Latest Research - HBMarkets

San Leon 04/08/10

Wed, 04 Aug 2010 16:54:27 +0100

San Leon management has shown impressive dealmaker ability, to inexpensively establish attractive and diverse early stage assets. Since floating in 2008 with a portfolio of mainly Moroccan and Italian assets, the company went on to acquire Gold Point Energy in 2009 establishing a significant Polish play. The inexpensive acquisition of struggling Island Oil and Gas in 2010 added assets on the Atlantic Margin and Celtic Sea and bolstered San Leon’s existing Moroccan position. However perhaps most promising were the farm out with PGS (for seismic) and Talisman which addressed the nagging question of how the company would finance its forward work programme.

Halfords 27/07/10

Tue, 27 Jul 2010 11:18:52 +0100

Halfords (HFD, 505.0p, £1,088.52m) The IMS for the period from 3 April 2010 to 26 July 2010, incorporates Q1, is somewhat mixed. The acquisition of Nationwide has increased total revenue by 9.6% year-on-year, but on an like-for-like basis group revenues declined by 1.9% with Halfords Retail down 2.1% whilst Autocentre revenues remained flat. The fall in Retail reflects the poor weather in April, uncertainty surrounding the General Election, the emergency budget and the delay in promotional activity from June to mid July due to the FIFA World Cup. Car Maintenance, Cycling and Online sales have continued to deliver like-for-like growth, whilst Satellite Navigation sales continue to fall, albeit at a slower rate. Gross margins were broadly flat year-on-year with currency and sourcing inflation headwinds being offset by self-help measures including better buying, "We-fit" penetration and higher margin accessories. Costs continue to be tightly controlled and the Board expects annualised cost savings of £2m, and a further £4m from the new National Distribution Centre. In our view the hike in VAT to 20% in January 2011 combined with the weaker UK labour market outlook will put pressure on consumer spending, notably in the UK and on big ticket purchases. However, we believe the Retail business offers some defensive attractions, especially in car maintenance and leisure divisions, and the Autocentres car servicing business may benefit from customers potentially trading down. We have been buyers of the stock since January 2010, when we tipped it in our “Thoughts for 2010”, with a target price of 450p. The 2011 and 2012 rating of 10.9x and 9.9x respectively, looks undemanding. We reiterate our BUY recommendation and increase our target price to 561p, which would provide a yield of 4.4% and a rating of 11x 2012 earnings estimates.

Argos Resources 26/07/10

Mon, 26 Jul 2010 14:23:14 +0100

Argos Resources is an oil and gas exploration company with acreage adjacent to that of Rockhopper within the Northern Falkland’s basin. Argos is about to come to market in an IPO valuing the company at c.£67m (post £22m raised). This seems reasonable given the pre-drill comparative valuations of Rockhopper and Desire of and, of course, given subsequent exploration success. Argos has a significant acreage and mean un‐risked prospective resource of 747mmbls. We can envisage upside as the company advances its 3D seismic programme and as Rockhopper and Desire continue to improve geological knowledge of the area.

Pan Pacific Aggregates 23/07/10

Mon, 26 Jul 2010 09:01:23 +0100

Pan Pacific Aggregates is based in Fraser Valley and on the Sechelt peninsular on the Western coast of Canada, close to Vancouver. The opportunity to develop aggregates supply to the Vancouver region is heightened by a significant stimulus package that targets improving transport links. Aggregate demand in the area is met from a mix of commercial operations and mama & papa type ventures that offer significant opportunities for growth, either by acquisition or joint ventures. In some cases simply grading the aggregate will increase achieved prices, but previous owners lacked the will to invest in the necessary capital equipment. With growth underlined by the market drivers and funding in place we rate the group a Speculative Buy.

