Market Cap: CAD$19m; Current Price: 34c; Target Price: 49.4c
- Results largely in line with our forecasts
- Minor downgrade to FY15 revenue forecasts, no change to price target.
NORTHLAND CAPITAL PARTNERS VIEW: Rockwell Diamonds’ Middle Orange River operations boasted a strong operational performance this quarter (Q215) with the new mining fleet leading to improved volumes at all operations, in line with expectations. Changes to our assumptions on the average diamond value at two of the mines (one upgraded, one downgraded) results in a small downgrade to our revenue forecast to $64.5m from $65.1m for the current financial year (FY15). This has no significant effect on our price target of 49.4c per share. Interim results are expected shortly and we will be looking for a reduction in operational costs as a result of the improved volumes and the new mining fleet.
Starcom (LON:STAR): Slow H1, expect better H2
Market Cap: £7.9m; Current Price: 9.4p; Target Price: Under Review
- Interims: Revenue lower - Ukraine disruption & lower than expected WatchLock growth
- H1 revenue fell 16.6% to $2.9m with the loss of sales to Ukraine (that represented 20% of FY13 revenue) coupled with lower than expected WatchLock revenue. This was impacted by US regulatory delays and a lack of traction from Mul-T-Lock, its JV partner, that focusing its marketing efforts on the second generation product.
- The lower revenue coupled with a lower gross margin (51.7% versus 56.7%) and higher operating costs ($2.2m versus $1.4m) resulted in a $1.3m negative swing in operating profit to a loss of $0.7m. Cash at period end was $0.1m (FY13: nil) but net debt increased to $1.2m (FY net debt: $0.9m) with an expansion in working capital ($2.4m) partially offset by February’s placing ($2.9m). Management reports better collection post period end.
- Product development. New versions of Helios (TT for the motorcycle market and Hybrid that combines cellular and satellite communications) are generating interest and revenues are expected in H2. New version of Triton has successfully undergone a series of extreme environment tests and is running pilots with potential customers – initial sales expected in H2. Kylos product due for launch shortly. Second generation of WatchLock (more compact, cheaper and improved battery life) should be available in H1 FY15. Four products being launched in 2014.
- Signed a Guatemalan distributor in May that has placed orders for a significant number of units across the product portfolio. Revenue of $400k is expected in the FY and the three year contract represents a total value of $1.8m. Post period end, a three year supply and support agreement has been signed by a distributor covering Central and Latin America with an initial order received.
- H1 performance below forecasts and FY is now expected to be below our previous forecasts at the top and bottom line despite a considerable improvement in H2.
NORTHLAND CAPITAL PARTNERS VIEW: A slow first half, as flagged in May’s trading update, as the company looked to bounce back from the loss of the Ukrainian business that represented around 20% of FY13’s revenue. We had been optimistic that growth in WatchLock revenues would have more than compensated and although we expect H2 will be much stronger than H1 and Starcom will be profitable in the FY, we now anticipate revenue growth of closer to 10% for the year. The company continues to drive product development with four product launches scheduled for this year and product evolutions extends into 2015 with the smaller, cheaper WatchLock that will offer much improved battery life. Balance sheet was somewhat stretched at the H1 balance sheet date but management reports good collection post period end.
- Soil sampling programme underway and new licence application made
- Soil sampling programme underway at the Corona Gold Project and expected to commence at the Bakers Gold Project in two weeks.
- Results expected for Corona Project in five weeks and the Bakers Project in seven weeks.
- Application made for a prospecting licence located adjacent to western edge of the Bakers Project targeting the gold bearing quartz-stockwork of the Dickey Lee gold mine.
NORTHLAND CAPITAL PARTNERS VIEW: Sunrise Resources is undertaking a soil sampling programme to generate targets for the first drill programme at the Corona and Bakers Gold Projects expected later this year. The Company hopes to be able to fast track its application for the Dickey Lee licence by including it in the existing Aboriginal Heritage Agreement. Sunrise notes that the Dickey Lee licence contains a drill ready target.