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18 Feb 20

LIBERUM: Sylvania Platinum* - Dislocation from record prices

Sylvania Platinum is trading at extremely cheap levels, just 0.9x adjusted EV/EBITDA on spot. The market clearly feels nervous about the rapid rise in the underlying commodities, palladium and rhodium.

Companies: Sylvania Platinum

13 Feb 20

Y/e trading update – sales ahead, cash in line

Checkit has provided an encouraging year-end trading update to January, disclosing sales of £11.8m, 5% ahead of forecasts, equivalent to +3% LFL growth (group basis), or +8% (ex. EET; non-core). Cash is also reported at £14.3m – ahead of forecasts, but distorted by non-trading activities. After adjusting for both, we believe the underlying cash position is £12.4m – in line with forecasts, in turn implying that CKT’s investment program (and resulting cash burn) is proceeding as anticipated. The update also splits out Checkit Europe’s and Checkit UK’s sales. While such segmental reporting will not be continued, it is reassuring to note that Checkit Plc has acquired a company (now branded ‘Checkit UK’) in good financial health, as it grew pro-forma sales 7% y/y to £11.6m. Checkit Europe meanwhile grew more strongly, at +30% (but off a low base) to £1.3m. Looking forward, y/e pro-forma sales of £14.8m compares against £17.2m expected in FY21E, implying 16% growth. Driving this, we expect Checkit’s landmark contract win with BP (announced Oct-19) to be a material driver. To remind, Checkit won a three year deal to provide its Real Time Operations Management capability to BP at 320 sites. Naturally, we viewed this announcement very positively – as it provided validation of Checkit’s proposition (at an enterprise scale). We look forward to future news flow, confirming the roll-out is going to plan and - potentially - ‘sub contract wins’ also, as the contract may be extended beyond BP’s (320) owned sites, to dealer-owned sites and internationally also. N/c to forecasts.

Companies: Checkit

12 Feb 20

LIBERUM: Plus500* - Q4 stronger than thought

Q4 saw $100m of revenues ex customer P+L. The company will return 100% of 2019 profits to shareholders through dividends and buybacks, has $293m net cash, and may seek targeted acquisitions, new licences and product extensions.

Companies: Plus500

18 Feb 20

The Industrial Revelation

BHP could revise down estimates if "viral outbreak is not well contained" in Q1 20, HeidelbergCement sees positive demand in 2020, Kone withdraws from Thyssenkrupp bid

Companies: Rotork Somero Enterprises

12 Feb 20

Scapa Group

FY20 trading update – trading profit “significantly below expectations”

Companies: Scapa Group

12 Feb 20

The Industrial Revelation

UK GDP in line with Dec construction beat but manufacturing miss, Japanese machine tool orders fall 36% y/y in Jan, Boeing nets no orders in Jan

Companies: HAYD HILS JHD OXIG RSW RNO SCPA TWD ZTF SOM GHH

12 Feb 20

LIBERUM: Premier Miton Group* - Net flow stabilisation should be a positive catalyst for the shares

Following a sharp rally in December 2019 many UK listed asset managers have continued to see small share price gains in 2020 with the sector up 4.0% year to date. However, we note that there has been a particular under-performance of Premier Miton’s shares, currently down 17.2% over the same period.

Companies: Premier Miton Group

17 Feb 20

CloudCall

New CRM partnership with Vincere

Companies: Cloudcall Group

17 Feb 20

WHI Morning Comment: Spectra Systems (SPSY)

Good entry point for great business Only marginally above levels last seen a year ago, we view shares in SPSY at the current price as representing an excellent entry point after coming off on profit taking. This was not, after all, an ordinary year for SPSY but an excellent one, characterised by upgrades, contract wins and most importantly, a significant collection of major opportunities which the company is working through and any of which has the ability to be a game changer for the business. To name a few among many: (1) potential further new work for a G7 central bank (existing client), (2) potential wins from a major Asian central bank, (3) major prospective polymer substrate contract, (4) tobacco smartphone authentication opportunities (TruBrand). As a provider of advanced technology solutions for banknote, product authentication, and secure lottery transactions, SPSY is a highly specialised producer of proprietary equipment, solutions and services, with high entry barriers to match. It is well-invested, hence the enhanced DPS in recent years; and the balance sheet is strong, with $11.1m of net cash (excluding $1.1m of restricted cash) reported with the most recent (H1) results, underpinning future growth expenditure. Importantly, our forecasts only encompass firm business prospects / established contracts. With TruBrand conducting tests in China (see above), this may have affected sentiment, but if so this is misconceived, since (a) this potential future revenue stream is immaterial or non-existent in our forecasts and (b) SPSY is not a one-trick pony – the pipeline is strong with other and major opportunities.

