Today's edition features:
• Amryt Pharma (LON:AMYT)
• Jubilee Platinum (LON:JLP)
• Angle (LON:AGL)
• Morses Club (LON:MCL)
"All the principal U.S. equities indices climbed yesterday, buoyed by gains in financials and energy stocks following yet more positive macro data. Jobless claims, for example, have remained below 300,000 for 108 consecutive weeks, the longest such streak since 1970. This prompted Fed-funds Futures to tick up again and now suggest a 57% chance of a further rate hike at the June FOMC meeting, up from 54% on Wednesday. With the yield on 10-year Treasuries also pushing to 2.393% from 2.385%, shares in investment banking majors like Goldman Sachs and Morgan Stanley were in demand amid broad optimism that this data will translate into improving earnings for US corporates. WTI crude also rose 1.2% to US$50.08/bbl during the US session, following strong demand signal from the EIA, continuing concerns regarding armed factions reducing Libyan output and OPEC hinting an extension of its production agreement to the year-end is being agreed amongst Members and other non-US producers; this made for making its third consecutive daily rise and pushed the S&P500 sector up 0.7%. Traders chose to largely ignore this yesterday’s sell-off across the Chinese stock markets, which saw their biggest intraday drop this year, amid liquidity worries and sharp declines in a number of recently-listed offerings. The fact that the PBOC refrained from open-market operations, the way in which the central bank adds funds to the financial system, for a fifth successive session on Thursday suggests to some economists that the region’s economic momentum is about to slow a notch further having already felt the impact of calming measures to burst certain asset bubbles, such as the housing market. Recovering some of its losses during this morning’s trade, however, the Shanghai Composite closed with a modestly gain along with most of the regions other bourses as the ASX found demand for energy stocks given oil prices remained above the US$50/bbl level although the Nikkei trailed the pack given the US$ continued to find resistance around the Y112 level. While London equities yesterday trod water, the Euro Stoxx 600 continued to find good demand amid persistent rumours that Mario Draghi is now confident enough in the Eurozone economy to start trimming-back monthly asset purchases. Post the triggering of Article 50, forex traders rebuilding their Sterling positions sold Euros against it as preliminary data from Germany, Spain and Belgium suggested Eurozone inflation had dropped back in March to well below the ECB‘s 2% target, diminishing the chances of the European Central Bank tightening monetary policy in the process. This took the Pound to its strongest relative in nearly four weeks. UK macro releases due today include March nationwide House Prices, Q4 GDP, Current Account and Total Business Investment, while the EU provides its March Preliminary CPI. The US contributes Personal Income, Consumption and Spending stats together with its March Chicago Purchasing Manager’s Index. UK corporates scheduled to release earnings or trading updates include second-liners like Touchstone Innovations (IVO.L) and CVS Group (CVSG.L). Despite positive signals from the overnight markets, London equities are seen reflecting on Sterling’s surprising strength combined with a rather downbeat mood amongst consumers, as suggested by the unchanged Gfk confidence figure released on Thursday; the FTSE-100 is seen opening cautiously, losing perhaps 30 points in early trading."
- Barry Gibb, Research Analyst
The FTSE-100 finished testerday's session 0.06% lower at 7,369.52, whilst the FTSE AIM All-Share index rose 0.30% to stand at 926.98. In continental Europe, the CAC-40 finished up 0.41% at 5,089.64 whilst the DAX was 0.44% higher at 12,256.43.
In New York last night, the Dow Jones rose 0.33% to 20,728.49, the S&P 500 gained 0.29% to 2368.06 and the Nasdaq added 0.28% to 5914.34.
In Asian markets this morning, the Nikkei 225 had advanced 0.14% to 19,089.09, and the Hang Seng eased 0.48% to 24,183.92.
In early trade today, WTI crude was down 0.38% to $50.16/bbl and Brent was down 0.47% to $52.71/bbl.
Hospitality firms warn on EU recruitment
The hospitality sector has warned it faces a shortfall of 60,000 workers a year if immigration from the European Union is too tightly controlled. The British Hospitality Association (BHA) said that thousands of businesses are facing having to drastically reduce their dependence on EU workers. Staff from the EU make up nearly a quarter of all jobs in the sector. Immigration is set to be one of the most controversial issues to be settled during the Brexit negotiations. The hospitality industry represents 3 million workers and about a tenth of the UK's economic wealth. In the first major business intervention since the triggering of Article 50, a report by KPMG for the BHA says that it will take 10 years to reduce the need for EU workers by training British staff, targeting older workers and encouraging younger people to take jobs in the sector. But with the UK economy approaching full employment, the report says that there are no easy pools of labour to exploit and that EU nationals will still make up a large part of the workforce.
