logo-loader

Investment Research Weekly Roundup including: Low & Bonar, Amur Minerals, Creston, Regency Mines and others

Last updated: 16:46 14 Jun 2013 BST, First published: 15:46 14 Jun 2013 BST

no_picture_pai

Amur Minerals (LON:AMC)

Flash note - Kubuk drilling could redefine Kun-Manie 13 June 2013

Amur has started its 2013 drill programme at the Kun-Manie Ni-Cu project, focusing on a 2.5km-long deposit called Kubuk. Geophysical and trenching (past results = c 50m horizontal length grading 0.63% Ni and 0.16% Cu) studies suggest all the hallmarks of a strongly mineralised region of the exploration licence; and one that could materially change the size and shape of Kun-Manie’s mine plan. Coupled with Amur inching towards a successful resolution to its mining licence, and investors could well see Kun-Manie’s true value becoming unlocked

 

Medcom Tech

Update - Riding the waves 13 June 2013

FY12 sales at Medcom Tech rose by 15.8%, in line with our forecast, after an acceleration of growth in H212. The reinforced balance sheet means the company is well-positioned for growth; our forecast sales CAGR of 15% for the next two years drives significant expansion in EPS. This could be boosted further by Medcom Tech’s plan to expand in Europe and into South-East Asia and Latin America and the formation of Medcom Flow to produce and market anaesthesia products.

 

Avesco Group (LON:AVS)

Update - Disney payout confirmed 13 June 2013

Confirmation that Avesco has received its share of the Disney litigation monies and will return 69% (worth 110p per share) to shareholders is excellent news. Despite higher interim profits this Update confirms a reduction in full-year estimates, as flagged in our recent Flash note. 2012 was always going to be a tough comparative, given Avesco’s success in the Olympics, and 2014 brings another strong raft of sporting events reinforcing the ‘odd year, even year’ effect. Ex the value of Disney payout the FY14e P/E is only 3.9x, which looks very low. 

 

JPMorgan Global Convertibles Income Fund (LON:JGCI)

Review - A different option comes to market 13 June 2013

JPMorgan Global Convertibles Income Fund Limited (JGCI) is a new investment company targeting a 4.5% yield on the 100p issue price as well as long-term capital growth through investment in a globally diversified portfolio of convertible securities. In the context of the global equity market the yield premium would be roughly two percentage points while convertibles offer potential downside protection in the event of a market downturn and some degree of participation in a stronger equity market. 

 

Investment Trusts

Investment Trusts Quarterly: Asia 12 June 2013

Asia is a vast region, with countries in differing stages of political and economic development. The economies of China, Japan and India dominate the region and asset allocation to, and stock selection within, these markets is a core part of managing Asian portfolios. Each of the big three is at a different stage of development, offering investors distinct opportunity sets. 

 

Rubicon (NZE:RBC)

Outlook - Lord of the rings 12 June 2013

Rubicon's investments in Tenon (an NZ-listed, US-focused appearance wood product distributor) and ArborGen (an international developer and supplier of advanced forestry seedlings) offer strong growth profiles and leading positions in their respective markets. Both will benefit from the US housing upturn in the near term. We see upside for Rubicon to NZ$0.84 per share (two-thirds or NZ$0.57 in existing markets, one-third from new ones). 

 

Eckoh (LON:ECK)

Outlook - Accelerating payment solution growth 12 June 2013

Eckoh’s FY13 revenue growth masks the progress the company made in growing its customer base by 28% over the year. H2 revenues accelerated as most new customers went live, but FY14 revenues should benefit more substantially and we expect further customer wins from Eckoh’s indirect sales channels. The Veritape acquisition is immediately earnings enhancing, widens Eckoh’s product range, expands Eckoh’s customer base from 50 to 121 and increases the potential for international growth. 

 

CML Microsystems (LON:CML)

Update - Sustainable growth 12 June 2013

Investment in expanding the portfolio of the core wireless and storage divisions continues to bear fruit, helping CML Microsystems to deliver its third successive year of strong earnings growth. We see scope for these trends to continue through our forecast period and beyond. Investment in an RF chip design team broadens wireless capability, while the closure of RDT improves focus.