Companies: Spectra Systems

13 Feb 20

CMD flags strong near-term opportunities

We take the opportunity after last week’s Capital Markets Day to review key themes touched on by management, and the impact on likely future performance. Takeaways impacting organic growth are: 1) The speed at which migrations/ launches occur with Vanilla is faster than previously expected; 2) Video Content and Intent Marketing opportunities open up new streams; and 3) The Group has more potential to generate value from back catalogue content than previously thought. Organic Media sales growth of +3% in our FY’21E forecasts looks too prudent in view of these updates. We therefore upgrade organic Media growth forecasts to +10% y/y, with modest upgrades of +2% and +3% to FY’21E sales and EBITDA. FY’21E FCF yield is 6.8% (Sept y/e); A yield of 4% would generate an intrinsic value per share of >£20.

Companies: Future

14 Feb 20

The Industrial Revelation

German GDP stagnates in Q4, BorgWarner expects weak 2020, IPG Photonic cuts Q1 numbers on Coronavirus disruption

Companies: CGS JHD OXIG RSW RNO SCPA TRI ZTF SOM GHH

12 Feb 20

New supply and license agreements with New Wave

Building on its existing collaboration, Itaconix has extended its commercial relationship with New Wave, a leading North American detergent supplier. Itaconix has entered into a licensing agreement for a new dishwashing detergent formulation based on Itaconix’ TSI 322 detergent polymer, which was launched last month. Since the announcement of the original December 2018 license agreement (for a triple-chamber dishwashing detergent pod based on Itaconix CHT 122), New Wave has gained new accounts and grown its volumes for use in private label brands at retailers throughout North America. As well as adding the new detergent formulation, a new supply agreement provides New Wave with certainty on pricing and supply of up to 1m lbs of Itaconix polymers over the next two years.

Companies: Itaconix

13 Feb 20

Premier Oil

Schemes approved by debt holders

Companies: Premier Oil

13 Feb 20

LIBERUM: Futura Medical* - Positive discussions with EU regulator and US timeline reiterated

Futura has published an update on its progress with the EU and US regulators today. Following positive conversations with an EU Notified body (regulator) it began formal proceedings yesterday to get MED3000 (control arm in FM57 study) approved as a medical device in Europe and is on-track to submit its technical file for approval in mid-2020.

Companies: Futura Medical

17 Feb 20

The Industrial Revelation

Japanese Q4 19 GDP sees largest fall since 2014 following recent tax hikes, US industrial production fell due to warm weather and Boeing 737 Max issues

Companies: HTG OXIG RSW RNO SCPA ZTF SOM GHH

19 Feb 20

Bond refinancing should not be an issue

Corem has become a better credit in recent quarters with a streamlining of the portfolio, significant strengthening of the balance sheet and stricter financial targets. Whereas an increasing focus on project developments and higher dividends are credit negatives, the strong net letting and positive market outlook bodes well for the future financial performance and we thus do not believe that the upcoming refinancing of CORE_008 will be an issue.

Companies: Corem Property Group Ab-A

19 Feb 20

Bulls Bears & Brokers: Martin Place Securities Barry Dawes on a new uptick for gold with silver also moving up

19 Feb 20

Pengana Private Equity Trust - Secondary Offer Review (ASX code: PE1)

