articles Proactiveinvestors articles RSS feed en Thu, 23 Nov 2017 09:37:11 +0000 Genera CMS (Proactiveinvestors) (Proactiveinvestors) Robert Walters - Leadership Through Experience Robert Walters PLC (LON:RWA) shares have gained 79% in the last 12m, 219% in the last 5 years, strongly outperforming peers. We argue this is driven by growth in NFI (Net Fee Income), up 18% like-for-like in H1 2017, or 11.5% overall NFI CAGR in the last 15 years, with only one down year.

In this report we examine some of the drivers which underpin this sustained organic growth trend.

Wed, 22 Nov 2017 13:55:00 +0000
Empresaria Group Plc - Perspective on the trading Update Empresaria released a trading update on November 21st, lowering the expected growth rate for FY2017 PBT. This was due to the weak market conditions in the Mideast which were flagged in the H1 results, and also to changes in legislation in Germany. The German issue, also previously know, relates to rules restricting the length of tenure for contract workers (Empresaria’s main focus) and the introduction of equal pay after 9 months. These rules take full effect in 2018, but employers appear to be adjusting their behaviour ahead of implementation

Wed, 22 Nov 2017 13:15:00 +0000
Genedrive PLC: Overlooked Story Entering the Launch of their HepC Diagnostic Kit
  • Genedrive (LON:GDR) on track to become a commercial stage, point-of-need diagnostics company
  • Launch of Genedrive® Hepatitis C (HCV) test at IFCC World Lab October 2017, with commercial sales expected in the coming quarters (African markets)
  • Distribution agreement signed for HCV test for Asia Pacific
  • Collaboration with the US Defense Department (bio-hazard program) to generate further income (c. $1.9mln) in the current fiscal year
  • Re-launch of Genedrive® MTB (tuberculosis) test is being reassessed
  • Management actively engaged in the disposal of the legacy service business (preclinical research and pharmacogenomics)
  • Cash position of £4.2mln as of 30 September 2017, enough to finance the ongoing business well into fiscal year 2019
  • Our SOTP valuation yields an equity value of c. £24mln, over 3x current market capitalization
  • ]]>
    Wed, 15 Nov 2017 20:56:00 +0000
    Tag Oil - Primed for Future Reserves & Production Growth TAG Oil Ltd (TSE:TAO) is a Canada-based oil and gas production and exploration company publicly listed in Toronto and with extensive operations and production infrastructure in the Taranaki Basin of New Zealand, as well as in Australia’s Surat Basin. We believe that development and exploration opportunities, in proven discovery fairways within the current portfolio, position TAG Oil Ltd (TSE:TAO) for future reserves and production growth. As a low cost/high netback oil and gas producer, TAG Oil Ltd (TSE:TAO) is debt free and has the reinvestment capacity to fully pursue these growth opportunities. We estimate a value of C$0.46 per share for TAG, based on EV multiples derived from a peer group of similar companies, whilst our DCF-based valuation indicates a core value of C$0.66 and risked value of C$0.82. We believe that our core value estimate of C$0.66, based on 2P reserves only, provides a strong support to current share price and represents a material upside.

    Thu, 09 Nov 2017 08:28:00 +0000
    Amur Minerals - Capital Network:Further Resource Upgrades Likely Amur Minerals (LON:AMC) is a London AIM listed minerals exploration and Development Company, currently focussed on developing the Kun Manie project, located in the far east of Russia. The project is primarily a nickel project, but with significant by products of copper, cobalt, platinum and palladium.



    Mon, 06 Nov 2017 13:54:00 +0000
    Midpoint Holdings - Capital Network: Announcement of Financial Results, 12 Months Ending June 2017 Midpoint Holdings Limited (TSX.V: MPT) announced on the 31st October 2017 its annual financial results for the 12-months (12m) and the quarterly results for the 4th quarter (4Q) ending June 2017. The Company has been able to demonstrate considerable financial progress during the year reporting significant growth in revenues and a greatly reduced net loss which benefitted also from the improved expense performance. Midpoint Holdings Limited’s (TSX.V: MPT) previous financial statements have always carried material uncertainty and substantial doubt about the Company’s ability to continue as a going concern. These are the first set of annual results announced where the current management team led by David Wong, CEO and Corbin Comishin, CFO has been in place for the entire period. We are very pleased to note from the independent auditor’s report that the improvement relieves company of past going concern. Midpoint Holdings Limited’s (TSX.V: MPT) filings noted that Wong and Comishin were appointed in November 2015 and as of September 30th, 2015 the business had cash of $129,827 with liabilities of $447,813. Investors have also taken notice of management’s efforts which have been reflected in the share price performance.

    Fri, 03 Nov 2017 08:33:00 +0000
    Optibiotix Health - Rapidly Transitioning to Commercial Phase
  • Preventing and treating diseases through the modulation of the microbiome is one of the most exciting frontiers of healthcare, and a fast growing market
  • OptiBiotix Health PLC (LON:OPTI), an innovative life sciences company focused on human microbiome, is rapidly transitioning from product development to the commercial stage with early revenues and commercial deals with major corporates including Tata and DSM
  • Underpinned by a strong scientific rationale and clinical studies, OptiBiotix Health PLC (LON:OPTI) products help managing significant health problems as weight loss, high cholesterol and hypertension
  • OptiBiotix Health PLC (LON:OPTI) commercial push is currently directed towards the rapidly growing consumer health market
  • A rich deal pipeline is likely to translate in material revenue growth (£1mln+) within 12 months
  • ]]>
    Thu, 02 Nov 2017 10:14:00 +0000
    Chariot Oil and Gas - Capital Network: Large-cap Portfolio with Small-cap Leveraged Upside Chariot Oil & Gas (LON:CHAR) is a UK-based oil and gas exploration company listed on the AIM market of the London Stock Exchange. The company has assembled a very prospective portfolio of assets located on both sides of the Atlantic in West Africa and South America, and has carried out the necessary adjustments to weather the commodity downturn, reducing staff from 22 to 12 and cutting G&A to less than US$5M. With a US$22M cash position significantly exceeding commitments, and no debt, Chariot Oil&Gas (LON:CHAR) is now in a position to drill three company-making wells in Morocco and Namibia in the near-term. Chariot Oil & Gas (LON:CHAR) intends to remain an exploration company, returning value to shareholders from the proceeds of the divestment of future discoveries at the point of maximum monetisation potential. We believe this is an opportune time for potential investors to revisit the equity story.

