- Arian Silver Corporation announces the provisional terms of the potential refinancing.
- The US$16,452,343 senior secured convertible loan note issued to Quintana AGQ Holding Co. LLC will be increased by US$1.5m. Additional amounts up to US$10m will be available under certain terms and conditions. The conversion price is expected to be the current market price on the TSX-V, CAD$0.17 per share.
- The maturity date for the loan will be 48 months from when the refinancing closes. The effective interest rate will be 12% per annum, payable from 2017.
NORTHLAND CAPITAL PARTNERS VIEW: Arian Silver Corporation has provided some further detail on the potential refinancing package that could allow the Company to re-commence commissioning of the plant and development of the mine at the San José Project, located in Mexico. The four year term of the loan should help to allay fears of substantial dilution should the convertible be exercised at the current market price on the TSX-V , CAD$0.17 per share, assuming that Arian will have the right to repay the convertible and it is not exercisable at Quintana’s option, TBC. The interest payable from 2017 is also positive giving Arian time to focus on ramping up production rates and generating cash before having to make the interest repayments. Though the deal has yet to be concluded, the provisional terms announced here seem as positive as Arian could hope for, yet we urge caution as the full terms of the financing are yet to be agreed. We await confirmation from the Company that the sum of the funds announced here will be enough to fill the cash shortfall and get the Company back on its feet.
- As per the pre-close update at the back end of July, net gaming revenue (NGR) was +22% to £19m in the 1H15, which correlates with active casino customers +22% YoY in the 1H15. Casino player yield 5% lower to £380 per player whilst casino cost per acquisition increased by 9% to £197. Furthermore, the business derived 85% of its revenue from regulated and taxed markets. Mobile showed healthy growth and now makes up c. 42% of casino revenue from 32% in the prior year whilst 32RED. It grew its NGR by 67% YoY to £0.9m and where 4,285 new players were added in the 1H15. EBITDA reduced by 45% YoY to £1.2m (£2.3m) after £2m of point of consumption tax (POCT) and additional marketing investment of £1m in the Italian market in the 1H15. Underlying l-f-l EBITDA excluding POCT was +57% YoY to £4.2m.
- Roxy Palace was recently acquired for a consideration of £8.4m, £2m in cash and £6.4m in shares at 64p. With the acquisition TTR inherited a casino customer database of 230,000 players which, similar to TTR, uses the Microgaming platform and therefore makes migration of players and integration of systems and software easier which in our view should lead to cost savings. Management reports that the integration process is progressing well to date.
- The outlook reads particularly well where there was a marked improvement in trading. In first 12 weeks of the 2H15 NGR was +52% YoY compared to the 35% reported at time of the pre-close statement in July.
NORTHLAND CAPITAL PARTNERS VIEW: Positive outlook statement from TTR with Italy showing healthy growth albeit from a lower base compared to revenue derived from the UK. The share price increased marginally from the time of the pre-close statement in July and the shares trade on c. 13x FY15 consensus earnings falling to 8.5x FY16 consensus earnings. However, consensus appears to omit POCT in earnings forecasts which is a cash cost to the business. Consensus is looking for £4.9m of PBT for FY15 and business produced £103,427 in the 1H15 after taking into account POCT of £2m.
- Revenue +28% RM7.8m with recurring revenue 43% of total revenue (H1 FY14: 49%). Mix of organic growth and contribution from RapidCloud Singapore (Exxelnet Solutions). Implementation of the Goods and Services Tax temporarily disrupted non-vital spending in Malaysia in H1 but has since picked up.
- Gross margin declined 700bps to 57% and gross profit increased 14% to RM4.4m with an increase in hosting charges. Operating profit halved to RM0.6m reflecting consolidation of associates as subsidiaries (Thailand and Philippines) and new subsidiary in Singapore and Indonesia. Cash of RM13.6m (FY14: RM3.9m), following June’s £1.7m placing, with trade receivables of RM9.9m. Intention to pay an interim DPS in Q4.
- With the impact of the Goods and Services Tax in H1 and the traditional seasonality, FY performance is expected to be H2 weighted. Management confident of hitting FY expectations.
NORTHLAND CAPITAL PARTNERS VIEW: Reasonable H1 performance with the winning of several contracts with larger organisations and a shift towards higher margin and higher value projects. Some disruption caused by the Goods and Services Tax in H1 but these projects should benefit H2. Management also reports that there are a number of sizeable prospects still outstanding. Geographic expansion has opened up a number of additional South East Asian markets with revenue expected to follow cost. Trading on 11.2x FY15 and 9.4x FY16.