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Beaufort Securities Breakfast Alert: MySQUAR Limited, Solo Oil PLC, Pathfinder Minerals, Zenith Energy

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Today's edition features:

• Solo Oil (LON:SOLO)

• MySQUAR (LON:MYSQ)

Pathfinder Minerals (LON:PFP)

Zenith Energy (LON:ZEN)

 

New Client Portfolio Platform

We launched our new client portfolio platform on Monday and whilst the vast majority of clients who have attempted to activate their access to the new system have done so successfully, we appreciate that some may have experienced issues. Our Client Services team have been running through the process with clients to help them over the telephone, but due to high call volumes our waiting times have increased. If you are having an issue gaining access to the new platform with the Client ID and Registration Code you have been issued with, please take a look at our step-by-step guide to negotiating the process here.

 

Markets

Europe

The FTSE-100 finished yesterday's session 0.26% lower at 7,523.04 whilst the FTSE AIM All-Share index was down 0.50% at 1,021.82. In continental Europe, the CAC-40 finished 0.29% lower at 5,368.29 whilst the DAX was 0.41% lower at 12,990.10.

Wall Street

In New York last night, the Dow Jones closed 0.02% higher at 23,163.04, the S&P-500 added 0.03% to finish at 2,562.1, while the Nasdaq fell 0.29% to 6,605.07.

Asia

In Asian markets this morning, the Nikkei was down 0.07% at 21,434.23 but the Hang Seng added 0.93% at 28,435.38.

Oil

In early trade today, WTI was up 0.37% at $51.48 per barrel and Brent was 0.21% higher at $57.35 per barrel.

 

Headlines

Bank of England under fire for lack of diversity

The Chancellor has been taken to task by MPs about the lack of diversity at the top of the Bank of England. Nicky Morgan has written to Philip Hammond asking for evidence proving that "all efforts" are being made to encourage gender and ethnic diversity in its recruitment process. The Treasury Select Committee's concern follows two recent appointments to the Bank's rate-setting committee. Silvana Tenreyro is now the only woman on the Monetary Policy Committee (MPC). She replaced Kristin Forbes, while deputy governor Sir Dave Ramsden filled the other vacancy on the MPC. That seat had previously been filled by Charlotte Hogg, who replaced Minouche Shafik in February. However, Ms Hogg resigned the following month for failing to declare that her brother worked for Barclays, which was deemed to be a conflict of interest. Ms Morgan has asked the Chancellor for "specific confirmation that all efforts are being made to encourage as diverse a range of candidates as possible" and that recruitment processes for the Bank's policy committees followed the same rigorous standards used for other public appointments. The letter asked the Treasury to publish recent data, including a gender breakdown of applicants seeking a position on the MPC and the Financial Policy Committee. Ms Morgan said her committee wanted to hear evidence from Mr Hammond or another minister or senior official on the issue.

Source: BBC News

 

Company news

Solo Oil (LON:SOLO, 5.00p) – Speculative Buy

Two pieces of news announced this week helped the Solo cause. On Wednesday Surrey Council gave planning permission for the Horse Hill work programme (extended flow test at HH-1, and two new wells: HH-1 sidetrack and HH-2). Solo has a 10% interest in Horse Hill Developments which equates to a 6.5% attributable interest in the Horse Hill project.

The second piece of news was from Tanzania - note that Solo is Tanzania focused with a 25% stake in the Ruvuma PSA (1.3 tcf GIIP) and a 10% interest in Helium One. The news is that Acacia Mining's major shareholder Barrick Gold has negotiated an agreement with the Government of Tanzania "whereby economic benefits generated by Acacia's operations would be shared with Tanzania on a 50/50 basis going forward". The structure is as yet unclear although some reports suggest Tanzania would take a 16% stake in Acacia's three mines which including tax and royalties might result in a 50% take. Barrick also stated that Acacia would make a $300m payment to the Government of Tanzania as a gesture of good faith.

Tanzania has rightly received bad press recently, and an agreement with African Barrick/Acacia Mining is essential for Tanzania's future as a destination for foreign investment. If indeed the agreement reached is a 16% (mine level) equity stake for Tanzania, investors will breathe a sigh of relief. And all Tanzanian based resources companies should see a positive rerating. The Horse Hill news is of course very positive and Solo shareholders can now look forward to this work programme, which should start towards the end of December/early January. We have a Speculative Buy Recommendation.

Beaufort Securities acts as corporate broker to Solo Oil PLC

 

MySQUAR (LON:MYSQ, 2.12p) – Speculative Buy

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 it has signed a Memorandum of Understanding ('MoU') to enter into a partnership with other service providers for the financing and delivery of Wi-Fi services and digital content on the Myanmar Railways. The Partnership will collaborate with Myanmar Railways to deploy a Wi-Fi network in the carriages, platforms and stations of the Yangon Circular train and the national rail network that will be offered for free to train travellers; digital content such as video games and chat platforms, advertisements and internet access will also be available. For MySQUAR, revenue is expected to be generated from advertising and from telecoms through direct carrier billing from video games and streaming content. There will be a revenue share agreement between the Partnership and Myanmar Railways, which will be net of all operating and administrative fees necessary for the deployment of this network.