SECONDARY OFFER OVERVIEW On 23 October 2019, Pengana Capital Group Limited (ASX: PCG) announced its intention to offer additional units in the Pengana Private Equity Trust (ASX: PE1) in the first quarter 2020 period (‘Secondary Offer’). The rationale of the Secondary Offer was to satisfy strong latent and realised secondary demand as well as improve the degree of secondary market liquidity in the Trust. The Secondary Offer comprises an offer of up to 345.4m units at a subscription price equal to $1.37 (representing the NAV per unit of the Trust as at 31 January 2020 less a special distribution of $0.0125 per unit). The Secondary Offer comprises three components based on a waterfall structure: 1) the 2:1 entitlement offer; 2) the shortfall offer; and, 3) the discretionary offer. Under the entitlement offer, each existing investor as at the entitlement record date of 20 February 2020 (“existing unitholders”) can subscribe for up to 2 new units for every 1 unit held. The shortfall offer will include any new units not applied for under the entitlement offer and is open to existing unitholders who have subscribed for their full 2:1 entitlement. The discretionary offer is open to existing unitholders and new investors, the latter at the discretion of the Responsible Entity. Any new units that are not applied for under the shortfall offer, plus 16.8m units under the Trust’s 15% placement capacity (of which ~10% is being used for the discretionary offer with the remaining ~5% reserved for the future issue of the loyalty units) will form part of the discretionary offer. All existing unitholders, irrespective of whether participate in the 2:1 offer or not, will also receive loyalty units in PE1 issued at the subscription price and which will be fully paid for by PCG. The amount issued to each existing unitholder will be based on 1) the units held and retained for four months (expected to be 23 July 2020 and 2) a “loyalty percentage”, which will be equal to 1% per $100 million raised under the offer. For example, if $100 million is raised under the offer, then the loyalty percentage will be 1%. If $250 million is raised under the offer, then the loyalty percentage will be 2.5%, etc. The variable percentage does not necessarily mean existing unitholders are better off the higher the raise amount, all things being equal. Rather it is designed to at least partly offset the increasing cash dilution impact the higher the secondary offer raise amount. SECONDARY OFFER CONCLUSION The issue with any follow on capital raises in private investment markets is the risk of cash dilution for existing unitholders. That is, it takes time to fully invest the new capital raised, with the prolongation of this deployment timeline diluting the prior expected returns profile. PCG have been steadfast in saying that it would only consider a secondary raise if it was not detrimental to existing unitholders in addition to not providing a substandard returns outcome to new investors (i.e. both should be on roughly the same footing in terms of longer term expected returns). PCG have achieved this outcome for existing unitholders through a unique structuring innovation in the Australian listed managed investments sector. Namely, loyalty units are issued to all existing unitholders irrespective of whether they participate in the 2:1 offer or not. This is in contrast to the recent Magellan and VGI Partners loyalty unit offers, which required existing investors to participate in the respective offers. IIR has in the past expressed reservations about this latter structure, with the risk that it creates an incentive to participate in a raise based on considerations that are not entirely directly related to the relevant investment vehicle. Hypothetically, if this sort of structure is determined to partly create an incentive exogenous to the investment merits of the vehicle in question, IIR suspects ASIC would ultimately review the appropriateness of the structure. Reassuringly, the Responsible Entity and Investment Investment Manager has undertaken extensive modelling on the basis of a maximum 2:1 raise to determine over a nine year forecast period whether the additional capital raising will prejudice existing and new investors via its impact on both the deployment of capital and investment returns when compared to the Investment Investment Manager’s initial IPO expectations. This analysis reveals that both existing and new investors are better offer under the 2:1. Existing investors, irrespective of whether they participate in the 2:1 or not, are better off on account of the faster than initially expected deployment of capital, the additional value of the loyalty units as well as the better than modelled short duration credit returns. Expected annualised returns for new investors are effectively comparable to existing IPO investors, as new investors are benefitting from a Day 1 portfolio that is already partially deployed into private equity. In our view, the structuring of the loyalty units tied with the modelling initiative and output lead us to believe that the secondary raise could not be better structured.

19 Feb 20

Jindalee Resources Limited (ASX: JRL)

Full Research Report can be accessed on www.independentresearch.com.au Jindalee has a A$11m market capitalisation, with a portfolio of properties in the lithium, nickel and gold commodity space. The 100% owned McDermitt Project in the USA has been receiving the most attention, and in 18 months from acquisition as a greenfield exploration site, has reported a maiden resource of 1.55Mt Lithium Carbonate Equivalent, with an exploration target that remains larger. Comparable ASX listed companies are trading at market capitalizations of A$30M to A$300M. These companies generally have completed scoping/PFS/DFS studies that provide the market with specifics on project scope. if Jindalee can provide this level of information to the market, we would expect the share price to be re-rated. KEY POINTS Jindalee is a geology driven project generator – The management has a track record of acquiring projects early and cheaply, adding significant value during the early lower cost phase of project generation, and partnering when assets entered more capital intensive development phases. The company has been listed since 2002 and still has only 38.5M shares on issue. McDermitt is one of a new class of lithium deposit – Current global lithium supply comes from hard rock spodumene producers, typically in Australia, or brine based producers in Chile and Argentina. McDermitt is a dried out lake deposit at surface, basically an open pit clay mine, with the potential to have cash operating costs close to the bottom end of the brine producer cost curve, while also having half the time to ramp up to full capacity of brine projects. Being a new class of supply is a source of risk at present, translating to a higher discount at present, but the discount is likely to wind back if similar projects are successfully developed. Share price drivers – We expect the McDermitt project to deliver news flow relating to additional drilling, and particularly additional metallurgical test work, which we expect will form the basis of a scoping study, or possibly a PFS and Reserve announcement. The PFS/Reserve would be the major share price driver, but we would expect interim announcements along the way to create a positive share price trend. Lithium price oversold – From our assessment of the cost curve, and more importantly by the actions of some existing producers who are winding back production, it is clear that the current lithium price will rebound, although that will probably have to wait for US/China trade wars, Corona virus impacts, and the effects of the Chinese subsidy changes to ease. Australian gold and nickel exploration – The newly applied for North Gruyere tenement is certainly a focus, and if Jindalee is allowed to drill in the Dorothy Hills shear zone along strike from the 6Moz Gruyere operation, we would expect that to spark some market interest. VALUATION As an exploration story, we find it difficult to place a specific value on the company’s assets. Any valuation is contingent on the outcome of value adding activity. From a review of comparable ASX listed lithium project developers, the median market capitalization per tonne of lithium carbonate equivalent resource is around A$80/t LCE, and if Jindalee can convert all its current 1.6 Mt LCE resource into a competitive project, with similar capex and opex metrics to comparable companies, then it should trade at over A$3/sh. The risk is that in the process of building an economic project, the resource typically shrinks, hence the market’s caution. The nickel and gold exploration ground in WA provides diversification and additional upside. Please note any comments on valuation are conditional on the occurrence of events that have yet to happen. All the assets of this company are either at the exploration stage, or very early in the project definition stage.

