Starcom (LON:STAR) – CORP: Major supply agreement
Market Cap: £2.2m; Current Price: 2.25p
Supply and support agreement
- Supply and support agreement with Pinnacle Systems Limited, based in Kenya, for the supply of Helios units. Under the agreement Pinnacle has committed to purchase many thousands of Helios units over a three year period and will be responsible for monthly recurring fees for the use of Starcom’s software service. The value of the contract based on the quantities specified is $5.5m – Starcom’s largest to date.
- Pinnacle is a market leader in road safety, fleet management and vehicle security systems in the Eastern and Central Africa regions. It is also one of the largest suppliers of truck speed monitoring systems in Kenya, where such systems are mandatory.
Northland Capital partners view: A significant and substantial contract for Starcom with Pinnacle committing to thousands of Helios units over the next three years and a minimum contract value of $5.5m – Starcom’s largest to date. The technical advantages of the Starcom product set has been demonstrated in a number of competitive situations but the ramp up in revenues has been disappointing. Today’s announcement, coupled with the North American technology and distribution partnership with Sato Global Solutions (12/11/15), the distribution order with Global Tracking Technology for Ethio Telecom (15/10/15) and the Helios Hybrid order (08/09/15) provides increasing confidence for 2016 and beyond.
Sunrise Resources (LON:SRES) – SPECULATIVE BUY*: County Line update
Market Cap: £1.2m; Current Price: 0.18p
Agreement to lease County Line mining claims to EP Minerals
- Sunrise Resources has reached an agreement to lease its County Line Diatomite claims to EP Minerals for 25 years, renewable for a further two 25 year periods.
- EP Minerals has 18 months to evaluate the 109 claims and select no more than 60 contiguous claims to Lease.
- Should EP Minerals extract diatomite from the clams Sunrise will receive an undisclosed royalty payable every six months from the start of production.
- In order to maintain the lease and insure timely advancement of the project, EP Minerals must make minimum payments of; US$450,000 within 18 months and three years thereafter a payment of US$75,000 and annual payments of US$150,000 in each subsequent year.
Northland Capital partners view: This agreement should allow Sunrise Resources to deliver on its strategy to develop sustained cash flow from its industrial mineral projects at a low capital cost. The agreement does give the leaser, EP Minerals, an extensive time (18 months) to evaluate the licences but after this period the US$450,000 payment should ensure that EP Minerals takes up the lease or returns the projects to Sunrise. Importantly, the agreement gives Sunrise the near to medium-term potential to realise value from one of its projects at no additional cost to the Company.
Amino Technologies (LON:AMO) – BUY: Trading update
Market Cap: £75.5m; Current Price: 107p; Target Price: 155p
Pre-close: FY15 in line with revised expectations
- FY15 (November) trading in line with market expectations (revenue, PBT and exceptional charges) following the profit warning at the end of October. Net cash at £2.1m was better than our neutral forecast. Management has reaffirmed its progressive dividend policy.
- Sales team has been restructured to addresss the execution problems of H2. The new integrated sales team across the Amino and Entone business will be led by Steve McKay, who was CEO of Entone and led Entone’s international expansion.
- Integration of the Booxmedia and Entone acquisitions is on schedule. Entone has strengthened the Group’s North American presence with a number of direct T2 customers and enlarged the customer base in Western Europe. Eastern Europe remains more challenging.
- Julian Sanders, who previously acted as interim CFO, will continue in the role in the current absence of Julia Hubbard.
- P&L forecasts unchanged but increase to forecast cash, BUY rating and 155p price target unchanged.
Northland Capital partners view: Management has taken swift action following the disappointing update at the end of October. This was a failure of sales execution in H2 with the two acquisitions (Entone and Booxmedia) distracting management. The addition of Entone has provided a ready-made sales resource and the company now benefits from larger scale with the additional growth potential of the Booxmedia end-to-end cloud video-on-demand platform. The Eastern European market remains tricky with the potential consolidation of a major South Eastern European customer but we maintain our BUY rating and 155p price target.
DiamondCorp (LON:DCP): Corporate update
Market Cap: £27.7m; Current Price: 7.4p
IDC loan reschedule and proposed £4m placing
- DiamondCorp has received IDC approval to reschedule the ZAR220m loan, with interest and capital now repayable from 01/02/17. As part of this, the interest rate will increase to 3.2% plus South African prime (9%) from 2% plus prime. As a result, the loan principle and capitalised interest will increase from ZAR258m at the end of Jan-16 to ZAR311m by 01/02/17 (c. £14.4m).