    Thu, 26 Oct 2017 15:05:00 +0100
    e-Therapeutics - Capital Network: Undervalued Stock with a Unique Approach to Drug Discovery
  • e-Therapeutics (LON:ETX) focuses on the discovery of  new drugs in a more efficient and effective way and aims to be a valued partner to address the productivity challenge that the pharma industry faces.
  • e-Therapeutics (LON:ETX) has developed a novel and unique in-silico approach to drug discovery: starting from the analysis of complex interactions between proteins in biological systems (networks), they apply advanced computational techniques to identify new drug candidates.
  • This approach was labeled Network-driven Drug Discovery (NDD) and has been validated across several therapeutic areas (cancer, central nervous system, auto-immunity, infectious diseases) and molecular pathways.
  • e-Therapeutics (LON:ETX) discovery platform has generated three drug candidates for multiple cancer indications which are ready to be out-licensed to pharma partners for their further development.
  • We estimate e-Therapeutics intrinsic value to be roughly 3x higher than current market capitalisation. The latter doesn't reflect the commercial potential of e-Therapeutics' most advanced drug candidates and of the platform itself.
  • e-Therapeutics ability to finalise a co-development or licensing agreement in the near term will represent a key inflection point for its stock re-rating.
  • ]]>
    Wed, 25 Oct 2017 11:14:00 +0100
    Midpoint Holdings - Capital Network: Midpoint approaches all time high Midpoint Holdings Ltd (TSXV: MPT), shares have closed at $0.22 CAD with approximately 2 million shares traded last Friday. Following our previous capitalisation update published on the 17th October 2017, the company’s share price has surged 70%.

    Mon, 23 Oct 2017 14:47:00 +0100
    Rose Petroleum - Capital Network: An Encouraging Update Rose Petroleum plc (LON:ROSE) provided an update on the likely completion date for the 3D seismic survey they are in the process of acquiring in the Paradox Basin, following the successful completion of a £3M funding. The 3D seismic data will be key to identify drill targets in the Cane Creek interval and other potential clastic reservoirs of the Paradox Formation, but also to steer the horizontal leg of the wells within the natural fracture system for optimal drilling and completion. Data acquisition started on 4/10/17 and should take up to five weeks; management expects to be in a position to select drilling targets by the end of the first quarter 2018. We have updated our project timeline accordingly, and believe the Company is well on track and has also indicated it may well advance this timeline. Management also identified a source of potential in the Leadville Limestone formation, additional to the resources estimated by Ryder Scott in 2014, in which the 3D seismic could identify potential structures.

    Mon, 23 Oct 2017 10:31:00 +0100
    Midpoint Holdings - Capital Network: Capitalisation Update Report New Investment into Midpoint, Significant Increase in Subscription Price.
    Midpoint Holdings Ltd (CVE: MPT), has announced a significant new share offering to raise up to S1.2m CAD through a non-brokered private placement of 16,000,000 Common Shares at $ 0.075 CAD. The investment will be led by Halifax (Canada) based Numus Capital Corp. and PowerOne Capital Group of Toronto. Upon announcement, Midpoint Holdings Ltd (CVE: MPT), shares jumped 62.50% and was TSX.V top gainer at the closed of market yesterday. Midpoint will pay an arm's length finder's fee comprised of Common Shares equal to 7% of funds related to investments in Midpoint Holdings Ltd (CVE: MPT), and no broker warrants.

    Tue, 17 Oct 2017 15:04:00 +0100
    Genedrive - Capital Network: FY 2017 Preliminary results: HepC test launch in sight KEY INVESTOR MESSAGES

    • Commercial launch of Genedrive® Hepatitis C (HCV) test expected to start in    the coming quarters (African markets)
    • Collaboration with the US Defense Department (bio-hazard program) to generate further income in the current fiscal year
    • Re-launch of Genedrive® MTB (tuberculosis) test in India is being reassessed
    • Divestment options for the Services business are being pursued
    • Cash position of £4.2mln as of 30 September 2017
    Tue, 17 Oct 2017 08:36:00 +0100
    Zenith Energy - Capital Network: Encouraging Progress in Azerbaijan Zenith Energy (LON:ZEN) provided an update on the redevelopment project in Azerbaijan. The update included the results of the successful perforation of unexploited pay zones in well C-21 in the Jafarli field, as well as the start of the workover on well Z-28 in the Zardab field. We are encouraged by the outcome of the work undertaken on C-21 where the application of new technology to identify new pay zones enabled the company to raise production by 35 bbl/d, in excess of the target of 15 bbl/d per well over the scope of the project. Although it has no impact on our 41p valuation of Zenith (LON:ZEN), continuing to demonstrate successful progress will be essential to secure the necessary financing to ramp up operations in the near future, as per the development plan.

    Zenith (LON:ZEN) is current redeveloping the Muradkhnali, Jafarli and Zardab oil fields, which form the largest onshore oilfield of Azerbaijan. The fields were discovered and brought to production in the 1970s; Zenith intends to apply new technology to recover some 33 MMbbl of additional oil reserves potential (Figure 1).

    Mon, 16 Oct 2017 14:38:00 +0100
    Midpoint Holdings - Capital Network: Strengthening of Board Operational Progress Continues, Board of Directors Strengthened with Key Appointment.

