Small Cap Feast

Small Cap Feast – 29 June 2020

Dish of the Day:

No Joiners Today

 

Off the Menu:

No Leavers Today

 

What’s Cooking in the IPO Kitchen?

The pantry is bare!

 

Breakfast Buffet

Arc Minerals 2.1p £20.3m (ARCM.L)

Commencement of the second season of exploration activities over the Zamsort and Zaco license areas in north western Zambia. Diamond drilling activities will commence over the Fwiji Target (‘Fwiji’) where the company has already defined the target area through previous exploratory works. Follow up work at a number of the other target areas, including Cheyeza East and Muswema, is currently underway.

The total diamond drilling program for the year is budgeted for an initial 8,000m with hole depths to between 100m – 250m below surface.

Diamond drilling is initially intended to confirm the interpreted anticlinal structure and mineralisation associated with the hinge component to this anticline. This will then be followed to test the mineralisation in the down-plunge hinge component to the anticline.

 

Distil 1.15p £5.8m (DIS.L)

The owner of premium drinks brands including Blackwoods Gin and Vodka, RedLeg Spiced Rum, Blavod Black Vodka, Diva Vodka and Jago’s Vanilla Cream Liqueur, announces its final results for the year ended 31 March 2020.

  • Turnover increased 2% to £2,441k from £2,401k
  • Gross profit increased 1% from £1,429k to £1,446k
  • Margins broadly flat at 59.2% for the same period, year-on-year (2019: 59.5%). · Operating profit increased 15% from £160k to £184k
  • Net cash outflow of £210k (2019: £37k inflow) resulting in year-end cash reserves of £858k (2019: £1.07m)

“Currently the On-Trade is yet to benefit from freedom of movement. International travel and travel retail is greatly reduced. The Off-Trade has benefited from the closure of bars and restaurants and online retailing has soared. We fortunately operate across all trade channels and our brands are well positioned at affordable prices. “ “At this stage I believe it is too early to forecast with accuracy or certainty for the coming year. Market guidance for the coming year will be released as soon as we are reasonably confident in consumer movement and trade channels reopening. In the meantime, we will continue to keep tight control of cash, costs and ensure product availability throughout the supply chain..”

 

Sound Energy 2p £23.2m (SOU.L)

On 26 June 2020, heads of terms (HOT) were entered into with a Moroccan conglomerate with significant liquified petroleum gas, butane and propane distribution and marketing operations in Morocco, pursuant to which the Company has now entered into exclusive discussions with the Partner in order to enter into agreements for both the purchase of LNG to be produced from the TE-5 Horst development, as well as the partial financing of the Phase 1 Development by the Partner.

Exclusivity has been granted to the Partner in relation to the Proposed Transaction until 31 December 2020 . In this context, the Company and its Partner have agreed to use their reasonable endeavours to conclude the Proposed Transaction on the basis of key commercial terms set out in the HOT.

The Partner has also agreed under the HOT to use reasonable endeavours to conclude definitive agreements in respect of a proposed partial financing for the development  through:

  • a £2m subscription by the Partner for new Sound Energy ordinary shares at a price of 1.2521 pence
  • a secured commercial loan of $13.5 million provided by the Partner to the Company in respect of the Phase 1 Development, with an 11.5% coupon and 12 year term.

 

Phoenix Copper 28p £17.5m (PXC.L)

Results of the initial metallurgical test work for the recovery of precious metals occurring in the Empire Mine deposit.

 Precious metals tests performed on samples from the Empire open pit deposit using non-toxic ammonium thiosulfate (“ATS”) reagent resulted in high gold recoveries of 97.8% and 97.7%, and silver recoveries of 69.8% and 78.2%, respectively

  • RC drill rig mobilised for extensional drilling of the gold and silver zones at Empire with the intent of adding additional gold and silver to the open pit resource
  • Diamond drilling programme at the Red Star silver-lead deposit well underway

 

NetScientific 5.9p £4.6m (NSCI.L)

Its venture portfolio company G – Tech Medical (“G – Tech”) today announced the completion of $6.7m Series A financing round led by DigiTx Partners.

NetScientific held a convertible loan note of $250,000, together with accrued interest, that had previously been fully impaired to £Nil. As part of the Series A financing the convertible loan note and interest converted to Series A Preferred Shares and Common Form Convertibles with a fair value, based on the financing round, in excess of £400,000. NetScientific now holds 3.8% of G – Tech’s fully diluted share capital.

G – Tech is developing a wearable medical technology that will be used to measure gastrointestinal motility.

 

Omega Diagnostics 50.7p £80.2m (ODX.L)

Omega notes the Press Release issued today by UK Rapid Test Consortium (UK-RTC) on developing a COVID-19 lateral flow antibody test  that can be used by people in their homes.

