UK- Ilika, Motif Bio,Petards Group, Wood Group
Date
8/21/2016 8:54:08 AM
(MENAFN- ProactiveInvestors - UK) Beaufort Securities, Wed
Markets
Europe
The FTSE-100 finished yesterday's session 0.68% lower at 6,893.92, whilst the FTSE AIM All-Share index closed 0.15% lower at 783.50. In continental Europe, markets ended in the negative as diminished prospects of a rate hike by the Fed strengthened the euro. This led to a decline in export-driven stocks, with auto stocks losing the most. France's CAC 40 and Germany's DAX shed 0.8% and 0.6%, respectively.
Wall Street
Wall Street ended in the red as weak economic data released in the US dampened investor sentiment. Investors awaited minutes of the Fed's meeting. The S & P 500 declined 0.6%, with the telecommunications sector losing the most.
Asia
Equities are trading higher as investors weigh the possibility of higher US interest rates this year. The Nikkei 225 gained 0.9%, paring some losses from the previous session. The Hang Seng was trading 0.3% up at 7:00 am.
Oil
Yesterday, Brent oil prices increased 1.8% to US$49.23 per barrel, while WTI prices rose 1.8% to US$46.58 per barrel.
Headlines
UK consumer prices increase in July
As per the Office for National Statistics, the UK consumer price index (CPI) climbed 0.6% y-o-y in July, after a 0.5% rise in June, marking the highest level since November 2014. This was due to higher prices for fuel, alcoholic beverages and accommodation services. On m-o-m basis, prices fell 0.1% after rising 0.2% in June.
Company news
Ilika (LON:IKA, 53.50p) - Speculative Buy
Ilika informed that it would take part in a three-year project to develop protected anodes for lithium sulphur batteries. The project would be led by Johnson Matthey and supported by Innovate UK and the Engineering and Physical Sciences Research Council (EPSRC). A grant of 365,133 would be used to fund project activities at Ilika.
Our view: Ilika's participation in the project is a positive development. The project would develop an innovative protected lithium anode, using Ilika's high-throughput material development technique, to discover new electrolyte composition options and fabricate a free-standing, lithium-containing protected anode/separator for integration into pouch cells. The novel protected anode would improve the cells' performance. The pouch cells developed in the project have high capacity and low costs for large scale renewable energy storage. The project will address a distinct market segment with Internet of Things (IoT) applications, for which Ilika's StereaxTM batteries are designed. Ilika expects to be supported by partners that have the requisite knowledge and expertise with regard to the development of such batteries. Recently, Ilika reported good results for FY 2016, with good progress in the operational and technical areas. The company has also made good progress with regard to the development of solid-state batteries. It's solid-state batteries have many benefits compared to lithium-ion batteries, such as faster charging time, lower leakage currents, non-flammable nature and possible integration with IC components to reduce end-device size. In addition, Ilika has secured grants for aerospace alloys to continue the development of aerospace alloys and materials for electronics applications. Considering the above argument, we maintain a Speculative Buy rating on the stock.
Motif Bio (LON:MTFB, 46.88p) Hold
Motif Bio, the clinical stage biopharmaceutical company specialising in developing novel antibiotics, yesterday announced financial results for the half-year ended 30 June 2016. Back in March, the Group announced first patient dosing in its two REVIVE (Randomized Evaluation IntraVenous Iclaprim Vancomycin trEatment) Phase 3 clinical trials in Acute Bacterial Skin and Skin Structure Infections ('ABSSSI'). It is now enrolling and dosing patients in two global Phase 3 clinical trials with an intravenous ('IV') formulation of iclaprim, for the treatment of ABSSSI. Data from the two trials are expected in the second half of 2017. Net cash used for these operations was US$8.9 million (H1 2015: US$1.2 million) during the period, which reflects the continuation of the clinical development of iclaprim. Research and development expenses increased by US$11.4 million to US$12.0 million, primarily attributable to the commencement of this process, of which US$10.1 million was spent in relation to contract research, US$1.0 million for clinical operations and US$0.9 million in relation to chemistry and manufacturing development. At half year stage, the Group had remaining cash/cash equivalents of some US$19.5 million (31 December 2015: US$28.6 million).
