Latham (James) (LON:LTHM) – BUY*: Prelims and forecast upgrade
Market Cap: £133.7m; Current Price: 682p; Target Price: 800p from 740p
Prelims: Continues to deliver
- FY15 performance: FY15 revenue was marginally ahead of forecasts and was +7.2% to £174.9m (NCPe: £174.5m). There was slowing of growth in H2 (6.0% versus 8.4%) reflecting a stronger Q4 FY14 comparator. A 30bps improvement in gross margin to 17.7%, due to an improvement in mix, resulted in an 8.6% increase in gross profit to £30.9m. This outstripped a 7.6% growth in operating costs and hence adj. EBIT increased 10.5% to £10.6m. Reported EBIT fell, reflecting FY14’s exceptional defined benefit gain (£1.8m).
- Investment programme: Net cash at £10.6m was up £1.5m on FY14 but flat on H115 with a £1.0m expansion in working capital, £0.6m towards the Pension shortfall and £0.7m paid in dividends. Bad debt levels were low for the year overall in spite of a Q1 spike. We expect the redevelopment of the two oldest sites to be phased over the next three years and this will dip into cash reserves but the balance sheet remains strong and the dividend remains well covered.
- FY16 upgrades result in an increased price target of 800p (from 740p). We maintain our BUY* rating.
NORTHLAND CAPITAL PARTNERS VIEW: James Latham continues to perform well. FY15 revenue at £174.9m (+7.2%) was slightly ahead of forecasts that were upgraded at the interims and April’s pre-close and adj. PBT at £10.1m (+20.4%) was 4% better than forecast - upgraded at the interims. Revenues grew across both the Panel and Timber divisions with strength in Accoya® modified wood and WoodEx engineered timber. Latham is successfully taking on innovative products that complement its core products, differentiate its offering and boost gross margins. FY DPS of 12.5p (+9.6%) and is comfortably covered (3.2x). Planned upgrade to older sites will dip into cash over the next three years but balance sheet remains strong. Good start to FY16 (+7% in the first two months) leads to P&L upgrades and we introduce FY17 forecasts. We maintain our BUY rating and increase our price target to 800p from 740p.
Premier African Minerals (LON:PREM) – SPECULATIVE BUY*: FY14 results
Market Cap: £16.8m; Current Price: 2.75p
LBT reduced to US$0.5m
- LBT reduced to US$0.5m in FY14 from US$4.7m in FY13 that included US$2.1m of impairments. The dominant cause for the substantial reduction in loss in FY14 was the US$2.3m obtained from the sale of Prem’s interest in Cicum Minerals.
- Net debt of US$0.6m in FY14 decreased from US$2.8m in FY13.
NORTHLAND CAPITAL PARTNERS VIEW: Premier African Minerals’ FY14 results reflect the significant progress the Company has made to date in moving its RHA Tungsten Project, located in Zimbabwe, to production. RHA has now produced its first concentrate and the plant is being fine-tuned while operations ramp up. This year should see stable revenue generation from production at RHA and we expect profits to be redeployed towards the increased Phase 2 production at RHA and the advancement of the Zulu Lithium Project.
Alexander Mining (LON:AXM) – BUY*: US patent
Market Cap: £1.9m; Current Price: 0.75p; Target Price: 2.6p
Patent for a Method of Leaching of Copper and Molybdenum in the US
- MetaLeach Limited, a subsidiary of Alexander Mining, has been granted a patent for a Method of Leaching of Copper and Molybdenum in the US, patent number 9,011,574.
- This patent forms part of MetaLeach’s family of core AmmLeach® technologies and has a standard term of twenty years from when the patent was first filed (29/07/11).
- No change to forecasts, rating or price target.
NORTHLAND CAPITAL PARTNERS VIEW: Further IP protection for Alexander Mining. Ensuring that the Company’s IP is protected is key for the future monetisation options. The Company is currently pursuing a number of potential commercialisation routes including; a definitive licence agreement with Ebullio Resources Fund and RCR Quantum Madencilik for the Silvas copper project in Turkey, and a HoA with Compass Resources from use of its technology on the Browns Oxide Copper-Cobalt-Nickel Mine in Australia.