As announced on 9 April 2020, the Company signed a Memorandum of Understanding  with Abingdon Health Limited, BBI Solutions Limited, CIGA Healthcare Limited, in conjunction with the University of Oxford to form the UK-RTC in order to jointly develop and manufacture a COVID-19 Rapid Test as part of the Government’s five pillar national testing strategy for COVID-19.

Abingdon Health Limited, lead partner of the UK-RTC, has informed consortium members that it has attained design freeze for the COVID-19 Rapid Test. The next stage is for Abingdon Health to complete verification, validation, transfer the manufacturing protocols to consortium members and gain regulatory approval. 

 

B.P. Marsh & Partners 241p £90.2m (BPM.L)

The specialist private equity investor in early stage financial services businesses has agreed to subscribe for a 30% Cumulative Preferred Ordinary shareholding in SAGE Program Underwriters , for an equity consideration of $250,000 (c. £200,000). 

Based in Bend, Oregon, USA, and established in 2019, by CEO Chuck Holdren, SAGE provides specialist insurance products to niche industries, initially in the inland delivery and field sport sectors.

 

Draper Esprit 448p £533m (GROW.L)

FY Mar 20 results from the  venture capital firm investing in and developing high growth digital technology businesses .  · Gross Portfolio Value increased by 18% to £703m (31 March 2019: £594m).

  • Gross Portfolio Fair Value increase of 10% with a £59m fair value movement in the year (31 March 2019: £140m, 58%).
  • NAV per share increased by 6% to 555 pence (31 March 2019: 524 pence).
  • Cash realisations of £40m (31 March 2019: £16m), with further exits amounting to approx. £80m announced post year-end.
  • £90m invested by the Group (31 March 2019: £226m), and a further £38m invested by EIS/VCT (31 March 2019: £35m).

“We have entered the new financial year with a well-positioned portfolio and in a strong position to capitalise on our growing reputation as one of Europe’s leading venture capital businesses. At the same time, we must be cognisant of the wider market uncertainty and increased pressures on the global economy, which have the potential to impact our portfolio companies and, by extension, our own business.

Our growth target for the coming financial year is 15%, with an expectation of returning to 20% through the cycle whilst recognising the volatile environment in which we are currently operating.”

 

Trident Resources 20p £20.7m (TRR.L)

Agreement with Moxico Resources plc, to acquire a staged Gross Revenue Royalty (GRR) over production from the operating Mimbula copper mine and associated stockpiles located in Zambia’s prolific Copperbelt Province. The GRR is being acquired in exchange for a cash consideration of US$5.0 million. Trident is entitled to royalty payments on production commencing from 1 July 2020 and extending in perpetuity.

  • Structured as a GRR of 1.25%, decreasing to 0.3% upon aggregate royalty payments of US$5.0 million being paid to Trident, with a subsequent decrease to 0.2% once the royalty has been paid on 575,000 tonnes of copper cathode or other finished copper product sold; and
  • The GRR is subject to a Minimum Payment Schedule, which ensures that Trident will at minimum be repaid US$5 million within three years.

  The asset is currently ramping-up production, having sold its first London Metal Exchange registered Grade A copper with a 99.99% purity in June 2020;

  • The Mimbula Mine has a large, well-defined JORC (2012) compliant total Mineral Resource of 84 million tonnes of ore grading 0.95% copper for a total of 798,000 tonnes of contained copper at a 0.3% cut-off;

 

Maestrano Group 4.7p £6.9m (MNO.L)

The machine learning platform for transport  corridor asset monitoring, announces that it’s wholly-owned subsidiary Corridor Technology Limited has been awarded a £50K grant under the Innovate UK “Business-led innovation in response to global disruption” competition.

The aim of this competition is to support UK registered businesses to focus on emerging or increasing needs of society and industries during and following the Covid-19 pandemic. By fast-tracking innovation, the UK will be better placed to maintain employment levels, a competitive position in global markets and make the UK more resilient to similar disruption.

 

Head Chef:

Derren Nathan
0203 764 2344
derren.nathan@hybridan.com

*A corporate client of Hybridan LLP

Disclaimer

This document, which does not constitute research, has been issued by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to any such action. This document has no regard for the specific investment objectives, financial situation or needs of any specific person or entity and is not a personal recommendation to any such person or entity. Recipients should reach an individual investment decision, based upon their respective financial objectives and financial resources and, if any doubt, should seek advice from an investment advisor.