Source: BBC News
Amryt Pharma (LON:AMYT, 20.88p) – Speculative Buy
The pharmaceutical company focused on best-in-class treatments for rare and orphan diseases, presented its final results for the year ended 31 December 2016 yesterday. It reported significant strategic and operational progress since its RTO in April 2016. Having completed a transformational acquisition in December 2016, with in-licensing of Lojuxta (lomitapide), which treats a rare, life-threatening disorder that causes abnormally high levels of ‘bad’ cholesterol, it is presently enjoying a run rate revenues of some €10.5m p.a., with significant growth potential that is immediately cash generative. Its lead development asset, AP101 (Episalvan) (a potential treatment for rare, genetic skin condition, Epidermolysis Bullosa), also made significant progress. Revenues totalled €1.35m, in line with management expectations, which included one month's revenue from Lojuxta which was in-licenced in December, and 8.5 months of contribution from Imlan following the acquisition of Birken. Operating losses, before RTO and acquisition related expenses, were €5.85m, including €0.23m of non-cash share based payments (2015: €0.6m). The Group had a cash balances of €8.3m (2015: €0.2m) at period end, following its raise of £10.0m (gross) (€12.6m) upon Admission, while also having secured non-dilutive funding from European Investment Bank of up to €20m.
Our view: Excellent progress, more than delivering on all promises, significant value will be delivered in just over a year from now. Very importantly, the Group right now has funding sufficient to carry AP101’s development through to expected release of key Top-line data, probably at end Q2 or early Q3’2018, while also supporting more modest on-going spend for AP102. On top of this, shareholders get immediate revenues and cash generation from the excellent Lojuxta licencing deal struck back in December. This seems to be the point investors still fail to appreciate. Two acquisitions and a commercial licensing deal have created a diversified pipeline of therapies ranging from earlier to later stage development along with a commercial offering which together target multiple Rare (or Orphan) Diseases. Such products do not just benefit from extended market exclusivity and reduced R&D costs right across the globe, but also enjoy a major pricing advantage which averages five-times that of traditional prescriptive products. While its business plan is presently unique in Europe, there is already large basket of NASDAQ-listed comparables which command a significant valuation premium to Amryt, despite most being pre-revenue and somewhat earlier in their development. Such anomalies, of course, can and do correct. And for Amryt this cannot be long away. Yesterday’s news opened investor eyes to the fact that its lead product is likely to be ready for US and European commercial launch during summer 2019. Episalvan then stands to become the treatment of choice for the chronic and debilitating condition for which there is currently no cure or successful remedial treatment; there are approximately 500,000 people living with EB worldwide and the global market for a treatment in EB is estimated to be in excess of EUR 1.3 billion. While this stands to create significant future value, Amryt shareholders should also be aware that a discounted-NPV for its low-risk licenced treatment of HoFH, Lojuxta, already significantly exceeds the Group’s market capitalisation. Significant upside potential. Beaufort reiterates its Speculative buy recommendation on Amryt Pharma.
Beaufort Securities provides Investor Relations services to Amryt Pharma plc
Jubilee Platinum (LON:JLP, 5.38p) – Speculative Buy
Jubilee has published 1H17 results (to December) which reflect the beginnings of Jubilee’s transformation to a processing company. This follows Wednesday's announcement that Hernic is now producing platinum group metals (PGMs). The most significant number for the period was capex of £11.2m (85% on Hernic’s construction). The reported period saw continued revenues and earnings from Dilokong but nothing yet from the much larger Hernic which is now on stream and will be the main feature of CY17. Dilokong has been and continues to produce chrome concentrate, while Hernic started chrome production last month and platinum production this week. Once Hernic is producing at steady state, we expect it to make upwards of 75% of Jubilee’s earnings. We anticipate steady state to be achieved in April and in terms of financials for the rest of CY17 to be dominated by Hernic's earnings.
Our view:Although CY16 was a successful and transforming year, in terms of earnings and cash generation CY17 will be a step change versus CY16. Capex will reduce very significantly now that Hernic is built and operating, while newsflow should be a positive combination of much larger chrome and platinum production plus progress on Jubilee's recent acquisitions. Both these acquisitions are exciting - PlatCro because it should be highly profitable (good grade and Jubilee keeps 100% of the PGMs), Resilience (copper in Oz) because it marks the first move into a new and potentially large market for Jubilee. All this progress is on the processing business, while post period, Jubilee also received its mining right for Tjate, the largest undeveloped deposit of platinum and one of the highest grade. These are busy and exciting times for Jubilee and we maintain our Speculative Buy recommendation.
