finnCap Research Company Note - 10 October 2018

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Sector: Mining

Avesoro Resources (ASO): Youga – Ouaré drilling results and exploration update

Key data

• Share price (p): 183.5
• Target price (p): 293.0
• Market cap (£m): 149.7
• Enterprise value (£m): 233.3

Avesoro Resources has released another set of drilling results from its ongoing gold exploration programme in Burkina Faso and Liberia. The programme is intended to convert 1 M oz of existing Mineral resources into Mineral Reserves. The programme consists of 171,000 metres of diamond drilling, of which 36% is in Burkina Faso with the remainder in Liberia. We retain our 293p price target.

Martin Potts | mpotts@finncap.com

Sector: Industrials

Iofina (IOF): Q3 2018 ops update

Key data                              

• Share price (p): 12.7
• Target price (p): 35.0
• Market cap (£m): 16.2
• Enterprise value (£m): 33.8

Operational momentum continues for Iofina, with record quarterly production of iodine delivered in Q3 2018, driven by strong performance from its new IO#7 IOsorb unit. This leaves FY18 guidance looking reasonably comfortable. Despite this, and the improving iodine price, the shares have languished, weighed down by the uncertainty over debt restructuring; a successful conclusion to negotiations would provide a material catalyst for the shares and pave the way for additional growth projects.

Jonathan Wright | jwright@finncap.com

Sector: Life Sciences

Avacta (AVCT): Affimers licence – external endorsement

Key data                              

• Share price (p): 24.5
• Target price (p): 120.0
• Market cap (£m): 16.9
• Enterprise value (£m): 11.7

A royalty-bearing licence with New England Biolabs to commercialise a product incorporating the Affimer technology for diagnostic tests, provides the much needed external endorsement that the market is craving, but also evidence that the licensing business model for the non-therapeutic applications of Affimers has merit. Whilst the financial terms of the agreement are not disclosed, we estimate royalties to be c.10%. Target price of 120p is unchanged.

Omega Diagnostics (ODX): Trading update

Key data                              

• Share price (p): 15.6
• Target price (p): U/R
• Market cap (£m): 19.8
• Enterprise value (£m): 20.6

Omega provided a trading update for the 6 months ending 30 September. Following its strategic review of the business, announced in April, that led to the sale or closure of its two loss-making businesses, revenues declined 27% to £5.23m with the profitable Food Intolerance division also down 7% to £3.8m, partly due to timing of orders, but up 12% on a sequential half-yearly basis. We still expect 5% growth for the full year. Validation batches of the Visitect CD4 Advanced Disease Test that have been sent for testing in India and Zimbabwe and a first purchase order for Allersys provide evidence of progress in these two key projects. Pending clearer visibility over the timing of Visitect’s launch, however, we leave our target price under review. Suffice to say, the current valuation, in our view, is underpinned by the profitable and growing Food Intolerance business, leaving aside upside from the potentially significant opportunity that exists for CD4 and Allersys.

Mark Brewer | mbrewer@finncap.com

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