    Midpoint Holdings Ltd (CVE:MPT), cross-border payments and foreign exchange provider, has announced significant operational improvements to its user platform following nine months of intensive planning and development. The new updated platform, an enterprise grade platform, delivers enhanced features and benefits to users as well as significant improvements in operational efficiency. Announced at the end of September 2017, the new platform addresses issues of scalability and user experience and also provides increased flexibility and functionality to customers when managing their payments and FX requirements.

    Tue, 10 Oct 2017 13:56:00 +0100
    Avacta Group - Capital Network: Preliminary Results Avacta’s FY 2017 Preliminary Results: Reagents and therapeutics programs all on track


    • Avacta’s Affimer® technology is a proprietary alternative to antibodies with key technical and commercial benefits
    • Avacta is building a pipeline of Affimer drugs for immuno-oncology and growing revenues based on a licensing model for Affimer reagents
    • Excellent progress in both parts of the business during the reporting period substantially de-risking the opportunity
    • A pipeline of potential valuable and licensable drugs is being built and the company is targeting first clinical trials in 2019
    • A sum-of-the-parts model now suggests an equity value four times the current market capitalisation



    On the 4th October, Avacta Group Plc (LON:AVCT) has reported preliminary results for the fiscal year ending July 2017, including a detailed update on the business.

    Overall Avacta Group Plc (LON:AVCT) is delivering according to management's guidance and has made significant progress in both the Affimer reagents' business and the Affimer therapeutics programs (please refer to our initiation report of March 2017 for an overview of Avacta's Affimer technology and business strategy).

    As regards the Reagents business, Avacta Group Plc (LON:AVCT) announced in April 2017 that, after a trial period, they have granted a leading diagnostic company exclusive rights to specific Affimer reagents. Although financial details weren't disclosed, this was the first time that Avacta signed an agreement of this nature, representing an important inflection point in de-risking the reagents business.

    As such we remove any risk adjustment from our valuation of the Affimer reagents business, which we now value approx. £140mil, from about £110mil before this deal was signed.

    Wed, 04 Oct 2017 09:30:00 +0100
    PCF Group - Capital Network: Trading ahead of expectations TRADING AHEAD OF EXPECTATIONS

    PCF Group Plc (LON:PCF), the UK specialist finance bank, released yesterday morning a trading update ahead of the full year results for the financial year ending 30th September 2017 in which the bank reported strong trading during 11 months of the year and now expects full year results to be ahead of market expectations. The full year results will be released on the 5th December 2017.

    The very pleasing out-turn now expected for the year has been due to a number of specific factors which includes the decision to move into direct retail deposits taking operations, the result of several years’ progress with UK regulatory authorities.

    The bank’s persistence in working towards receiving UK regulatory approval to raise retail deposits was finalised on the 27th July with the commencement of retail deposit taking activities and the bank has raised in the two months since approximately £51m, exceeding management expectations. The PCF Group Plc (LON:PCF) retail deposit strategy is to access the UK retail savings market on a measured basis, matching the internal need for funding to customer financing requirements and thus not to attract an excess of deposits that cannot be utilised. When appropriate, PCF Group Plc (LON:PCF) will also use retail deposits to pay down wholesale debt.

    However, the rate at which the bank has gathered deposits since commencement of deposit activities bodes extremely well for management expectations for the future loan book, which is expected to grow to £350m by financial year end 2020 and then to £750m by financial year end 2022. By our estimates the loan book should therefore grow above £200m by the end of financial year end 2018 which this trading statement, in our view, supports. The loan book has grown by 17.5% in the 11 month period to £141.6m, in-line with our expectations for the whole of financial year 2017.

    The growth in new business origination has accelerated in the year so far to £74.1m up from the £62.1m reported in 2016. The growth across the bank was +19.3%, supported, we suspect, by better pricing in the latter stages of the year afforded by the less expensive retail deposits gathered. Portfolio quality remains high with a loan loss impairment charge of just 0.5%. Once again, PCF has reminded investors that the bank does not offer Personal Contract Purchase (PCP) products in which the customer can receive credit on an interest payment only credit arrangement instead of a fully amortising hire purchase contract arrangement in which both interest and principal must be paid at each payment date.


    Thu, 28 Sep 2017 15:18:00 +0100
    Itaconix Plc – Capital Network: Breakthrough opportunity PROGRESS YTD

    Itaconix PLC (LON:ITX) reported H1 results (18/09/2017) which showed good progress, with revenues of £0.3m (H1 2016 ongoing: nil) and new collaborative partnerships in key product segments.

    In this report we examine some of the drivers which are supporting this rapid commercial adoption of Itaconix PLC (LON:ITX) technologies, including productspecific performance attributes and the long-term mega-trend towards environmental sustainability in specialty chemicals.


    Itaconix PLC (LON:ITX) has transformed (and renamed) itself in recent years towards a tight focus on specialty polymers for home care, personal and consumer health care, and industrial products. The H1 results demonstrate that the strategy is now delivering real commercial progress. Some of the drivers include:

    • A patented production process that combines the versatile chemistry of Itaconic acid with breakthrough economics. • A range of bio-based products which can replace petrochemical ingredients. Industry-wide changes are being driven by consumer preferences, regulatory changes and the “Together for Sustainability initiative within the specialty chemicals sector. • Virtually limitless headroom for growth, with addressable end markets of $30bn. • Existing commercial revenues growing strongly. • Strategic partners including Akzo Nobel, Croda, and Solvay broaden the available channel to market.

    In this report we examine some of the drivers in detail, with an overview of product categories and key differentiators.


    At this early stage of growth we don’t believe that there is any basis to value the shares on 2017/18 multiples. But by 2020 we believe the company could be generating £12m of revenue which would imply the shares trade on a 2020 multiple of 1.2x EV/Sales compared to peers on 3-4x (e.g. Croda plc.). With growth potential extending well beyond 2020, it’s unlikely that the market would value Itaconix this cheaply, in our view.

    In the meantime, we believe the main driver for the share price will be adoption of Itaconix products by additional commercial customers. We expect progress across all three end markets – home care, personal and consumer health care, and industrial.

