DiamondCorp (LON:DCP) – BUY*: NCP update note
Market Cap: £35m; Current Price: 9.1p; Target Price: 18.7p (from 16.4)
Markedly undervalued compared to peer group
- Forecasts upgraded, BUY rating Maintained and price target increased to 18.7p from 16.4p.
NORTHLAND CAPITAL PARTNERS VIEW: We have updated our forecasts following DiamondCorp’s interim results (01/09/15) also taking into account the delays to tunnel development due to fractured ground conditions. As a result, we have lowered our run of mine (ROM) production volume forecast for FY15 by 66% to c. 50,000t. We have also lowered our grade forecast from 45cpht to 43cpht and therefore our ROM carat production forecast has been lowered by 68% to c. 20,000cts for 2015. We assume the fractured ground conditions continue into 2016 and have lowered our tonnage forecasts for the year by 13% to c. 310,000t. We also lower the grade forecast to 47cpht from 50cpht, reducing forecast carat production by 20% to c. 135,000cts during 2016. ROM carat production levels for 2017 remain in line with our forecasts but we have increased 2018 and 2019 forecasts by 40% and 10% respectively following guidance from management. Other significant developments include the Company’s plans to recommence the treatment of 80,000t of tailings per annum. This is expected to yield c. 5,000cts per annum at a value of US$63/ct. The tailings will be blended and processed with the ROM ore to reduce water consumption, as the preservation of water resources will be important at Lace. While the near-term changes to our production forecast are largely negative the depreciation of the Rand against other currencies increases margins and has a significant positive effect on our valuation that increases to 18.7p from 16.4p
Tavistock Investments (LON:TAVI) – CORP: Product launch
Market Cap: £14.8m; Current Price: 5.1p
Collaboration with BlackRock to combine ETF and active strategies
- Collaboration between its subsidiary, Tavistock Wealth Limited, and BlackRock to offer a new portfolio range, Tavistock PROFILES, to Tavistock’s financial advisers and clients. PROFILES will combine the existing Tavistock ACUMEN Portfolios – baskets of passive investments, including ETFs – with a range of actively managed BlackRock funds.
- Tavistock portfolio strategists will use research data developed by BlackRock to target specific volatility ranges that match investor risk ratings. ACUMEN Portfolios and ACUMEN ONLY Profiles are constructed and optimised by Tavistock using iShares by BlackRock. The discretionary fund manager fee for the Tavistock PROFILES will be 0.125% plus VAT.
NORTHLAND CAPITAL PARTNERS VIEW: Collaboration with BlackRock expands Tavistock’s offering to clients by combining actively managed BlackRock funds with the existing passive investments and offers a cost-effective and flexible way to invest.
Petrel Resources (LON:PET) – CORP: Interims
Market Cap: £2.5m; Current Price: 2.5p
Interims:
- Offshore Ireland: JV partner Woodside Energy is ready to undertake a 3D seismic acquisition programme in Porcupine Basin. Petrel has also applied for three packages of acreage in the Irish Atlantic Margin Licensing Round.
- Ghana: Ghanaian National Petroleum Commission is actively considering the current re-application by Pan Andean Resources Limited over c. 1,500sq km of the shallow-to-medium depth part of the prospective Tano Basin.
- Iraq: No progress in the Wasit Governorate, a Shia controlled province between Baghdad and the Iranian border, where Petrel is involved via a 20% interest in Amira Hydrocarbons Wasit. Petrel incurs no costs.
- Operating loss of €148k (H1 FY14: €229k) but exchange rate differences of €237k resulted in a post tax profit of €90k (H1 FY14 loss: €188k). Cash of €1.2m (FY14: €1.3m).
NORTHLAND CAPITAL PARTNERS VIEW: Petrel’s main focus is in Offshore Ireland with JV partner Woodside Energy expected to start its 3D programme next year and Petrel awaiting the results of the most recent Licensing round. The situation in Ghana remains frustrating and the prospects for further immediate progress in Iraq look slim. Company remains comfortably funded.
Thor Mining (LON:THR) – SPECULATIVE BUY*: Final results
Market Cap: £1.5m; Current Price: 0.04p
LBT widens
- LBT during FY15 increased to £0.9m from £0.8m in FY14, largely due to an increase in corporate expenses.
- Net debt increased to £1.2m in FY15 from £0.9m in FY14.
- At the Molyhil Tungsten Project, Thor is hoping to secure finance for the project development in the near-term following the publication of the updated DFS during the financial year.
- During the financial year, Thor completed the acquisition of the Pilot Mountain Tungsten Project and reached an agreement to acquire the balance of the Spring Hill Gold Project. Thor expects to commence drilling at Spring Hill following ministerial assent for the acquisition.
NORTHLAND CAPITAL PARTNERS VIEW: FY15 was a challenging financial year for Thor Mining with the fall in the ammoniumparatungstate (APT) price and depressed market conditions resulting in continued delays to the development financing. Thor is continuing to advance its discussions with a number of parties regarding the financing for Molyhil. In the near-term we are awaiting ministerial assent for the acquisition of Spring Hill so the Company can commence a twinning drill programme at the project to test for a potential uplift in grade through the use of an improved assay technique.
Game Account Network (GAME.L): Interims
Market Cap: £30m; Current Price: 55p
Simulated gaming partnership in California
- Underlying net revenue, which excludes the impact of a system sale in the prior year, was -6% YoY to £2.9m (£3.1m). Strong growth in net revenue from simulated gaming in the US and Australia in particular which increased six fold YoY to £1.2m and now accounts for 41% of net gaming revenue compared to just 5% in the prior year. B2B recurring revenue was +43% YoY to £2m primarily linked to the increase in Simulated Gaming revenue. Game and platform development revenue however decreased by c. 51% YoY to £0.7m (£1.4m) excluding the impact of a system sale in the prior year.
- Clean EBITDA loss increased by £1.1m to £1.5m, again reflecting the lack of a system sale in the 1H15 adjusting for the system sale Clean EBITDA loss remains unchanged YoY at £1.5m. Balance sheet in healthy shape with £7.6m of cash after £3.2m was invested in its Internet Gaming System capability in the 1H15.
- The outlook for Simulated Gaming remains strong and the business is seeing strong demand for the product from casino operators in the US in particular. A further two operators in the US will launch in the 4Q15, San Manuel in California and Maryland Live in Maryland, which should further boost Simulated Gaming revenue particularly in FY16. The group continues to engage in discussions with regards to a system sale and is targeting a sale completion in either the 4Q15 or in early FY16.
NORTHLAND CAPITAL PARTNERS VIEW: As previously alluded to the slower than expected introduction of regulated real-money online gambling in the US is delaying developments for GAME, however the company’s Simulated Gaming product is clearly showing healthy growth with a six fold increase YoY and the outlook for Simulated Gaming looks encouraging. This also gives GAME an entry into a very large market ahead of any intra-State or inter-State real money online regulation in our view. However the market still awaits a system’s sale which remains a significant catalyst for the share price in the immediate future.
AdEPT Telecom (LON:ADT) – BUY: Death of director
Market Cap: £57.8m; Current Price: 260p
From Friday: Death of Deputy Chairman
- On Friday, it was announced that Christopher Fishwick, the Company’s Non-Executive Deputy Chairman, had died unexpectedly.
- The team at Northland Capital Partners extends our deepest sympathy to his family.