Today's edition features:
• ValiRx (LON:VAL)
• Westminster Group (LON:WSG)
Markets
Europe
The FTSE-100 finished yesterday's session 0.21% lower at 7,285.74 whilst the FTSE AIM All-Share index was up 0.28% at 999.43. In continental Europe, the CAC-40 finished 0.03% higher at 5,268.76 whilst the DAX was up 0.08% at 12,605.20.
Wall Street
In New York last night, the Dow Jones closed 0.05% lower at 22,284.32, while the S&P-500 was 0.01% higher at 2,496.84 and the Nasdaq was up 0.15% to 6,380.16.
Asia
In Asian markets this morning, the Nikkei 225 was 0.33% lower at 20,262.37, while the Hang Seng was up 0.44% at 27,635.26.
Oil
In early trade today, WTI crude oil was 0.5% higher at $52.14 per barrel and Brent was up 0.34% at $58.64 per barrel.
Headlines
EasyJet puts its weight behind plans for electric planes
EasyJet is backing plans to develop commercial passenger aircraft powered by electric batteries instead of conventional aero engines. The airline wants the proposed planes to fly passengers on its short-haul routes, possibly within 10-20 years. The prototype is going to be developed by a new US firm called Wright Electric, which has already built a two-seat battery-powered plane. The new, larger plane would have a range of 335 miles, the companies said. EasyJet said this meant it would be able to cover popular routes such as London to Paris, Brussels, Amsterdam, Cologne, Glasgow and Edinburgh. EasyJet's possible involvement was first revealed in March 2017. Carolyn McCall, the chief executive of EasyJet, said she was now confident that such a plane, possibly carrying 220 passengers, would eventually fly. "We share an ambition with Wright Electric for a more sustainable aviation industry," she said. "Just as we have seen with the automotive industry, the aviation industry will be looking to electric technology to reduce our impact on the environment."
Source: BBC News
Company news
ValiRx (LON:VAL, 1.00p) – Speculative Buy
ValiRx, a life science company, which focuses on clinical stage cancer therapeutic development, taking proprietary & novel technology for precision medicines towards commercialisation and partnering, yesterday released its half-yearly report for the period ended 30 June 2017. The Board detailed a loss before income taxation reduced slightly by 2.6% to £2.25m (H1 2016: £2.31m), leading to a total comprehensive loss for the period of £1.99m (H1 2016: £2.07m). Back in March, the Group raised a total of £1.16m through an equity placement to existing and new investors in order to fund its continuing clinical trials, progress its pre-clinical candidates and for general working capital purposes, leaving the Group with cash/cash equivalents at the interim stage of £383,426 (H1 2016: £568,805). A further equity placing in September 2017 successfully raised £0.5 million. Operational highlights during the period included substantial progress across both the clinical and pre-clinical portfolio. VAL401's Phase II clinical trial, for example, for patients with lung cancer was expanded to 3 sites; recruitment has now ended and the trial is expected to complete by year-end 2017. Its Phase l/ll Clinical Trial of VAL201 also demonstrated consistent safety and tolerability with signs of activity in patients with advanced prostate cancer. Elsewhere, VAL101 underwent drug optimisation to block/ silence Bcl-2 Expression identified inter alia in Pancreatic Cancer cells, while VAL301 is in late pre-clinical phase initially for the treatment of the gynaecological condition, endometriosis - a reformulation of VAL201, which pre-clinical studies suggest does not compromise bone density or fertility. Post-period, VAL101 reported much improved technical efficacy and commercially viable efficient manufacturing capabilities and that preliminary results for the optimised second generation of the VAL101 molecule has demonstrated gene silencing levels that are similar to the original structure; VAL101's late pre-clinical studies to be accelerated in preparation for the compound's entry into the clinic.
Our View: Delivering results against best expectations while being run on a shoe-string! In truth, valuing a Group with two advanced Phase II cancer trials along with an exciting pre-clinical portfolio at just £1m is blatantly absurd. Consistently advancing its therapeutic portfolio, the past 6 months saw value-added across the Group's various assets, in particular bringing VAL201 and VAL401 closer to the point where the clinical programmes will deliver meaningful data and heighten expectation of attracting an industrial partner. Given that this is 'value point' specifically targeted by the Group's low-risk business plan and the inflection from which investors should anticipate accruing significant reward, management is clearly delivering on its promises. ValiRx's portfolio of therapeutic drugs collectively address multi-billion dollar markets and target significant unmet need. Comparisons with peer groups having similar clinical portfolios, or early stage partnership deals with pharma groups seeking entrance into such therapeutic areas (such as licensing agreement signed with Mystic Pharmaceuticals Limited in July), highlights a significant valuation gap. ValiRx shares recognise none of the value created over the past 24 months, nor the depth of its therapeutic pipeline. While it is understandable that the market remains concerned regarding the Group's ongoing funding needs, which are routinely satisfied through discounted equity placements, it should be remembered that management is seen to delivers tangible development progress ahead of any such raise and also to recognise that a Big Pharma development collaboration for either VAL201 or VAL401 would likely be concluded at a multiple of the Group's current valuation. Beaufort reiterates its Speculative Buy rating on the shares, while maintaining its price target of 6.5p.
