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Northland Capital Partners View on the City Ferrex Plc, Safestyle UK, Stratex International and Lombard Risk Management

Northland Capital Partners View on the City Ferrex Plc, Safestyle UK, Stratex International and Lombard Risk Management

Stratex International (LON:STI) – BUY*: Goldstone Resources update

Market Cap: £5m; Current Price: 1p; Target Price: 6.8p 

  • Auger programme defines two new target zones
  • Goldstone Resources (GRL.L), a company where Stratex owns a 33.45% interest, has announced an operational update at its Homase/Akrokerri Gold Project, located in Ghana. Goldstone has completed a 1,332 hole auger sampling programme over eight high-priority gold targets located along strike from the 602,000oz Au Homase/Akrokerri gold deposit.
  • Results have defined two target zones (Figure 1): 1) a 1,500m anomaly at the AK02 prospect, located to the southwest of the Homase/Akrokerri gold deposit; 2) a 800m anomaly, the AK04 prospect that may be an extension of the AK02 anomaly. Both targets appear to occur over a flexure of the structural zone that hosts the existing resource to the northeast.
  • Three lines of shallow reverse circulation drilling (1998-1999) may have intersected part the AK02 zone, with results including 5m at 1.3g/t Au from 39m (99AKRC083), 6m at 1.6g/t Au from 24m (98AKRC028) and 2m at 3.1g/t Au from 21m (98AKRC021). However, the results from the auger programme suggest that the strongest anomalies have not been drill tested to date.
  • Historic RC drilling over the 800m AK04 anomaly only took place over 100m of strike and had mixed results that include 1m at 8.4g/t Au from 20m (00AKRC109) and 3m at 2.3g/t Au from 40m (00AKRC104). 700m strike of the anomaly has yet to be tested. Close-spaced infill auger sampling is now underway to support drill target definition.
  • No change to forecasts, rating or price target.
  • Figure 1: Map of the Homase/Akrokerri Gold Project

NORTHLAND CAPITAL PARTNERS VIEW: It is positive to see that Stratex’s acquisition of a 33.45% interest in Goldstone Resources already demonstrating the potential for further upside at its Homase/Akrokerri Gold Project. The initial resource of 602,000oz Au at Homase/Akrokerri forms an important base for Goldstone to build on by discovering additional proximal satellite orebodies, creating a larger resource base on which an economic operation can be established. The Company is focusing its efforts on establishing near surface gold oxide mineralisation that can be combined with the existing 100,000oz Au oxide resource and mined and processed at low cost, creating a potentially high margin operation.


Ferrex (LON:FRX) – CORP: Nayega update

Market Cap: £6.88m; Current Price: 0.6p 

  • Completion of the DFS for the accelerated start up
  • Ferrex has completed a Definitive Feasibility Study (DFS) for an accelerated start up and defined a maiden Ore Reserve at its Nayega Manganese Project, located in northern Togo.
  • The DFS sees a reduction in both capital and operational costs combined with an accelerated start-up of a 250,000t operation, improving the project’s economics.
  • A maiden Ore Reserve of 8.48mt at a grade of 14% manganese (Mn) has been defined.

NORTHLAND CAPITAL PARTNERS VIEW: The completion of the Definitive Feasibility Study and the establishment of a maiden Ore Reserve at the Nayega Manganese Project, located in Togo, are major milestones for Ferrex. The updated study results in the simplification and modularisation of the plant but other elements of the study remain largely unchanged. A third party review of the DFS is currently underway as part of the financing due diligence, and further details of the DFS will be published once the review is completed and the mining permit is issued.


Safestyle (LON:SFE): Trading Update

Market Cap: £154m; Current Price: 198p 

  • Current trading in line with expectations 
  • Following on from the positive statement at the time of finals in March, the business appears to have made a good start to the new financial year where order intake was +2.7% YoY in the first four months and this compares to strong prior year comparatives. 
  • Alluding to cost increases relating to glass prices and costs relating to regulatory requirements however a sales price increase was introduced in January 2015 which helped offset some of these cost pressures so the Board is confident in delivering growth in revenue and profits in the current year. 
  • In FY14, the business delivered +9% YoY revenue growth to £136m on the back of increasing the average unit sale prices and average order value, and combined with a 7% reduction in operating costs the business produced PBT of £16.8m, +10% YoY and c. 3% ahead of consensus forecasts. Consensus is looking for c. 4% PBT growth in FY15. Given the positive start to the new year, this looks achievable. 

NORTHLAND CAPITAL PARTNERS VIEW:  The share price has performed well since the final results in March +14% and since listing in December it is +87%. The stock rating has improved and the shares now trade on c. 11.5x consensus FY15 EPS from below 10x previously, and still not overly demanding in our view. With a prospective dividend yield of c. 5% the story should continue to attract attention in our view. 


Lombard Risk Management (LON:LRM) – Prelims

Market Cap: £30.0m; Current Price: 11.4p 

  • FY results in line; departed founder and CEO returns as NED
  • Revenue +5.4% to £21.5m (recurring flat at 42%). Licence revenue +1% and recurring revenue +5.8%. Adj. EBITDA down 23.3% to £4.6m; PBT down 47.7% to £2.3m and basic EPS down 58% to 0.87p. Capitalised R&D spend was £5.1m (FY14: £5.3m).
  • Net cash down fractionally at £2.2m with cash generated from operations of £5.7m (+£0.5m) offset by capitalised R&D, loan repayments (£0.7m) and dividends (£0.2m). Proposed final dividend of 0.045p bringing the FY DPS to 0.08p (+6.7%). 
  • Outlook: Positive with further initiatives from the European Banking Authority with more revenue from ALMM and LCR expected. First contract delivered for the new US Federal Reserve reports FRY-14 and more revenues expected in FY16 along with the IOSCO changes. Further growth expected from the Compliance area. Larger contribution from the partner channel. Record recurrent revenue at c. £9.5m and order book at £5.9m.
  • Following the announcement that John Wisbey, founder, CEO and major shareholder (38%), was stepping down with immediate effect (19/05/15), it has been announced that he will continue to serve as a NED. John McCormick has stated his intention to resign as a NED. Philip Crawford will act as Executive Chairman on an interim basis.

NORTHLAND CAPITAL PARTNERS VIEW: Results overshadowed by the sudden departure of John Wisbey, founder, CEO and major shareholder, on Tuesday and his return as an NED today. Wisbey has indicated no immediate intention to reduce his holding (38%) but he is likely to be perceived as overhang in the market. Unsurprisingly, Lombard Risk has been closely identified with Wisbey and hence the selection of a new CEO is key. FY results were in line with forecasts that were revised down in March following some regulatory delay that resulted in some contract deferrals. The level of capitalised R&D spend remains considerable and there was also a noticeable spike in operating costs in H2. We would look for a return on that investment. 

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

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

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

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