Octagonal (LON:OCT) – BUY*: Trading update
Market Cap: £8.7m; Current Price: 1.6p; Target Price: 2.8p
Update on trading at GIS
Despite a challenging 2H16, as a result of reduced activity in investment banking, GIS management responded quickly by reducing staffing levels and operating costs where possible. This also coincided with a migration onto a next generation operating system where savings were previously ring-fenced.
GIS’s results are expected to be in-line with expectations with revenues exceeding £4.2m, ahead of our forecast £4.1m, and EBITDA of c. £1.1m again ahead of our £1.0m forecast for GIS for FY16E.
GIS executed over 82,000 transactions during the year and saw a marked improvement particularly in March 2016 which continues today. Management remain positive with regards to the outlook for GIS.
No change to forecasts at this stage, we reiterate our BUY rating and 2.8p price target, full year results due in June 2016.
NORTHLAND CAPITAL PARTNERS VIEW: Positive trading update from the Company which shows GIS trading comfortably in line with our forecasts, despite citing challenging conditions in the 2H16. There is headroom for considerable upscaling of trading volumes which will have a positive impact on profit margins for the business. Furthermore, with minimal balance sheet risk and a short working capital cycle the majority of profits converts into cash. This will enable the business to expand its service offering and fund a progressive dividend policy. The shares trade on 7.8x FY17 earnings, we maintain our BUY rating and 2.8p price target.
ValiRx Plc (LON:VAL) – CORP: New patent granted
Market Cap: £4.7m; Current Price: 10p
US patent grant for VAL401
ValiRx announced that ValiSeek Limited, the joint venture between ValiRx and Tangent Reprofiling Limited, has received notification today from Tangent that a US patent covering the use of VAL401 as a treatment for adenocarcinoma has been allowed by the US patent office.
Adding to the earlier US patent grant covering the composition of formulation for VAL401, as announced on 14 May 2015, the Directors of ValiSeek believe this announcement to be further validation of the innovative scientific foundation behind and supporting the VAL401 project just as the upcoming clinical trial has been designed to provide validation of the clinical applicability.
NORTHLAND CAPITAL PARTNERS VIEW: VAL401 is a reformulation of a generic drug which has over two decades of clinical use in the treatment of mental disorders. The drug is now being reformulated for the treatment of cancers, given pre-clinical data supporting these new indications. Due to its established safety profile, ValiRx expects to soon commence a Phase 2 clinical trial on the treatment. Today’s patent grant further strengthens the IP around this promising reformulation.
MediaZest (LON:MDZ) – CORP: Pre-close Trading Update
Market Cap: £1.9m; Current Price: 0.18p
“best-ever financial performance”, positive EBITDA.
In a Trading Update for the year ended 31 March 2016, MediaZest, the creative audio-visual company, reported its “best-ever financial performance”.
MediaZest reports that it expects FY’16 of “not less than £3.14 million (prior year £2.48 million)”, with improvements in margins and reductions in overhead costs, resulting in a maiden positive full year EBITDA of approximately £50,000 (prior year EBITDA loss of £625,000). Consequently the retained loss is reduced from £656,000 to approximately £100,000 ).
Cash in hand at 31 March 2016 was similar to the prior year end (March 2015 - £13,000). The Group retains its banking facilities, including an invoice discounting arrangement of up to £500,000, reporting that the amount in use as at 31 March 2016 was approximately £230,000).
Commenting on trading performance, the Group notes that Q4 was “as anticipated quieter than the previous three quarters”, with several rescheduled projects resulting in a shortfall in projected profitability for the year. However, current clients continued to place business, with the addition of new clients including Estée Lauder and Mamas & Papas. MediaZest reports that recurring revenues have grown strongly in the last 12 months, nearly doubling in that period, in line with Group strategy.
In other areas, two face recognition systems live in retail stores; almost £1.0m of new business has been closed for the current year; and pitches are underway for several large projects, two of which, MediaZest says, “have the potential to be transformative for the business”.
Recruitment of a replacement Finance Director is well underway and the Board intends to announce an appointment in the next few weeks.
Chief Executive, Geoff Robertson, said: “The Board is pleased with the substantial improvement in financial performance during the last 12 months, whilst recognising that there is further work to be done to move to full profitability beyond the EBITDA level. We have added several key new clients in the period, most of whom we expect to engage with on additional new projects over the coming months and years. Coupled with the growth in our contractual recurring revenues with many of the same clients, we anticipate this will build a more consistent and growing income base for the Group.”
Mediazest notes that figures are subject to audit and do not yet include an accounting adjustment under IFRS2 (Share based payments) as a result of the Employee Share Option Scheme which was implemented during the year, a non-cash item which nevertheless will affect the year end result.
Mike Jeremy +44 (0)20 3861 6623
mjeremy@northlandcp.co.uk
Thor Mining (LON:THR) – CORP: Q316 update
Market Cap: £1.2m; Current Price: 0.03p
Lone repaid from Spring Hill proceeds
During Q316 Thor Mining sold its Spring Hill Gold Project for A$3.5m plus a royalty, to date the Company has received A$2m for a 60% interest in the project. Thor is in discussions to bring forward the receipt of A$1.5m for the remaining 40% interest in Spring Hill.
The loan secured against the Molyhil and Pilot Mountain tungsten projects has now been repaid.
Discussions to secure the project finance for Molyhil are ongoing.
At Pilot Mountain planning has begun for an exploration programme.
NORTHLAND CAPITAL PARTNERS VIEW: Thor Mining has paid down the debt that was secured on its Molyhill and Pilot Mountain tungsten projects using two thirds of the initial payment received for its 60% interest in the Spring Hill Gold Project. As a result, capital remains tight for the Company and it is trying to bring forward the receipt of the balance of the proceeds from the sale of Molyhil.