finnCap Research Company Note - 10 January 2019

Jan 10, 2019 / News

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Sector: Energy

Anglo African Oil & Gas (AAOG) : Corp

Funding secured to complete TLP-103C

Key data                              

  • Share price (p)                  10.1
  • Target price (p)                32.0
  • Market cap (£m)                              24.0
  • Enterprise value (£m)                    17.3

AAOG has raised £6m gross via the placing of 60m new shares at 10p/sh. These funds replace the troublesome Sandabel facility and leave AAOG fully funded to complete drilling and flow test TLP-103C. This well is currently drilling ahead to the higher risk/reward Djeno exploration target, with initial results expected before end-Jan. The well has exceeded expectations so far and management’s confidence has been boosted by the accuracy to date of its geological model. Our risked-NAV based price target is cut from 38p to 32p following the raise, but still offers major upside potential, especially in the Djeno success case.

Jonathan Wright |


Sector: Life Sciences

InnovaDerma (IDP) : Corp

Trading update – Boots purchase order expected shortly

Key data                              

  • Share price (p)                  94.5
  • Target price (p)                220.0
  • Market cap (£m)                              13.6
  • Enterprise value (£m)                    11.7

Today’s 6-month trading statement indicates revenues of £3.9m, -6%. Whilst retail sales grew 36% during the period, the shortfall was attributed to DTC channel sales declines. Remedies have been made (including additional social media platforms) and growth has resumed in recent weeks. Skinny Tan’s launch into Boots is being finalised, with the first purchase orders expected in coming weeks. Full-year expectations remain unchanged, implying H2 revenues of £10.5m, up £4m on H2 FY 2018. Whilst appearing challenging, it is driven by a threefold increase in the number of UK retail stores ranging its flagship products (Skinny Tan and Roots). We make no changes to forecasts and retain a 220p price target.

Mark Brewer |


Sector: Technology & Telecoms

Proactis (PHD) : Corp

Board changes; trading in line

Key data                              

  • Share price (p)                  142.0
  • Target price (p)                250.0
  • Market cap (£m)                              134.3
  • Enterprise value (£m)                    167.6

Alongside a reassuring in-line trading update, Proactis has reported that Tim Sykes (former CFO) has been appointed CEO with immediate effect. Hamp Wall is stepping down as CEO and board member, and will continue involvement with the group in an advisory capacity, particularly regarding M&A and market dynamics. Having achieved the successful completion of the post acquisition integration phase under Hamp, the group is now clearly in a position to focus on delivering organic growth from retention of existing customers and development of new customers, with a leadership role more suited to Tim. The opportunity for maximising the potential of the buy-side customer base, and developing the sell-side platform and customer base acquired with Perfect Commerce, including the Accelerated Payment Facility, remains exciting. The current market valuation is extraordinarily low for the fifth-largest pure play spend control provider in the world, illustrated by the 6.8% FY19 free cash flow yield and P/E of only 12x. 250p target reiterated, and with trading in line we look forward to more detail at the interim trading update in February.

Andrew Darley |


Quartix (QTX) : Corp

FY 2018 results in line with forecasts

Key data                              

  • Share price (p)                  260.0
  • Target price (p)                425.0
  • Market cap (£m)                              123.7
  • Enterprise value (£m)                    118.8

FY 2018 results will be in line with our forecasts based on the trading update provided in early December, resulting in strong cashflow and the anticipated bonus dividend, as usual. The Cambridge-based international telematics supplier continues to deliver steady revenue and earnings growth, allied to strong FCF generation. Looking ahead, FY 2019 has started in line with current forecasts for continued Fleet growth but offset by declining sales of Insurance telematics as Quartix refuses to chase low-margin contracts. The 2018 revenue and earnings growth was driven by Fleet, notably in the US and France. In the UK, Fleet growth picked up again in H2 after management remedial action when it slowed in H1. The outlook for Fleet remains very exciting, and while 2019 results are likely to be impacted by further declines in Insurance volumes, international growth and new technologies should see a brighter future in the long term. Our forecast is unchanged and we continue to see excellent opportunity for investors as the shares look particularly cheap after the recent market correction, offering a 5% yield secured on the recurring high-margin Fleet business.

Lorne Daniel |



Contract wins underpin wisdom of Brexit protection

Key data                              

  • Share price (p)                  167.5
  • Target price (p)                205.0
  • Market cap (£m)                              49.1
  • Enterprise value (£m)                    0.0

The Space division has secured yet another major ESA contract, further underpinning our forecasts for 2019 and our growth expectations beyond. Just before Christmas, SCISYS announced an €11.2m order from Thales Alenia and then two further orders totalling €3m, all for the ESA’s Galileo programme. Since the turn of the year, it has revealed a €2.8m contract for a Monitoring & Control (M&C) system for the ESA Tracking Network (ESTRACK) and a €5m upgrade to the Galileo Ground Control Segment (GCS). This raft of contract wins follow the group’s move to re-domicile in Ireland in November, protecting it from Brexit concerns, and they highlight the wisdom of that action. Although these are multi-year programmes and were expected and included in existing guidance, they further underpin confidence in forecasts and the expectation of growth in future. In uncertain times, SCISYS stands out in the security of its long-term blue-chip contracts and growth prospects the 2019 P/E of just 12x looks extremely cheap, particularly when allied to a 1.5% yield.

Lorne Daniel |

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