Morning Note – 21 November 2023

Trifast - Interims – margin gains on track but with higher interest costs

Interims highlight a resilient performance in challenging market conditions. Some decent margin gains have already been delivered from internal actions, with more expected. Adj PBT has been affected by higher interest charges. A strong focus on cash generation has resulted in a £10.2m reduction in net debt to £27.8m, driven by a reduction in working capital. We reduce FY24E EPS by 12.3% and FY25E by 20%. We shave our TP to 100p, offering significant upside from currently attractive levels, being

Trifast (TRI LN) - Interim results show strategic progress

Trifast has announced an encouraging set of interim results both operationally and financially. The operational improvements being made under the new management team are starting to be reflected in the financial performance of the business, particularly in terms of working capital. Despite the operating environment remaining challenging, it is on course to broadly hit ZC FY24 profit estimates. Importantly the working capital commitment of the business continues to fall improving cash generation

Morning Note – 24 October 2023

Trifast (TRI LN) - Trading in line, strong progress on its strategic initiatives

Trifast has released a trading update ahead of its interim results next month (21st November) confirming trading remains in line with management expectations despite a tough macroeconomic backdrop. Revenue for H1 is down c. 2% yoy (AER) as strength in its Light and Heavy vehicle end markets (c. 35% of FY23 revenue) was more than offset by weakness in its Health & Home and Distribution channels (c. 35% of FY23 revenue). Importantly, however, the Group’s strategic initiatives are bearing fruit as

Morning Note – 11 July 2023

Trifast - FY23 results in line: a refined strategy to focus on delivery

FY23 results were in line with reduced forecasts, with the group experiencing a tough year. The new management team have got to grips with several initiatives to refine strategy and sharpen focus on profit and cash generation. The pricing reviews have started to recoup inflationary pressures and have restored gross margins in H2 to more normal levels. Inventories have been cut by £10m in H2, while the UK restructuring should yield annualised cost savings of £5m. The new year has started well, su

Trifast (TRI LN) - Fundamentally undervalued

In this note Zeus look at the current valuation of the Trifast business and the potential to unlock equity value in a relatively short space of time. On this basis, Trifast shares appear fundamentally undervalued. We derive a price target of 102p (+33% upside) based solely on returning the working capital commitment of the business back in line with historic levels. Factoring in a conservative DCF and peer group analysis gives an average valuation of 103p. Our medium term, Blue Sky analysis, ass

Morning Note – 26 April 2023

Trifast - FY23 update: slightly better trading with a robust plan for FY24

The FY23 trading update is slightly better than February’s guidance, with Adj PBT slightly ahead of £9.0m guidance, and the outlook looks to FY24 giving a ‘marked improvement in performance’. It is a more positive update, highlighting new management’s vigorous and comprehensive plan to return the group to previous margin targets of 10-13% and reduce inventory to historic levels. The slight beat on guidance results in a 2% EPS upgrade, with a 5% dividend increase and much better debt levels. We r

Morning Note – 20 February 2023

Trifast - Trading falls short on customer destocking, resignation of CEO

The group has announced a disappointing trading update highlighting a specific problem with a significant Asian customer destocking. This has more than offset the benefits of recent price increases and operational efficiencies gained. It therefore comments that results for FY23 will be significantly below market expectations. Mark Belton has resigned as CEO and been replaced by Scott Mac Meekin as Interim CEO, stepping aside from his existing NED position at Trifast. This is a disappointment at

Trifast: A turnaround in performance after a difficult FY22 (10 for 23 extract)

Trifast is fundamentally a strong business, with long-established OEM relationships across the globe in a diverse range of end markets, including some interesting growth markets such as EVs, electronics and medtech. Like many industrials, it has seen challenging conditions since the pandemic that have affected supply chains and inflation. We see these pressures easing through FY23, with additional management vigour expected to drive improvements in performance and margin. The Atlas programme sho

i3 Energy (I3E LN) - Canada site visit review

Last week we attended a site visit to i3’s assets in central Alberta in Canada – the company’s largest producing area. We were left with a favourable impression of the magnitude of the company’s operations in the region, of the professional operational running of these, and of the overall level of opportunity in this well-established oil and gas province.

