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Beaufort Securities Breakfast Alert: Altus Strategies, MySQUAR Limited, N4 Pharma Plc

Published: 19:02 11 Oct 2017 AEDT

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Today's edition features:

Altus Strategies (LON:ALS)

• MySQUAR (LON:MYSQ)

• N4 Pharma (LON:N4P)

 

Markets

Europe

The FTSE-100 finished yesterday's session 0.40% higher at 7,538.27 whilst the FTSE AIM All-Share index was up 0.09% at 1,019.82. In continental Europe, the CAC-40 finished 0.04% lower at 5,363.65 whilst the DAX was 0.21% lower at 12,949.25.

Wall Street

In New York last night, the Dow Jones closed 0.31% higher at 22,830.68, the S&P-500 added 0.23% at 2,550.64 and the technology-focussed Nasdaq climbed 0.11% to end at 6,587.25.

Asia

In Asian markets this morning, the Nikkei was up 0.27% at 20,879.49 and the Hang Seng added 0.06% at 28,508.79.

Oil

In early trade today, WTI crude was 0.27% higher at $51.06 per barrel and Brent was up 0.14% at $56.69 per barrel.

 

Headlines

Energy price cap 'needs legislation', Ofgem says

A price cap on energy bills proposed by the prime minister last week is unlikely to take effect before winter. Theresa May had promised to revive a plan to cap charges for an extra 12 million consumers. Howewer, Ofgem said it would ensure that all consumers on standard variable tariffs would be protected as soon as possible "if legislation is in place". Until then a more limited price cap will be extended to another one million low income households, Ofgem said. Restrictions on the cost of gas and electricity for those with pre-payment meters already saves some four million households about £80 a year. The regulator wants to extend the scheme to about two million other people who get certain benefits.

Source: BBC News

 

Company news

Altus Strategies (LON:ALS, 8.38p) – Speculative Buy

Altus has announced the potential acquisition of Legend Gold Corp (LGN.V). Terms have been agreed and management control sufficient shares on both sides that it is likely to complete. The basic terms are an all shares transaction valued at £3.4m and where Legend shareholders end up owning 27.6% of the enlarged share capital of Altus. Legend has six gold licences in Mali that cover nearly 400km2 of prospective exploration ground and contain c 900koz of discovered gold resources.

Our View: Whilst the above transaction is subject to due diligence, final documentation and regulatory approvals, we believe it's likely to complete. In terms of where the value lies for Altus (apart from the 900koz of gold for the equivalent of c US$5/oz, which is less than the cost of discovery) the RNS focuses on the Diba project which is near the Sadiolia mill, so Diba ore could potentially be processed there. Other than that, the Legend 's exploration licences are in a good gold jurisdiction, near major mines and either post discovery or with significant artisanal activity. We maintain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Altus Strategies plc

 

MySQUAR (LON:MYSQ, 4.02p) – Speculative Buy

The Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, yesterday announced it has signed a Memorandum of Understanding ('MoU') with Sealand Capital Galaxy Limited . It has entered a partnership for the mobile games of MySQUAR to be distributed under Sealand's (through its subsidiaries) licence agreement on the Huawei inTouch platform and for Sealand's mobile games to be distributed in Myanmar through the MySQUAR platform. Huawei is the third largest smartphone provider in the Myanmar market which is the fastest growing in Asia. Details of the partnership shall be finalised within the next 60 days. Sealand makes investments and acquisitions in the information technology and social media sectors in the APAC (Asia-Pacific) region, with a particular focus on mobile gaming and mobile payment companies. Sealand, through its subsidiaries, has agreements in place with Huawei to distribute mobile games in Asia and with WeChat Pay to provide mobile payment services to the messaging app platform in Hong Kong. Sealand recently acquired a majority stake in Rightyoo, a mobile game development company. Sealand and MySQUAR are in discussions to distribute Rightyoo games through the MySQUAR gaming platform in Myanmar. "Sealand actively monitors opportunities in Southeast Asia and we are eager to enter the fastest growing market in the region, Myanmar, for mobile gaming and payments," said Nelson Law, Chairman of Sealand Capital Galaxy Limited. "We hope to leverage MySQUAR's first place position in the Myanmar mobile gaming market with millions of downloads and its partnership with MyPay Limited, to offer RightYoo's gaming content through MySQUAR in Myanmar."

