Kazera Global (KZG) : Corp

New resource estimate for NTI tantalite mine

Key data

  • Share price (p) 0.5
  • Target price (p) U/R
  • Market cap (£m) 1.2
  • Enterprise value (£m) 0.5

Kazera Global has released an update from its investee company African Tantalum (Pty) Limited (‘Aftan’). Aftan has a controlling interest in the Namibia Tantalite Investment mine at Tantalite Valley in southern Namibia. The update includes a new resource estimate for the White City pegmatite in compliance with the JORC (2012) standard. We do not have a price target for Kazera Global.

Martin Potts 020 7220 0544 mpotts@finncap.com

Outstanding contract win and pivot to recurring

Key data

  • Share price (p) 40.0
  • Target price (p) 125.0
  • Market cap (£m) 13.0
  • Enterprise value (£m) 11.6

Pelatro has won a landmark contract with one of the biggest telcos in the world; a major global operator and household name – an outstanding achievement for a small newcomer in the market. After careful deliberation, it has been taken as another recurring revenue/gain-share deal (a fourth this year) rather than a large upfront licence. As Pelatro matures and feels more established, management can afford to take a longer-term view, sacrificing short-term growth and profit for the stability of recurring, incremental revenue streams. A likely $7m of upfront licence has now been foregone in these deals this year and thus FY 2019 revenue guidance is cut to $6.5m (still up 6% YoY). The impact of this pivot to much higher quality revenue should not hide remarkable performance this year. For comparison, had these been taken as licences, FY 2019 sales would have been $13.5m; 28% ahead of our $10.5m forecast set mid-2018, and 121% YoY growth on a comparable basis. That follows 161% and 95% YoY growth in FY 2017 and 2018 respectively. This breakthrough win comes on top of consistently strong sales growth and the increasing quality of earnings, and we reiterate our 125p TP.

Lorne Daniel 020 7220 0545 ldaniel@finncap.com

Interims – VISITECT CD4 starts to deliver on potential

Key data

  • Share price (p) 10.0
  • Target price (p) 25.0
  • Market cap (£m) 15.1
  • Enterprise value (£m) 16.6

Interim results were in line with the 22 October trading update, reflecting the financial benefits of closing its German business and selling the infectious disease business. Revenues from continuing operations increased 6% to £4.5m, largely reflecting the growth in Food Intolerance (+6% to £4.1m). This resulted in an adjusted EBITDA and pre-tax loss of c.£0.25m (vs. -£0.3m) and c.£0.35m (vs. -£0.5m), respectively. Omega also announced a further order from Nigeria for VISTECT CD4, which is contingent on approval in that market, but could be shipped by the FY year-end. We are not changing CD4 forecasts at this time until there is clarity over MoH approval. We make minor changes, however, to our FY forecasts to reflect the adoption of IFRS 16, which reduces adjusted pre-tax profits by c.£60k in both years. Year-end net debt is unchanged at c.£0.8m. We leave our target price unchanged at 25p.

Mark Brewer 020 7220 0556 mbrewer@finncap.com

President Energy (PPC) : Corp

Reinstating estimates

Key data

  • Share price (p) 3.9
  • Target price (p) 10.0
  • Market cap (£m) 44.3
  • Enterprise value (£m) 65.3

We are reinstating President Energy estimates after taking into account the recent temporary oil price controls and its strategic pivot towards gas in Argentina. Our forecasts come down materially, as does our price target, which we have cut from 19p to 10p. However, we believe the shares have already moved to discount the uncertain investment climate within Argentina. At this stage, the incoming President’s approach towards the oil industry remains unclear, although he has indicated support towards the development of Vaca Muerta shale. This uncertainty makes it hard for investors to commit, but PPC’s growing core Rio Negro assets provide investment flexibility alongside material growth potential that a period of stability in Argentina will reveal.

Jonathan Wright 020 7220 0543 jwright@finncap.com

SDI Group (SDI) : Corp

Acquisition – 7% accretive in first full year

Key data

  • Share price (p) 67.0
  • Target price (p) 75.0
  • Market cap (£m) 65.1
  • Enterprise value (£m) 66.7

SDI has announced the acquisition of Chell Instruments; paying c.£4.3m for the business (FY 2018 EV/Sales and EV/EBIT of 0.9x and 5.5x) funded from cash and a new debt facility with net debt at year-end now expected to be c.£5.0m. SDI has shown that it can source and execute another accretive acquisition in what was a competitive tender bid process. We expect the acquisition to be c.7% accretive to EPS in FY 2021 and raise our target price by 25% to 75p to reflect the accretion as well as rolling forward our target year, implying an EV/EBITDA of 11.9x and adjusted P/E of 17.3x.

Mark Brewer 020 7220 0556 mbrewer@finncap.com