Pharos Energy (PHAR LN): Production remains in line with subdued guidance | JKX Oil & Gas* (JKX LN): 3% yoy increase in production, cash position remains strong | UK Oil & Gas (UKOG LN): Positive planning permission update

PHAR JKX UKOG

• 09 Jul 20
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Allergy Therapeutics (AGY): Corp Regulatory update – Phase III birch allergy trial | Elixirr (ELIX): Corp Thriving on change | Telit (TCM): Corp Earnings well protected during COVID slowdown | Tracsis (TRCS): Corp Worst case avoided

AGY TRCS TCM

• 09 Jul 20
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This is a positive trading update for a period impacted by the pandemic restrictions and uncertainty. The COVID-related global slowdown caused an 8% LFL YoY revenue decline to $166.5m in H1, but an improving gross margin and management’s temporary cost controls have protected earnings sufficiently to be ahead of H1 LY (adj. EBITDA of $16.0m). ‘Profit in cash’ (adj. EBITDA less capex and lease payments) is also ahead of the $2.6m seen LY. In fact, cashflow has been very healthy, net cash rising from $48.2m to $55.7m in the period, notably boosted by collections from the divested automotive business. A pleasing aspect of H1 is the continuing growth in higher-margin IoT services, up 12% YoY despite COVID. Easing of restrictions in H2 should see a return to more usual revenue and profit levels, and our FY 2020 earnings growth expectations remain unchanged despite revenue falling YoY – thanks to the cost savings management implemented. Looking further out to next year, a return to revenue growth and continued profit improvement is anticipated for FY 2021, due to pent-up demand and greater IoT adoption on concerns over physical restrictions in future pandemics. At the interim stage, Telit is well positioned to continue to deliver its impressive track record for earnings growth (we expect 9% adj. EBITDA growth this year and 19% next). Currently on an EV/EBITDA multiple of just 3.3x, the shares are deeply undervalued for a stock delivering such consistent profit progress with a very solid balance sheet in these uncertain times.

Telit Communications

• 09 Jul 20
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On July 16 Telenor reports Q2, where the full Covid-19 impact will be seen. The Nordic telco market appears relatively resilient to Covid-19, but Asia, Pakistan and Bangladesh will be hit more. This looks to be reflected in current consensus estimates and partly offset by lower costs. As such, and as Telenor is trading at a discount to peers with optionality from M&A in Asia and being a relatively defensive holding, we maintain our Buy rating.

TELENOR

• 09 Jul 20
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Material acceleration of strategic plan

Melodyvr Group Plc

• 08 Jul 20
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Filtronic (FTC): Corp

Filtronic

• 06 Jul 20
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U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France. The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet. The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries. The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month. Elsewhere, crude oil dipped but remained on track for a weekly gain.

TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN

• 06 Jul 20
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Wentworth Resources (WEN LN)c; £0.40 Price Target: Initiation of coverage - Wentworth Resources is one of the very few small cap E&P names whose profile should be appealing to ESG focused investors. Wentworth is solely focused on producing natural gas, the cleanest fossil fuel (and the preferred transition fuel to renewable energy). Gas is used instead of coal to support the rapidly growing electricity demand in Tanzania where Wentworth is one of only two established gas producers. The company is headed by Katherine Roe, one of the few female CEOs in the sector. With gas sold at a fixed price, the business is profitable irrespective of the oil price. Wentworth is member of a very small group of E&P juniors that offers a dividend yield (almost 8% for 2020, one of the highest in the sector). The dividend distribution could grow. FY20 WI production is estimated at ~21 mmcf/d. With ~150 bcf of WI 2P reserves and 230 bcf of WI 3P reserves, production is expected to grow by ~50-100% as power capacity is added. While the production plateau is very long, the shares trade at EV/DACF multiples of only 2.0x in 2020 and 1.0x in 2021. The current share price is 45% below our Core NAV (NPV15% on the 2P reserves). Maintaining 27 mmcf/d WI production until licence expiry recovers the 1P reserves and requires hardly any capex. The shares are worth £0.26-0.33 under these assumptions (NPV10%-NPV15%). (1) Adding a compressor should boost WI production to 35 mmcf/d in 2024 and adds £0.06-0.08 per share. (2) Extending the licence duration beyond 2031 would allow the drilling of a sixth well to increase WI production to 42 mmcf/d, convert 80 bcf of possible reserves into the 2P category and boost our valuation to £0.64 per share (~3.8x current levels). (iii) Wentworth estimates 0.6 tcf of WI prospective resources on the licences. At US$1/boe, this has an additional unrisked value of £0.40 per share. Our target price of £0.40 per share represents >2x the current share price. Diversified Gas & Oil (DGOC LN): Borrowing base update | Jadestone Energy (JSE LN): Acquisition in Indonesia and arbitration in Vietnam | Premier Oil (PMO LN): Not acquiring the additional 25% WI in Tolmount | Reabold Resources (RBD LN)/ADX Energy (ADX AU): Well test results in Romania | Royal Dutch Shell (RDSA/B LN): 2Q20 update | UK Oil & Gas (UKOG LN): Planning consent rejected in the UK | PetroNeft Resources (PTR LN): Update in Russia | Energean (ENOG LN): Update on acquisition of Edison E&P | Sound Energy (SOU LN)C: LNG head of terms in Morocco | Solo Oil (SOLO LN): US$5 mm Equity facility

PMO RDSA RDSB WRL UKOG

• 03 Jul 20
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Gamma is acquiring around 80% of HFO Holding AG (HFO), one of the leading SIP Trunk providers in Germany, for an initial consideration of €20.4m in cash with an option to purchase the remaining shares over the next three years. In line with its stated strategy, Gamma can invest and use its commercial strength and expertise to accelerate HFO’s growth and replicate the Group’s success in the UK by developing a market leading position in Germany. Noting net debt of €2.9m when the deal closed, the implied historical EV/EBITDA multiple of about 10x compares with Gamma’s equivalent of 18.7x. We estimate that the deal will be 4% earnings enhancing in the first full year of ownership and our estimate upgrades reflect that. The European markets for cloud telephony in which Gamma is now represented will ultimately overtake the UK in size, providing Gamma with significant future growth potential. We view this acquisition as another significant step in Gamma’s strategic aim to expand into Europe via exposure to another lucrative market opportunity.

Gamma Communications

• 02 Jul 20
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