Battered Dolfines illuminates a future path with the HSE acquisition

After a long period of searching for another profitable acquisition, Dolfines decided to expand its footprint in the Health, Safety and Environment market and buy out AEGIDE International, which has more than 200 clients across the world. In FY22, the acquired company generated turnover of €2.75m, and had averaged 15% annual growth over the last three years. In our view, the acquisition enhances Dolfines’ opportunities and sheds some light on the future path of the company.

Tapping into the HSE market with new equity-financed acquisition

Dolfines has executed an equity financing programme to prop up its balance sheet and finance an acquisition in FY22. The result was a year-long downhill trend on the share price at a stupefying level of 98%. Committed to the strategy to generate more revenues and expand market share, Dolfines embarked on another cash-accretive acquisition opportunity this year, again with equity line financing that will sustain downward pressure on the stock for at least until the end of Q1.

Target cut by -21.6% (Dolfines)

TARGET CHANGE CHANGE IN TARGET PRICE € 0.06 vs 0.07 -21.6% The target price is reduced due to the declining DCF and NAV values. At such low prices, a slight change in the price brings about significant change. CHANGE IN NAV € 0.10 vs 0.14 -27.4% The NAV decrease stems from the massive dilution the company carried out in FY2022 with the number of shares increasing by more than 12x. The share issuance continued in early FY2023, further reducing the NAV. CHANGE IN DCF € 0.09 vs 0.12

Capital increase slashes the valuation (Dolfines)

Capital increase slashes the valuation TARGET CHANGE CHANGE IN NAV € 0.14 vs 0.27 -48.4% Since our last update, Dolfines has continued its capital increase programme with the conversion of the remaining bonds. The conversion of notes resulted in a massive dilution by creating more than 100 million shares (almost doubling), which was reflected in the tanking share price since September 2022. Accordingly, our NAV is severely impacted by the rising number of shares. CHANGE IN DCF € 0.12

Costly financing cuts the target price (Dolfines)

Costly financing cuts the target price TARGET CHANGE CHANGE IN TARGET PRICE € 0.14 vs 0.40 -66.0% In the aftermath of last week's developments on equity line financing, we have updated our model. The massive dilution resulted in a 3x increase in the number of outstanding shares. We are expecting the financing woes to continue into next year, and have hence downgraded our target price. CHANGE IN EPS 2022 : € (0.01) vs (0.02) ns 2023 : € (0.01) vs (0.03) ns The dilution as a resul

Can Dolfines’ shareholders survive its financing hurricane?

In a recent round of equity line financing with convertible bonds, Dolfines was able to bring €4,135k to finance a new acquisition, pay debts and invest in research and development projects. But this came at a grave cost for the shareholders as the share price nose-dived. At this point, the company and the shareholders could only hope for this precarious form of financing to do its job and facilitate cash generation from investments.

H1: Growth in both segments

Revenue stood at €4.3m in H1, confirming the positive momentum communicated in Q1. The Oil & Gas activities recovered sharply with the high oil price, while the strong growth continued at 8.2 France. The prospects also look good for H2, with drilling activity remaining elevated and with the workforce growing in Renewable energies. Overall, a positive update, which will help to support the stock price.

Development continues in renewables

The strategy update was in line with the recent communications from the company, but provided more details ahead of the capital increase. While the oil & gas activities continue to recover, the priority remains on renewables (both inorganic and organic). A large share of the proceeds will fund acquisitions, with one soon to be announced in renewables services. Furthermore, the company is aiming to break-even at operating cash flow level by the end of the year.

Target cut by -20.3% (Dolfines)

TARGET CHANGE CHANGE IN EPS 2022 : € (0.02) vs (0.02) ns 2023 : € (0.03) vs (0.03) ns We have updated our model with the integration of the FY21 results and net loss of €1.55m. Estimates for FY22/FY23 are unchanged. CHANGE IN NAV € 0.83 vs 1.01 -17.0% Following the FY21 results, we have added a €4m capital increase, at a subscription price of €0.30 per share, leading to the creation of 13.3m shares. This represents a c. 30% discount on the 29/04/2022 closing price (day of the annou

FY21: recap as investments accelerate in renewables

The FY21 results came in below our expectations as Covid-19 dragged on mobility thus limiting oil & gas activities, although the strong start to the year confirms that the recovery is ongoing. As investments ramp up, the company has announced a c. €4m recap, split between debt conversion and an equity increase. The latter should be enough to sustain research & development activities in renewables for both the new floater and the telescopic arm for offshore wind inspection.

EPS upgrade (2021: from € -0.06 to -0.06, 2022: from € -0.03 to -0.02) (Dolfines)

EPS CHANGE CHANGE IN EPS 2021 : € (0.06) vs (0.06) ns 2022 : € (0.02) vs (0.03) ns The company has published a positive release, with a strong January and February in inspection and audit (Factorig). We are thus slightly increasing our estimates for Factorig, to €3m of revenue for FY22 vs €2.5m previously, partly offset by lower estimates in Services, where we now forecast revenue of €1.5m vs €1.7m previously.

