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Northland Capital Partners View on the City: Advanced Computer Software Group plc, Magnolia Petroleum, Galantas Gold, Auhua Clean Energy and others

OIL & GAS: MAGNOLIA PETROLEUM (LON:MAGP)

PARTICIPATION IN NEW WOODFORD WELL/IP FOR MISSISSIPPI LIME WELL 

  • Magnolia will participate in the Williams-1H horizontal well targeting the Woodford with Highmount with a 3.125% working interest (WI) and 2.5% net revenue interest (NRI). Anticipated net capex is $102k.
  • Separately, the Cordray-Ritter well targeting the Mississippi Lime (0.597% NRI) recorded IP of 762 boepd (4.5 boepd net to Magnolia).
  • No change to forecasts, BUY rating or 4.6p price target.

 

NORTHLAND UK VIEW: Magnolia’s interests have grown to 158 wells; 113 producing, 14 being drilled completed and 31 awaiting spud. We expect a number of high impact well announcements shortly. In the Bakken, the Marathon Oil-operated Gustafson and Helegson wells (both with 4.1% NRIs) have been completed and are awaiting IP rates. In the Mississippi Lime, the company recently announced its participation in the Cummings-operated Blaser well (9.4% NRI). 

 

TMT: ADVANCED COMPUTER SOFTWARE (LON:ASW)

PRELIMS: SCOPE FOR ORGANIC GROWTH

  • Revenue +23% to £120.9m with 9% organic and recurring revenue flat at 57% with a further 25% of repeating revenue. Future contracted revenue increased £79.1m to £189.1m following the acquisition of CSH, post year end. Three major acquisitions during the year.
  • Adj. EBITDA +12% to £27.0m; adj. EPS +12% to 5.6p and a maiden dividend of 0.4p/share. Cash conversion of 108% (+300bps) and cash generated from operations of £26.7m and net cash of £30.9m.
  • Health & Care +13%, Business Solutions +6% and 365 Managed Services +9%.
  • Q1 started well with the integration of CSH proceeding according to plan. Will still look at further acquisitions but there is considerable scope for organic growth.

 

NORTHLAND UK VIEW: Advanced Computer Software has made major strides in the past five years to become a well-diversified software and services provider with large levels of recurring revenues and good cash conversion. The premise of much of its products is cost reduction and hence although it is targeting sectors where spending remains tight (e.g. NHS), the RoI case is winning through. Progress has been reflected in the share price performance and the rating of 16.9x FY14 earnings is slightly elevated but not stretched.  

 

TMT: IDOX (LON:IDOX)

INTERIMS: MUCH TO DO IN H2

  • Revenue -2% to £26.6m with the slippage of a number of large Engineering Information Management (EIM) contracts partially offset by the acquisition of Artesys. Adj. EBITDA down 28.4% to £5.8m and adj. EPS of 1.02p (-35%). Cash generation +10% to £10.2m. Interim dividend of 0.3p (+9%).
  • Announced the disposal of the non-core recruitment business to ILX (ILX.L) for up to £0.6m.
  • Expects a better H2 and confirms expectations for the full year – consensus estimates of EPS of 3.3p.

 

NORTHLAND UK VIEW:  Disappointing H1 performance had previously been flagged with the slippage in a number of EIM contracts. This does mean there is a substantial pipeline to target but investors will want to see execution against this and prospects in other divisions. The recruitment business had been non-core for some time and removes a mild management distraction. There is much to do in H2.

 

CLEAN ENERGY: Auhua Clean Energy (LON:ACE)

FROM YESTERDAY: PROPOSED DIRECTOR SHARE SALE DROPPED

  • Termination of the proposed sale of a 25% stake in Auhua Clean Energy (ACE) by Auhua Holdings Limited to the ASX-listed Byte Power Group Limited (BPG.ASX) at 25p/share due to volatile market conditions and Australian currency fluctuations.
  • ACE’s chairman Tham Raphael owns 100% of Auhua Holdings Limited and this has a 64.1% holding in ACE, representing his holding. 
  • ACE remains committed to building its international customer base and BPG and ACE will continue to explore expansion for ACE’s split solar powered water heating systems into the Australian market.
  • No change to forecasts, BUY rating or 50p price target.