Reabold Resources - Payment received from Shell

Good news for Reabold, which is set to receive £5.2m of the second tranche payment from Shell imminently for the Victory gas field it acquired last year. The final £4.4m payment is due once the development approval for the field is received from the NSTA in the coming months. These funds will allow RBD to progress its two onshore gas developments in the UK and Italy and consider further distributions to shareholders. Partner funding of these projects remains an issue, but RBD’s risk/reward profi

Oil & Gas - Cavendish sector note

88 Energy, Falcon Oil & Gas, Trinity Exploration & Production, Plexus Holdings, Baron Oil, Harbour Energy, EnQuest, Capricorn Energy, Arrow Exploration, Southern Energy, Serinus Energy, SDX Energy, Panoro Energy, Eco (Atlantic) Oil & Gas, OKEA ASA, Equinor Source: FactSet, weekly change 27/11/23-1/12/23 Oil extended declines, closing out a sixth straight weekly drop, as the OPEC+ output cuts announced Thursday failed to dispel the market’s gloom over swelling global supplies. West Texas Intermed

Tower Resources (TRP LN) - Initiation Report (SPECULATIVE BUY, 0.12p/sh TP)

Cameroon: Ready for the Rig

Pan African Resources - Valuation up 22.2% with new gold price forecasts

On 22 November, Pan African Resources (PAF) announced that operations to date in FY24 had performed in line with, or better than, expected, with gold production for H124 anticipated to be in the range 94,000–98,000oz (cf 92,307oz in H123). As a result, it increased its production guidance for FY24 to 180,000–190,000oz, which caused us to increase our production estimate in turn by 1.9% (or 3,575oz) to 189,725oz. The change made only a modest difference to our EPS forecasts for FY24 (see Exhibit

Morning Note – 4 December 2023

New Debt Facility – Lowering TRR Cost of Capital

We have been roadshowing Trident Royalties all week during which time the company released an announcement that they have entered into a commitment letter with BMO and CIBC for a new $40m revolving credit facility (RCF), with the potential to increase the facility to $60m via an accordion feature. The proceeds from the $40m are going to be used to repay the existing secured debt facility of $40m with Macquire in Q1 next year.

Baron Oil - Chuditch PSC – Six-Month Extension

Baron has been granted a further six-month extension to the Chuditch PSC. The end of Contract Year Two will now be 18 June 2024, at which time Baron will need to make a decision on entering Year Three. In the Third and final phase of the PSC, a final investment decision (FID) will be required on an appraisal well targeting the Chuditch discovery (Chuditch-2). Baron continues to make good progress in its discussions with potential funding partners, having previously announced that it is in “advan

Hartshead Resources - Fully Funded Solution

Hartshead has secured a funding solution with partner Rockrose Energy to fund 100% of the Phase I development costs. Under the agreement, Hartshead has the option to exchange an additional 20% licence interest for an uncapped free carry, thereby covering the total cost of the Phase I development project (financing backstop). Importantly, Hartshead maintains at its election the option not to proceed with the RockRose financing solution, and introduce other financing solutions (eg project debt, pr

SP Angel Morning View: Ford takes 8.5% stake in Indonesian nickel project as Automakers swim upstream

Southern Energy - 3Q Results and Comprehensive Update Note

Southern Energy delivered solid 3Q results with the focus of attention now turned towards the completion of 4 drilled uncompleted wells (“DUCs”). We see our investment thesis for Southern Energy – premised on the scale, location, quality, deliverability, low-cost nature of the company's Gwinville gas field in Mississippi, USA – very much strengthening based on our structural commodity price outlook and our growing confidence in the highly prolific Gwinville gas field, sharpening our interest in

SP Angel Morning View: Gold powers through $2,100/oz on outlook for Fed rate cuts

SP Angel Morning View: China lithium stocks rally on prospects for market rebound

UK-Listed Energy Sector: Review of the UK oil and gas landscape – why the country needs it, current policy and tax

The front of this note takes a look at the UK oil and gas sector, why domestic production is advantageous, what the main political parties think, and what could happen going forward. The latter part contains a review of the companies in our coverage – some that are UK centric, which give exposure to the note’s wider theme, and others that are focused elsewhere.

Andrada Mining: Lab-scale Spodumene concentrate results further advance Andrada’s lithium strategy

Andrada Mining (“Andrada”; “ATM”) has produced its first laboratory scale high-grade spodumene concentrate from mineralised pegmatite at Lithium Ridge (ML133). The material was sourced from the drill core of three holes through two separate pegmatite ore bodies drilled earlier this year. The weighted average feed grade was 1.69% Li2O (15.2% Spodumene), with a 76% Li2O recovery, producing a 6.8% Li2O high-grade spodumene concentrate suitable for lithium carbonate production. A second drill progra