    Mon, 25 Sep 2017 10:13:00 +0100
    Judges Scientific - Capital Network: Interim Results 1H 2017 INTERIM RESULTS

    Judges Scientific Plc (LON:JDG) reported strong 1H 2017 results delivering record figures across revenues, adjusted profit before tax, adjusted earnings per share, and dividends. The management expects to meet the current market consensus for FY2017 earnings thanks to ongoing order intake recovery driving organic growth.

    ■ Strong demand recovery continued since June 2016

    Judges Scientific Plc (LON:JDG) revenues were up 20% to record high £32.7mn for 1H 2017 (14% organic growth) with adj. operating profit increasing 48% to $4.4mn. Organic sales growth was seen across the region except UK with the biggest growth coming from China/Hong Kong (up 40%). Given most of subsidiaries’ business are international, the management expects healthy demand growth from China and relatively stable growth in EU/US to continue regardless of dampened growth in UK post Brexit. The group’s total order intake saw the same geographical pattern with China/Hong Kong posting the strongest growth of 85% Y/Y for the 1H 2017. The organic order book has improved from 11.2 weeks in June 2016 to 14.9 weeks in January 2017 and 16.5 weeks as of 2H 2017. Demand issues at two subsidiaries in 2016 have receded and management are progressing with resolving the production problems at a third business. As a result, the company’s 12M-trailing ROTIC has improved to 17.4% from 15.2% at the end of 2016.

    ■ New acquisition: Oxford Cryosystems

    During 1H 2017, Judges Scientific Plc (LON:JDG) acquired Oxford Cryosystems, a manufacturer of cryogenic cooling systems used for X-Ray crystallography and other applications. Oxford Cryosystems' products are sold to original equipment manufacturers (OEM) for integration into X-ray Diffraction systems or to users in university research laboratories. While the acquisition is immediately earnings accretive, the acquisition is not a near term growth driver and is no different from Judges’ core strategy of long-term buy and build.

    ■ Solid dividend growth continues along with prudent debt management

    Judges announced interim dividend of 10.0p (vs. 9.0p in 2016), which is well in line with the company’s dividend policy and its historical track record. The management reaffirmed that enhancing shareholder return is its priority as long as the business continues scaling up both organically and through acquisitions, hence c.10% p.a. dividend growth in the near term appears realistic in our view. Overall cash flow has improved during the period, and the company successfully lowered the adj. net debt to £5.8mn from £9.9mn at the beginning of the year bringing net debt/ adj. EBITA ratio to below 1x or close to historical average of around 0.5x.


    Wed, 20 Sep 2017 12:05:00 +0100
    Green Dragon Gas - Capital Network: Alignment of Interests between Partners in GSS and GSN Green Dragon Gas Ltd (LON:GDG) announced that it has finalised agreements with CUCBM, a subsidiary of CNOOC and Green Dragon Gas Ltd (LON:GDG) partner in the GSS and GSN Blocks, which conclude eight years of discussions regarding Green Dragon Gas Ltd (LON:GDG) interest in the wells historically drilled by CUCBM in the two Blocks. These agreements confirm the respective interests of the partners as well as the amount of costs recovery resulting from CUCBM’s work programme for the period 2007-2014. Although we welcome this announcement, it is unclear from the RNS whether these agreements have an immediate impact on either GDG’s gas reserves or on future production, revenue and cash flows. We suspect most of the positive impact to be expressed in a closer future cooperation between the two partners focussed on the monetisation of gas resources, which should be positive for investors’ sentiment and have a positive impact on the share price. However, we keep our 221p valuation unchanged.

    This announcement follows an earlier announcement by GDG (15/09/17) of the approval of a Project Code for the Overall Development Plan (ODP) on the GCZ block by the China National Development and Reform Commission (NDRC), confirming its final approval. The Block is jointly operated by CNPC and GDG through a joint management team based in Jincheng, Shanxi. The development cost for GCZ will be c.US$53.8m over 2017 and 2018. CNPC will invest US$28.5m according to its 53% participating interest and GDG US$25.3m based on its 47% participating interest in the Block.


    Wed, 20 Sep 2017 11:10:00 +0100
    Corero Network Security PLC - Capital Network: Gathering Pace YEAR-TO-DATE PROGRESSING STRONGLY

    Corero Network Security Plc (LON:CNS) H1 results release (14/092017) showed strong progress, with revenue up 51% for the flagship SmartWall product. Perhaps even more importantly the recurring revenue element for SmartWall was up 177%. This reinforces the growth profile going forward because licence fee income grows cumulatively as new customers are added. 

    We believe these results demonstrate that the company has essentially completed its transition from a software generalist to a DDoS protection specialist, and that the SmartWall DDoS protection product continues rapidly gaining traction in the market.

    In this report we review the progress of the group. We also revisit some of the fundamental drivers, and how the DDoS protection market functions. We argue that SmartWall’s real-time threat mitigation represents a disruptive new presence in the space.


    Among the main attractions of Corero Network Security Plc (LON:CNS) as an investment:

    • A highly differentiated product in SmartWall which offers game-changing performance compared with anything else in the market place. • Substantial headroom for further market share gains, within a continuously growing end market for DDoS protection. • An expanding range of channels to market, and technology partners including Juniper Networks, Gigamon, and McAfee to extend Corero Network Security Plc (LON:CNS) market reach. • Support of a shareholder base that includes specialist institutions such as Miton and Herald Investment Management, and also the Chairman and principal shareholder Jens Montanana.

    In this report we examine some of these themes in more detail.


    The shares have gained 81% since the successful fund raising in April. Still, looking forward we believe the company could reach revenues of $50m in 3-5 years. This would imply a market cap of £115m based on peer-group multiples (e.g. Radware, RDWR:NSQ), with no further fundraising required in our view, or 4x upside from the current level. If Corero continues to deliver on milestones, there is still everything to play for here for investors.

