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Northland Capital Partners View on the City ValiRx, Craneware, Action Hotels

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ValiRx Plc (LON:VAL) – CORP: VAL 401 update
Market Cap: £10.9m; Current Price: 36p

ValiRx initiates preparations for Phase 2b clinical trial of VAL401
ValiRx announced that it has initiated preparations for a Phase 2b clinical trial of its lung cancer drug, VAL401—the company’s second clinical candidate.
 A clinical trial contract has been established between ValiSeek and Clinical Accelerator, a UK-based clinical trial management organisation, to manage and execute a Phase 2b Clinical Trial in patients with non-small-cell lung adenocarcinoma.
 The trial will be designed to assess the treatment’s:
1. effectiveness (as observed by measurements of disease progression, quality of life and survival);
2. pharmacokinetics; and
3. safety and tolerability.

NORTHLAND CAPITAL PARTNERS VIEW: ValiRx’s appointment of Clinical Accelerator is instrumental in seeking a fast-track of VAL401 into Phase 2b trials. VAL401 is a novel reformulation of a generic drug which has over twenty years of clinical use in the treatment of mental disorders. As such, the drug’s safety profile is well established. ValiRx is now reformulating the drug for the treatment of lung cancer, given strong pre-clinical data supporting this new indication. 

Vadim Alexandre +44 (0)20 7382 1134
[email protected]

Craneware (LON:CRW): FY pre-close
Market Cap: £175.7m; Current Price: 655p

Further growth in revenue visibility
 Total value of contracts signed of $72.5m (FY14: $71.0m) but given the company’s revenue recognition policy, the bulk of the revenue of these sales has not been recognised and FY revenue is expected to be between $44.5m and $45m (consensus $48m), representing 4.5% to 5.6% growth. Adj. EBITDA expected to be between $14.0m and $14.5m, up 6.9% to 10.7% (consensus $13.8m).
 Renewals in the year above 100% with strong cash generation resulting in year-end cash above $40m (FY14: $32.6m).
 FY results due 8th September.
NORTHLAND CAPITAL PARTNERS VIEW: Slightly pedestrian pre-close with 2% growth in total contracts signed and c. 5% growth in reported revenue reflecting the company’s conservative revenue recognition policy. This means that the company has good revenue visibility over a three year period – at the interim stage this stood at $119.9m with $98.0m ‘Revenue under Contract’, $20.1m ‘Renewal Revenue’ and $1.8m of ‘Other Recurring Revenue’. Renewal rates remain strong with customers expanding their deployments and the company remains well capitalised. The US healthcare market also looks more stable following the recent Supreme Court ruling in favour of Obamacare. Shares continue to trade at the upper of the sector at 26.8x FY15 and 23.3x FY16.

David Johnson +44 (0)20 7382 1130
[email protected]

Action Hotels (LON:AHCG): TRADING
Market Cap: £83m; Current Price: 56.5p

On track to meet expectations
 Revenue was +11% YoY to $22m in 1H FY15 on the back of the group delivering occupancy levels above 80%. The ibis Salmiya Kuwait and ibis Sharq Kuwait performed particularly strongly with occupancy levels of 88% and 90% respectively. As a result, EBITDA was +14% to $8.7m YoY.
 The outlook looks positive. In addition to recently announcing the acquisition of the 73 room ibis hotel near Melbourne airport in Australia establishes the ninth hotel and 1,561 rooms. The development pipeline is on track to deliver a further three hotels before the end of 2015.
 In May management alluded to a positive start to the new year where 1Q15 started well and where ADR was +3% YoY to $111, revenue was +22% compared to the same period in the prior year. Consensus is looking for c. $15m of EBITDA for FY15 so given the $8.7m of EBITDA produced in the 1H15 forecasts look well underpinned in our view.

NORTHLAND CAPITAL PARTNERS VIEW: The business is trading well and with the hotel portfolio expanding and key partnerships in place, management appears on track to deliver on its goal of 16 hotels and 2,820 rooms by 2017. The stock currently trades on at a c. 49% discount to Adj. NAV per share of 84p and offers a dividend yield of c. 3.2% to investors.


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