 

NORTHLAND UK VIEW: Byte’s failure to raise the funds for the purchase of the Auhua Holdings’ stake is obviously disappointing but has no impact on the operations of Auhua Clean Energy (ACE) and says more about recent market turmoil than the potential for ACE products outside China. For the purpose of our forecasts, there were no assumed exports sales in our forecast period and there is still considerable scope for domestic growth. The current rating is very undemanding and we maintain our BUY rating and 50p price target.

 

MINING: Galantas Gold CORPORATION (LON:GAL, CVE:GAL)

FROM YESTERDAY: ENVIRONMENTAL STUDY RESULTS: NO RISK OF ACID DRAINAGE

  • Galantas Gold Corporation has received the results of the two additional environmental studies conducted on the Omagh Gold Mine.
  • The first of these studies proves that the country rock at the mine is not acid forming and some of the rocks are potentially acid neutralising, consistent with earlier studies.
  • The second study, a Northern Ireland environment Agency (NIEA) water study has confirmed that the mine is fully compliant with all its water outlet requirements.
  • Shares were up 9% yesterday on the back of this positive announcement.

 

NORTHLAND UK VIEW: The completion of these additional environmental reports is an important step forward for Galantas Gold Corp. The study on the acidity of the country rock means that allegations made by two Omagh residents regarding the rocks likely impact on the environment from acid mine drainage and the use of the A5 road, are incorrect. These results will now be submitted with other existing environmental evidence to Minister Kennedy of the Department for Regional Development, responsible for the Road Service agency and who will determine whether to approve the A5 road scheme, allowing the Company to transport waste rock off site. This is key in allowing the Company to recommence open pit operations at the mine, and is also likely to be important for the underground mine planning consent.


1. Northland Capital Partners Limited (“Northland”) acts as Nominated Advisor and/or Broker to the company.

2. Northland) and/or its affiliates companies do beneficially own 1% or more of any class of the issuer’s equity securities, as of the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month. 

3. The authoring analyst or any associate of the authoring analyst does maintain a long or short position in any of the issuer’s securities directly or through derivatives, including options or futures positions.

4. Northland, its affiliated companies, partners, officers, directors or any authoring analyst of Northland has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services.

5. Northland or any of its affiliated companies has performed investment banking services for the issuer during the 12 months preceding the date of issuance of the report.  

6. A partner, director, officer, employee or agent of Northland or any of its affiliated companies is an officer, director, employee or advisor of the issuer.  Disclosures are applicable for all companies

7. The authoring analyst, or any associate of the authoring analyst, has viewed the material operations of the issuer. 

8. The authoring analyst, or any associate of the authoring analyst, received reimbursement for travel expenses.

9. Northland makes a market in the securities of this company.

 

 

DISCLAIMER

This document is provided solely to enable clients to make their own investment decisions. It may therefore not be suitable for all recipients and does not constitute a personal recommendation to invest. It does not constitute an offer or solicitation to buy or sell securities or instruments of any kind. If you have any doubts about the suitability of this service, you should seek advice from your investment adviser. This document is produced in accordance with UK laws and regulations. It is not intended for any person whose nationality or residential circumstances may render its receipt unlawful.

The past is not necessarily a guide to future performance. The value of shares and the income arising from them can fall as well as rise and investors may get back less than they originally invested. The information contained in this document has been obtained from sources which Northland Capital Partners Limited believes to be re¬li¬able. The Com¬pany does not warrant that such information is accurate or complete. All estimates and prospective figures quoted in this report are forecasts and not guaranteed. Opinions included in this report reflect the Company’s judgement at the date of publication and are subject to change without notice. If the investment(s) mentioned in this report are denominated in a currency different from the currency of the country in which the recipient is a resident, the recipient should be aware that fluctuations in exchange rates may have an adverse effect on the value of the investment(s). The listing requirements for securities listed on AIM or PLUS markets are less demanding, also trading in them may be less liquid than main markets.

Northland Capital Partners Limited and/or its officers, as¬sociated entities or clients may have a position, or other material interest, in any securities men¬tioned in this report. Northland Capital Partners Limited does not provide recommendations on securities of firms with which it has a corporate relationship. More information about our management of Conflicts of Interest, Investment Research Methodology & Definition of Recommendations can be found at www.northlandcp.co.uk 

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