    Fri, 15 Sep 2017 14:44:00 +0100
    Zenith Energy Ltd – Capital Network: Valuable Oil Redevelopment Play in Azerbaijan Zenith Energy Ltd (LON:ZEN) (Zenith) is an oil and gas production company incorporated in Canada and dual-listed in London and Toronto. Zenith’s strategy of investing in low costs producing assets with relatively material upside potential, culminated in the recent award of a PSA in Azerbaijan for the redevelopment of mature onshore assets with potentially material remaining oil resources. Meanwhile, Zenith Energy Ltd (LON:ZEN) has continued to pursue a measured development strategy in Italy, centred around monetisation of gas resources. We estimate a potential upside of up to 41p (C$0.66) per share, based on third-party reserves assessment and recognising the risks and challenges facing Zenith Energy Ltd (LON:ZEN) in Azerbaijan. We believe that Zenith’s strategy to own its rigs is a critical risk-mitigating factor for the project, whilst management’s ownership of c. 20% of the equity provides perfect alignment of interests with shareholders.

    On 16/3/16, Zenith entered into a Rehabilitation, Exploration, Development and Production Sharing Agreement (REDPSA) with the State Oil Company of Azerbaijan Republic (SOCAR) and SOCAR Oil Affiliate (SOA). Following Cabinet of Ministers’ approval (25/4/16) and Parliament ratification into law (14/6/16), the official handover of the assets to Aran Oil, a newly incorporated operating joint venture between Zenith (80%) and SOA (20%), was completed on 11/8/16. The REDPSA has now the dignity of an Ordinary law in the Civil Code of the Republic of Azerbaijan, and consequently cannot be cancelled or rescinded unless for reasons of extreme gravity.

    The REDPSA area (Muradkhanli Contract Area) has a duration of 25 years, with a possible additional 5-year extension to be approved by SOCAR, and covers some 642km2 in the lower Kura Basin some 300km West of Baku, the capital city. The Contract Area covers the largest onshore oil fields discovered in Azerbaijan, Muradkhanli, Jafarli and Zardab, which have been producing since the 1970s (Figure 1).

    Tue, 12 Sep 2017 10:12:00 +0100
    Genel Energy PLC (GENL.L) - Capital Network - Good Time to Revisit the Equity Story Genel Energy PLC (Genel) is a London-listed oil and gas production company with assets in the Kurdistan region of Northern Iraq (KRI), Somaliland and Morocco. Political instability in Iraq and the rise of ISIS created a particularly challenging stock market sentiment for companies active in the region, such as Genel Energy PLC, with concerns about security compounding those from irregular oil sales payments. More recently, sharp production declines and subsequent reserves downgrades at one of Genel Energy PLC’s main oil asset increased the pressure on the company already suffering from the collapse in the oil price. We believe that after recent reserves downgrades and with potential progress anticipated for the Miran/Bina Bawi gas development, it might be a good time to revisit the equity story, with a view on the mediumterm development of these assets.


    Fri, 08 Sep 2017 10:03:00 +0100
    Proactis Holdings Plc (LON:PHD) – Capital Network: Entering the Big League Proactis Holdings Plc (LON:PHD) is a provider of software for Spend Control and eProcurement, systems which are used by most large organisations to manage the way they transact with their supplier base. In recent years Proactis Holdings Plc (LON:PHD) has been gaining market share, within a growing market, delivering a 35% CAGR in revenues, and 62% in EPS.

    Thu, 07 Sep 2017 13:34:00 +0100
    Morses Club PLC (LON:MCL) - Capital Network: New Debt Facilities Morses Club PLC (LON:MCL) is the number two player in the well-established UK non-standard credit market, with a clear opportunity to take advantage of changes in the market to grow revenues and earnings.

    Home collected credit (HCC), often referred to as doorstep lending, has been around for decades, and despite the advent of the digital age looks likely to remain a feature of the UK credit market, particularly for those consumers who are financially disadvantaged including those living on benefits. In terms of "knowing your customer", it is hard to beat a model where agents visit borrowers' homes to collect payments. Loans are arranged in the consumer’s home with fixed payments and no late fees or accruing interest. Borrowers know exactly what they are borrowing and on what terms. Morses Club PLC (LON:MCL) is the no. 2 lender in this market serving 216,000 customers with an average customer balance of £570 and loan duration of 41 weeks.

    Customer satisfaction scores are 95% or above, repeat customers >90%; Morses Club PLC (LON:MCL) is well established and successful at what it does and has not previously diversified into other adjacent markets. Loans are issued and collected by self-employed agents who are paid commission on what is collected, not on the loans issued. In the financial year to February 2017, Morses Club advanced £144.1m and collected £217.2m.

    The non-standard credit market is evolving but HCC is set to remain a core service. Provident Financial Group (PFG), the major player in the sector, is scaling back HCC activity in favour of other product markets, providing short-term opportunities for Morses Club to pick up new business. In the longer term, the growth of digital and online product markets offers the potential to reach selective new customers and reduce the cost of serving existing customers. We see both of these developments as exciting propositions for Morses Club’s growth and believe that the business has already invested internally to cater for increased customers.
    Acquisition potential as regulation forces business change; a third driver of growth may come from more stringent industry regulation which has the potential to persuade a significant number of smaller firms to look to exit of scale back their activity. This may increase loans offered onto the market by Morses Club, which has already increased scale and products offered by executing the selective acquisition targets including Shopacheck Financial Services in 2014.

    Loan performance is critical and capable of stable returns; the credit crunch of the previous decade was a difficult period for the industry, but the current decade had seen Morses operating on an even keel. Looking at the results for the financial year to February 2010, we can see that the Company turned a profit and collected more cash than was lent. In every subsequent year following the credit crunch the Company made a profit. We concur with management that the business may see shifts up and down in the overall market as the economy improves then deteriorates, but that does not necessarily correlate with loan book deterioration. Missed payments do arise, but there is no fee or accruing interest. We believe this is key to arrears performance as collections can resume without further customer charges.

