Independent Oil & Gas (IOG) : Corp

Gas reception facilities acquisition and Harvey update

Key data

  • Share price (p) 14.1
  • Target price (p) 56.0
  • Market cap (£m) 47.7
  • Enterprise value (£m) 58.9

IOG is acquiring the Thames Reception Facilities at the Bacton gas terminal for a nominal consideration ahead of refurbishment as part of its gas development project. It is also expected to spud the Harvey appraisal well next week. This well is targeting a 129 bcf gas prospect with a high chance of success that forms a material addition to IOG’s core Southern North Sea gas development project.

Jonathan Wright 020 7220 0543

Netcall (NET) : Corp

Trading update – building cloud revenue

Key data

  • Share price (p) 30.5
  • Target price (p) 90.0
  • Market cap (£m) 43.7
  • Enterprise value (£m) 42.5

The trading update for the year to June FY19 reveals performance in line with unchanged expectations, and continuing development of the core KPIs of cloud bookings (+197% cloud services bookings to £7.6m); and annual contract value (ACV) from Low-code (+36% to £4.6m, driving group ACV growth of 10% to £15.7m), demonstrating the importance of Low-code to the group. Net cash of £1.2m compares very favourably with expectations of net debt of £1.1m, resulting from strong cash generation even during a period of continuing investment in sales and R&D. Cloud services bookings (including Low-code) has exceeded those of traditional product sales for the first time, demonstrating improvement in visibility at the same time that revenue growth accelerates into FY20. We necessarily ignore a near-term free cash flow approach, given that we cannot separate investment in growth, and do not propose our valuation should penalise ambition – the group intends to benefit from continuing expansion of increasing spend in R&D and sales & marketing given the sturdy balance sheet; the £6.6m FY25 BGF debt is covenant-free precisely to give leeway to invest in growth given the scale of the opportunity. Netcall’s MATS platform gains recognition as the only UK contender global leader by both Forrester and Gartner and yet it appears the Low-code business is attributed a negative value by the current share price. Positive newsflow will get this stock the attention it deserves. Twelve-month target price of 90p reiterated.

Andrew Darley 020 7220 0547

Quartix (QTX) : Corp

Fleet performance underpins H1

Key data

  • Share price (p) 284.0
  • Target price (p) 425.0
  • Market cap (£m) 135.9
  • Enterprise value (£m) 130.8

As seen from the June update, the leading supplier of subscription-based vehicle tracking systems has enjoyed a strong H1 performance driven by its Fleet business, which saw vehicle subscriptions rise 11%, from 123k in January to 138k by the end of June; and new telematics installations are currently running 45% ahead of LY. Pleasingly, Fleet growth is seen in all regions, with particularly encouraging results from the new markets. That offsets some of the continuing decline in Insurance telematics, although the group results are still down on LY. Nevertheless the performance was ahead of expectations and led to our forecast upgrade last month, and we remain confident in FY forecasts.

Lorne Daniel 020 7220 0545

Sopheon (SPE) : Corp

Trading update: sunshine and Cloud

Key data

  • Share price (p) 940.0
  • Target price (p) 1 425.0
  • Market cap (£m) 95.5
  • Enterprise value (£m) 80.4

Sopheon’s trading update for the interim period ending 30 June reveals, as ever, a strong sales pipeline that has expanded 48% since January, while the number of deal opportunities >$500k has grown 29%. 1H19 revenue and EBITDA are $13.7m (1H18: $15.9m) and $2.0m ($4.1m) after an unusually strong comparable period in 1H18. Visibility of full-year revenue is 71% (in line with performance in FY17 and FY15) of adjusted FY revenue expectations of $34.0m: the momentum in the strong pipeline remains unchecked; however, client behaviour has moved more rapidly than expected towards cloud consumption rather than perpetual licences. Revenue recognition is therefore protracted – even as client commitment and multi-year contracted revenue visibility are improved. We adjust revenue forecasts in line with guidance, to equal prior year performance (albeit with more, and growing, recurring revenue in the mix), encouraged by the increased visibility which will ensue. Prospects are undimmed for the third pillar of business (after ERP and CRM) to be Enterprise Innovation and Change Management, where Sopheon’s Accolade solution has international success and a proven track record with a fleet of household names as clients. With $18.7m net cash on the balance sheet, enabling all strategic options, Sopheon remains a UK champion with strong potential but at risk of being acquired. Target 1,425p (1500p) as forecasts dip albeit the quality of the pipeline and business grows, and cloud revenue leads to increased visibility to improve on the current 38% recurring revenue. We look forward to ongoing momentum and contract announcements to prove our target price movement churlish.

Andrew Darley 020 7220 0547

Synairgen (SNG) : Corp

COPD Phase II clinical trial update

Key data

  • Share price (p) 10.4
  • Target price (p) 54.0
  • Market cap (£m) 11.3
  • Enterprise value (£m) 6.0

Synairgen confirmed that it is on track to complete its 120-patient Phase II trial of SNG001 (inhaled interferon beta) in COPD in the 2019/2020 winter virus season due to an increase in the number of participating UK clinical sites and an acceleration in the number of eligible patients into the pool of COPD patients. Moreover, a blinded analysis of the patients enrolled to date has shown that viral infection is having a significant detrimental impact on COPD symptoms in the trial, confirming the significant unmet need for this patient group and increasing the probability of showing a clear drug-related effect. We reiterate our target price.

Mark Brewer 020 7220 0556

finnCap operates an ‘access-for-all’ approach for corporate research, approved by the FCA and paid for by finnCap’s corporate clients.