Tungsten Corp Plc

Tungsten Corp PLC (TUNG) is a London, United Kingdom-headquartered, leading global supply chain enabler which founded the Tungsten Network’s electronic invoicing network in 2000 to help in accelerating global trade for customers. Tungsten Network seeks to improve business outcomes for the networked firms and is a compliant business transaction network which is backed by intelligent use of data. These include access to disruptive supply chain finance through Tungsten Network Early Payment, real-time spend information through Tungsten Network Analytics, electronic invoicing for connected supply chains through Tungsten Network and much more. 

Trading Update
On 19^th September, Tungsten Corp announced its interim results for Q1 FY2020. Due to expanded product sales and new customers in FY19, the company’s revenue was up by 5 per cent on AER (actual exchange rate) and 2 per cent on CER (constant exchange rate) in comparison to Q1 FY2019. As expected, the company’s New sales billings surged to £0.9 million in Q1 FY2020 versus £0.7 million in Q1 FY2019. The company’s adjusted EBITDA surged to £1.0 million in Q1 FY2020 from an adjusted EBITDA loss of £0.1 million in Q1 FY2019. The company’s net cash balances declined to £2.2 million in Q1 FY2020 from £2.8 million as on 30 April 2019.

Financial Highlights – Financial Year 2019 (30^th April 2019, £, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 30th April 2019, reflecting existing customer price increases, additional product sales to current customers and net benefits of new customer sales, revenue (including TNF) in FY 2019 increased by 6.8 per cent to £36.0 million as against £33.7 million in FY2018. Representing growth of 6.3 per cent, revenue excluding the results of Tungsten Network Finance grew to £35.4 million in FY2019 versus £33.3 million in FY2018. Excluding Tungsten Network Finance, EBITDA was recorded at £2.5 million in FY2019 as against an EBITDA loss of£3.3 million in FY2018. Operating loss for the year was £5.2 million againstan operating loss of£12.1 million in FY2018. Gross cash at the end of FY2019 was £3.8 million, while net cash was £2.8 million at the end of FY2019, as the company successfully generated cash flows of £1.9 million in the second half of the year.

Share Price Performance

Daily Chart as at October-17-19, before the market closed (Source: Thomson Reuters)

On 17th October 2019, Tungsten CorpPlcshares were trading at GBX 42.00 at the time of writing before the market close (at 3:20 PM GMT), down by 4.54% against the previous day closing price. Stock's 52 weeks High and Low are GBX 55.00/GBX 19.95.

Valuation Methodology


Conclusion
Due to ongoing uncertainty in the UK economy, the financial services sector is negatively impacted. The company has shown an increase in the financial performance in the Q1 FY2020 and FY2019. The company targets a 100% increase in new sales billings from £4 million achieved in FY19 and through the continuation of recurring and repeatable revenue, it expects revenue growth (excluding TNF) to accelerate from 6.3% in FY19.

Through revenue growth and continued cost discipline, it plans to achieve low double-digit EBITDA margin. The company expects to become the invoice delivery platform of choice for current and new suppliers on its global network through the launch of its Total AR solution, which would offer both non-network Buyers and Suppliers the ability to enhance their services. The company has also embarked on the divestment of non-core business, which will allow it to focus on its core propositions and grow its invoicing business.

Over the course of 4 years (FY15 - FY19), the company’s revenue surged from £22.55 million in FY15 to £36.05 million in FY19. Compound annual growth rate (CAGR) stood at 12.44 per cent.

Based on the decent prospects and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 42.00 (as on 17^th October 2019, before the market close), with single digit upside potential, based on 1.40x NTM EV/Sales(approx.) on FY20E Sales(approx.).
 

Midatech Pharma Plc

Midatech Pharma Plc (MTPH) is a pharmaceutical company that develops and commercializes products in oncology and other therapeutic areas. The company’s products include oravig, zuplenz, soltamox and gelclair. Midatech’s products are used in the treatment of diabetes; rare cancers including brain, ovarian, liver and pancreatic cancer and neurological and ophthalmologic conditions. It collaborates with universities, and speciality and major pharmaceutical companies to develop its platform technologies.
Recent News
On 8th October 2019, Midatech Pharma announced the commencement of MTD201 Phase 1 study for the treatment of neuroendocrine tumours and acromegaly.
Financial Highlights – H1 Financial Year 2019 (30^th June 2019, £, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, due to low grant revenue for the period, the company’s total income declined to GBP 452 thousand as against GBP 549 thousand in H1 FY2018. The company reported an operating loss of GBP 5,244 thousand in H1 FY2019 versus an operating loss of GBP 6,270 thousand in H1 FY2018. The company’s LBT (Loss before tax) stood at GBP 5,251 thousand for the first half of the financial year 2019 versus an LBT (loss before tax) of GBP 6,509 thousand in the first half of the financial year 2018. The company’s LAT (loss after tax) continuing and discontinued operations stood at GBP 4,419 thousand for the first half of the financial year 2019 versus a LAT (loss after tax) of GBP 11,413 thousand in the H1 of the financial year 2018. The total basic and diluted loss per share (continuing and discontinued operations) in H1 FY2019 stood at 1 pence versus a basic and diluted loss per share of 18 pence in H1 FY2018.
 
Share Price Performance

Daily Chart as at October-17-19, before the market closed (Source: Thomson Reuters)

On 17th October 2019, Midatech Pharma Plcshares were trading at GBX 6.20 at the time of writing before the market close (at 3:38 PM GMT), up by 15.34% against the previous day closing price. Stock's 52 weeks High and Low are GBX 20.69/GBX 2.46.

Conclusion
The company’s profitability in the first half of the financial year 2019 remained in the negative zone. The company is now focusing on advancing its research and development pipeline through clinical testing. The group will be initiating a pivot trial in the H2 FY2019 and also completed a phase study of MTD201 in FY18. Midatech also secured significant funding in late 2018. The safety portion of the MTX110 trial in patients with DIPG will be finishing soon. The current market sentiment in relation to the company is fair with favourable fundamental indicators, positive estimates and valuation. 

Based on the above rationale, we have given a “Speculative Buy” recommendation at the closing price of GBX 5.375 (as on October 16, 2019).

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