    Agent territory builds have accelerated since the full year results; Morses Club announced on the 18th August that net new agent territory builds in the year to date were over 400, adding to the 1,826 reported for the full year to February 2017. This is in-line with our estimate for the full year to February 2018. We expect more modest additional net new territory builds from hereonin, reflecting the weighting of net new builds to the beginning of the year.

    Wed, 06 Sep 2017 12:20:00 +0100
    Genel Energy PLC – Capital Network: Good Time to Revisit the Equity Story Genel Energy PLC (LON:GENL) is a London-listed oil and gas production company with assets in the Kurdistan region of Northern Iraq (KRI), Somaliland and Morocco. Political instability in Iraq and the rise of ISIS created a particularly challenging stock market sentiment for companies active in the region, such as Genel Energy PLC (LON:GENL), with concerns about security compounding those from irregular oil sales payments. More recently, sharp production declines and subsequent reserves downgrades at one of Genel Energy PLC (LON:GENL) main oil asset increased the pressure on the company already suffering from the collapse in the oil price. We believe that after recent reserves downgrades and with potential progress anticipated for the Miran/Bina Bawi gas development, it might be a good time to revisit the equity story, with a view on the mediumterm development of these assets.

    Genel Energy PLC (LON:GENL) was created in 2011 through the reverse take-over of Genel Enerji, a Turkish company with oil and gas assets in the KRI, into Vallares an LSElisted investment company. Genel has shareholding interests in two producing fields: DNO-operated Tawke (25%) and jointly-operated (with Addax Petroleum) Taq Taq (44%) oil fields; two development assets: Miran (100%) and Bina Bawi (100%); one discovery under appraisal: Peshkabir (25%) contained within the Tawke PSC; all located in the KRI. Genel also has interests in exploration assets in Somaliland and Morocco (Figure 1).


    In the past 18 months, Genel reported a reserves downgrades for the Taq Taq field (in early 2016) with 2P reserves now down to 59MMbbl (McDaniel & Associates, Feb-17) from 172MMbbl in Dec-15, following higher than anticipated production declines and increasing water cut.

    Current production of just below 15kbopd is down from 85kbopd in Dec-15, while water cut went from 13% to 50% during that period.

    In contrast, the Tawke oil field has continued to perform according to expectations and Genel does not expect the issues encountered at the Taq Taq field (and resulting declines) to be repeated at Tawke due to differences in field morphology and drive mechanism. However, Genel abandoned previous 2017 guidance for gross production at Taq Taq of 24-31kb/d, saying it would announce output on a monthly basis. Jun-17 production was 14.7kb/d resulting in a 2017 average of 21.0kb/d, compared to 2016 net average production of 53.3kb/d.

    Wed, 30 Aug 2017 10:14:00 +0100
    Empresaria Group plc : Capital Network : Continuing the Run of Strong Results STRONG PROGRESS – VERSUS MIXED SECTOR BACKGROUND

    Empresaria’s H1 results confirm the message of July’s trading update, and the outlook for the full year – continued growth in Net Fee Income (NFI) and EPS. Net Fee Income was up 26% (17% at constant FX), adj. Operating Profit +23% (9% at constant FX).

    This has been delivered against a mixed background for the wider peer group. The big generalists such as Hays or Randstad have maintained growth, but some of the specialist peers (notably Impellam plc.) have encountered headwinds. Empresaria has benefitted, in our view, from a balanced geographic footprint and from its multi-niche customer industry base.

    The company has noted that there has been a slowdown in hiring processes in the UK post-election, but overall the group is on track, and we maintain our FY forecast of 19.5% earnings growth, well ahead of the sector trend.


    The biggest driver of H1 Net Fee Income and Operating profit was the contribution from the major investments made during 2016 - Rishworth Aviation and ConSol. We believe that the strategy of targeted external investments remains a key value driver going forward.

    It is important to note that the operating profit growth has been achieved in spite of charges (£0.5m) for integration and growth enhancement, within the newer investments and also the existing portfolio. This is one of the reasons for the reduction in the conversion ratio (Net Fee Income into Operating Profit) to 14.2% from 14.8% a year earlier. We expect this conversion ratio to resume an upward trend as the benefits of these above-the-line investments feed through.

    Tue, 22 Aug 2017 09:52:00 +0100
    European Metals Holdings Ltd: Capital Network – Sitting on the Largest Lithium Resource in Europe Sitting on Largest Known Lithium Resource in Europe

    European Metals Holdings is a London AIM and ASX listed minerals development company. The firm is currently progressing the Cinovec Lithium Project in the North-West of the Czech Republic (almost on the German border).


    The Lithium story: Lithium is a key component in modern battery technology. With the prospective boom in electric vehicle demand, in addition to growth in other battery storage requirements; lithium is widely regarded as a commodity which will be in demand.

    A Low cost asset: The proposed Cinovec operation sits on the largest known lithium resource in Europe, and is initially proposed to have a 22 year mine life (commencing 2021), producing ~20.8Ktpa of Lithium Carbonate (LCE) (the lithium product immediately ready for battery production). We note that this mine life is only based on ~5% of the known resource, thus upside potential for life extension, and/or scale of the project is a meaningful possibility.  Importantly for potential European Metals Holdings investors, the operation is expected to have operating costs of ~US$3500/t LCE, placing the operation in the lower half of the global operating cost curve. Current capex estimates for the project are US$393m. Assuming a LCE price (flat for life of mine) of US$10000/t (broadly around current levels), and the net by-product operating cost of US$3500/t, investors could see an asset NPV (@10%) of ~US$370m (as compared to a ~US$75m company market capitalisation at present). Furthermore, at the asset level, at steady state production (and again assuming US$10000/t LCE price), the asset could generate cashflow yields of ~150% per annum. This is based on current market cap of ~US$75m, and before consideration of funding mix for upfront project capex, which is likely to contain significant debt portion, which would dilute cash returns to equity holders. That being said, the potential cashflow at the asset level should be able to allow for plenty of dilution, and still leave equity investors with significant cash yield. 

