Anglesey Mining (AYM.L) | Solo Oil | ValiRx (VAL.L) | Biffa (BIFF.L) | Venture Life Group (VLG.L)
The FTSE-100 finished yesterday's session 0.58% higher at 7,396.98 whilst the FTSE AIM All-Share index was up 0.26% at 1,013.49. In continental Europe, the CAC-40 finished 0.26% higher at 5,114.62 whilst the DAX was up 0.67% at 12,296.63.
In New York last night, the Dow Jones closed 0.1% lower at 21,784.78, the S&P-500 was little changed at 2,465.10 and the Nasdaq closed 0.07% higher to end at 6,397.87.
In Asian markets this morning, the Nikkei 225 was down 0.36% at 19,326.37, while the Hang Seng was 0.64% higher at 27,697.93.
In early trade today, WTI crude was 0.29% higher at $49.23 per barrel and Brent was up 0.48% at $54.75 per barrel.
PR firm Bell Pottinger 'nearing collapse'
Bell Pottinger's Asian unit has said it will separate from its British parent, amid reports the public relations firm is nearing collapse. Bell Pottinger's UK business is expected to go into administration as early as next week, the firm said. The Asian business will begin trading under a new name "in the coming days". The PR firm was expelled from the industry trade body after being accused of stirring up racial hatred in South Africa. The company's Asian business is seeking to distance itself from the scandal. "The Asia business is entirely ringfenced and solvent," Asia Chief Executive Ang Shih Huei said in a statement sent to clients on Friday seen by the BBC. "Our teams are intact, we continue to serve our clients and it is entirely business as usual." Bell Pottinger Asia said it would soon re-launch with a new ownership structure and operate under the name Klareco Communications.
Anglesey Mining (AYM.L, 3.00p) – Speculative Buy
Anglesey Mining announced an update on its wholly owned Parys Mountain copper-lead-zinc project in North Wales. On the back of continued strengthening of base metal prices the Company believes now is the time to progress the development of Parys Mountain. As such, management is planning commencement of a number of key steps including: an Environmental Impact Analysis (EIA), a Definitive Feasibility Study (DFS), recruitment of key corporate staff as well as discussions with potential project finance provides over the short term. The DFS is expected to be completed in H1 2018 followed by detailed discussions regarding project finance and initial production targeted for H1 2020. The current resource estimate is 2.1Mt grading 6.9% combined base metals in the indicated category and 4.1Mt grading 5.0% combined base metals in the inferred category. The life-of-mine could be increased significantly and the NPV enhanced should a high proportion of the 4.1Mt of inferred resources be converted into the indicated category.
Our View: The above announcement is positive news for the Company as it sets out its plan and timeline for developing Parys Mountain. The recently completed Scoping Study points to a potentially viable mine plan with robust internal rate of return using metal prices below current levels. We note that the NPV(10%) increases 30% to US$43.2m and the IRR to 33.1% from 28.3% when using current zinc and copper prices. Whilst more detailed work is required to complete the DFS which will provide the platform for project funding discussions, we continue to be encouraged with the initial economics and look forward to further updates as Anglesey executes its planned timetable for development. In the meantime, we maintain our speculative buy on the stock.
Solo Oil (SOLO.L, 5.75p) – Speculative Buy
Horse Hill Developments has received permits from the Environmental Agency to carry out its planned work programme at Horse Hill (licenses PEDL 137 and PEDL 246). The permits allow extended flow tests at HH1 plus drilling and testing 2 new wells - a side track at HH1, and a new HH2 well. Solo has a 10% interest in Horse Hill Developments which owns 65% of the licenses, i.e. 6.5% net. UKOG has circa 50% interest in Horse Hill Developments and is the operator. Before work starts, HHD needs planning permission from Surrey Council. They will meet on the 18th October and HHD and its various stakeholders including Solo expect operations to start in 4Q17.
Our View: This development means we can expect newsflow from Horse Hill this year. It is not yet clear in what order the work will be done, this will probably be stated once planning permission is in place. Solo's share price has not benefited from its Horse Hill ownership despite a significant 6.5% interest. We believe this is illogical and assuming positive Horse Hill news in 4Q, Solo shares should this time go better.
