VELTYCO GROUP PLC (LON:VLTY) – BUY*: Update
Market Cap: £28m; Current Price: 42p; Target Price: 52p
Significantly ahead – double digit increase to forecasts
Strong trading update from Veltyco last week, where the company confirmed results for FY16 will be significantly ahead of our expectations. Revenue is expected to be in excess of €5.7m or 16% ahead of our forecast of €4.9m and EBITDA is expected to be in excess of €2m or 47% ahead of our forecast of €1.4m.
On the back of the strong performance we bring our forecasts for FY16E in line with the new expectations and also increase forecasts for FY17E and FY18E, where more efficient marketing investment is increasing revenues and margins. We now expect EBITDA of €4.3m, +34% (€3.2m) on previous forecasts and YoY growth of 111% for FY17E and for FY18E EBITDA increases to €5.4m, +29% (€4.2m) on previous forecasts.
On our new forecasts the shares trade on 7.6x FY17 EBITDA, a c. 22% discount to peer multiples. On a relative basis, applying the peer multiples supports a price of 49p. Our DCF points to 55p and we take the midpoint as previously applied, which points to 52p, or +24% upside to the current price.
NORTHLAND CAPITAL PARTNERS VIEW: The strong performance in FY16 drives healthy double digit increases to forecasts for FY17E and FY18E. Despite the strong performance in share price in recent months the stock still trades on and undemanding rating of 7.6x EBITDA or 8.6x earnings on our new forecasts. We reiterate our Buy rating on the stock.
Savannah Resources (LON:SAV) – CORP: Placing and subscription
Market Cap: £28m; Current Price: 6.25p
Raises £2.24m with LoI for £1.01m
Savannah Resources has raised £2.24m through the issue of 42,699,200 shares in a placing and subscription at a price of 5.25p per share.
Savannah also has Letters of Intent for an additional £1.01m from Chairman, Matthew King, and major shareholder, Al Marjan. Savannah will seek authorities from shareholders to issue the 11,190,088 shares relating to this subscription. The subscription would see Al Marjan maintain its 29.99% interest.
Following the receipt of £2.24m the Company will have a pro-forma cash balance of £3.02m.
Following admission there will be 493,645,655 shares outstanding.
NORTHLAND CAPITAL PARTNERS VIEW: A significant fund raise for Savannah Resources that will allow the Company to make some major strides forward by completing its Mineral Resource Estimate updates and scoping study at its Block 4 and 5 Copper Project, located in Oman, continue the scoping study for the Mutamba Heavy Mineral Sands Project, located in Mozambique and define drill targets at its lithium projects, located in Finland.
Active Energy Group (LON:AEG) – CORP: Operations and Trading Update
Market Cap: £26.2m; Current Price: 3.15p
Update on separate but complementary divisional activity
Active Energy, the renewable energy, forestry management and timber processing business, has issued an operational and trading update for each of its three divisions; AEG CoalSwitch, AEG TimberLands and AEG WoodFibre.
AEG CoalSwitch continues to expand in N. America, with additional initiatives in Europe and Asia. AEG states that it is “confident that AEG's CoalSwitch division will be the Company's primary area of growth in 2017”. AEG has identified a location for the first reference plant in North America to be operational “before the end of 2017”. It is also encouraged by developments regarding the Métis Settlements in Alberta, following meetings “in recent weeks between representatives of the Métis Settlement Partners, officials representing the interests of the Government of Alberta and members of the Active Energy board to discuss the requisite regulatory, legal, operational issues and establish the corporate framework for the CoalSwitch initiative”. AEG has also “expanded its commercial development pipeline with numerous groups” in North America, Europe and Asia. As a result, the company indicates “hopes that an additional reference plant will also be established either in Malaysia or in the Baltic States during 2017, subject to available funding”.
AEG TimberLands update. AEG reports harvesting rights over more than 100,000 hectares of forestry assets in Alberta and targets additional assets local to its CoalSwitch operation. It also reports preliminary discussions for the potential acquisition of similar assets in N. America and Europe.
AEG WoodFibre sources feedstock in Ukraine for the supply of Turkey's largest MDF producers. AEG reports that the operation experienced slower trading in the aftermath of the July 2016 attempted military coup in Turkey. As a result AEG reports that FY16 divisional revenue will be below 2015 levels ($24.378m reported); however, divisional gross profit will “show an increase” year-on-year. Installation of the planned softwood processing line was adjusted to new circumstances with the result that completion is expected by the end of April 2017. AEG remains “focused on improving the trading prospects for AEG WoodFibre and, with the market having settled following the disruption in H2 2016, is executing its long-term investment plan to increase production output to meet demand for both hardwood and softwood in the region”.
NORTHLAND CAPITAL PARTNERS VIEW: AEG notes that its three divisions operate separately but are complementary. This is evident in the alignment of developments for CoalSwitch – rapidly emerging as its leading initiative – with those of AEG TimberLands. Likewise it is logical that the WoodFibre operation has adjusted to geopolitical circumstances. This update confirms that AEG has been far from idle in developing its strategy into FY17.