Motif Bio plc (LON:MTFB) – BUY*: Maiden interim results
Market Cap: £54m; Current Price: 50p; Target Price: 114p
Transformational six months
Motif announced its maiden interim financial results for the six months to June 30 2015.
These six months were transformational for Motif.
On 2 April 2015, the Company completed an AIM listing raising £2.8 million at 20 pence per share
Shortly after, the U.S. Food and Drug Administration (FDA) agreed to Phase III trials for the group’s flagship antibiotic iclaprim.
Also, the Company received QIDP designation granted by the FDA for iclaprim - post-period end - giving iclaprim up to ten years of market exclusivity once approved. This allowed the company to then raise £22 million at 50 pence per share to begin funding the Phase III trials.
We maintain our forecasts and reiterate our 114p Target Price.
NORTHLAND CAPITAL PARTNERS VIEW: The year to date has been a truly transformational period for Motif. The company has generated significant shareholder value. We expect this to continue for the foreseeable future. We reiterate our 114p Target Price. BUY.
Stratex International (LON:STI) – BUY*: H115 results
Market Cap: £10m; Current Price: 2.15p; Target Price: 7.8p
Costs reduced while moving to production
NORTHLAND CAPITAL PARTNERS VIEW: Stratex International’s H115 results reflect the Company’s focus on reducing costs and conserving cash while its 45%-owned Altintepe Gold Project, located in Turkey, is advanced to production in 2015 at no direct cost to Stratex. LBT for H115 remained in line with H114 at £1.4m, as a £0.2m reduction in administration expense was offset for by an increase in losses resulting from equity investments. Exploration expense in H115 was £0.5m compared to £1.2m in H114 and net cash was £2m in H115 down from £6.2m in H114 and £3.6m in FY14. Importantly, this is the last set of financials before Altintepe commences production (expected in September) and these H115 results reflect that transition. We expect the H215 results will reflect the ramp up phase of production at the mine and we conservatively assume the mine will produce c. 6,000oz Au in 2015. Production levels are then expected to increase to c. 30,000oz Au in 2016 and c. 40,000oz Au in 2017, generating increased levels of income for Stratex. We maintain our price target of 7.8p for Stratex which is currently 237% above its current market price. We have adjusted our forecasts to reflect our expectations of continued lower administrative costs along with several other minor changes.
Latham (James) (LON:LTHM) – BUY*: AGM statement
Market Cap: £135m; Current Price: 697p; Target Price: 80p
From yesterday: positive start to FY16
Revenue for the first four months increased 7% reflecting higher volumes traded, with more small orders delivered ex-stock. Direct sales have also increased. Margins are higher than the same period last year and also Q4 FY15. Bad debt has returned to more normal levels. Overall trading is in line with expectations.
Demand for both Timber and Panel products continues to improve, although the environment remain competitive. Capacity has been increased for specialist panels with further investment in racking at Hemel Hempstead and Thurrock. Negotiations have commenced for a new site in Yate and management has identified possible sites for the relation of the Wigston site.
Interims are scheduled for November 26th.
No change to forecasts, BUY rating or 800p price target.
NORTHLAND CAPITAL PARTNERS VIEW: Good start to the year with (+7% revenue) growth maintained across Timber and Panel products and an improvement in margins, reflecting a richer product mix as the company gains traction with innovative products, such as Accoya® modified wood and WoodEx engineered timber. These products offer higher gross margin but also enables Latham to differentiate itself in the market. Latham’s customer base spans multiple subsectors and there is little customer concentration and therefore benefits from the general improvement in economic activity. The planned relocation of Yate and Wigston, its two oldest sites, will dip into the Company’s cash reserves over the next three years but the balance sheet remains strong. We maintain our BUY rating and 800p price target.
SQS Software Quality (LON:SQS) – Acquisition
Market Cap: £179.7m; Current Price: 574p
Acquisition strengthens US presence
Acquisition of Galmont Consulting, a software testing consultancy in the US, for up to $22m. The consideration will be satisfied through existing cash resources, debt and the issue of up to 1.2m shares subject to performance criteria over the next 36 months. Initial consideration of $7.0m – split between cash and shares. Earn-out of up to $3m based on year 1 performance with the balance on the 36 month performance.
Galmont operates in the Mid-West of the US with a presence in Chicago, Dallas, New York and Kentucky. The acquisition complements SQS’s existing strength across the Banking, Financial Services and Insurance (BFSI) and Manufacturing sectors and adds capability in government and healthcare. In FY14, Galmont recorded revenue of $17.1m and PBT of $1.1m. The enlarged US business (existing SQS operations, Trissential acquisition and Galmont) had $62m in pro forma revenue.
NORTHLAND CAPITAL PARTNERS VIEW: Further strengthening of SQS’s US operations following April’s Trissential acquisition and Galmont also moves SQS into more government and healthcare work. There is an ongoing shift towards independent software testing and SQS is well positioned to capitalise meanwhile its focus on managed services is improving revenue visibility and margins.