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Investment Research Weekly Roundup


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Investment Research Weekly Roundup including blur Group, Goldplat, Caledonia Mining, WANdisco

January 18 2013, 11:00am


BrainJuicer - LON:BJU

Update - Better than feared 17 January 2013

The year-end trading update indicates results ahead of those to which we moved after November’s warning, with revenue marginally ahead of the previous year and better-than-expected cost containment. The revenue shortfall has been predominantly in the  traditional product offering, which provides some encouragement that the  novel ‘Juicy’ products are continuing to build traction. We have left our FY13 forecasts as they stand for now, until we have a better feel for trading patterns into the new financial year. The shares are likely to mark time until the outlook clarifies. 


Sucampo Pharmaceuticals - NASDAQ:SCMP

Update - Absorbing Amitiza’s generic threat 17 January 2013

News that Anchen Pharmaceuticals has submitted an ANDA with Paragraph IV certification against Amitiza was not a surprise to us. Sucampo says it has been preparing a patent defence strategy for its key growth driver and we expect the company to file for patent infringement. Amitiza’s listed patents expire in 2020-27, but we now prudently assume that generics enter the US market in 2018, three years ahead of our prior estimate of market exclusivity until 2020. We reduce our rNPV for Amitiza by 25%, but offset this with the inclusion of a $25m contribution from new pipeline candidates, which are increasingly important to diversify Sucampo’s portfolio. Our overall valuation is lowered to $315m ($7.52/share) from $345m ($8.24/share).


Caledonia Mining - LON:CMCL

Update - Post-indigenisation growth 17 January 2013

Caledonia aims to be the first fully indigenised company to initiate a full growth strategy, for its flagship Blanket gold mine. To this end it has announced a four-year plan to increase production at Blanket to 76kozpa by 2016, 90% above the current budgeted annual production rate of 40kozpa. The capital cost of this increase is modest (totalling US$ 37m from 2013 to 2017); with the required extra metallurgical capacity already present. The additional capex will be used predominantly for development and exploration. This capex will be sourced solely from internal cash flows with no further shareholder dilution needed. Based on CMCL successfully ramping up underground mining at Blanket, we value the company’s shares at C$0.23 on a fully indigenised (49% ownership) and diluted basis, using a10% discount rate and our long-term gold price of US$1,676/oz. 


Empresaria - LON:EMR

Update - Early rebuilding 17 January 2013

The year-end trading update confirms that Empresaria is set to deliver FY12 figures in line with market expectations – in itself a respectable result in difficult markets. It is as yet early days in the corporate recovery story and there is little, if any, help from underlying markets. The shares continue to trade at a heavy discount to the sector, but the group should now start to leave its historic issues behind and a  consistent performance should enable the rating to start on recovery.  


Optimal Payments - LON:OPAY

Update - Strong H2 across the board 17 January 2013

Optimal Payments (OP) expects to report FY12 revenues and EBITDA above current market expectations, as the straight through processing (STP) and stored value (SV) businesses both saw strong growth in H2. Based on the positive momentum exiting FY12, we have raised our FY12 and FY13 revenue, EBITDA and EPS forecasts, assuming stronger growth for both businesses. While the stock has performed well over the last year, it continues to trade at a discount to peers.  


Verastem - NASDAQ:VSTM

Outlook - Targeting cancer stem cells 17 January 2013

Verastem will shortly begin a series of studies that should provide definitive proof-of-concept for its cancer stem cell (CSC) hypothesis. The company plans to initiate Phase II trials of its lead compound, VS-6063, a FAK inhibitor that preclinical tests suggest is CSC-directed in mesothelioma and ovarian cancer. It also expects to advance VS-4718 and VS-5584, two CSC-directed compounds, into human clinical studies and decide on suitable indications thereafter. Verastem is well funded (>$90m cash) to reach the significant value inflection points associated with the results of these studies.  


Nordgold- FRA:RTSD

Outlook - Ready for growth 17 January 2013

Nordgold (NORD), the third-largest Russian gold producer, has gained a strong footprint in Africa, which offers a compelling growth opportunity. With gold sales of c 700koz in 2012e, the company is ready to launch its flagship Bissa mine in Burkina Faso in Q113, adding c 200koz of gold at capacity, which is set to be closely followed by a similar scale Gross project in Russia. We believe that Nordgold’s strong growth profile coupled with the ongoing operational turnaround at the existing mines should drive its earnings recovery and support the stock. We value NORD at US$6.8/share, which, taking into account a 4.3% dividend yield, implies a 63% return.  