 

Hydrodec Group (LON:HYR)

Update - On track for FY13 growth 12 June 2013

Hydrodec’s AGM statement confirmed the group is on track to achieve the growth shown in our estimates and continues to target positive EBITDA by the end of the current financial year. It also gave further details on the planned expansion in capacity in the US. We leave our estimates unchanged and continue to see fair value at 12.5p/share. 

 

Record (LON:REC)

QuickView - Return to client growth 12 June 2013

In FY13, Record showed clear evidence of increasing client inflows and once again began to broaden its client base. AUME in sterling increased 19% and client numbers improved by three to 44. Previous year outflows and a weaker revenue mix were still negatively affecting FY13 profitability, but with costs well contained and renewed fund inflows, profits are expected to return to growth in FY14e. The CY14e P/E of 13.5x is in line with peers, while FY13 cash of £29m is c 40% of market cap. 

 

Verastem (NASDAQ:VSTM)

Update - Adaptive VS-6063 Phase II design 12 June 2013

Verastem’s investor update at ASCO 2013 disclosed the detailed design of its Phase II trial of its lead product, VS-6063, in mesothelioma, which should shortly start enrolling patients. The 350-patient adaptive study will focus on VS-6063’s efficacy as first-line maintenance therapy. In our opinion, the approach will allow Verastem to demonstrate activity quickly in this highly intractable indication and could potentially support a registration with a relatively low clinical efficacy bar. We see upside in the stock as Verastem approaches the first significant clinical data from the study, possibly in late-2014.

 

Creston (LON:CRE)

Outlook - Digitally driven 12 June 2013

Creston’s FY13 results show a resilient performance, with international and digital taking a growing proportion of revenue. Good new client wins and an increasing level of cross-agency work should now drive revenues and this should be reflected more strongly in earnings in future years. Creston has a strong balance sheet with net cash to fund expansion. It no longer has a major overhang of deferred payments. At 3.5x calendar 2013 EV/EBITDA, the shares are at an overly large discount to other agencies. 

 

Acal (LON:ACL)

Outlook - Back on a growth track 11 June 2013

Acal reported FY13 results ahead of our expectations, with strong cost control and lower tax the key contributors to the 11.7% EPS beat. The company gained share in a tough economic environment and the recent Myrra acquisition expands its presence in Europe as well as adding North American and Asian customers and manufacturing capacity in China. Acal is driving organic growth by cross-selling, customer acquisition through its newly launched website and increasing awareness of its specialist electronics solutions, and continues to look for acquisitions in Europe and beyond to add specialist product and increase geographic presence.

 

Cameco (TSE:CCO)

QuickView - Power to the people 11 June 2013

While near-term uncertainty remains in the uranium market, we see increased demand in the long term. There are several near-term catalysts that could mark a turning point for the sector. The megatons to megawatts (HEU) agreement is set to expire at the end of 2013, potentially removing 24Mlbs per year from the market. In addition, Japan may, under new safety regulations, submit plans to restart some of its reactors in 2013. More importantly, China and India have maintained their ambitious plans for building new reactors. Over the long term, these catalysts will widen the fundamental supply/demand gap and ultimately push prices higher. Given Cameco’s strong production profile, we believe the company will be able to leverage its earnings on the back of higher uranium prices. 

 

Investment Trusts

German industrials spotlight: Sand in the gears 11 June 2013

The German auto industry is under threat from cheaper Asian imports. Despite the recent correction, the yen has weakened by 14% vs the euro year to date (to 31 May). This is principally due to the Bank of Japan’s plans to double the monetary base and give Japanese auto manufacturers a significant price advantage over European peers. Furthermore, Japan’s reflationary policies are likely to provoke reciprocal action from key trading partners such as China and South Korea. If a series of competitive devaluations develops, then the euro will automatically appreciate vs both the yen and the won. Under this scenario, Asian cars will offer increasing value to eurozone consumers and German manufacturers may begin losing market share in their home continent. These developments coincide with deepening concern about China’s economic outlook. China is an increasing ly important export market for German auto manufacturers and lower demand growth from this region would have a noticeable impact on revenues and profits. 