    A strategic location: With lithium demand likely to surge in coming years, underpinned by the growth in electric car penetration (and battery storage applications), the Cinovec project is ideally placed in close proximity to some of Europe’s largest car manufacturers (and electronic manufacturers). We understand European Metals Holdings has already been attracting meaningful interest from some large potential customers, and we would envisage that as electric vehicle and battery storage output grows, that the major European auto-producers would prefer a stable source of proximate supply.

    Funding is a key issue: With expected strong interest from German auto-manufacturers in the Cinovec product; we would anticipate European Metals Holdings signing meaningful offtake agreements ahead of project development, which would help facilitate a significant debt component to the funding mix for project development (typically assisting returns on equity). A strong asset value should underpin an attractive funding mix, of which the exact details will determine the upside potential for equity investors.

    Overall: European Metals Holdings is one of the few European equity exposure’s to the Lithium demand thematic. It possesses a large resource base, in a strategic location. Production should be low cost, accordingly, the operation should be able to withstand the vagaries of commodity markets.  As the company commences the Cinovec definitive feasibility study in the second half of 2017, we recommend potential investors watch out for announcements of offtake or alliances with potential customers, as key catalysts for the stock.

    Wed, 16 Aug 2017 09:35:00 +0100
    Green Dragon Gas – Capital Network: NDRC Approval will Shorten lead up to Commercialisation Green Dragon Gas (GDG) announced that the China National Development and Reform Commission (NDRC) has approved a Project Code for the Overall Development Plan (ODP) on the Greka Shizhuang South Zaoyuan portion of the Main Block (GSS), concluding that the ODP does not require an approval process and only needs to be registered. Management reckon this approval will shortens the time to large-scale commercial gas production from the GSS Block. We note that this announcement follows the recent approval (18.4.17) of the ODP on the GCZ Block. Both GSS and GCZ Blocks were specifically mentioned within China's 13th Five-Year Plan as being critical to domestic production requirements, and the latest approvals demonstrate the Chinese Government commitment to fulfilling this ambition. We see the next catalyst for the stock as the probable approval of an ODP for the GGZ Block in 2017.

    The development program on GSS would add 42 vertical and 47 LiFaBriC wells by 2020 for a net investment of US$49.2m by GDG which has a 60% participating interest in this block with its 40% partner, China United Coalbed Methane Corp (CUCBM), a wholly owned subsidiary of China National Offshore Oil Corporation (CNOOC). This would come in addition of the already approved and more material development program on GCZ which would add 147 wells by end 2018.

    Our valuation of GDG at 221p per share, based on a risked valuation of 2P reserves and adjusted for Net debt/cash and capitalised corporate costs, is unchanged. However, the approval of a second ODP this year should increase investors’ confidence in the quality of GDG’s assets and in the company’s ability to realise this valuation (Figure 1).

    Tue, 01 Aug 2017 09:17:00 +0100
    Medgold Resources - Capital Network: Well Funded Early Stage Gold Explorer Medgold Resources Corp. (MED.CVE) is a European-focused TSX-V listed exploration and development company targeting gold properties in central and southern Serbia. The company is run by a highly experienced management team with a successful track record of building value in resource companies. Medgold is aiming to become a leading European gold company.


    Serbian near surface targets: Medgold (MED.CVE) possesses significant acreage in the highly prospective exploration regions of Central and Southern Serbia. Medgold has already seen encouraging near-surface results for precious metals in underexplored regions of the Serbo-Macedonia Belt for precious metals (e.g. 40m sawedchannel sample @ 8.3 g/t Au)

    A well-funded exploration program: The company has a well-funded exploration program, achieved through a savvy alliance and option agreement with a larger partner (TSX- and NYSE-listed silver producer, Fortuna Silver Mines @US$750m mkt cap). This significantly reduces the potential risk of unknown equity dilution for prospective shareholders, as the potential asset/project dilution is very clearly defined through the option agreements. Furthermore, the optioning of some of the Serbian targets (as well as the direct equity ownership stake of 24% in Medgold) by Fortuna, provides investors with strong validation that Medgold’s exploration ground looks prospective.

    The best of both worlds: Smaller gold exploration companies generally tend to fall into two buckets. Either with exploration assets which are outcropping/near surface and high grade; but located in relatively unstable, ‘frontier’ countries. Or with lower grade, deep cover exploration targets, but located in stable jurisdictions. A key feature of Medgold for potential investors, is that it is targeting the near surface, high grade deposits, but also is located in a stable and well-understood jurisdiction and results from the Tlamino Project demonstrate this point. Thus we would consider it attractively placed versus peers on a risk-reward basis.

    Focused management: Medgold is in the process of disposing of its Portuguese exploration assets to focus on the highly prospective Serbian assets; where management is increasingly looking to both further define existing explorations targets, and also expand the company’s land holdings. Too often one sees mineral exploration companies spend too much time and too much cash on trying to get results out of land holdings; and we like that Medgold management have shown the discipline to cut assets when they believe the potential upside has become limited.

    What to watch for: Newsflow on positive exploration results in Serbia will be a key share price driver.


    Medgold Resources Corp. is a European-focused TSX-V listed exploration and development company targeting gold properties in central and southern Serbia. The company is run by a highly experienced management team with a successful track record of building value in resource companies. Medgold is aiming to become a leading European gold company.

    Mon, 31 Jul 2017 13:16:00 +0100
    Haydale Graphene Industries – Capital Network: The Tipping Point The nanomaterials market is transitioning from a concept technology to commercial applications. Haydale (LON:HAYD) specialises in the integration of nanomaterials into commercial and industrial technologies. We argue that this is a good position to occupy within the value chain – exposed to end market growth but not exposed (negatively) to the likely future price compression in raw graphene or other nanomaterials.