ValiRx (VAL.L, 1.80p) – Speculative Buy
ValiRx, the clinical stage biotechnology company, yesterday announced that it continues to make a good progress in the development of its proprietary GeneICE (Gene Inactivation by chromatin engineering) technology platform, and therefore will accelerate late pre-clinical studies for its VAL101, a novel therapeutic based on GeneICE technology. ValiRx has a world-wide exclusive license from Imperial College for the GeneICE technology and for any resulting products, in addition to newly generated intellectual property rights. GeneICE technology acts to target and shut down (or 'put on ice') the 'rebellious genes' that expresses Bcl-2, the gene associated with cancer and potentially some neurological problems. The first generation of the VAL101 molecule showed in pre-clinical studies that whilst it successfully reduced Bcl-2 and cancer cell death occurred, the molecule's structure and manufacture however required optimisation for commercial production. ValiRx has since developed a second generation of the VAL101 molecule which preliminary results demonstrated a gene silencing levels that are similar to the original structure with much improved technical efficacy and commercially viable efficient manufacturing. ValiRx is leading a consortium conducting the studies, with other internationally respected partners. The consortium has been awarded two prestigious Eurostars Grants, where the first grant of €1.4m was to further develop the GeneICE platform, and the second grant of up to €1.6m was to be used to progress the pre-clinical studies of VAL101. ValiRx's CEO, Dr. Satu Vainikka, commented "We at ValiRx along with our partners are very excited about the potential of the GeneICE platform technology and we are delighted to be able to show the successful optimisation and production of any molecule from this platform. We look forward to further developments and encouraging announcements in due course".
Our View: Taking VAL101 to the next stage. With a much improved second generation VAL101 molecule, the Group will now accelerate its late pre-clinical studies in preparation for the compound's entry into the clinic. Elsewhere, ValiRx has two advanced clinical trials: VAL401 and VAL201. VAL401 is in Phase II clinical trials for the treatment of non-small cell lung cancer. Its patient recruitment has been closed and the trial remains on track to be completed by the year end, following which further data processing and analysis will be performed. VAL201 is in the final stage of its Phase l/ll study for the treatment of hormone resistant prostate cancer, with patients receiving the highest dose prescribed by the trial protocol, which is on track to complete during 2017. VAL201 is targeting treatment of advanced symptoms without suppressing sexual and related functions or any of the many other debilitating side effects that alternative therapies present. The Group operates a low-risk, high return model that is shareholder friendly in the respect that it seeks to crystallise value before reaching the most expensive development phases. It routinely provides shareholders with tangible progress between modest funding rounds. As such, it is realistic to expect the Group to consider further fundraising in coming months, be it in terms of straight equity of drawdowns of its Convertible Loan Facility, in order to support continuing development of its two lead candidates. Given the clinical progress being made, however, it is clear that shareholders can now capture quite extraordinary value from a Group presently valued on a market capitalisation of just £2.3m! Comparisons with peer groups having similar clinical portfolios, or early stage partnership deals with pharma groups seeking entrance into such therapeutic areas (such as licensing agreement signed with Mystic Pharmaceuticals Limited in July), highlights a significant valuation gap. ValiRx shares recognise none of the value created over the past 18 months, nor the depth of its therapeutic pipeline. While it is understandable that the market remains concerned regarding the Group's prospective funding needs, it should also recognise that a Big Pharma development collaboration for either VAL201 or VAL401 would likely be concluded at a multiple of the Group's current valuation. Beaufort reiterates its Speculative Buy rating on the shares with a price target of 6.5p.
Biffa (BIFF.L, 232.75p) – Buy
The leading UK integrated waste management company, yesterday issued a Pre-Close Trading Update ahead of its Half Year Results announcement for the six months ending 22 September 2017, scheduled for 22 November 2017. Biffa's board confirmed a good performance had been achieved during the period with sustained momentum overall. It has continued to deliver solid organic and acquisition revenue growth, while Underlying EBITDA and Underlying Operating Profit growth have been driven by a strong operational performance and cost control, including the delivery of acquisition synergies. In July, Biffa completed the acquisition of O'Brien Waste Recycling Solutions Holdings Limited, a leading provider of waste and recycling solutions in the North East of England, for £35.2m, which has subsequently performed well. Beyond this, the Group's acquisition pipeline is busy as management explores further value enhancing opportunities. The Group's balance sheet remains strong, with cash generation and net debt remaining in line with expectations.
