but with real upside from a proven petroleum resource there is certainly something here to recommend for the brave.
Cupid
Review - Steaming ahead 31 August 2011
Cupid’s interim results show further rapid growth in international revenues, to be boosted by the recent Brazilian acquisition. This success should not mask that the UK business is still growing strongly (+68%), despite the relative maturity of the market and the group’s relatively high share. Cupid continues to invest heavily in marketing, as well as in corporate deals. We are edging up our FY11 numbers, leaving FY12 forecasts broadly unchanged. Cash balances of £8.4m at end June should fund the investment in growth that justifies the premium rating.
Primary Health Properties
Review - Secure port in a storm 30 August 2011
The interims showed portfolio performance and revenue growth on track for our full year and dividend growth forecasts. H2 looks well set, with firepower ready for acquisitions and strategies under consideration to unlock value. The medium-term objective remains a material increase in portfolio scale and, although we assume that the debate over healthcare reform results in a development hiatus into 2012, PHP still expects to fold-in another £40-60m of assets from market purchases in the next year, refinance current debt and roll out earnings enhancing asset management initiatives. These should benefit operating margins and EPS in the short term. The shares have strong attractions in an uncertain economic backdrop. The downside, as ever, remains well-covered by long-term revenue visibility and security, a fully-let portfolio and a resilient asset class relative to other commercial p roperty.
Greenwich Loan Income Fund
Flash note - NAV update 30 August 2011
Greenwich Loan Income Fund (GLIF) has reported its NAV for end June 2011. On our preferred franchise value methodology, NAV/share is 51.7p (from 52.8p in December), while on the statutory accounting basis NAV/share has dropped to 70.6p. Applying MTM to assets and valuing liabilities at par, its NAV/share is 47.6p (from 45.4p). On our preferred approach the share trades at a 24% discount, which is materially higher than average for investment companies as a whole, those with US assets, or those specialising in debt.
Topotarget
Update - Thoughts on belinostat 30 August 2011
The main potential for belinostat is in solid tumours, although it could gain approval initially in the haematological cancer, peripheral T-cell lymphoma (PTCL). Solid tumours account for c 90% or all cancers and belinostat should face less competition in these indications. To exploit this opportunity more fully, Topotarget needs to expand its clinical trial programme. This is largely dependent on it being able to out-license the European rights to a major pharmaceutical company.
Ariana Resources
Outlook - Advancing Red Rabbit 30 August 2011
Ariana Resources continues apace to commission its 50:50 Red Rabbit JV in western Turkey, with initial production planned for H212. The current project timeline sees completion of a definitive feasibility study (due by end 2011) as the next key catalyst to be delivered. This DFS will be used to secure the modest US$18.5m capex requirement for Red Rabbit that remains after Proccea contributes a total US$8m spend to earn in to its eventual 50% share of the project. We value Ariana’s 50% share of Red Rabbit at 4.92p rising to 7.40p at the current spot price for gold of c US$1,850/oz. Additional value will be geared to exploration success at the company’s wholly owned exploration licences and joint-ventures across Turkey.