TechFinancials Inc. (LON:TECH) – CORP: Interims
Market Cap: £13m; Current Price: 19.5p; Target Price: Under review
B2B continues to grow at healthy rates, OptionFair below expectations
- H1 (June) total revenue increased by c. 3% YoY to $7.34m. Gross margins increased by a healthy 900bps to 71% and as a result gross profit was +16% to $5.18m. EBITDA however decreased by 31% YoY to $0.55m as a greater proportion of R&D costs were expensed compared to the prior comparative period, a swing of c. $0.6m. Furthermore, the company has incurred additional cash costs associated with being a publicly quoted company. Finally, the business produced $0.4m of net operating cash though this was offset by capital investment in the period. The balance sheet is in a strong position with $4.6m of cash as at the end of June 2015.
- TechFinancials’ core (B2B) software licencing business showed strong YoY growth where revenue was +33% to $4.03m and 17 new software contracts were signed to the platform in the 1H15. The total number of brands as at the end of June 2015 was 65 compared to 48 at the end of 2014.
- OptionFair, (B2C) performance in the 1H15 was disappointing (as flagged in August’s trading update) and affected by senior management’s decision to reduce marketing investment combined with the impact of new CySEC regulations in Cyprus, which resulted in a lower than expected rate of customer conversion, primarily in the 2Q15. Revenue in OptionFair decreased by 20% YoY to $3.3m.
- Outlook; changes to the management team and to operations in Cyprus have been instigated in order to restore and improve the rate of customer conversion within OptionFair, however these changes are not expected to take effect in FY15 in order to enable OptionFair to achieve previously expected targets and as per the trading update on 21 August the company does therefore not expect to meet previous market expectations. The Board expects OptionFair to return to a higher level of customer conversion and improved profitability in FY16.
NORTHLAND CAPITAL PARTNERS VIEW: Despite the disappointing performance in OptionFair (B2C) the B2B software business, which is central to our investment case, continues to perform strongly and 17 brands were added to the software platform in the 1H15, which now stands at 65 brands. Furthermore, the B2B model in our view helps to diversify the business across multiple jurisdictions and multiple customers and with the new simplified FOREX platform now up and running this should further aid the business in winning additional customers to the platform. Finally, the business remains well capitalised with $4.6m of cash on the balance sheet in order to grow. Our forecasts and price target are under review.
Stratex International (LON:STI) – BUY*: Altintepe update
Market Cap: £10m; Current Price: 2.2p; Target Price: 7.8p
Short production delay
- Cold commissioning is completed but unseasonal rains have led to a minor delay in the completion of the heap leach pad. Production is now expected to commence in October 2015.
- We have decreased out expected production for 2015 for the mine from c. 10,000oz Au to 8,000oz Au. We maintain our BUY rating and price target 7.8p per share
NORTHLAND CAPITAL PARTNERS VIEW: The minor delay in gold production at Stratex’s 45%-owned Altintepe Gold Project, located in Turkey, is frustrating but assuming as it is expected to be less than a month it has no significant effect on our forecasts or price target.
Savannah Resources (LON:SAV): Block 4 update
Market Cap: £4.9m; Current Price: 1.95p
High grade gold identified at the Salahi 1 Prospect
- Savannah Resources has identified additional high grade gold mineralisation at the Salahi 1 Prospect located in Block 4, Oman.
- The additional gold mineralisation is located in several gossanous outcrops located between the Salahi Main Gossan and Salahi North Prospect with individual grab samples returning anomalous gold grades between 0.1g/t Au and 13.9g/t Au. Anomalous gold has now been defined over a strike length of over 1km with widths up to 26m, though 500m of this strike has not yet been tested. It remains open to both the north and south.
- Additional surface sampling is planned.
- FIGURE 1: Location of the Salahi Main Gossan and Salahi North Gossan with recent grab samples
NORTHLAND CAPITAL PARTNERS VIEW: Positive grab sample assay results from Savannah Resources with the Company continuing to demonstrate the gold potential of its Omani Projects alongside the considerable potential for VMS Copper. Savannah is now looking to undertake additional sampling in the area located between the Salahi Main Gossan and Salahi North Gossan (yellow oval in Figure 1).
Crimson Tide (LON:TIDE): Contract win
Market Cap: £8.2m; Current Price: 1.8p
Contract with leading UK retailer
- mpro5 contract win with one of the leading UK retailers worth c. £1.1m over the 36 month term. Roll out expected to start by the end of this year with invoicing building during deployment, expected to be complete during H1 2016.
- mpro5 has been successfully piloted over a long time for use in the management of insurance claims and retail store safety. The deployment includes a mobile device, website and integration with third party systems. The software is hosted on Microsoft Azure.
- Impact on forecasts, rating and price target.
NORTHLAND CAPITAL PARTNERS VIEW: Crimson Tide’s mpro5 ‘mobility as a service’ platform has been proved in a range of vertical markets including retail, facilities management, logistics and healthcare. Dealing with large organisations means that sales cycles are often long but with a small operating cost base, such contract wins can have a material impact on profitability. There is scope to sell additional licences into this customer and replicate with other retailers in the UK and internationally. Crimson Tide reported a small PBT (£80k) in FY14 on revenue of £1.2m and this is forecast to increase to £0.2m this year and £0.4m in FY16, before any revisions on the back of today’s news.