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Beaufort Securities Breakfast Alert: Armadale Capital, Cyan Holdings, Evgen Pharma

Published: 08:16 04 May 2016 BST

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The markets
Europe

The FTSE-100 finished yesterday's session 0.90% lower at 6,185.59 and is expected to open 5 points lower today, whilst the FTSE AIM All-Share index closed 0.25% lower at 725.90. On the continent, equities ended sharply lower amid sell off in banking shares after poor corporate earnings of financial firms. Additionally, mining stocks fell as weak global manufacturing data reflected less demand for the metals. Germany’s DAX and France’s CAC 40 shed 1.9% and 1.6%, respectively.
Wall Street
Wall Street ended in the red as weak economic data released in China renewed fears of slowdown in global economy. Furthermore, weak oil and commodity prices exerted pressure on basic resource stocks. The S&P 500 declined 0.9%, with the energy sector leading the laggards.
Asia
Markets are trading lower, tracking the global equities. Weak Chinese manufacturing data and a cut in Europe’s growth projection fuelled concerns over the health of the global economy. The Hang Seng was trading 0.8% down at 7:00 am. The Nikkei 225 was closed on account of Greenery Day public holiday.
Oil
Yesterday, WTI and Brent oil prices decreased 2.5% and 1.9%, respectively. The spread between the two varieties stood at US$1.3 per barrel.

Headlines
UK manufacturing sector contracts in April
As per Markit, UK’s manufacturing PMI fell to 49.2 in April from 50.7 in March, marking the first contraction in three years. The decline was mainly due to weak domestic demand, decline in new business from overseas markets and uncertainty ahead of the European Union (EU) referendum.
EU diminishes Eurozone growth and inflation forecasts
The European Union downgraded the Eurozone’s growth forecast for 2016 to 1.6% from 1.7% projected earlier. The agency lowered the projection for 2017 to 1.8% from 1.9%. EU also lowered the inflation forecast for this year to 0.2% from 0.5%.

Company news
Armadale Capital (LON:ACP, 2.50p) - Speculative Buy
Armadale Capital, the investment company focused on natural resource projects in Africa, announced yesterday an update on its ongoing exploration programme at its Mpokoto gold project located in the Katanga Province in the DRC. The company has initiated a 2,000m auger drill programme comprising 150 auger holes. Despite operating in the wet season, approximately 53 holes have been completed and qualitative sampling results demonstrate that gold mineralisation extends both north-west and south-east of the defined resource. The current drill programme will be followed by further auger drilling on a tighter grid to delineate target mineralisation which will then be the focus of a 2,500m diamond drill programme. The object of the overall drill programme is to expand the current resource of 678,000oz grading 1.45g/t and increase the planned four year life of mine for Phase 1 production. Armadale continues its discussions with African Mining Contracting Services (A-MCS) regarding project financing of at least US$20m.

Our view: We are encouraged with the initial auger drilling and the potential to increase additional mineralisation to the north-west and south-east of the main resource area. We also note the potential for high-grade extensions around the previously drilled MPD 064 which intersected 55m grading 3.3g/t Au including 15.7m grading 10.5g/t Au. With project funding potentially secured through ongoing discussions with A-MCS group and a Mining Licence already in place we look forward to continued development of the low capital project especially in light of the recent surge in gold price. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Armadale Capital PLC.

Cyan Holdings (LON:CYAN, 0.28p) - Speculative Buy
Yesterday, Cyan Holdings (Cyan) signed a contract with JST Group, as per which the latter would distribute Cyan's smart meter technology in Thailand. JST provides technical products and services in Thailand. Cyan has installed the CyLec smart metering technology in JST's laboratory in Bangkok. The financial details of the deal remain undisclosed.

Our view:Cyan continues to expand its market, as it enters into a deal with JST Group in Thailand. The company has entered into many contracts to improve its geographical footprint. Recently, Cyan received a purchase order from telecommunications contractor Micromodje of around £10m for a 360,000 unit smart electricity metering implementation in the Islamic Republic of Iran. The order is for the supply of Cyan's CyLec Advanced Metering Infrastructure hardware solution as wells as its proprietary Head-End Software. Cyan entered the Chinese smart metering market in December 2015 through a partnership agreement with Newcapec Electronics Company Limited. This is to seek opportunities following the release of the 12th Five-Year Development Plan of China’s Ministry of Industry and Information Technology in 2012, which aims to scale the IoT market to US$163bn by 2020. We are encouraged by the company’s recent developments and maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Cyan Holdings.

Evgen Pharma (LON:EVG, 20.25p) - Speculative Buy
Yesterday, Evgen Pharma (Evgen) informed that the first patient has been dosed in its Phase II clinical trial of SFX-01 in aneurysmal subarachnoid haemorrhage (SAH), a form of stroke. The SAS (SFX-01 after subarachnoid haemorrhage) trial is a randomised, double-blind, placebo-controlled study comparing oral SFX-01 with placebo. The trial would recruit 90 patients (45 in each treatment arm), with all patients receiving nimodipine, which is the current standard of care. Patients would be dosed within 48 hours of experiencing SAH and approval has been obtained to provide emergency dosing before consent. The SAS trial is expected to be complete by in Q2 2018.

Our view: The commencement of the Phase II trial of SFX-01 is an important development for Evgen. SFX-01 is a synthetic version of sulforaphane, which is an anti-cancer agent, and stabilised in a novel patented complex using a proprietary manufacturing process. There is a clear unmet medical need for SAH, for which there has been no significant clinical advances for more than 20 years. SFX-01 can qualify as an orphan drug for SAH in most major regulatory jurisdictions. This would provide the drug extended market exclusivity and render it easier and faster to gain marketing approval. Evgen’s other programmes for metastatic breast cancer and multiple sclerosis are on schedule. In light of the above argument, we maintain a Speculative Buy rating on the stock.

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