Cinpart 20/07/10

Tue, 20 Jul 2010 12:41:35 +0100

Cinpart has 2 businesses. Its legacy business is the manufacture and supply of gas ignition components to appliance manufacturers worldwide from a base in Thailand. More exciting is its 72% shareholding in Active Energy which owns the global rights to a range of voltage optimisation equipment aimed at commercial properties, called VoltageMaster. With Governments world-wide forcing buildings to become more green, the installation of voltage stabilisation is relatively easy and has proven ability to reduce energy consumption. Cinpart has been announcing a range of contracts that underline the technology’s validation, together with innovative routes to markets including the USA. With the Obama effect increasing the momentum in the USA we see a bright future for Active Energy.

Ormonde Mining 29/06/10

Wed, 30 Jun 2010 14:01:07 +0100

Recent developments have been extremely positive for Ormonde which is seeking to develop the Barruecopardo tungsten trioxide (WO3) project, a known resource located in the Salamanca province of Spain. Production from Western Europe is in serial decline. China meanwhile (responsible for c.77% of world production) is thought to have all but ceased export of ores of this strategically important and practically irreplaceable metal and prices of Tungsten have more than doubled since 2005 (and remain relatively constant at these higher levels). Ormonde operates in a historic mining area which suffers high unemployment. We can envisage significant political impetus to expedite the time frame of production in 2012, another positive. Finally, we believe that these factors are not fully represented in the current valuation (a 12 month low) provides a compelling opportunity for investors.

Independent Resources 28/06/10

Tue, 29 Jun 2010 07:50:53 +0100

Independent Resources is an oil and gas exploration company with a focus on CBM and gas storage opportunities in Italy and a share of oil exploration activities is Tunisia. The company should be considered a good strategic investment. Italy is in gas deficit, Independent has gas and, perhaps more notably, is seeking to develop strategically important storage facilitates that will help temper future gas shortages and ease security of supply. The valuation looks underwritten by CBM assets with further upside in the form of very near term Tunisian exploration and potentially, game changing upside if it is able to finally secure permitting for its proposed Rivara gas storage operation.

Northern Petroleum - 24/06/10

Fri, 25 Jun 2010 12:23:59 +0100

Northern Petroleum has evolved from a small UK based oil exploration and development company to a significant operator with a balanced risk exposure across 56 licences including potential high value aggregate billion barrel targets in Italy. We consider Northern Petroleum undervalued compared to peers on an existing P1 reserve based valuation where it is worth around 129p* alone (P2 would suggest considerably more) and see significant scope for re-rating as it moves to the next stage of its development as a mid‐tier operator. The investment can be viewed as something of a two way bet, with both exploration and development upside. We rate Northern Petroleum as high amongst the best oil and gas situations on offer on AIM.

Berkeley Mineral Resources 28/04/10

Thu, 17 Jun 2010 11:35:54 +0100

Berkeley Mineral Resources (BMR) owns 3 tailings dumps, resulting from over 80 years of activity at the Kabwe mine in Zambia, rich with lead and zinc. The evolution of processing technology now makes these tailings dumps effective sources of raw material. The current assets could generate over $31m of operating profits over the 4 years it would take to process them. A major upside is offered by the potential to acquire further tailings dumps at Kabwe, once the reprocessing plant has been built.

Range Resources 17/06/10

Thu, 17 Jun 2010 11:28:52 +0100

Range Resources is an oil and gas exploration company with assets in Texas (development and exploration), Puntland - Somalia (advanced exploration) and Georgia (early stage exploration). Historically Range has attracted speculative investor interest for its exposure to extremely high risk but very prospective Puntland licences.

Goldstone Resources - 28/05/10

Fri, 28 May 2010 08:49:08 +0100

Goldstone Resources is an AIM listed Africa based gold exploration company. The company is targeting projects with the potential to host gold exploitable resources of over 1.5m ounces . To facilitate this aim, the company is building a portfolio of projects at varying stages, from grassroots to advanced brownfield exploration. The most advanced asset of these is the Homase project located in the prolific Ashanti region of Ghana where the company operates a joint venture agreement (51% GRL) with local company Cherry Hill Mining. We have been impressed by management’s rapid delivery of expectations. Subsequent to the last placing in March the company has rapidly outlined a JORC compliant resource which it will look to expand further through exploration.

