finnCap Research Company Notes - 29 January 2019

Jan 29, 2019 / News

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Sector: Energy

Anglo African Oil & Gas (AAOG) : Corp

Djeno Unchained

Key data                              

  • Share price (p)                  9.6
  • Target price (p)                52.0
  • Market cap (£m)                              22.8
  • Enterprise value (£m)                    16.1

Exciting times for AAOG as its TLP-103C well hits oil in the Djeno. Analysis of well logs has confirmed a 12m oil column was encountered, with additional deeper potential. Alongside the previous R2, Mengo and new horizons found with the well, this brings the total oil column to an impressive 56m. The TLP-103C well is now to be completed as a producer from the Mengo and R2 reservoirs, offering AAOG rapid cash flow. Plans for another well to test the Djeno will now be advanced and full field development plans for the Tilapia asset will also be progressed. There is still a long way to go in this journey but this is an excellent start and we are raising our risked-NAV and price target from 32p to 52p to account for the de-risking of both the Mengo and Djeno horizons delivered with this well.

Jonathan Wright |


Sector: Technology & Telecoms

Netcall (NET) : Corp

Interim trading update

Key data                              

  • Share price (p)                  31.5
  • Target price (p)                90.0
  • Market cap (£m)                              45.0
  • Enterprise value (£m)                    45.8

Netcall‘s interim trading update for the six months to December 2018 reports trading in line with unchanged expectations, and net debt of £0.8m as the company matches cash flow to investment in growth. EBITDA of £2.0m was delivered from revenue of £11.4m, demonstrating 7% revenue growth from the expected investment in opex and achieving 47% and 43% of full-year forecasts respectively (cloud contract wins leading naturally to a 2H weighting). With the annualised contract value of new bookings exceeding those of product sales for the first time, visibility and earnings quality is improving – a 96% increase in total bookings included 818% growth in cloud bookings to £4m. The order book (measured as annualised contract value, or ACV) increased to £15.1m, including 40% growth in low code ACV to £4.2m. As the number of multi-year contracts increases, growth and visibility improve in tandem, and we look forward to further contract win newsflow after a flurry of large wins and renewals in June and August. Target 90p reiterated.

Andrew Darley |


Sector: Life Sciences

Omega Diagnostics (ODX) : Corp

Visitect CD4 progress report

Key data                              

  • Share price (p)                  13.3
  • Target price (p)                U/R
  • Market cap (£m)                              16.8
  • Enterprise value (£m)                    17.5

Omega Diagnostics confirmed that it has successfully manufactured three validation batches of VISITECT CD4 Advanced Disease Test, and they were tested in India, Zimbabwe and the UK. All batches performed in line with the design goal parameters. Once performance evaluations (trials) have completed in Zimbabwe and India, the company will be in a position to CE Mark the Advanced Test. We await clearer visibility over the timing of Visitect’s launch plans as well as progress with Allersys before introducing our FY 2020 forecasts and a target price. Suffice to say, the current valuation is underpinned by the profitable and growing Food Intolerance business, leaving aside upside from the potentially significant opportunity that exists for VISITECT CD4.

Mark Brewer |


Sector: Mining

Savannah Resources (SAV) : Corp

Mina do Barroso project update

Key data                              

  • Share price (p)                  4.9
  • Target price (p)                20.0
  • Market cap (£m)                              40.7
  • Enterprise value (£m)                    27.7

Savannah Resources has reported on the results of metallurgical test work on samples from its Mina do Barroso lithium project in northern Portugal. Test work on core samples from the Grandao deposit has produced concentrates grading 6% - 6.5% Li2O with lithium recoveries in excess of 80%. The benchmark grade for traded spodumene concentrate is 6% Li2O with low impurities; this test work has demonstrated that the Grandao deposit will be suitable for the production of commercially saleable concentrates. The Grandao deposit currently represents the first five years of mine production. This is a major step forward for the project, as not all spodumene deposits are suitable for the production of high grade saleable concentrates. We maintain our 20p price target.

Martin Potts |


Sector: Technology & Telecoms

Sopheon (SPE) : Corp

Further positive trading update

Key data                              

  • Share price (p)                  1 300.0
  • Target price (p)                1 400.0
  • Market cap (£m)                              131.9
  • Enterprise value (£m)                    119.2

After an upgrade in October and early advice of outperformance on 11 January, Sopheon has given further detail and confirmation that EBITDA will be significantly ahead of expectations. We lift FY18E EBITDA from $8m to $9m (compared with expectations of $7.4m at the beginning of the year) from a revenue uplift from $32.5m to $33.0m, the success coming from 18 new customers (FY17: 13) on top of the increase in recurring revenue to $14.7m ($12.0m). Visibility (revenue already contracted for recognition in FY19) has already climbed to $19.4m ($18m), with a strong pipeline in in the US and Europe and growing interest in Asia. Recruitment of quality staff to drive further growth having been a struggle, FY19 has seen increased traction in hiring skilled people. We look forward to prelims on 21 March, and the opportunity to publish forecasts for FY20. Target reinstated, at 1400p vs 1295p previously.

Andrew Darley |

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