Beaufort Securities acts as Corporate Broker to Jubilee Platinum PLC
MySQUAR Limited (LON:MYSQ, 1.18p) – Speculative Buy
The Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focussed internet-based mobile applications, yesterday released its unaudited interim results for the six months ended 31 December 2016. Revenue for the period were US$340,716 (H1’2015/16: US$350,000) from gaming, advertising and mobile application development services. Total expenses (including cost of sales and operating expenses) in the same period were US$1,926,926 leading to net loss of US$1.582m (US$1.306m). During the period, it launched various mobile games including MyFish, Hawk Hero and Chakra Ninja, as well as the location-based consumer-to-consumer mobile marketplace application Fastsell and VoIP application CallHome (closed beta version). It also entered into two Convertible Loan Notes (‘CLN’) with Sandabel Capital LP with a total of US$3 million in principal value. It continued to progress integration of MYPAY payment application with MyChat and signed a Master Service Agreement with Fastacash Pte Ltd to provide payment application development services. Very importantly, post period, MySQUAR successfully opened a value-added-service provider account and integrated with Telenor Myanmar for direct carrier billing services in Myanmar, under which users of MySQUAR's applications and games can make payment via the carrier billing service of Telenor.
Our view: MySQUAR is building out its monetisation opportunities. Having secured user accounts across all applications/games of approximately 7.5 million by 12 January 2017, which continues to grow apace, quite naturally the Group’s focus has now switched from user numbers to monetisation. Revenues for the period were, however, fractionally below the same time last year due to a couple of months unexpected delay in securing the Telenor agreement (which accounts for a Myanmar’s mobile market share some 37%) and can be expected to significantly boost second-half activity, given the comparative inconvenience of using existing mobile top-up cards or the limited coverage provided by Red Dot payments. Expecting similar arrangements to also be made with MPT and Ooredoo in coming months, MySQUAR appears set to deliver an impressive 2017/18 result, with the opportunity to demonstrate success by achieving first monthly breakeven before the June 2017 year end. In this respect, Beaufort expects the Group to deliver a significant jump in second half revenues to some US$1.25m (up from US$795k in 2H’2015/16) while continuing to build strongly the year after. Despite its balance sheet being just about empty of cash, right now it has some headroom available under the US$1 million credit facility provided by Rising Dragon Singapore Pte. Ltd, while only US$2.1 million in principal value has so far been drawn down from Sandabel. This should be sufficient to carry MySQUAR to the point of being cash flow neutral for 2H’2017/18. Operationally MySQUAR’s has over-delivered, while running its sophisticated platform on a shoestring. Its market position and brand is now sufficiently protected to project generation of handsome returns in coming years, a fact that is unlikely to have been missed by its numerous and very cash-rich global peer group, who remain determined to continue ensnaring quality brand names in virgin territories that have successfully participated in an online user ‘landgrab’ and demonstrate the ability to generate income from them. In this respect, MySQUAR’s unique opportunity remains quite dramatically undervalued; Beaufort retains a price target of 21.0p/share and repeats its Speculative Buy recommendation, although it does recognise that the terms of the remaining issued CLNs, the balance of which can be expected to convert over the coming six or so months do, at this time, continue to create a potential stock overhang which some fear will continue to act as a drag on the share price.
Beaufort Securities acts as Corporate Broker to MySQUAR Limited plc
Angle (LON:AGL, 45.50p) – Speculative Buy
Angle (AGL.L, xx.xxp) – Speculative Buy ANGLE, the specialist medtech company focused on cell separation technology called the Parsortix system for detection and harvesting of cancer cells, yesterday announced that the Barts Cancer Institute, Queen Mary University of London (‘BCI’), have presented new results for ANGLE's Parsortix system in prostate cancer at the World CDx Europe 2017 conference. BCI have completed a pilot study in over 80 patients to evaluate the capability of Parsortix to identify whether prostate cancer patients have progressed to metastasis (the spread of cancer to another part of the body). The results indicated that the use of Parsortix, in combination with existing assessments, is potentially “more effective than existing parameters” currently used to predict metastasis in identifying those patients who have progressed to metastasis. ANGLE’s founder and CEO, Andrew Newland, commented “This is another significant milestone in progressing the development of Parsortix for the treatment of prostate cancer. The new results further support the expansion of the potential clinical application to include both early and late stage prostate cancer”.