    Major applications for Haydale (LON:HAYD) include composite materials, specialty inks and coatings, and additive manufacturing (3D printing). The nanomaterials are graphene and silicon carbide, and potential others in future. We argue that these applications have now reached a tipping point from research to commercial reality (see pie charts p2).

    In the trading update of July 19th, Haydale (LON:HAYD) announced that FY June 2017 total income (revenue and other) has doubled, meaning about £3.9m for the year. Based on the order backlog, and major projects under way, we expect further strong growth in the next few years. We consider two of the specific channels for further growth.

    In November 2016 Haydale announced a Joint Development Agreement with Huntsman Corporation to develop graphene enhanced resins. Adding small amounts of graphene in the resin layers of materials like carbon fibre can dramatically improve (x10) the dissipation of electrical charge (aerospace applications) and heat (aeros and autos). The deal with Huntsman potentially dramatically accelerates Haydale’s penetration of this market.

    Thu, 27 Jul 2017 10:15:00 +0100
    PCF Group - Capital Network: Raising Retail Deposits will be Game Changer Substantial growth in new business forecasted by management; the current customer portfolio stands at £128m which management expect to grow to £350m in 3 years and to £750m in 5 years across both Consumer and Business Finance divisions. The returns guidance is very positive with ROAA (Return on Average Assets) targeted at 2.5% and ROE (Return on Equity) targeted at 12.5%, with both metrics improving further in the 3-5 year horizon. Combined with the reduction in credit risk as the Group focuses on the Prime and Super-prime markets (low and lowest credit risk), the potential returns look attractive.

    An exciting opportunity for the Group (PCF.LON) and new PCF Bank Ltd; the positives of operating a bank include the opportunity to diversify treasury operations and fund directly from the savings markets. Matching the funding to risk appropriate customer loans should be straightforward, managing the regulation and bank oversight less so as this is more complex, but the rewards could be significant. 
    An authorised UK bank now seeking access to retail deposit funding; following bank authorisation PCF (PCF.LON) is now raising retail deposits. The group has historically relied upon more expensive wholesale market funding, but following the change to a diversified treasury strategy to include deposits, the fall in overall cost of funding will enable the Group to offer more competitive finance rates to customers in higher credit areas of the asset finance market.

    Wed, 26 Jul 2017 15:31:00 +0100
    Solo Oil – Capital Network: Risked Value Represents Significant Upside Solo Oil Plc (“Solo”) is a London (AIM) listed oil and gas investment company engaged in the acquisition and development of a diverse global portfolio of oil and gas assets. The company has a core portfolio of non-operated assets in Tanzania, including a stake in the prolific Ruvuma Basin, an interest in the producing Kiliwani North gas development on the Songo Songo Island, and a 10% interest Helium One, including the Rukwa project. Other assets include non-operated interests in the Weald and Wessex Basins (Horse Hill and Isle of Wight) onshore UK, a strategic investment in Burj Africa in Nigeria and an enhanced Oil Recovery project in Ontario, Canada.

    Tue, 25 Jul 2017 10:07:00 +0100
    BOS GLOBAL - Capital Network: Progress on Track The BOS GLOBAL share price rose from 3p to 19p during the 6 months Nov 2016 – May 2017, but has since fallen back to 8.6p. Whilst volatility is not unusual as a tech company progresses from start-up to commercialisation, we felt it’s a good time to review events.

    Wed, 19 Jul 2017 14:22:00 +0100
    NQ Minerals Plc - Capital Network: Company Changing Acquisition NQ Minerals is a London listed (NEX exchange) minerals exploration and development company. The company holds advanced exploration projects in North Queensland in Australia; but the key focus for investors should be their recent acquisition of the Hellyer Tailings project in Tasmania, Australia, which has the potential to see the company be strongly cash generative in 2018.

    Fri, 14 Jul 2017 11:42:00 +0100
    Corero Network Security - Capital Network: Delivering Results in Real-Time Corero Network Security (CNS.LON) provides protection against Distributed Denial-of-Service (DDoS) attacks, through its SmartWall Threat Defence System. The largest customer groups are Internet Service Providers (ISPs) and hosting service providers. The SmartWall system is differentiated from its peers by its ability to apply a DDoS mitigation solution in real-time, reducing costly network downtime. The DDoS threat remains a growing issue, and this report we present a snapshot of the market growth for DDoS protection. 

    Tue, 11 Jul 2017 10:40:00 +0100
    BB Healthcare Trust - Capital Network: High-Conviction Global Healthcare Opportunities Building on the expertise acquired with BB Biotech, the largest European biotech investment trust with over $3 billion under management and 25-year track record, in December 2016 Bellevue Asset Management launched the BB Healthcare trust (BBH.LON), a highly differentiated product in the market of actively managed funds.

    Mon, 10 Jul 2017 11:52:00 +0100
    Midpoint Holdings - Capital Network: Confidence Illustrated as Management Increases Stake We are today updating on Midpoint Holdings Ltd (MPT.CVE), the peer to peer, cross-border foreign exchange platform, following director dealings and quarterly results.

    Fri, 07 Jul 2017 15:54:00 +0100
    Plastics Capital Plc - Capital Network: Gearing up for Growth Plastics Capital (PLA.LON) has reported FY results which are closely in line with our expectations (see table below). The company delivered 29.5% revenue growth and 6.5% earnings growth, reflecting M&A and organic improvement, but offset by the cost of fixing operational issues at the Palagan films business and new P&L investments for future growth elsewhere in the business (both issues previously disclosed).

    Mon, 03 Jul 2017 09:43:00 +0100
    Thor Mining - Capital Network: Poised for Development Thor Mining (THR.LON) is an exploration and development company with an advanced tungsten/molybdenum project poised for development; and exciting lithium and tungsten exploration projects. Thor is listed on the Alternative Investment Market (AIM) in London and the Australian Stock Exchange (ASX).

    Mon, 26 Jun 2017 15:21:00 +0100