Cabral Resources - ASX:CBS


Update - Focus moves to DSO hematite ore 17 January 2013

On 22 November, Cabral Resources released the remaining drill hole assay results from its maiden drilling programme at Morro do Gergelim. Although the drill results were consistent with the company’s original geological theories, in terms of the presence of banded iron formation horizons, they indicated lower iron ore volumes than expected. As a result, Cabral now believes it is unlikely to meet the original target tonnage range of 200-450Mt. Further, it is unlikely that Morro do Gergelim alone hosts enough iron ore volume to become an economic iron ore project based on criteria set out in the pre-scoping study commissioned by ProMet Engineers in 2011. Notwithstanding further assessment of magnetite ore potential at Morro do Gergelim and now Ibitira, management announced a re-prioritising of exploration focus towards DSO hematite ore within its existing portfol io or in combination with the possible acquisition of third-party tenements. The company ended the September quarter with A$8.4m in cash and zero debt. 


Norton Gold Fields - ASX:NGF

QuickView - Chinese buyer – new era 16 January 2013

Norton Gold Fields (NGF) the Western Australian-based gold miner is set to embark on a new era following the successful cash takeover offer in August 2012 by Zijin Mining Group Co. Ltd (Zijin), China’s largest gold producer. With a market capitalisation of c A$12.5bn, Zijin provides NGF with a significant level of financial and technical support to continue developing the current gold resources and expand its greenfield operations on a +10 year operational plan. 


Highlands Pacific - ASX:HIG

QuickView - Ramu ramp up 16 January 2013

Highlands Pacific (HIG) the Papua New Guinea (PNG)-based miner officially opened the Ramu nickel/cobalt project and exported its maiden shipment of mixed nickel cobalt hydroxide product in November 2012. Full commissioning should be by mid-2013 producing c 31,500 tonnes of nickel pa and c 3,300 tonnes of cobalt pa from a laterite open-pit mine. With a bankable feasibility study (BFS) recently completed on the giant Frieda River copper/gold project (of which HIG 18.2% and Xstrata 81.8%) and significant drill intercepts reported at its copper/gold porphyry exploration project at Star Mountain, the near term appears favourable for HIG


Ebiquity - LON:EBQ

Outlook - Acquisition led growth in H113 16 January 2013

Ebiquity’s interim results showed significant growth, with revenue up 27%, led primarily by acquisitions, and adjusted operating profit up 29%. Affected largely by higher interest paid and minorities from recent acquisitions, normalised EPS rose 11%, to 2.60p (H112: 2.35p). Ebiquity’s business is second-half weighted and we are maintaining our FY13 EPS estimate of 8.7p. We are initiating an EPS estimate of 9.6p for FY14, based on 5% revenue growth and an increase in group operating margins from the integration of the recent acquisitions. Deferred consideration in respect of recent acquisitions is likely to increase debt to equity to 42% by FY13 year end, though ex further deals we estimate this to decline to 30% by FY14 year end. 


Cleveland BioLabs - NASDAQ:CBLI

QuickView - First line of (bio)defence 15 January 2013

Cleveland BioLabs’ biodefence franchise is fundamental to its near-term investment case and 2013 should see significant progress in the development of Entolimod (CBLB502) as the first available treatment for acute radiation syndrome (ARS). A potential development funding contract from BARDA in H113 is a major stock catalyst and financing event. Pivotal studies in animals and humans are planned for 2013 and a BLA submission is targeted for Q414. Entolimod, a TLR5 agonist, also holds potential as an anti-cancer agent, with a Phase I study to complete in Q413.



Update - Keeping its momentum 15 January 2013

WANdisco’s trading update confirmed that momentum continued into Q4, both in terms of commercial progress with the Subversion application lifecycle management business and in hitting development milestones in big data, where the first product launches are now anticipated in Q1.  