Beaufort Securities acts as corporate broker to ValiRx Plc
Westminster Group (LON:WSG, 11.25p) – Speculative Buy
Westminster Group ('Westminster'), a supplier of managed services and technology-based security solutions to governments and government agencies, non-governmental organisations (NGO's) and blue-chip commercial organisations worldwide, yesterday announced that it has raised £750,000 through issuance of 7,500,000 new ordinary shares at a price of 10p per share. The proceeds will be used to support the Group's development, with a particular focus on preparation for the anticipated Middle East project opportunity in its Managed Services division. Following Admission of the Placing Shares (expected on 10 October 2017), the Group will have 120,743,420 Ordinary Shares in issue, none of which are held in treasury. Through a separate announcement released on 22 September 2017, Westminster Group provided its interim results for the 6 months ended 30 June 2017 ('H1 FY2017'). During the period, revenue advanced by +44% to £2.9m; comprised of +41% growth each in Managed Services (£1.8m) and Technology (£1.0m) division, with Ferry Operation contributed revenue of £51k (H1 FY2016: nil), against the comparative period (H1 FY2016). Due to negative gross profit from the Ferry operation and the commencement of concession payments to Sierra Leone Aviation Authority, gross margin has declined to 59% (H1 FY2016: 73%). Administrative expenses increased by +71% to £2.9m, driven by the costs of the Ferry operations (£0.4m, H1 FY2016: nil), higher Group and central costs (£1.0m, H1 FY2016: £0.8m), and exceptional items (£0.4m, H1 FY2016: £0.3m). Altogether, this led to an adjusted EBITDA loss of £0.6m (H1 FY2016: profit £0.2m) and reported loss before tax of £1.4m (H1 FY2016: loss £0.8m), leading to loss per share of 1.4p (H1 FY2016: loss 1.2p). The Group has raised £0.6m and £1.0m in February and April, respectively. Cash and cash equivalents at the period end stood at £800k (31 December 2016: £152k), while this fell to £400k at 1 September 2017. On the operational front, the Group said certain Board members, including the Chairman and CEO, have now met with, and reached agreement, with the client and other bodies involved on the key points of the Middle East project, the long term managed services contracts opportunity, and it is now working with them to finalise the commencement programme and scope. Although with complex projects of this nature there can never be certainty as to timing or outcome, the Board said it "look forward" to making a further announcement in the "near future". Westminster's CEO, Peter Fowler, commented "The first six months of the financial year have been defined by our intense focus, efforts and achievements in developing our Managed Services business which has the potential to deliver transformational growth. Our financial results for the period show an improved performance by both the Managed Services and Technology Divisions, both of which achieved healthy revenue growth. The ferry operations in Sierra Leone, which commenced services in January 2017, have failed to meet our expectations".
Our View: Westminster Group's results for the H1 FY2017 made for sobering reading. Despite both Managed Services (63% of revenue) and Technology division (35% of revenue) achieving strong revenue growth during the period, the Group's profit performance was let down by the Ferry Operation which recorded an EBITDA loss of £0.4m (H1 2016: nil). This was below the Board's expectations due to disappointing passenger growth and financial performance amid a background of growing competition. Given such circumstances, together with downgrades on future passenger growth forecasts (therefore the greater loss), the Board has now taken the tough decision to exit its ferry operations (and cancel the lease on its second vessel, the Sierra Duchess). As per this decision, the Group have entered into a formal agreement with Sea Coach Express, the largest ferry operator in Sierra Leone, commencing on Monday 25 September, under which they will take over the Sovereign (SL) operations and responsibility for managing the service and vessels, including the Sierra Princess, and will expand the Sovereign fleet by several more vessels. Westminster Group will be jointly promoting and marketing the enlarged operation and will receive a share of revenues on ticket sales made through its own operations, together with a payment for all passengers travelling to and from its terminals. The Group will continue to operate and manage the terminals in accordance with its 21-year agreement signed with the government in 2014. This move is expected to push the Group back to achieving a positive contribution from ferry ticket sales and passenger royalties from Q4 2017. Going forward, the Managed Services division will become the Group's key focus; clearly, with ever-increasing international threats to airport security there are many business opportunities to target in emerging markets. Growth in passenger numbers continued across all airlines except Air France, which declined due to a reduction in their flight numbers. Looking ahead, launch of a new service by Fly Mid Africa in July 2017, commencement of flights to Nigeria by Air Peace later this month and Turkish Airlines who are looking to begin services in Q4 2017, can be expected to create opportunity for significant passenger growth. The Technology division continues to secure orders for a wide range of products and services delivered to clients all over the world. The Group continues to build its recurring revenue base, which it now stands at c.10% of the maintenance and service sales. Given the Group's monthly cash burn of c.£166k, together with repayment of the convertible loan notes valued at £2.2m (plus annual coupon of 10%) maturing in June 2018, the Board noted in its interim statement that it will need to secure additional funding. Yesterday's oversubscribed placing to raise £750,000 (before expenses) demonstrate continuing support for the Group's prospects by the investors. Such funds will support the anticipated 15-year Middle Eastern airport contract opportunity which has the potential to generate annual revenues in excess of £35m. Considering the Group has now addressed the principal problem within its portfolio of businesses and continue to make encouraging progress elsewhere in its pipeline, together with the potential for long-term recurring revenues, Beaufort reiterate its Speculative Buy rating on Westminster Group.
Beaufort Securities acts as corporate broker to Westminster Group PLC