 

Low & Bonar (LON:LWB)

Outlook - Wider ambitions 11 June 2013

Forming the Bonar division, by combining the group’s two largest operating companies, is the clearest indication yet that management is intent on gaining exposure to faster-growing markets outside Europe. This can enhance existing earnings growth rates and support rating expansion from the current 9.3x prospective P/E ratio. 

 

Oil & Gas

Macro Outlook: A price rout is possible 11 June 2013

The near- to medium-term outlook for oil prices is looking increasingly bearish. Largely driven by North America, non-OPEC supplies are growing robustly, OPEC production is buoyant, demand growth is subdued and inventories are very comfortable. There is clearly the possibility of a price rout over the next year or two. However, we suspect that, in the near term at least, geopolitical uncertainties, fears concerning the fragility of production infrastructure and bullish financial market sentiment will help support prices. An extended period of soft prices could be on the cards through mid-decade. The analogy could be the second half of the 1980s.

 

Regency Mines (LON:RGM)

Update - DNi plus blue sky 11 June 2013

Regency’s flagship asset is its 50% interest in the Mambare nickel laterite project in Papua New Guinea. In addition, it also owns a 7.5% interest in its joint venture partner at Mambare, Direct Nickel (DNi). DNi is coming to the end of pilot plant test-work on a new and potentially revolutionary technology to treat nickel laterites. At the same time, the Geological Survey of Western Australia (GSWA) has now released the results of its geophysical survey over Regency’s Fraser West tenements (inter alia), showing 1) a 6.5km extension of the trend containing Sirius Resources’ Yardilla prospect into RGM’s tenements and 2) a parallel structure to the north and west where past testing by Sirius encountered nickel in soil concentrations of up to 600ppm (see page 6). 

 

Aegerion Pharmaceuticals (NASDAQ:AEGR)

QuickView - CHMP backs lomitapide 10 June 2013

The CHMP’s recommendation to approve lomitapide (Lojuxta) for HoFH, a rare genetic disease resulting in dangerously high levels of cholesterol, paves the way for EU launch in H213. With regulatory hurdles cleared in the two largest markets (US approval as Juxtapid in Dec 2012), Aegerion’s focus switches to commercial execution. With the stock up 180% ytd and an EV of $1.97bn, investor expectations are high ($1bn peak sales); poorer than anticipated lomitapide sales could result in significant pullback.

 

Xaar (LON:XAR)

Update - Another significant upgrade 10 June 2013

The acceleration in trading which started in Q412 has gathered momentum in Q2. Ceramics remains the primary driver, although demand from the labelling, laminates and now graphic arts markets is also strong. This results in a 19% upgrade to FY13 sales, which with operational gearing translates to a 41% upgrade in EPS, despite higher investment. 


NYSE Alternext Half Year-Review

NYSE Alternext Half Year-Review, June 2013 10 June 2013

In response to market feedback, we have extended the scope of analysis provided in each profile. Edison's analysts have been in contact with the 150 NYSE Alternext listed companies profiled in this review, aiming to provide investors with a snapshot of each company’s activities, strategy, recent financial performance as well as comment on valuation. Edison’s analysts have relied on consensus earnings estimates but have reflected feedback received by companies on historic and forecast numbers. Deinove, Diaxonhit Global Bioenergies, Hybrigenics, Esker and Neovacs are clients of Edison Investment Research, and their forecasts are those of the analyst. 

 

Nanobiotix (EPA:NANO)

Update - Giant leap forward from initial small steps 10 June 2013

First clinical data have shown good efficacy, with two patients at the lowest dose achieving 95% tumour necrosis, which compares favourably to historic radiotherapy data. In addition, NBTXR3 demonstrated good tumour diffusion and no leakage to surrounding healthy tissue. No serious treatment related adverse events were observed. These data increase our confidence of success in NBTXR3, raising our valuation to €10.6/share. 