Update - CRC study misses, HCC trial starts 15 January 2013

The failure of tivantinib to show a statistically significant increase in PFS in a Phase II trial in second-line metastatic colorectal cancer (mCRC) makes further development in this disease setting a challenging prospect for ArQule and its partners. Meanwhile, the Phase III trial in second-line hepatocellular carcinoma (HCC) is now underway, with the first clinical sites now open for patient enrolment. Despite its recent clinical study misfortunes, ArQule remains on solid financial ground, with an estimated $130m of cash and cash equivalents at the end of 2012, sufficient to support operations into 2015, when final data of the Phase III HCC trial should become available


Vivalis - EPA:VLS

QuickView - Valneva say never again 15 January 2013

French stem cell company Vivalis, is to merge with the Austrian vaccine company Intercell, to create a new company called Valneva. The merger, due to take effect in May, will be followed by a €40m rights issue. Vivalis shareholders will own 55% of Valneva, with Intercell’s shares being converted at a 39% premium to the pre-deal share prices. An extra 8.6m shares will be issued to former Intercell shareholders should its Pseudomonas vaccine be approved. We view the merger positively: the two companies have complementary vaccine technologies and significant cost synergies should be achievable.  


Goldplat- LON:GDP

Flash note - Robust gold recovery operations 14 January 2013

Goldplat, the African-based gold producer, has announced a trading statement for its H113 results for the six months to 31 December 2012. The operating profits for the first half are expected to be around £2m, largely in line with H112. This is on the back of continuing robust operations at GRL and GRG, the gold recovery units based in South Africa and Ghana respectively. The Kilimapesa gold mine in Kenya has suffered operational losses in the first half, but is expected to break even by year end with production of c 1,000oz. This setback will see full production at Kilimapesa pushed back to FY15.  


Aberdeen New Thai Investment Trust - LON:ANW

Review - A very good year 14 January 2013

Following on from an eventful 2011, which saw both a landslide election victory and the worst flooding in 50 years, Thailand’s economy has recovered strongly during 2012. Reflecting this, the Thai equity market has also provided a strong performance during the last 12 months, with the Thai SET returning 39.5% (total return, sterling adjusted). Aberdeen New Thai (ANW) has beaten this benchmark, returning 55.7% and 60.3% in terms of NAV and price total return respectively. The outperformance of the Thai market versus regional peers (MSCI Asia ex-Japan Index) continues a very long trend and ANW remains at the top of its AIC Asia-Pacific peer group in terms of share price total return performance over one, three and five years. Thai equity market valuations are not as cheap as they have been historically, but the economy continues to recover well from the flooding and company earnings, and dividends, are growing. 

ThromboGenics - EBR:THR

QuickView - High price and hopes 14 January 2013

Jetrea is due to launch imminently in the US with a price 30% above prior guidance. The recent share price performance likely reflects expectations for premium pricing and with this now achieved, focus shifts to launch dynamics. Product launches can be difficult to forecast accurately, and the share price suggests high expectations. However, a positive EU recommendation in coming weeks is likely to provide near-term support.  


Innovation Group - LON:TIG

Outlook - Aggregation of incremental gains 14 January 2013

Management initiatives to restructure the business and set it on a profitable growth trajectory came through strongly over FY11 and FY12. We expect this trend to continue; prospects for BPO continue to look robust, while investment in updating and expanding the software suite should now start translating into an acceleration in growth of higher-margin software sales.  

blur Group - LON:BLUR

Update - Scaling up 14 January 2013

Q4 KPIs point to continued strong growth and with brief volumes and values  than doubling over the year, 2012 consensus revenues appear firmly underpinned. Management is targeting ‘aggressive growth’ in 2013 and with increased headcount and the launch of two new exchanges, it is scaling the business accordingly.  


Oil & Gas

Seismic reflections: Cheap US chemical feedstock 11 January 2013

Cheap natural gas liquids are providing a major boost to the competitiveness of the US chemical industry. As a result, interest in capacity expansion in US bulk chemicals is surging while the industry in Europe is increasingly concerned. Enhanced competitiveness is, of course, a function of the rapidly increasing availability of domestic feedstock following the development of liquids-rich shale gas resources, especially in the Eagle Ford and Marcellus formations of Texas and Appalachia respectively. The barely tapped Utica shale of western Appalachia offers further massive potential.