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Obtala Limited – price target 30.52p

Undervalued African forestry and agriculture business fully funded to unlock the deep value embedded within its asset base. Obtala Limited is an Africa focussed forestry and agriculture company with a goal of becoming one of East Africa’s largest sustainable food and timber producers. New management streamline strategy and raise funds for expansion Since the appointment of a new senior management team in April 2016 Obtala has streamlined its strategy to focus on developing its latent forestry and agriculture assets. The sterling equivalent of c.£18.3 million has been raised since December last year to invest in building towards meaningful and sustainable levels of production in both divisions. Forestry In Mozambique Obtala has an effective 58% stake in Argento Limited, which owns 312,465 hectares of natural forestry concessions on 50-year licences. Funds from a recent preference share issue position the division to rapidly expand its operations towards full production in the coming years. Agriculture In Tanzania Obtala owns 1,735 hectares of farmland on long-term leases. The operations have so far had $10 million of investment spent upon clearing land, developing infrastructure and planting initial crops. Revenues are now being earned, with Obtala planning to significantly increase the amount of planted hectares and focus on high value orchards and exports. Shares undervalued on a number of metrics Obtala shares now trade at only a small premium to the value of the stake in Argento alone, priced per the recent fundraise. This implies the agriculture business, net cash & potential for expanding the timber business are being valued at just £1.2 million. Our DCF model suggests fair value of 30.52p, hence we initiate coverage with a Conviction Buy stance.

  • 10 May 17

Zenith Energy. Compelling investment play on Azerbaijan – sum of the parts target of 65.1 cents per share

Zenith Energy Limited is a TSX Venture Exchange listed company reportedly looking for an additional listing in another major market, be that Oslo, New York or London. Zenith has recently built up its existing portfolio by adding a substantial acquisition in Azerbaijan which we believe could propel the company towards a mid-cap oil valuation on a medium – long term investment timeframe. Acquisition in Azerbaijan potentially transformative Located in the Lower Kura Basin and around 240km inland from Baku, the Muradxanli Block is the largest onshore oil and gas concession in the country, covering 642.4km2 with three under-developed oil fields, the Muradxanli, Cafarli and Zardab Fields and offering both development and exploration upside. Italian assets offer value but Argentina on hold In Italy Zenith owns various gas production and exploration assets. It also owns interests in two small oil fields in Argentina where production has been curtailed after a recent storage tank collapse. Sum-of the parts valuation suggests significant value Valuing the Azerbaijan assets using a DCF model based on the new CPR report and adding in the Italian assets, excluding further capital issues, we have a sum of the parts valuation of 65.1c per share. The Italian assets alone cover the current market cap, with Azerbaijan providing significant potential value. DISCLAIMER Zenith Energy is a research client of Align Research. Align Research has an interest in Zenith Energy shares. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

  • 12 Oct 16

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