 

International Biotechnology Trust

Review - Unquoted performance continues to improve 07 June 2013

The biotechnology sector has performed strongly during the last five years and particularly during the last 18 months, when the sector has experienced a re-rating. Recent price gains have moved ahead of earnings growth. However, the manager remains comfortable with valuations arguing that, despite the recent uplift, they remain below longer-term averages and do not look stretched in a historical context. More importantly, the longer-term story of increasing demand from growing and ageing populations, particularly in the western world, and from growth in emerging markets, remain intact. Recent results show that IBT’s quoted portfolio underperformed the NASDAQ Biotechnology Index (NASBIOT) during the 12 months to 28 February 2013, while the valuation of the unquoted portfolio has outperformed. This partly reflects the inclusion of contingent earnout payments (milesto ne payments) in IBT’s NAV. This has added £3.6m (6.5p per share) to NAV as at 28 February 2013 and brings IBT in line with its venture peers.


Tenon (LON:TNO)

Update - Recovery on track, valuation gap to narrow 07 June 2013

Tenon’s share price has regained early February levels after a recent trading update, though still lags retailers in the US homebuilder space. There is already a gap to our existing NZ$1.51-1.77 valuation range (ex NZ$0.28 tax credit) and some peer group measures suggest further upside, above NZ$2.00 (again, ex tax credit). We expect the share price to reflect Tenon’s trading performance and to begin to narrow this valuation gap. 

 

Oil & Gas

APPEA 2013: The next wave? 07 June 2013

The Australian petroleum production and exploration association (APPEA) 2013 conference provided much food for thought. Unlike past years when the sense of collective buoyancy was palpable, this year there was a definite theme of reflection. The sector is now deeply aware that much of its cost structure is no longer globally competitive. With the current fleet of mega-liquefied natural gas (LNG) projects now each well advanced towards completion, there was much talk about needing to prepare for ‘the next wave’ of investment. In our view, the next wave is likely to look very different to the last. We think the smaller and more nimble players are best placed to benefit from market dynamics over the next five or more years. 

 

API Group (LON:API)

QuickView - Potential not recognised 07 June 2013

The API share price has come back by 26% from its 2013 peak, particularly after the February trading update when the group also announced the ending of the formal sale process instigated by two principal shareholders. The current rating recognises neither the achievements of management over the past five years nor the growing medium-term potential.

 

Transgene (EPA:TNG)

Update - Promising read across from related products 07 June 2013

Ahead of a key time for Transgene, data presented at ASCO on products related to TG4010 and Pexa-Vec provided reassurance about the possible results from two important trials. Subset analysis from a Phase III trial with L-BLP25, a MUC1 vaccine like TG4010, in non-small cell lung cancer (NSCLC) showed a significant survival benefit in patients with concurrent chemoradiotherapy. There was also positive data from the first Phase III trial with an oncolytic virus (Pexa-Vec has the same mechanism of action). Transgene’s prospects largely rest upon the results of the first stage of the Phase II/III with TG4010 and the Phase IIb with Pexa-Vec, both due in H213. 


Alchemia (ASX:ACL)

QuickView - Merck CHIMEs in 07 June 2013

Merck Serono’s collaboration on a Phase II trial of HA-Irinotecan in combination with Erbitux (cetuximab) bodes well for validation of Alchemia’s HyACT platform technology and the potential displacement of irinotecan. A Phase III trial of HA-Irinotecan vs generic irinotecan as part of the FOLFIRI regime in second-/third-line metastatic colorectal cancer is currently underway, with read-out results due in H114. Favourable data may pave the way for US approval in 2015. 

 

Biotie Therapies Corp (OTCMKTS:BIOZF)

Update - An option in epilepsy 07 June 2013

Biotie’s portfolio review has landed its first target, with a $1m option deal to acquire Neurelis for its intranasal diazepam to treat acute epileptic seizures. We view the $1m cash upfront, $8.75m exercise price (in Biotie shares) and cost of development as relatively modest for a new product opportunity with $100m peak sales for the reference product. Meanwhile, Biotie’s tozadenant is now the leading A2a antagonist in development for Parkinson’s disease, following the failure of Merck & Co’s preladenant in Phase III studies. Both developments are potentially positive for Biotie in the long run, although we maintain our €231m (€0.51 per share) valuation. More 

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

1 hour, 30 minutes ago