finnCap Research Company Notes - 17 December 2018

Dec 17, 2018 / News

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Sector: Energy

Anglo African Oil & Gas (AAOG) : Corp

TLP-103C hits oil and gas at the first target

Key data                              

  • Share price (p)                  6.7
  • Target price (p)                38.0
  • Market cap (£m)                              11.7
  • Enterprise value (£m)                    5.2

AAOG has encountered hydrocarbons at the first R1/R2/R3 target interval. Not a major surprise given this is a producing horizon, but still encouraging in that it confirms the geological model and raises confidence levels for the deeper targets. We value the R1/R2 horizon at 6p/sh assuming 1.1mmbbls net resource. Next up is the Mengo target, which is higher risk/reward. We estimate the Mengo has a risked-NPV of 17p/sh (29p/sh unrisked).

Jonathan Wright |

Sector: Mining

Savannah Resources (SAV) : Corp

Exploration update – Portugal

Key data                              

  • Share price (p)                  5.6
  • Target price (p)                20.0
  • Market cap (£m)                              46.5
  • Enterprise value (£m)                    33.5

Savannah Resources has reported on additional results from the current drilling campaign at its Mina do Barroso lithium project in northern Portugal. The drilling programme continues to return significant intersections of lithium mineralisation as Savannah aims to increase the current Mineral Resource Estimate of 20.1Mt at 1.04% Li₂O containing 209,000t of Li₂O. This is the largest known spodumene deposit in Western Europe. We maintain our 20p price target.

Martin Potts |

Sector: Technology & Telecoms


New contract win

Key data                              

  • Share price (p)                  146.5
  • Target price (p)                205.0
  • Market cap (£m)                              42.9
  • Enterprise value (£m)                    0.0

SCISYS has won a €11.2m contract with Thales Alenia Space France to continue the development and maintenance of four key Galileo Ground Mission Segment elements. The contract, which involves security and cyber resilience enhancements, highlights the group’s leading position as a software supplier within the European space market, as SCISYS continues to hold long-standing relationships with Thales Alenia Space and Galileo. Together with a record order book and strong balance sheet, this contract helps underpin forecasts for growth in the current year. We reiterate forecasts and our 205p target price.

Lorne Daniel |

K3 Business Technology (KBT) : Corp

Positive year-end trading update

Key data                              

  • Share price (p)                  226.0
  • Target price (p)                275.0
  • Market cap (£m)                              97.1
  • Enterprise value (£m)                    97.8

K3 has reported a positive trading update for the year to November vindicating the strategic decisions made over the past two years, leading to full-year performance slightly ahead of current market expectations. In keeping with the current strong financial control, net debt of £0.7m is pleasingly better than our £1.0m expectation. In addition to strength in cost control and working capital management, the expected revenue mix improvement in favour of K3’s own IP, particularly K3 fashion (previously ax | is fashion), continued to generate new client wins, whilst management is excited about opportunities that Imagine, the cloud native platform, is generating with new and existing customers. Having arrived and redirected the group in 4Q16, the management team has proved the success of the restructuring, with global interest in K3’s own IP offering higher-margin upside through transformation of the model. Target 275p reiterated.

Andrew Darley |

Sector: Life Sciences

LiDCO (LID) : Corp

Full-year trading update and HUP progress

Key data                              

  • Share price (p)                  4.7
  • Target price (p)                11.0
  • Market cap (£m)                              11.4
  • Enterprise value (£m)                    9.9

The slower conversion of its pipeline in High Usage Programme haemodynamic monitors in the US and the decision to transition its largest UK customers to HUP has prompted today’s trading update. Under IFRS15, revenues and profits for FY 2019 will not be met and accordingly we have reduced revenues and adjusted pre-tax profit by c.£0.9m and c.£0.8m, respectively. Strategically, we consider the decision to build a UK HUP user base to be the correct long-term one as it improves long-term revenue visibility and the quality of earnings. From a US perspective, the level of interest in HUP remains strong, with no evidence of pipeline withdrawals, but it is taking longer than expected. We expect year-end cash to be c.£1.5m. We reduce our target price to 11p as a consequence, which would imply the stock trading on a CY 2019 E/Sales multiple of 3.2x.

Mark Brewer |

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