Our View: This news highlights the value of MySQUAR's unique social media platform. It reminds investors that having been able to create such a high-profile, branded online service that dominates local-language services with a loyal and rapidly expanding country-wide customer base, its operations are now of sufficient national significance to be allowed to enter an agency partnership servicing Myanmar's entire railway network, the largest in South East Asia. The Yangon Circular train, for example, is a local commuter rail network with 46km of track that runs in a loop connecting rural neighbourhoods with the city centre and sells between 100,000-150,000 tickets per day. Myanmar's national rail network runs north to south with branches headed east and west with over 6,000km of track; there are plans for infrastructure improvements to the most widely used train lines that are expected to be completed through overseas development assistance by 2023. Effectively cementing MySQUAR's role as the go-to online site for Burmese people, this opportunity will further broaden its customer base and generate significant additional monetisation opportunity. Eric Schaer, CEO of MySQUAR, said: "We are pleased to participate as a digital content provider for business opportunities with Myanmar Railways. MySQUAR continues to actively seek strategic partnerships that build brand awareness and allow us to broaden our user base through new channels. We anticipate this partnership could have vast long-term potential as the railways are improved and railway use is projected to multiply over the coming years as roads become more congested." MySQUAR shares, of course, appear to have recently been destabilised by what appears to be something of a bear raid. Yesterday's news may help to put such concerns to rest, as well might release of the 2017/18E preliminary results which are expected in less than a month from now. Beaufort's vision remains unchanged in that, based on expected progress, it considers MySQUAR has the potential to produce its first net earnings for shareholders as early as its financial year-ended June 2019, by which time its branded social media and entertainments platform will indeed have secured deep foundations in Myanmar. This all suggests the shares still have a long way to go from their currently depressed levels notwithstanding, of course, the opportunity for a predatory approach from one of the acquisitive online hubs which remain hungry to add new virgin territories to their international portfolios. Indeed, whether the ambitious, deal-hungry Sealand Capital Galaxy Limited that has already declared its desire to capture more of Myanmar's rapid growth actually has deeper designs on MySQUAR remains to be seen. Whatever, they would not be the only one to recognise its exceptional long-term opportunity, in recognition of which Beaufort retains its target price of 21p/share on MySQUAR along with a Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to MySQUAR Limited

 

Pathfinder Minerals (LON:PFP, 0.95p) - Speculative Buy

Pathfinder has announced that progress in the Mozambican courts remains frustrating with the Supreme Court of Mozambique dismissing Pathfinders 'harmonisation of laws' appeal. However Pathfinder is pursuing a non court solution with its Mozambican representative who is in discussions with government and the original vendor Jacinto Veloso.

Our View: Pathfinder's two concessions in Mozambique have been subject to a dispute with its former local partner General Jacinto Veloso since 2012. The appeal, which sought recognition of a judgement by an English court that ruled in Pathfinder's favour has been dismissed on procedural grounds. Whilst the dismissal is frustrating for Pathfinder and its shareholders we note that Company is currently working towards an out-of-court settlement that could see restoration of the concessions to Pathfinder's control if successful. We are optimistic that a mitigated agreement can be reached.

Beaufort Securities acts as corporate broker to Pathfinder Minerals plc

 

Zenith Energy (LON:ZEN, 10.12p) – Speculative Buy

Zenith has published a workover update from wells Z-21 and Z-28 in the Zardab Field - one of three main fields in Zenith's 642km2 contract area. About 20 years ago Z-28 and Z-21 produced over 500 bopd for a short period before clogging up with sand. Nothing has been done since so these are potentially very high impact workovers. Z-28 is Zenith's most complicated to date and as of yesterday the team had cleared out the well to 2922 metres and this will continue down to the liner top at 3568 metres, before the liner is cleaned. At Z-21 some simple well intervention (without the rig) has caused a surprising result. The well started producing 5 bopd, was shut in for 2 weeks and then had an unexpected blow out, with sustaining surface pressure of 30 ATM, peaking at 90 ATM. The combination of high pressure, large quantities of oil, and Z-21's history of being a very short lived well before failure, bode well.

Our View: Both Z-28 and Z-21 will take a few more weeks to complete. But progress is good and the high pressure at Z-21 is exciting news. It reflects the high pressure of the whole contract area which in most cases also means slow decline rates. Zenith's COO stated "Zardab is a young, hugely unexploited field with original high reservoir pressure" and "we expect a successful workover of Z-21 to generate signficant production". Importantly, whatever the result of these two workovers, Zardab is a largely unexploited field with a proven reservoir and high pressure oil production. We have a Buy recommendation.

Beaufort Securities acts as corporate broker to Zenith Energy Limited

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