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Northland Capital Partners View on the City Alliance Pharma, Hummingbird Resources and Telit Communications

Published: 08:09 13 Jul 2015 BST

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Hummingbird Resources (LON:HUM): Yanfolila update
Market Cap: £34m; Current Price: 32p
Upside indicated from grade control drilling

  • Hummingbird Resources has announced the interpretation of its recently completed grade control drill programme.
  • This work has seen a 15% increase in like-for-like gold grade over the grade control orientation panel to 5.24g/t Au.
  • This drilling also confirms the high grade zone with 12,200t at 7.7g/t Au.
  • A closer spaced grade control drill programme will be completed prior to the commencement of mining.
  • Plant earthworks are ongoing.
  • From Friday: Hummingbird was awarded a 25 year Mineral Development Agreement by the Government of Liberia for the 4.2moz Au Dugbe Gold Project. The next stage in the process will be the signature of the President of Liberia and its ratification by the National Legislature of the Republic of Liberia, following which the MDA will be passed into law.
  • Forecasts, rating and price target remain under review following the finalisation of the recently completed technical studies that have indicated an improvement to the projects economics.

NORTHLAND CAPITAL PARTNERS VIEW: Positive to see Hummingbird Resources continuing to demonstrate further upside potential on the already robust economics at the Yanfolila project. This work completed at the Komana East pit (332,5000oz Au recoverable) has demonstrated a consistent increase in grade relative to the orientation panel and if the grade increase continues over the whole deposit we would expect to see a significant improvement to the project returns. This upside would be in addition to the expected improvements to the operating metrics resulting from the improved pit designs and mine scheduling (17.06.15). The updated financial model based on these improvements is currently being finalised.

Alliance Pharma plc (LON:APH) Pre-close trading statement
Market Cap: £104m; Current Price: 45p
Trading in line with management’s expectations

  • Alliance Pharma announced its pre-close trading update ahead of the announcement of its interim results for the six months ended 30 June 2015.
  • The Group continues to perform in line with management's expectations.
  • Sales were approximately £22.8m (H1 2014: £21.4m) in the first half of the year.
  • Key product Hydromol™ generated sales of £3.3m in the period, 10% higher than in the same period in the prior year.
  • ImmuCyst volumes remain uncertain as partner Sanofi's facility ramps up production.
  • Management remains confident of the outlook for the full year.

NORTHLAND CAPITAL PARTNERS VIEW: Alliance continues to demonstrate steady progress. The group’s diversified and expanding product base allows it to deliver steady growth, despite setbacks in certain key product lines—such as ImmuCyst.  

Telit Communications (LON:TCM): Trading update
Market Cap: £340.5m; Current Price: 296p
Good growth in H1

  • H1 revenue expected to be +13.2% at c. $156.2m. This includes $11.1m (+20.6%) from Telit’s Platform as a Service (PaaS) through its service division. Net cash is expected to be flat (FY14: net debt of $3.9m).
  • Guidance for FY15 of revenue of $347m to $354m and adj. EBITDA of $42m to $47m. This implies H2 growth of 22% to 27% over H1 and FY growth of 18% to 20% and adj. EBITDA growth of 21% to 35%.
  • H1 results on August 3rd.

NORTHLAND CAPITAL PARTNERS VIEW: Solid pre-close statement with FY guidance in line with consensus and pointing to good levels of growth in H2. This includes a larger contribution from Telit’s Platform as a Service (PaaS) that provides ongoing revenue through data management, application management, operational management and connectivity. On the basis of consensus estimates, Telit is trading on 20.3X FY15 EPS, falling to 13.7x FY16 – not overly demanding given the growth profile of the business and the potential in the Internet of Things.

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