- Alongside this, the Company is proposing a placing to raise £4m for additional working capital and to fund the production ramp up following the delays resulting from the fractured ground conditions and delay with the conveyor belt installation, as well as funding the coupons on the Tiffany loans and UK bonds.
- Forecasts, rating and price target under review.
Northland Capital partners view: DiamondCorp has overcome a number of teething issues as it developed the Lace Diamond Mine, located in South Africa. The difficult ground conditions on the 290m level and the issues with the conveyor belt have meant that the Company is around four months behind its production schedule. This delay in the production schedule and resulting delay in diamond sales combined with the higher cost resulting from the difficult ground conditions has used up the Company’s cash contingencies leading to the requirement for additional working capital.
Churchill Mining (LON:CHL) – SPECUALTIVE BUY*: ICSID Arbitration update
Market Cap: £25m; Current Price: 17p
From yesterday: Completion of post hearing briefs
- Following the document authenticity hearing (03/08/15-10/08/15), the Tribunal set out a number of questions to be addressed in two post-hearing briefs. Churchill and Indonesia submitted their first briefs in October 2015 and the reply briefs in November.
- Churchill’s post-hearing submission focused on: (i) the large and diverse body of evidence that shows that the allegedly forged mining licences were in fact authorised by the Regency, (ii) the legal and factual consequences of Indonesia’s refusals and failures to produce the documents ordered by the Tribunal, and (iii) the consequences of Indonesia’s failure to call as witnesses a number of key Regency officials that were directly involved in the event in question.
- On the 04/06/15, Churchill had noted that Indonesia no longer alleged that Churchill participated in the alleged scheme to defraud Indonesia, however, in its first-round of post-hearing brief Indonesia changed its case again and now makes allegations of forgery and fraud against Churchill, these allegations were not part of the case it presented at the August hearing.
- These fresh allegations focus on a single Churchill executive who was not present at the August hearing and who Indonesia has never requested for cross examination. Churchill replied to these allegations in its post-hearing briefs and noted that despite the years of police investigations not one Churchill employee or officer has ever been charged in connection with this affair. Churchill has also asked that the Tribunal declare that Indonesia is barred from changing its case and that late change of case threatens Churchill's right to procedural fairness.
Northland Capital partners view: The filing of post-hearing briefs by Churchill Mining and Indonesia represents the close to the document authenticity stage of the proceedings and the tribunal will now consider the submissions, it is not known how long this process will take.
Bilby (LON:BILB): Trading update
Market Cap: £39.7m; Current Price: 116p
From yesterday: Some slippage at Greenwich but substantial framework won
- Some slippage in a P&R contract with Greenwich Council that was originally expected to start in August 2015 and has now commenced. Although P&R did undertake some additional work during the delay, it was lower margin and hence P&R’s trading performance for FY16 is expected to be marginally below previous board expectations.
- Successful integration of Purdy that was acquired in July 2015. Bilby is beginning to benefit from its increased scale and will target additional customer synergies and opportunities.
- Since period end, P&R has won a significant framework tender for gas support work for the South East Consortium, a consortium of housing associations responsible for more than 140,000 properties. P&R was ranked as the first placed contractor and this could represent the largest scope of prospective work to date. The framework runs for four years with contracts starting in 2016 for up to seven years. Purdy was ranked second supplier of choice for electrical services.
- Katie O’Reilly has been appointed FD. David Ellingham will assume the new role of Managing and Business Development Director and Darren Dunnett will step down as MD of Bilby to focus on servicing P&R’s expanding order book.
- Interim results scheduled for December 9th.
Northland Capital partners view: The share price fell c. 17% yesterday as investors focused on the Greenwich Council slippage rather than the South East Consortium tender win that represents a considerable revenue opportunity for both P&R and Purdy going forward. Some slippage in contracts is not abnormal in the Public sector and Bilby has been able to infill some other services and the original contract has now commenced. The shares have performed well since IPO in March and are still up 95% in spite of yesterday’s correction, trading on 16x FY16 and 14.3x FY17 EPS.