18 Feb 20

FY19 confirmed the business model's solidity

FY19 results confirmed the predictability and toughness of Kerry’s business model. The same scenario continued: Taste & Nutrition remained solid, pushed up by healthy life style and acquisitions, while the Consumer Foods division is still challenging. We believe FY20 will stay the same way.

Companies: Kerry Group

18 Feb 20

Q4: new production continues to drive growth

The quarter’s results came in line with consensus and were driven by the start-up of FPSO#10 at Berbigão-Sururu. The CMD confirmed the commitment towards renewables, highlighted by the photovoltaic power projects acquired last month. Exploration & Production (now renamed Upstream) will nonetheless remain the central division, accounting for more than two-thirds of the group’s results, with meeting future production expectations the key risk for the stock.

Companies: Galp Energia SGPS

18 Feb 20

OptiBiotix Health agrees exclusive deal for LPLDL in USA and Canada

18 Feb 20

Agnico Eagle Mines - Record production and cash flow

Agnico Eagle’s FY19 results revealed production of 1.782Moz at a total cash cost of US$673/oz, compared with prior guidance of 1.77–1.78Moz at US$620–670/oz. Adjusted EPS for Q419 was US$0.37/share – almost exactly the same as Q319 – to result in FY19 adjusted EPS of US$1.01/share (Edison calculation). At the same time, the quarterly dividend was raised from US$0.175/share to US$0.20/share. However, despite the positive aspects of the results, production guidance for FY20 was lowered from 1.9–2.0Moz to 1.875Moz (a decline of 3.8% at the midpoint) and the shares sold off 15.6%, albeit we believe this reaction to have been overdone. Production guidance for FY21 and FY22 remained (effectively) unchanged.

Companies: Agnico Eagle Mines

18 Feb 20

Kavango Resources review KSZ drill results and discuss new copper JV

18 Feb 20

Kavango Resources team review KSZ drill results and discuss new copper JV

18 Feb 20

Size matters

ISP’s opportunistic take-over bid on UBI Banca has a strategic rationale, low execution risk and is being performed under interesting financial conditions.

Companies: Intesa Sanpaolo

18 Feb 20

Kodal Minerals CEO details Mali Lithium agreement and lodging of mining licence

18 Feb 20

Accelerated repositioning

The quarterly underlying performance came in line with expectations. The expected Coronavirus-related impairments and the temporary extra capital consumption look limited. The related revenue losses remain unknown but are expected to be progressively offset by organic growth. The announced acceleration in the group’s repositioning comes at the right time, confirming management’s confidence in Asia’s longer-term potential and enabling the group to improve its capital usage ahead of the implementation of Basel 3.

Companies: HSBC

18 Feb 20

Another steady quarter but conservative 2020 outlook

2019 ended on a steady note for Novo Nordisk. While Ozempic continues to do well, the addition of Rybelsus should further solidify the group’s non-insulin offerings. However, insulins – still c.46% of sales – continue to be a pain-point, especially in the US. Overall, there are no major growth drivers in the non-diabetes areas, which could limit the group’s ability to withstand another round of pricing-related uncertainty with US elections due later this year.

Companies: Novo Nordisk