Beaufort Securities Breakfast Alert: MySQUAR Limited, Solo Oil, Interserve Group


The FTSE-100 finished yesterday's session 0.94% lower at 6,947.55, whilst the FTSE AIM All-Share index closed unchanged at 826.18. In continental Europe, the CAC 40 index ended the day 0.46% down at 4,450 and the DAX closed 0.73% lower at 10,504.
Wall Street
In New York overnight, the Dow Jones fell 0.29% to 18,086.4, the S&P-500 dropped 0.3% to 2,126.5 and the Nasdaq lost 0.27% to stand at 5,199.82.
In Asian markets this morning, the Nikkei 225 rose 0.12% to 16,919.75, while the Hang Seng gained 0.88% to 23,240.35.
In early trade today, WTI crude was up 0.27% to $50.21/bbl and Brent was up 0.5% to $51.78/bbl.

Ryanair cuts profit forecast after fall in pound
Ryanair (RYA.L) has reduced its forecast for full-year profits, blaming the drop in the pound following the Brexit vote. The budget airline said net profit would be €1.3bn to €1.35bn (£1.17bn-£1.2bn), 5% below its earlier guidance. Ryanair said the "primary cause" of the lower forecast was the 18% fall in sterling since the Brexit vote. Ryanair boss Michael O'Leary said while better cost control and stronger growth would help to offset the impact it was "prudent" to adjust its guidance.

Company news

MySQUAR Limited (LON:MYSQ, 3.88p) – Speculative Buy
MySQUAR, the Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, yesterday announced that it has exceeded 6 million registered users across its apps and games, as at 14 October 2016. Moreover, MySQUAR is expected to release a new version of MyCHAT, a mobile chatroom app, before the calendar year-end 2016. MySQUAR has spent over 18 months of technical redevelopment for the new version and said it will contain more features to appeal to users and more analytics to appeal to advertisers. The Group also said it has adopted "more aggressive plan" for its games and will launch at least two new games in Q4 2016, with one of which will be based on Naruto, the popular Japanese manga comic character that is also highly popular in Myanmar via TV, film and books. MySQUAR's CEO, Eric Schaer commented "User acquisition continues to grow at a remarkable rate, as does the appetite in Myanmar for MySQUAR's products and services, and shows no signs of slowing down. We are finding that with each success, the environment for launching new games and apps is considerably enhanced."

Our view: MySQUAR continue to demonstrate its rapid user acquisition momentum, where it has exceeded previous guidance of 5 million registered users by the end of 2016, announced on 22 August 2016. Registered users has now increased by +660% since the IPO, back in July 2015. With the new version of MyCHAT which will enable more detailed analytics regarding users, the management has showed its intension to monetaise its over 6 million user base in the coming future. Such development will help delivery of advertising more precise and therefore more valuable to both the Group and its advertisers, especially from American multinational companies who wishes to grab 26th most populous countries in the world, following recent withdrawal of US sanctions to Myanmar. Expected launch of new games in Q4 2016 is also something to look forward too, given rapidly increasing number of registered users, already revenue generating gaming business and globally and locally popular Naruto character in a country where 47% are under-24 years of age. Based on recent progress, the Group has the very real potential to be achieving monthly break-even or better before the end of the current financial year. This is something that is unlikely to have been missed by its numerous and very cash-rich global peer group, who remains determined to continue ensnaring players in virgin territories that have successfully participated in an online user 'landgrab'. In this respect, MySQUAR remain quite dramatically undervalued; Beaufort has set a price target of 21.0p/share and repeats its Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to MySQUAR Limited

Solo Oil (LON:SOLO, 0.22p)
This morning Solo announced work has started on the Ntorya appraisal well, Ntorya-2. Site preparations are complete and the rig is being mobilised from the nearby Ntorya-1 wellsite. The Ntorya-2 drilling process will provide more newsflow over the coming weeks with spudding expected early December, followed by drilling updates and flow testing most likely starting in January. N.B Solo has 25% of the Ntorya Gas Project alongside Aminex who is the operator.

Our view: The Ntorya-2 well has been a long time coming, and investors may well have forgotten its significance. The discovery well, Ntorya-1, tested at 20mmcf per day and 139bbls of condensate which was a commercial discovery in itself. Independent consultants estimate 153bcf in place, 70bcf of gross best estimate contingent resources, and an estimated 1Tcf of undiscovered gas in place. It is this 1Tcf number which Ntorya-2 is targeting, by drilling what is believed to be an up-dip and thicker extension of the Ntorya-1 sandstone reservoir, picked out by the 2014 seismic programme. This is an exciting time for both Solo and Aminex and a story we believe is worth following closely.

Beaufort Securities acts as corporate broker to Solo Oil PLC

Interserve Group (LON:IRV, 350.75) - Buy
Interserve, the international support services and construction group, has been awarded a three-year facilities management account worth £37.5 million with the UK's largest listed commercial property company, Land Securities. The partnership will see Interserve provide a range of services including security, cleaning, customer service support and waste management, across eight of Land Securities' flagship shopping centres. An additional centre - Westgate in Oxford - will be added to the account from 2017. Interserve is one of the leading providers of facilities and construction services to the retail sector and manages services at more than 60 shopping centres in the UK, as well as in Spain and across the Middle East. The Group's knowledge and expertise in servicing shopping centres is enhanced by its extensive experience of building and fitting-out malls and shopping outlets in the UK and in the Middle East.

Our view: The creation of this partnership is testament to Interserve's ability to deliver a cost-effective and integrated service for the retail sector. Interserve will work with Land Securities, and its mechanical and electrical supplier NG Bailey, to deliver an enhanced customer experience and establish best practice across centres nationwide. Under the new three-year deal, 560 employees will transfer to Interserve from previous suppliers as part of the new account. We regard this as positive. Regarding the recently announced conclusion of the strategic review of its Equipment Services business (which trades as RMD Kwikform). In February 2016 Interserve announced that following several years of substantial growth across the Group, it would conduct a strategic review of RMDK to assess the full range of options to maximise value for shareholders. Through the strategic review, the Board concluded that Interserve retain RMDK as a core part of the Group. We wonder if there were no buyers for the business, but we have given the Group the benefit of the doubt and retain our Buy stance.

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