Sunrise Resources (LON:SRES) – SPECULATIVE BUY*: Update note
Market Cap: £1.2m; Current Price: 0.18p
What to expect in 2016
NORTHLAND CAPITAL PARTNERS VIEW: Sunrise Resources is focused on generating cash flow from its industrial mineral projects and adding value through mineral discovery at its exploration projects. 2016 will see Sunrise undertake a second phase of drilling at the Bay State Silver Project, located in Nevada, following the initial ultra-high and high-grade drill results from the first three holes. An additional fourteen holes have been permitted at the Project and Sunrise is expecting to commence the follow up programme once the snowfall has cleared, potentially Apr-16 to May-16. If the results of this programme are positive and define additional high grade intercepts, there is the potential that Sunrise could produce a maiden mineral resource estimate at the project.
Fishing Republic (LON:FISH) – BUY*: Trading Update
Market Cap: £4.3m; Current Price: 16p; Target Price: 36p
Revenue marginally ahead of FY15 forecasts
Positive update from Fishing Republic (FISH LN; Buy; TP 36p) where revenue increased by c. 21% YoY to c. £4.1m and marginally ahead of our forecasts for the business for FY15. It also implies the business generated c. £2.2m of revenue in the 2H15, which was +16% on the 1H15 and an impressive +42% in the 2H15 on the 2H14, clearly demonstrating the benefits of deploying capital raised at the IPO in June 2015.
In December, the company raised a further £0.5m in order to increase the store network from eight stores to ten stores in FY16 and management confirms today that the new larger store format in Hull opened last week and the new stores in South Birmingham and Crewe are on track for opening in March 2016. Furthermore, the integration of Cotswold Angling, near Swindon, acquired before Christmas, is proceeding well.
We recently increased our forecasts for Fishing Republic on the back of the acquisition and store expansion, where revenue increased from a previous £5.1m to £6.5m and EBITDA from c. £0.6m to c. £0.7m, no changes to forecasts today.
NORTHLAND CAPITAL PARTNERS VIEW: Positive update which reveals the business is clearly benefiting from the listing and capital injection. Growing to ten stores in FY16 not only increases the geographic footprint but also exposes the business to customers in the South of England through its Swindon store. The shares trade on 8.3x FY16 earnings and c. 5.6x EV/EBITDA which is undemanding. We reiterate our Buy rating and 36p price target.
Keras (LON:KRS) – CORP: Grants Patch update
Market Cap: £6m; Current Price: 0.5p
Secures £563,889 Loan Note to fund gold production
Keras Resources has secured a £563,990 unsecured loan note, before expenses, that will provide the working capital required to commence production at the Grants Patch Gold Tribute Project in Q216.
The loan note has an 8% redemption premium, 10% coupon (payable upfront) and comes with a £1’s worth of warrants for every £1 in the note. The warrants have an exercise price of 0.5p and are valid for two years.
Dave Reeves, Managing Director of Keras, and Peter Hepburn-Brown, Non-Executive Director, are subscribing for £194,444.5 and £50,000 of notes respectively.
NORTHLAND CAPITAL PARTNERS VIEW: It is very positive to see Keras Resources’s management team backing themselves so strongly, providing over 40% of the loan capital to see the Grants Patch Gold Tribute Project into production. The Company expects to be cash flow positive next quarter as it ramps up to production of 20,000oz-30,000oz Au at an all-in sustaining cost (AISC) of c. A$1,200/oz with the current gold price in Australian Dollars of A$1,600/oz.
DiamondCorp (LON:DCP): Directorate change
Market Cap: £31m; Current Price: 7p
Nick Allen retires and Christopher Ellis joins
Nick Allen is retiring as a Non-Executive Director of DiamondCorp.
Christopher Ellis has been appointed as a Non-Executive Director.
Forecasts, rating and price target remain under review.
NORTHLAND CAPITAL PARTNERS VIEW: Mr Ellis is an investment banker with over twenty years’ experience in London and US. The latter half of his career has been centred on all financial aspects of the diamond supply chain and he has represented and advised industry banks, cutters & polishers, jewellery manufacturers and retailers. His appointment should fill the skills gap left by Mr Allen’s retirement with his significant knowledge base of the downstream diamond industry.
Keywords Studios (LON:KWS): Trading update
Market Cap: £109m; Current Price: 204p
FY15 comfortably ahead of consensus
FY15 (Dec) adj. PBT comfortably ahead of consensus with results due April 5th. Performance driven by strong pro forma organic growth, with the continued good performance of the existing service lines complemented by the newer services of customer support and art creation.
Acquisitions during the year of Reverb and Kite Team, that have provided a presence in South America, Alchemic Dream that added customer support services, and Liquid Development that increased its presence in art creation. Looking at further acquisitions having raised a further £10m in November.
NORTHLAND CAPITAL PARTNERS VIEW: Positive update with Keywords successfully expanding its service offering, geographic footprint and customer base and is set to beat consensus estimates (EPS: 8.87p). Video game developers and publishers are looking to outsource more services associated with the creation, distribution and support of content and Keywords is well placed to benefit. The sector remains highly fragmented that provides ongoing opportunities for Keywords in its buy-and-build strategy. Shares are trading on 23.0x FY15 (before upgrades) and 18.6x FY16 and remains our preferred way of gaining exposure to the video games market.