Agronomics Limited (LON: ANIC)

Business Overview
Agronomics Limited (LON: ANIC) is an investment company which focuses on opportunities in the modern foods industry. The company is focused on other alternatives ways of producing meat and plant-based sources of nutrition which are environment-friendly. The company invests in companies that can generate revenues through the development of biopharmaceutical drugs. The company generally invests in equity and equity related products of both quoted and unquoted companies. Agronomics Ltd was formerly known as Port Erin Biopharma Investments Limited.

Recent News
On 20^th December 2019, the company announced the completion of a subscription of €2,000,000 in the form of a Convertible Loan Note in Meatable BV ("Meatable"), which is a company based in the Netherlands and focuses on producing cultivated beef and pork. According to this subscription, Agronomics would get minimum 5.26 per cent equity in Meatable. This Subscription would be paid in cash using the company's own resources. The CLN would convert into equity automatically in the event of qualified financing, being €5m or greater, or on the maturity date, being January 2022.

Financial Highlights – H1 Financial year 2020 (31st December 2019, GBP)
On 16^th January 2020, the company announced its half yearly results ending on 31^st December 2019.

(Source: Interim Report, Company Website)

In the first half of the financial year 2020, the company’s investment income, including loan interest and net unrealised gains, was GBP 84,262 as compared to GBP 53,307 in the first half of the fiscal year 2019. Operating expenses were GBP 577,782 against GBP 82,740 in H1 FY 2019, due to spending on professional fees relating to the investments acquired and fundraised completed during the period. The loss for the period was GBP 493,493 versus the loss of GBP 17,357 in H1 FY2019. Basic and diluted loss per share was 0.5p as compared to the loss of 0.07p in H1 FY2019.

Share Price Performance

Daily Chart as on 17^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 17^th, 2020, Agronomics Ltd shares were trading at GBX 8.92 at the time of writing before the market close (at 8:00 AM GMT), down by 0.89 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 14.81/GBX 3.05. The stock price has given negative 4.85 per cent returns during the last six months. It has given negative 12.97 per cent return in the last one week.

Conclusion
During the first half of the financial year 2020, the company’s financial performance had declined. The company was able to increase its income from the investment. However, its operating cost has increased tremendously. Operating expenses, including professional fees, has surged to almost seven times against the operating expenses during the same period last year. The company is prone to various risks which could impact the overall business of the company. Inability to implement a strategy to make a return from its investments could affect the revenue as well as the reputation of the company. Credit default risk could hamper the company’s growth and investors’ confidence. Liquidity risk could affect the operations and investments of the company. Fluctuation in foreign exchange rates could affect the profitability of the company. Inability to secure capital and funding could affect the operations and further investments of the company.

Based on the risk factors as highlighted above, we recommend investors to “AVOID” taking fresh positions in the stock at the current price of GBX 9.20 (as on 17th January 2020 at 8:02 AM GMT).  

Pharos Energy Plc (LON: PHAR)

Business Overview
Pharos Energy Plc is an independent Oil & Gas Producers company. The company has exploration, production and development interests in the region of Vietnam and Egypt. The company was formerly known as SOCO International Plc.

Recent News
On 8th January 2020, Pharos Energy Plc announced the selection of Geoffrey Green. Mr Green will hold the responsibilities of Independent Director Non-Executive effective from 20th May 2020 after the conclusion of the company’s AGM (Annual General Meeting).

Operations and Trading Update
On 8th January 2020, Pharos Energy Plc announced its operations and trading update for the full year ending 31st December 2019. The company’s production from its Vietnam operations stood at 7,081 boepd, the production from Egypt operations at exit rate was at 6,007 bopd for the period. The average production from the Egypt operations stood at 5,055 bopd for the period from 2nd April 2019 to 31st December 2019. The company’s cash balances stood at USD 58 million, while the net debt was at USD 42 million for the period. The company’s revenue from Vietnam operations stood at USD 155 million (approximately) for the period, with the average realised oil price of $68 per barrel. The premium to Brent was at over $4/bbl for the financial year 2019 and the term sales’ premium was approximately $6/bbl in the first half of the financial year 2020. The company’s revenue from Egypt operations stood at USD 34 million (approximately) for the period from 2nd April 2019 to 31st December 2019, with the average realised oil price of $59 per barrel. The discount to Brent was at approximately $6/bbl for the financial year 2019.

The company will make its preliminary results announcement on 11^th March 2020.

Share Price Performance

Daily Chart as on 17^thJanuary 2020, before the market closed (Source: Thomson Reuters)

On January 17^th, 2020, Pharos Energy Plc shares were trading at GBX 50.80 at the time of writing before the market close (at 9:30 AM GMT), up by 3.67 per cent against the last day closing price. Stock's 52 weeks High and Low are GBX 78/GBX 47.37. The stock price has given negative 27.63 per cent returns during the previous year. It has given 3.67 per cent returns in the last one month.

Valuation Methodology


*Peers: Genel Energy Plc, Rockrose Energy Plc, Cadogan Petroleum Plc, Lekoil Ltd, Volga Gas Plc, SDX Energy Plc and Serica Energy Plc

Conclusion
The company has shown a decline in financial performance in the first half of the financial year 2019. Both the top-line and the bottom-line performance have declined, while the profitability remained in the negative zone for the period. The company through the development of organic opportunities is focussing on its operations. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

Based on the valuation and factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 51.10 (as on 17th January 2020, before the market close at 9:10 AM GMT), with support from few catalysts needs to be evaluated at a later stage. 
 
 *All forecasted figures and information have been taken from Thomson Reuters.
*Currency exchange rate taken for 1 US Dollar = 0.77 GBP.

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