Our view: This news demonstrates further progress for ANGLE’s Parsortix system. Prostate cancer is the most common cancer in men, while metastasis is responsible for more than 90% of cancer-related deaths. The ability to determine whether the cancer is contained within the prostate gland or whether it is continuing to progress to metastasis is a key element for offering a personalised treatment while reducing harmful exposure to radioactive imaging for early cases. The current standard for detecting metastasis is through imaging which cannot be predictive as it is imaging sites that already have a developed condition. The results from BCI suggests potential for the Parsortix system to be used to identify patients with metastasis through a simple blood test, offering potential for improved prediction of likely development and/or early detection. ANGLE’s goal is to seek sector approval and endorsement of its unique solution, which not only enables cancer detection but also harvests the Circulating Tumor Cells for personalised cancer care. Last months, for example, ANGLE announced positive interim evaluation for its two independent 200 patient ovarian cancer clinical studies in Europe and the US, where Parsortix system demonstrated an accurately for the first 50 patients sufficient to differentiate between women with a malignant pelvic mass and those with benign tumours. As at 26 January 2017, the Group confirmed patient enrolment (for ovarian) is over 90% complete in Europe and 70% complete in the US with headline data from the full studies expected in Q2 FY2017. Its study for metastatic breast cancer is also underway, with completion of analytical and clinical studies expected to complete in time to permit FDA submission later this year. Beaufort’s current financial model sees ANGLE achieving limited revenues and remaining in quite deep losses until FY2018, before ramping sharply upward during the following year to become cash flow positive for the first time by period end. Based on a cash position of around £6.5m (31 October 2016: £9.7m) by the end of the current year, Beaufort considers the Group will be in the position to demonstrate to shareholders a strong sales growth trajectory and modest positive earnings before considering tapping shareholders or, indeed, industrial partners, once again for additional funding. During this time, Beaufort also believes that ANGLE will have been recognised as the most suitable of the various non-invasive cancer detection tests that are presently undergoing trials for hospitals and medical institutes. This will accrue significant value to Parsortix. Beaufort retains its Speculative Buy recommendation on the stock and considers its relative share price weakness of the past 3 or 4 months presents an opportunity.
Morses Club (LON:MCL, 118.00p) – Buy
Morses Club (‘Morses’), the UK’s second largest home collected credit (‘HCC’) lender, yesterday announced that it has launched first online instalment loans product, Dot Dot Loans, following the acquisition of Shelby Finance Ltd (‘Shelby Finance’) in January 2017. Shelby is fully authorised by the FCA to provide online instalment loans and operates as a subsidiary of Morses. The Group said Dot Dot Loans is not expected to have a material impact on profit in the current financial year. Morses’ CEO, Paul Smith, commented “This is an important step in the evolution of our business as we use technology to offer customers a broader range of products, supplementing our core home collected credit offering”. Morses will announce its preliminary results for the FY2017 on 27 April 2017.
Our view: The launch of its first online instalment loans product is in accordance with the Group’s strategy to establish it as a multi-channel non-standard credit provider. Dot Dot Loans is targeting a potential market of some 9 million additional UK customers. Such digital products should be considered complementary to Morses’ HCC offering. Management stated back in January 2017, that a growing number of its website visitors are looking at alternatives to its traditional offering. Online instalment loan products will enable customers to access credit in increasingly flexible ways, but with the additional benefit of Morses Club's customer service ethos. After carefully analysing the moves of its major peers into digital products, Morses has been assessing the best strategy learning from their successes and mistakes. One such point is higher impairment charges typically associated with online lending. Of course, Morses’ management’s experience in handling and limiting the impact of such events, means that early warning and remedial action can ensure any outcome remains within its planning. Given the extended duration sector leader Satsuma (owned by Provident Financial) took the achieve breakeven, it is likely to be a couple of years at least before the current Dot Dot trials are seen to make any significant impact on the Group’s bottom line. In its trading update for the full year FY2017 that was announced early this month, the Group confirmed continued growth and performance with progress achieved against all key metrics. The shares have performed satisfactorily over the past 6 months, modestly outperforming the FTSE All-Share. Given the quality of management and visibility offered by this long-established operation, a FY2017 P/E multiple of just 11.0x along with almost a 5.1% yield (compared with Provident Financial’s 2017E of 15.5x and 4.8%), coming with a P/BV of 2.6x, suggests it still remains something of a bargain, particularly considering this virtually ungeared lender brings with it a sector leading 29.1% ROE. Beaufort retains a Buy rating on Morses Club with price target of 155p/share.