Watermark - 26/05/10

Wed, 26 May 2010 08:36:04 +0100

Watermark is commercialising treatment technology that will process polluted water removed from mines and transform it into potable water. The development completed the projects’ definitive banking feasibility study in October 2009 but has suffered from unexpected delays in getting approvals from the South African Government. The delays have created short term funding pressures – leading to the placing announced today. Ultimately we believe the Government approvals will flow – but failure could prove catastrophic for Watermark Global and its investors.

Gulf Keystone - 25/05/10

Tue, 25 May 2010 12:36:45 +0100

Gulf Keystone has 4 licenses in the prolific oil producing Kurdistan region of Northern Iraq. Its areas offer an estimated 1.5bn barrels of oil which are estimated to offer an NPV of $2.4 per barrel. This equates to a fully diluted NPV of $3.3bn or 198p per share (our risked PT is 148.5p). Gulf Keystone has 4 license areas in Iraq; Shaikan; Akri‐Bijeel; Sheikh Adi and Berr Bahr (see key licenses). The company also has Algerian assets planned for disposal. An interim placing was conduced at March at which time the company flagged the larger raise to come. The successful completion of that raise provides the funds to advance the exciting exploration and development programme whilst also, potentially, allowing the company to increase its stake in key concessions.

Shanta Gold 09/04/10

Thu, 13 May 2010 16:08:42 +0100

Shanta Gold is a gold exploration and development company operating in Tanzania with a JORC outline resource of over 2m ounces. Licences are either wholly owned or give the company the right to earn a majority share through completion of a feasibility study. The company has two economically viable projects Singida and Chunya and a third Mgusu which requires further evaluation. In spite of an impressive run in the shares this year, near term catalysts offer scope for further upside. A scoping study for Chunya, to be completed within the next few months, should herald greater confidence in the project economics while further exploration work on Singida which could potentially increase the extent of the already sizeable resource. Click the link below to download the full research note in PDF format now!

Europa Oil and Gas 20/04/10

Thu, 13 May 2010 16:06:55 +0100

Europa Oil and Gas is a European focussed exploration and production (E&P) company with production and exploration in the UK and additional exploration in Romania and France. Proven reserves are low but provide a useful benchmark for valuation (and could also be upgraded significantly), whilst production throws off useful cashflow making the group largely self financing. The prospective Romanian and French licences are potential ‘company making’ opportunities. Click the link below to download the full research note in PDF format now!

Empyrean 09/04/10

Thu, 13 May 2010 16:03:50 +0100

Empyrean is an oil and gas exploration and production (E&P) company with assets in the US. Having learned hard lessons from its flagship Sugarloaf project and weathered the worst of the economic downturn, the group has advanced and expanded its project portfolio. With Sugarloaf on stream at last and cashflows expected toward the end of the year, (from cost recovery from operator Hilcorp) and Riverbend likely to deliver gas to sales in the coming months the risk profile has improved considerably. Whilst problems at Riverbend show all too well that significant exploration and operational risk remain, the company is on a much firmer footing to recover value from its 4 license interests all of which have demonstrated hydrocarbon shows, therein significantly reducing exploration risk. With production able to be put to sales rapidly owing to strong infrastructure in its territories to group should be on the road to self sufficiency later this year. Click the link below to download the full research note in PDF format now!

Mercator Gold 13/05/10

Thu, 11 Feb 2010 13:05:35 +0100

Mercator Gold is in fact a diversified resource company with interests in the US, Asia and Australia. The most interesting project is the Copper Flats project in the US state of New Mexico. As a small company with limited fire power Mercator is seeking innovative methods to finance its diverse portfolio and has achieved a free carry in the Copper Flats project by farming out 62.5% to TSX listed THEMAC. Other assets include ACS Asia, a 70% owned profitable cable manufacturing business, an Indonesia based pre‐IPO (Australia) gold investment, an option for a uranium project in Argentina amongst others. The company’s legacy investment in the Meekatharra gold deposit is expected to exit administration and yield some share value in the form of a TSX listing. Given a low entry price we can see significant value principally, emanating from the Copper Flats project, while minority shares in other assets add limited risk and potential to surprise on the upside.