Our View: Beaufort remains confident in the Group's strategy, commercial opportunities, and outlook for the full year. Operating in a highly fragmented industry, Biffa is able to identify well-priced 'gap-filling' acquisitions which rapidly 'bolt-on' to its existing network and infrastructure, eliminating duplicated cost and so boosting operating margins in the process. Euro-based costs (less than €50m pa) inflated by Sterling weakness have been protected to early 2019E through hedging, following which some minor additional costs may need to be passed on to customers, while 2019E full year Group debt will also likely be burdened by a £10m exceptional charge related to an outstanding historic landfill tax dispute with the Inland Revenue. But these are small items relative to the underlying progress being made and the excellent positioning of the Group. With no intensification of competition seen in a market that is experiencing limited churn while supporting reasonable increases in annual charges, Beaufort sees very limited risk to the business plan. Trading on a price/earnings multiples of 12.6x and 11.2x for 2018E and 2019E, with prospective yields of 2.9% and 3.2%, Beaufort retains its Buy rating on the shares while raising its price target to 270p (from 250p previously). With respect to the shares reaching this 'fair value' target, however, investors should bear in mind that funds representing three major shareholders, namely Avenue Europe International Management LP, Bain Capital Credit, LP and Barings (U.K.) Limited, arranged for the discounted placing of one-third of their 30% holding at 220p/share back at the end of July. Being primarily early-stage investors, this disposal was very much in accordance with their normal planning; it did, however, bind their remaining 20% holding to a 90-day lock-in, meaning they may well attempt to make a further block sale of equity as early as end-October. This potential new supply of equity may well restrain the shares in the interval and create a buying opportunity for longer-term investors who foresee the Group's prospective inclusion in the FTSE250 not that far away.
Venture Life Group (VLG.L, 58.00p) – Speculative Buy
Venture Life Group ('Venture Life'), the international consumer self-care group focused on developing, manufacturing and commercialising products for the aging population, yesterday announced the signing of new long-term distribution agreements for two of its products; UltraDEX and Myco-Clear. Polipharama Benessere Srl ('Polifarma'), a well-established pharmaceutical sales company, will market and sell the Group's UltraDEX oral healthcare product range in Italy, into both the dental and pharmacy channel. Polifarma is planning to launch the UltraDEX range in the Italian market early 2018. For its new in-house developed product Myco-Clear, a topical treatment for Onychomycosis (fungal nail infections), the Group has signed long-term distribution agreements with United Health (cover marketing in Egypt, Kingdom of Saudia Arabia & UAE) and Ecopharm (Bulgaria). Myco-Clear has been developed to treat discoloured, misshapen nails on both the hands and feet as a result of aesthetic issue and the underlying infection, and is the subject of a patent application. Myco-Clear has been approved as a Class IIa Medical Device in Europe and the Group commenced clinical programme to strengthen the package of data around this product. In addition, the Group said sales data for Lubatti, the luxury skincare range, in China for July 2017 showed record monthly sales since its launch in January 2016, supported by continued investment in sales and marketing by its long-term partner, Gialen. Venture Life's CEO, Jerry Randall, commented "The continued commercial success across our portfolio continues the momentum seen in the first half of 2017". The Group is scheduled to release its interim results on 21 September 2017.
Our View: Venture Life continues to demonstrate the international growth and expansion of its products. The latest partnership for UltraDEX brand resulted in the opening of nine new markets since the acquisition of Periproducts Limited back in March 2016 (now fully integrated), seven of which are in Europe, including Italy and Spain. The recent trading update, released in July, noted that UltraDEX has achieved record monthly gross sales in June 2017 with continued growth in the UK, with many new store listings taking place since then. The Group is in discussion in many other countries, including within Europe, noting it expects to deliver "more news in this regard in the near term" and reiterated its target to establish distribution partnerships for UltraDEX in 30 markets by 2020. It is also worth highlighting the Group's ability to secure long-term distribution agreements for Myco-Clear before the completion of clinical trials, which demonstrates high interest for the product, as currently available alternatives are said to have limited efficacy. Venture Life's trading update for the 6 months ended 30 June 2017 announced on 12 July 2017 demonstrated revenue growth of +28% and like-for-like growth of +18%, against the comparative period. Given continued growth and momentum, along with synergies and profitability expected to accrue for the full integration of Periproducts Limited, Beaufort reiterates its Speculative Buy rating on the Shares.
During the three months to end-August 2017, the number of stocks on which Beaufort Securities published recommendations was 203, and the recommendations were as follows: Buy - 65; Speculative Buy - 117; Hold - 20; Sell - 1.