The information contained in this document is based on materials and sources that are believed to be reliable; however, such information has not been independently verified and therefore it is not possible to confirm such information as being accurate. This document is not intended to be a complete statement or summary of any securities, markets, reports or developments referred to herein. No representation or warranty, either express or implied, is made or accepted by Hybridan LLP, its members, officers, employees, agents or associated undertakings in relation to the accuracy, completeness or reliability of the information contained in this document, nor should it be relied upon as such.

The content of this document includes market commentary and other information which we have prepared in relation to the company referred to in this document, which is our broking client. The provision of this document to you constitutes a minor non-monetary benefit which is capable of enhancing the quality of service provided by Hybridan LLP and which is of a scale and nature which could not be judged to impair the duty of Hybridan LLP to act in the best interest of its client falling within article 24(7)(b) of Regulation 600/2014/EU (MIFID II Regulation).

Any and all opinions expressed are current as of the date appearing on this face of this document only. Any and all opinions expressed are subject to change without notice and Hybridan LLP is under no obligation to update the information contained herein. To the fullest extent permitted by law, none of Hybridan LLP, its members, officers, employees, agents or associated undertakings shall have any liability whatsoever for any direct or indirect or consequential loss or damage (including lost profits) arising in any way from use of all or any part of the information in this document.

This document should not be relied upon as being an independent or impartial view of the subject matter and, for the avoidance of doubt, constitutes non-independent research (as such term is defined in the Financial Conduct Authority’s Conduct of Business Sourcebook to reflect the requirements of the MIFID II Regulation and Directive 2014/65/EU (known as MIFID II)). The individuals who prepared this document may be interested in shares in the company concerned and/or other companies within its sector, may be involved in providing other financial services to the company or companies referenced in this document or to other companies who might be said to be competitors of the company or companies referenced in this document. As a result both Hybridan LLP and the individual members, officers and/or employees who prepared this document may have responsibilities that conflict with the interests of the persons who receive this document. Hybridan LLP and/or connected persons may, from time to time, have positions in, make a market in and/or effect transactions in any investment or related investment mentioned herein and may provide financial services to the issuers of such investments.

In the United Kingdom, this document is directed at and is for distribution only to persons who (i) fall within article 19(5) (persons who have professional experience in matters relating to investments) or article 49(2) (a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (as amended) or (ii) persons who are each a professional client or eligible counterparty (as those terms are defined in the Financial Conduct Authority’s Conduct of Business Sourcebook) of Hybridan LLP (all such persons referred to in (i) and (ii) together being referred to as relevant persons). This document must not be acted on or relied up on by persons who are not relevant persons. For the purposes of clarity, this document is not intended for and should not be relied upon by any person who would be classified as a retail client under the Financial Conduct Authority’s Conduct of Business Sourcebook.

Neither this document, nor any copy of part thereof may be distributed in any other jurisdictions where its distribution may be restricted by law and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions. Distribution of this report in any such other jurisdictions may constitute a violation of territorial and/or extra-territorial securities laws, whether in the United Kingdom, the United States or any other jurisdiction in any part of the world.

Where possible this document is made available to all relevant recipients at the same time. Dissemination of research by Hybridan LLP is monitored to ensure that it is only provided to relevant persons. Research prepared by Hybridan LLP is not intended to be received and/or used by any person who is a retail client.

Hybridan LLP and/or its associated undertakings may from time-to-time provide investment advice or other services to, or solicit such business from, any of the companies referred to in this document. Accordingly, information may be available to Hybridan LLP that is not reflected in this material and Hybridan LLP may have acted upon or used the information prior to or immediately following its publication. In addition, Hybridan LLP, the members, officers and/or employees thereof and/or any connected persons may have an interest in the securities, warrants, futures, options, derivatives or other financial instrument of any of the companies referred to in this document and may from time-to-time add or dispose of such interests.

This document may not be copied, redistributed, resent, forwarded, disclosed or duplicated in any form or by any means, whether in whole or in part other than with the prior written consent of Hybridan LLP.

MIFID II status of Hybridan LLP research
The cost of production of our corporate research is met by retainers from our corporate broking clients. In addition, from time to time we issue further communications as market commentary (such as our daily newsletter, Small Cap Breakfast), which we consider to constitute a minor non-monetary benefit which is capable of enhancing the quality of service provided by Hybridan LLP and which is of a scale and nature which could not be judged to impair the duty of Hybridan LLP to act in the best interest of its client falling within article 24(7)(b) of the MIFID II Regulation.

Hybridan LLP is a limited liability partnership registered in England and Wales, registered number OC325178, and is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. Any reference to a partner in relation to Hybridan LLP is to a member of Hybridan LLP or an employee with equivalent standing and qualifications. A list of the members of Hybridan LLP is available for inspection at the registered office, 2 Jardine House, The Harrovian Business Village, Bessborough Road, Harrow, Middlesex HA1 3EX.

If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”.