Our View: That's the beauty of the social media platform MySQUAR has created. Having attracted a rapidly expanding and loyal customer base and facilitated a broad range of services to complement and monetise it, deals like the one just struck with Sealand, cost little to implement and can be rapidly moved onto its platform. Already populated by eager users, MySQUAR's leading position in Myanmar mobile gaming together with its MyPay partnership, should ensure RightYoo's content quickly generates a new stream of revenue, a good share of which should then fall directly to the bottom line. MySQUAR management is doing all the right things and its momentum continues to build! In fact, based on expected progress, Beaufort now considers MySQUAR has the potential to produce its first net earnings for shareholders as early as its financial year-ended June 2019, by which time its branded social media and entertainments platform will indeed have secured deep foundations in Myanmar. This all suggests the shares still have a long way to go from their currently depressed levels notwithstanding, of course, the opportunity for a predatory approach from one of the acquisitive online hubs which remain hungry to add new virgin territories to their international portfolios. Indeed, whether the ambitious, deal-hungry Sealand that has already declared its desire to capture more of Myanmar's rapid growth actually has deeper designs on MySQUAR remains to be seen. Whatever, they will not be the only one to recognise its exceptional long-term opportunity, in recognition of which Beaufort retains its target price of 21p/share on MySQUAR along with a Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to MySQUAR Limited

 

N4 Pharma (LON:N4P, 5.75p) – Speculative Buy

N4 Pharma, the specialist pharmaceutical company focused on reformulating existing drugs and vaccines for improved performances, yesterday announced the publication of the PCT Patent Application for its proposed reformulation of sildenafil (commonly known as Viagra). The patent application deals specifically with N4 Pharma's plans to reformulate sildenafil to allow for an initial faster onset of drug in plasma, followed by a further release where the sildenafil is delivered into plasma more steadily and over a longer time period. Such reformulation of sildenafil would see a faster acting and longer lasting version of current market leader Viagra. Moreover, it is expected that the new formulation can be taken with or without food, unlike Viagra. The Board believes such benefits would make its reformulation attractive to both the end consumer and pharmaceutical partners in the final development and commercialisation of the drug. Following formal publication of the Patent Application, which has a priority date of 2 June 2016, the next stage in granting the final patent is 2 October 2018. This is the deadline for entry of the patent application into national phases and the start of the detailed review in each key territory. N4 Pharma's CEO, Nigel Theobald, commented "With the Patent Application now formally published, we can talk more freely with investors and other interested parties about what our reformulated sildenafil will hope to achieve in terms of its pharmacokinetic properties and where it might sit amongst competitors in this highly lucrative market".

Our View: The news marks another step towards its aim to develop the reformulation of sildenafil, for which the Company is expected to commence initial human pilot clinical trials in Q1 2018 with a limited number of healthy male volunteers. The reformulated version is expected to have clear advantages over existing drug, Viagra, where it acts faster, lasts longer and does not require to be taken with food. This is reflected in market research undertaken by Black Swan Analysis earlier this year, where between 12% and 25% of UK clinicians and between 19% and 28% of US clinicians who are currently prescribing sildenafil (and competing products such as Vardenafil and Tadalafil) said they would switch patients to N4 Pharma's product. The results of initial human pilot clinical trials are expected to be released in Q2 2018, which will allow N4 Pharma to make any final adjustments to the reformulation and then present the pharmacokinetic data together with relevant manufacturing/quality information to the Food and Drug Administration ('FDA') and the relevant European regulatory authorities along with a proposed approach to conducting a pivotal clinical study which will be required for marketing authorisation. At this point, the Board would have options whether to engage with an industrial partner (in exchange for royalties) or to undertake the pivotal trial itself if sufficient financial backing can be attracted. Given the Group's available cash resource (£1.5m at end-June), this should be sufficient to fund it through to the end of 2018 to fully furnish a data room and ensure all interested parties put their 'best cards on the table'. With Sildenafil presently has global annual sales of some US$4.6bn, Beaufort estimates a potential opportunity for N4 Pharma's faster acting, longer lasting version in the range of US$400m to US$600m per annum. This alone provides an ideal reminder that having adopted a relatively low-risk business model that offers a rapid route to first revenues, N4 Pharma's present valuation appears to ignore the opportunities its lead candidate presents. Even after awarding an absurdly low 20% probability of success and assuming a call for an additional £2m raise to complete clinical studies before attracting a suitable partner, a net-present value of £10m is still more than twice yesterday's closing price. Investors also tend to forget that there is much more to N4 Pharma than just its sildenafil reformulation. Having ceased development of Paroxetine reformulation, the Company should now be able to focus its pipeline resources toward more commercially attractive areas, which also seek to address potential multi-billion dollar markets. Beaufort reiterate its Speculative Buy rating on the Share with a target price of 12p.

Beaufort Securities acts as corporate broker to N4 Pharma Plc

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