Initiating coverage: Back to growth

Like the rest of the industry, Pharos Energy was impacted by the Covid-induced collapse in the oil price, at a time when the company was heavily investing in Egypt. Net debt rose to US$57.5m at end-FY21. However, management has farmed out 55% of its Egyptian assets and put through significant cost-cutting measures, reducing debt to a more modest level of c.US$16m at the end of June 2023. Pharos is now in a position to restart returning cash to shareholders (via a dividend and buyback) and we believe it is set to increase investment, including commitment exploration, which should be a significant driver of shareholder value.

Initiating coverage: Back to growth

Oberon Investments Group is a wealth management & planning, private ventures and corporate advisory boutique. A recently acquired majority stake in a fintech/custody business is not yet reflected in the valuation, in our view. Oberon was established in 2018 and listed on the ASE in 2021. Intensive investment in challenging markets has created a differentiated business model, positioned well in a consolidating sector. Investment is driving impressive growth in funds under management & administration, and in revenue, which should convert to strong EBITDA growth in FY25E.

Initiating coverage: A unique proposition

In an attractive video games market, tinyBuild is investing to accelerate growth, including new technologies and larger-budget Games-as-a-Service (GaaS) titles, and has a strong pipeline of games under development. The company’s strategy retains an emphasis on expanding its own intellectual property (own-IP) portfolio and monetising its catalogue of AA and indie games using a franchise and multimedia model. Following recently reported challenges, the outlook for platform deals has stabilised. Direct sales to consumers continue to perform well and the strong reception to recently announced titles bodes well for the future.

Initiating coverage: Building for the future

STV continues to be viewed as a mature broadcaster, yet it is transforming into a growing streaming and production business. We see continued double-digit growth prospects in these areas, together with a resilient broadcast business, and calculate five-year growth of 7% pa in revenue / 10% pa in operating profit for the group (FY23E-FY28E). Near-term economic pressures are factored into current EPS estimates, but should also drive eyeballs towards STV’s free AVOD service. Current valuation (7.6x FY23E EPS / 4.3% dividend yield) looks modest given the longer-term potential.

Towards streaming and content

RBG is a unique provider and consolidator of high-margin professional services businesses. Strong growth in FY21 and solid trading performance reported in July provides clear evidence that RBG’s strategy and commercial approach are delivering. The acquisition of Memery Crystal has added significant scale and breadth to RBG Legal Services (RBGLS), and we expect further selective M&A. Given RBG’s better business mix and high returns from contentious work, we see good support for margins. In our view, the current discount to peers is unjust given forecast growth, both organic and through bolt-ons. In addition, we believe the significant upside potential from contingent work and litigation finance, both in-house and third party (LionFish), is not reflected in the share price.