finnCap Research Company Note - 28 September 2018

Sep 28, 2018 / Research Notes

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Sector: Energy

Anglo African Oil & Gas (AAOG): Interim results

Key data                              

  • Share price (p): 9.1
  • Target price (p): 40.0
  • Market cap (£m): 14.7
  • Enterprise value (£m): 8.2

Nothing of real note within the financials, with the main event still the drilling on its Tilapia field; a new pad has been constructed and drilling of TLP-103C is expected to start the week of 8 October. It is frustrating that TLP-103 encountered problems, but these were unforeseeable. Nevertheless, this does not change the attractive risk/reward nature of this multi-horizon well, targeting the producing R1/R2 sands at Tilapia (risked NPV 6.5p); an undeveloped discovery in the lower Mengo sands (risked NPV 18.6p); and a deeper exploration prospect in the Djeno interval (risked NPV 17p). Given the delay and likely cost overrun for this well, financing will be tight, so management is putting in place a debt facility to ensure adequate funding. The new Tilapia licence is expected to be completed soon and discussions on new asset opportunities are also being progressed.

Chariot Oil & Gas (CHAR): Prospect S spudding soon

Key data                              

Share price (p): 8.0

Target price (p): 27.0

Market cap (£m): 29.2

Enterprise value (£m): 7.5

The rig drilling Chariot’s Prospect S in Namibia is expected to arrive on location tomorrow and spud shortly after. This well is targeting a 459mmbbl prospect and is expected to take 40 days to drill. Success would be truly transformational for Chariot – we carry a risked NPV for this well of 24p/sh (180p/sh unrisked). This is the second Namibian well in succession for this rig, following on from Tullow’s dry well at Cormorant-1, although there is no read-across. Cormorant was drilled in half the expected time, so an early result is possible. Farm-out discussions are ongoing and can continue up until the well reaches its primary target.

 Jonathan Wright | jwright@finncap.com

Sector: Technology & Telecoms

Ideagen (IDEA): Acquisition

Key data                              

  • Share price (p): 160.0
  • Target price (p): 180.0
  • Market cap (£m): 324.7
  • Enterprise value (£m): 323.9

Following last week’s very comfortably over subscribed £20m placing (@142p), Ideagen has announced the £20.5m acquisition of Morgan Kai Group Ltd, a provider of leading internal audit software to complement Pentana, Ideagen’s existing solution, and elevate the combined businesses to become the number 2 vendor in the £200m internal audit market. After synergies of £0.3m, the acquisition is expected to contribute £2m to FY20 EBITDA, +13% vs previous expectations, lifting adj diluted EPS +6% after accounting for the placing. The balance sheet retains capacity to accommodate the two further medium-term acquisitions referred to in the placing document, expected to further enhance adj. dil. EPS. Maintaining our target EBITDA multiple of 22x FY20, excluding the potential further acquisitions, we lift our 12-month target price to 180p (167p).

Andrew Darley | adarley@finncap.com

Sector: Industrials

Zambeef (ZAM): Upbeat year-end trading update

Key data                              

  • Share price (p): 11.8
  • Target price (p): 20.0
  • Market cap (£m): 35.3
  • Enterprise value (£m): 114.2

Zambeef has issued a year-end trading update for the year ending September 2018. This is an upbeat statement highlighting that the momentum that was evident in the Retail and Cold Chain Food Products businesses at the interim stage continued to the end of the year. We are increasing our FY2018E adjusted PBT estimate from US$4.2m to US$4.9m, but are not changing future year forecasts or price target.

Raymond Greaves | rgreaves@finncap.com

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