Edison Equity Research & Stock Reports

Petro Matad

The Snow Leopard-1 well (100% Petro Matad) was drilled to total depth of 2,930m in granitic basement. No sands were encountered in the shallow target, although gases (C1 to C5) and an oil sheen were observed in the drilling mud. The deeper objective encountered an overall gross interval of more than 400m. However, no oil or gas shows were observed and the interval was found to be water-bearing. Once operations to plug and abandon the well are complete, the rig will move to the Wild Horse prospect, targeting 480mmbo of unrisked prospective resource in the Baatsagaan Basin. Our valuation included 4.2p/share risked for the Snow Leopard prospect, which we expect to remove from our RENAV of 30.8p/share, reducing it by 13.6% to 26.6p/share.

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Scisys

SCISYS has reported a strong H1 with professional fees jumping 24%. However, this was off a weak H117 and some business was brought forward from H2. Consequently, we are forecasting a more balanced H1/H2 in FY18. We have increased our FY18 revenues by £3.0m to reflect this balancing, but we have maintained our profit forecasts. All divisions posted record revenues, the order book remains robust at close to £100m and net debt continues to decline. Management’s goal of £60m in revenues and double-digit margins within the next few years looks increasingly conservative and we believe the stock is solid on c 14.6x our FY19e EPS.

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Herantis Pharma is focused on the development of innovative regenerative medicines targeting unmet needs. Its two lead assets are cerebral dopamine neurotrophic factor (CDNF), a potential disease-modifying treatment for Parkinson’s disease (PD), and Lymfactin, the only gene therapy in development for breast cancer-related associated (BCAL) secondary lymphedema. The underlying science for both is novel and positive efficacy/safety data from ongoing proof-of-concept clinical trials expected in 2019–20 would serve as validation of the research efforts and additionally could crystallise value through partnering opportunities for these unique assets. We value Herantis Pharma at €9.3/share.

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THIN FILM ELECTRONICS

Apple’s introduction of native NFC support in the iPhone models launched this month is a key development for Thinfilm. First, it makes it easier for consumers with these models to tap and read NFC tags, removing an inhibitor to adoption. Second, it indicates that Apple is becoming more supportive of a consumer-friendly NFC ecosystem. The initial reaction from Thinfilm’s customers to the announcement appears to be very positive. Because it will take time for this heightened interest to convert to potential orders, we leave our estimates and valuation broadly unchanged.

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The Mission Marketing Group

The mission has delivered another set of good trading results, with H118 organic revenue growth of 5% (10% including acquisitions). Krow, bought in April 2018, is performing well, while internal initiatives on shared back-office functions and tech-enabled collaboration are helping to boost operating margins, up 100bp to 10.1% in H118, towards the FY20 goal of 14%. Banking arrangements have been extended through to FY21, on lower rates, amply covering existing commitments and allowing scope for further deals. The lengthening record of delivering on expectations and of earnings growth is not consistent with the deeply discounted rating.

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