finnCap Research Company Notes - 24 July 2018

Sector: Mining

Savannah Resources (SAV): Consultants appointed for Mina do Barroso Feasibility

Key data                              

• Share price (p): 9.8
• Target price (p): 20.0
• Market cap (£m): 80.9
• Enterprise value (£m): 67.9

Savannah Resources has announced that it has appointed Primero Group to undertake the Feasibility Study for the development of the Mina do Barroso lithium project in northern Portugal. Primero Group has substantial experience with the assessment, design, delivery and operation of similar lithium projects globally and is currently partnered with Tawana, Galaxy, Pilbara Minerals and Piedmont. We maintain our 20p price target.

Martin Potts | mpotts@finncap.com 

Sector: Energy

Europa Oil & Gas (EOG): UK portfolio strongly underpins shares

Key data                              

• Share price (p): 4.2
• Target price (p): 60.0
• Market cap (£m): 12.5
• Enterprise value (£m): 10.2

Ignore Ireland and its major upside potential from medium-term exploration. Europa is now trading at a hefty discount to the value of just its UK business, where planning approvals are progressing. Success in the coming months would prove a material catalyst. Meanwhile, the prospects for the completely overlooked Irish exploration portfolio will continue to improve as confidence returns to the space.

Jonathan Wright | jwright@finncap.com

Sector: Technology and Telecoms

Netcall (NET): FY trading update

Key data                              

• Share price (p): 74.8
• Target price (p): 75.0
• Market cap (£m): 106.9
• Enterprise value (£m): 107.6

Netcall has reported a trading update for the full year to June 2018 revealing 20% EBITDA growth to £5.4m (vs £5.8mE), including a maiden contribution from MatsSoft, acquired early in August 2017. Initial cross sales of MatsSoft, alongside new international sales and partnership deals, led to significant revenue growth in MatsSoft (proforma), alongside a reported return to growth in the core Netcall business. The strong sales pipeline gives confidence in the strategic fit of MatsSoft, its quality reaffirmed by inclusion in the Gartner Magic Quadrant for high productivity platforms, as well as the contract renewal with its largest customer – worth a minimum of £3.7m over four years and showing the potential for the platform. We reiterate our FY19 75p sum of the parts target price, looking forward to more detail of MatsSoft’s success and strategic future, with the potential for consideration of an acceleration in inward investment to enhance the growth opportunity.

Andrew Darley | adarley@finncap.com

Sector: Life Sciences

Avacta (AVCT): Co-development – novel and highly differentiated

Key data                              

• Share price (p): 28.5
• Target price (p): 200.0
• Market cap (£m): 19.7
• Enterprise value (£m): 11.4

A co-development partnership agreed with Tufts University of Medicine potentially creates a novel and highly differentiated Affimer drug conjugate (AfDC) platform with a dual mechanism of action. Early discussions with major pharma companies demonstrates that there is significant partnering interest once appropriate data from the collaboration has been generated. Avacta and Tufts have filed for broad patent protection, with Avacta retaining exclusive rights to commercialise these novel drug conjugates.

Proteome Sciences (PRM): Interims – down but certainly not out

Key data                              

• Share price (p): 3.3
• Target price (p): 6.0
• Market cap (£m): 9.7
• Enterprise value (£m): 18.3         

Interim results to 30 June 2018 are short of our expectations for the full year outcome, primarily due to a shortfall in service revenues, prompting downgrades. However, there were early leading signs that the services business has momentum and is on track to deliver an improved performance, evidenced by (i) an H1 order book greater than that secured in the whole of 2017, (ii) working orders being discussed in Q3 greater than H1 revenues, (iii) a broader and more diversified customer mix and (iv) ongoing discussions with large biopharma that may lead to larger and potentially recurring contracts. Our new forecasts reflect the delays in building Biomarker service revenue. Target price is reduced to 6p, which is underpinned by the TMT® licence revenue, which is worth at least 5p per share.

Mark Brewer | mbrewer@finncap.com