Our view: The reality is that Motif Bio's half year statement did not actually answer the question that shareholders are now most concerned about. On 9th August, management shocked with an announcement that its much vaunted public offering of American Depositary Shares and listing on the NASDAQ Global Market had seen its pricing deferred. Given what has quite evidently been exceptional progress with iclaprim's development, for a giant international market that is now becoming desperate for delivery of novel and innovative new antibiotics, investors appeared to believe that the only genuine barrier to it securing a US$1bn+ opportunity from just its first two indications was availability of funding. And that problem seemingly had been resolved. Understanding US investors' greater willingness to place a premium rating on such early-stage development opportunities, particularly when there are obvious peer comparisons, management extensively toured sector specialist US investors in order to gain sufficient confidence to appoint book runners in anticipation of the issue of, perhaps US$35m in new equity to be quoted on the NASDAQ. Shareholders has expected to be told during August of just such a successful raising, which they hoped would be priced at or close to that being achieved in London. But this was not the outcome and, in truth, yesterday's interim statement provided little additional transparency. To say that the Group 'remains in registration with the Securities and Exchange Commission and is continuing to engage with investors', unfortunately is as clear as mud. Whether the shock result was down to bad 'summer' timing, simple inadequacy of the appointed book-runners or some other complication remains unclear. Whatever, Motif's management states in its own assessment of risks that a 'lack of funding would limit any strategic initiatives to in-license or acquire additional product candidates or programs'. Its remaining pool of cash is simply not enough to keep its programmes in track and right now a new London fund raise would likely be extremely complicated, so management appears to have no choice but to 'try again' in the US. Perhaps a rabbit, in the form of a major new US core investor matching the subscription pledge already committed by 25% UK shareholder, Invesco Perpetual, could be pulled out of the hat to save the day? Or perhaps a pharma major could look to get involved? Beaufort genuinely feels that such an opportunities are not unrealistic but, given the recent disappointment and continuing lack of clarity, downgrades its recommendation to 'Hold' from 'Speculative Buy' while awaiting further information. That said, Motif's eventual successful securing of the necessary development funding should, in due course, ensure significant upside for shareholders who have had the courage to remain aboard.
Petards Group (LON:PEG, 16.50p) - Speculative Buy
Petards has announced that it has been awarded a contract to supply Bombardier Transportation (Bombardier) with Petards eyeTrain systems. The new contract, which is worth 1.3 million, is for the supply of Petards eyeTrain systems to be fitted to the AVENTRA Electrical Multiple Unit (EMU) trains to be built by Bombardier for the London Overground. Petards deliveries are due to commence during the latter part of this year with completion expected during the second quarter of 2018.
Our view: Further Contract award to Petards with Bombardier to the supply of Petards well established eyeTrain system for applications on to their new AVENTRA Electrical Multiple Unit trains. There appears to be some increasing momentum in orders and we maintain our Speculative Buy.
Wood Group (LON:WG., 730.50p) - Buy
Wood Group declared results for the half year ended 30th June 2016. During this period, revenue slipped 16.6% y-o-y to US$2.6bn, and EBITDA dropped 26.3% to US$166.4m. The Engineering division reported a 23% fall in revenue in H1 2016 compared to the previous year, while EBITDA was down 21%. PSN Production Services reported a 15% drop in revenue and a 33% fall in EBITDA in H1 2016. Profit before tax and exceptional items decreased to US$100.7m from US$160.2m in H1 2015. Profit for H1 2016 stood at US$44.6m (H1 2015: US$121.2m). EPS dropped to 10.9 cents per share compared to 31.7 cents per share in H1 2015. The net debt, including joint ventures, stood at US$351.4m. The company declared an interim dividend of 10.8 cents, 10% higher than H1 2015, to be paid on 22nd September 2016. Separately, Wood Group informed that it was chosen as the main automation contractor for the Future Growth and Wellhead Pressure Management projects at the Tengiz field in Kazakhstan, being operated by Tengizchevroil. Wood Group's vendor-independent Automation & Control business would provide optimal integrated process and safety solutions under a multi-year contract, valued at around US$700.0m.
Our view: Wood Group delivered a good performance in H1 2016, riding on its asset-light, mostly reimbursable business model. The company remained focused on cost management and utilisation in difficult trading conditions. Wood Group continued its work of operational reorganisation and headcount reduction (by 10%) in H1 2016. The company generated around US$50m of additional sustainable overhead savings through the ongoing reorganisation, delayering and back-office rationalisation. Wood Group increased the dividends payable to shareholders in line with its plan to increase by a double-digit percentage for 2016. The company's healthy balance sheet and long-term financing enabled it to reinvest in the business through acquisition and organic investment. Wood Group continued to strengthen its position internationally, including two recent contract successes in the Middle East. The expansion of the company's operations in Iraq is likely to present new growth opportunities, which would utilise Wood Group's broad service capabilities, international knowledge and strong expertise. Aiming to build lasting customer relationships, the company established offices in Dubai and Iraq, and plans to develop the workforce and supply chain partnerships in these areas. In addition, the company acquired Ingenious, Inc., a supplier of proprietary software and consulting services to the global chemical, oil & gas, and energy industries. Through this acquisition, the company would gain strong manufacturing operations management (MOM) capabilities and build on and diversify its Automation & Control business. Moreover, SVT's acquisition led to improvements in Wood Group's vibration, dynamics and noise engineering services. Wood Group being chosen as the main automation contractor for the Future Growth project is a further positive development. We believe the recent acquisitions and contracts contribute to Wood Group's vision for growth. Beaufort maintains its Buy rating on the shares.
Beaufort Securities