Strong start of the year

The stock is up 15% at pixel time on a positive press release showing a turnover (for January and February) higher than in 2019 (at €1.3m). This is led by Factorig (inspection division), where the company performs work in Latin America, and has a strong commercial activity.

Prequalified in Saudi Arabia for rig inspection

Positive news in oil & gas with this prequalification for rig inspection and acceptance services for Saudi Aramco Drilling. The Middle East has been particularly resilient to the oil crisis, where Factorig has recently signed several contracts with new customers. Overall, the low breakeven levels, as well as continuing development works, will allow a decent level of activity in inspection services across the whole business cycle.

Updating shares outstanding on potential debt conversion (Dolfines)

Updating shares outstanding on potential debt conversion TARGET CHANGE CHANGE IN NAV € 0.99 vs 1.19 -16.6% The NAV and DCF are down as we have updated the conversion of the (€1.5m) green bond issued in January 2021 to the current share price level, with a 20% discount, leading to the creation of 3.3m shares. Note that, ultimately, the dilution of shares will depend on the bondholders’ decision to convert, and the conversion price (which depends on the stock price). Note that we have als

Second green bond, rig sale resurfaces

The company is issuing a €2m green bond and is separating the conventional and renewable activities. The latter was already announced early last year, yet it seems that the improving environment in oil & gas explains this restart. The stock is up 15%, after a volatile November, and, in our view, due to the company issuing the €2m bond instead of using the OCABSA line.

Fully funded for range of activities - operational and key third party evaluations

Predator Oil & Gas Holdings PLC - Initiation of Coverage - Buy Target Price 0.25 Pence

• Up to 200MMscfd gas to industry opportunity in Morocco • Replacing more expensive and CO2 emitting LPG • 295BCF (2C) in Guercif permit onshore Morocco • Multifold upside from yet undrilled prospective in permit • Competitive advantage from capital-light phased development approach • 3-month re-rating to 15p after flow-testing discovery well, and two appraisal wells in June/July 2023 • 12-month target of 25p with first gas of 1MMscfd in May/July 2024 ramping-up rapidly to 10MMscfd • Further ups

Savannah Energy+ (SAVE, Suspended, Under Review) - Gas sales and purchase agreement signed with AMOCON

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Andrada Mining (“ATM”) has announced several unsolicited approaches from international entities to accelerate production from its lithium portfolio through a potential strategic partnership in its Uis project in Namibia. A global investment bank has been appointed to provide a structured assessment of potential partners based on financial and technical merits. After the expansion of the Phase 1 tin operation in 2022, Uis achieved record quarterly tin concentrate output for the three months to Fe

Initial Equity Trading Comments - 15 May 2023

Touchstone Exploration+ (TXP, House Stock at 58p) - US$7m revolving loan facility

FLASH: Completion date extended (again)... but positive drilling results indicate resource upside

Successful first test at CN-1

Jersey Oil and Gas (JOG LN) - Full year 2022 results

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Cenkos: Diversified Energy Company Plc -- 54% Cash Margin & 37% Annualised FCF Yield

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Pantheon Resources (PANR) – Corporate – Successful $22m Placing

Pantheon Resources announced the closing of a $22m significantly oversubscribed placing and subscription priced at 17p. The use of proceeds will include: i) funding the flow testing of the Alkaid#2 well from the SMD horizon, ii) funding a competent person report to be prepared by Netherland Sewell and Associates covering the Theta West and Alkaid oil discoveries, iii) funding the preparation of dynamic models and field development models to be prepared by SLB (formerly Schlumberger) and iv) fund

The time has come!

In the next six months, Aminex (AEX) will embark on a development programme that will see the company become a producer and free cash flow (FCF) generator. Between drilling the new Chikumbi-1 well (CH-1), re-entering the existing two wells, processing of the new 3D seismic, signing a GSA, and reaching first gas, there will be plenty of milestones in 2023 to, in our view, gradually “guide” the market towards recognising a full value for the targeted initial 60mmscf/d gross production in late 2023

Hybridan Research: Sector Review: Critical minerals for UK - mining and battery recycling: 09-05-2023

Virgin mining: Energy security and decarbonisation are driving the race in the sourcing of critical minerals from the natural world. This has contributed to the revival of exploration activities in the US, Europe and to a lesser degree the UK. For example, the global identified lithium resources increased from 40m tonnes in 2015 (the Paris Agreement year) to 97m tonnes in 2023, at a CAGR of 12%, according to the U.S. Geological Survey data. For example, there was no identified lithium resources

Hybridan Small Cap Feast - 23 Feb 23

23rd May 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objectiv

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