Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

Beaufort Securities Breakfast Alert: Jubilee Platinum, Savannah Resources, Sunrise Resources, Acacia Mining, InterContinental Hotels Group

Beaufort Securities Breakfast Alert: Jubilee Platinum, Savannah Resources, Sunrise Resources, Acacia Mining, InterContinental Hotels Group
no_picture_pai.jpg

Markets

Europe
The FTSE-100 finished yesterday's session 0.09% lower at 7,020.47, whilst the FTSE AIM All-Share index closed 0.04% better-off at 827.41. In continental Europe, the CAC 40 index ended the day 0.09% lower at 4,536 and the DAX closed 0.09% up at 10,711.
Wall Street
In New York overnight on Friday, the Dow Jones fell 0.09% to stand at 18,145.71, the S&P-500 lost 0.01% to finish at 2,141.16 and the Nasdaq was up 0.03% at 5,257.4.
Asia
In Asian markets this morning, the Nikkei 225 rose 0.15% to 17,210.64, while the Hang Seng firmed 0.27% to stand at 23,437.8.
Oil
In early trade today, WTI crude was down 0.57% to $50.56/bbl and Brent was also down 0.48% at $51.53.

Headlines

Banks 'set to relocate out of UK'
Large banks are getting ready to relocate out of the UK early next year over fears around Brexit, the British Bankers' Association (BBA) has warned. Writing in The Observer, its boss Anthony Browne also says smaller banks could move operations overseas by 2017. "Their hands are quivering over the relocate button," he wrote. Most banks had backed the UK remaining in the EU. Mr Browne also said the current "public and political debate at the moment is taking us in the wrong direction." His comments build upon those he made at the BBA annual conference last week, when he said banks had already "set up project teams to work out what operations they need to move by when, and how best to do it".

Company news

Jubilee Platinum (LON:JLP, 3.66p) – Speculative Buy
Jubilee has published a 3Q16 operations update, its first quarterly update of the year. Now that Dilokong (DCM) has ramped up, Jubilee will stop publishing monthly updates, so we expect the next quarterly in 3 months’ time. In 3Q to September, chromite concentrate production at Dilokong (DCM) continued to perform well. 28,559t were produced generating revenue of £2.1m and earnings attributable to Jubilee of £0.89m. Meanwhile the Hernic chrome and platinum project remains on budget and time with commissioning still targeted for December. £7.45m has been spent at Hernic, approximately 71% of total project capital. The other new news relates to the platinum recovery at Dilokong. Jubilee has been investigating its options on how to best profit from the high-grade platinum tailings the chrome operation produces i.e. build its own platinum concentrator or toll treatment. Jubilee has established the best route is to upgrade the platinum rich material on-site (modest capex requirement) to an even higher grade feedstock, and then use toll treatment.

Our view: It is good news that the Dilokong chrome operation continues to operate profitably. While there is exciting upside from the nearly built Hernic operation (chrome and platinum), and the Dilokong platinum business. Also, in the announcement management states that “we are confident that we will shortly conclude a further acquisition with discussions progressing favourably in other areas of acquisition and joint venture.” There is plenty going on at Jubilee with the next major event to watch out for, Hernic commissioning in December. We retain our speculative Buy recommendation.

Savannah Resources (LON:SAV, 4.14p) – Speculative Buy
Savannah Resources, the diversified exploration and development company, announced today that it has initiated the Environmental Impact Assessment (EIA) for the Mahab 4 and Maqail South copper deposits in the Sultanate of Oman. The EIA is required as part of the licencing requirements for new mine developments in Oman. Mahab 4 and Maqail South deposits are located within Block 5 which is held by Al Fairuz Mining of which Savannah owns a 65% shareholding. Both deposits have a combined resource of 1.7Mt grading 2.2% Copper. A revised mineral resource estimate for Maqail 4 and Maqail South and is expected in Q4 2016 on the back of a recently completed drill programme. Savannah is targeting commencement of copper mining in late 2017 with the application of open-pit development at the Maqail South deposit and underground development proposed for the Mahab 4 deposit.

Our view: This is another important milestone for the company as it continues to target mining in late 2017. The EIA is expected to take six months to prepare and go through the approvals process. Mahab 4 has an Indicated and Inferred resource of 1.5Mt grading 2.1% Cu and Maqail South has a current inferred resource of 0.16Mt grading 3.8% Cu, a revised mineral resource estimate for Mahab 4 and Maqail South is expected in Q4 2016 on the back of a recently completed drill programme. Whilst the current resource footprint is relatively small we note that both deposits are high-grade and we are encouraged with the potential to increase the overall resource. We look forward to the revised mineral resource estimate in Q4 2016, in the meantime, we maintain a Speculative Buy rating on the stock.

Sunrise Resources (LON:SRES, 0.20p)
Sunrise announced drill results from a three-hole programme at its Bay State silver project in Nevada. Two holes were drilled to test the main Chihuahua Vein (successfully drilled in 2H15, 0.5m at 16.5oz/t and 1.4m at 14.7oz/t) while the third hole was testing a parallel vein. One of the two Chihuahua holes skimmed the vein 300m below surface, an encouraging result since it proves the vein continues at depth, although frustrating because the hole did not properly intersect the vein. The other Chihuahua hole didn’t find the vein which management believe could be due to a fault.

Our view: The value of Bay State will very much depend on the continuity of mineralisation, grade and scale. This morning’s results unfortunately haven’t provided much information which is frustrating but doesn’t end the project. Importantly, Sunrise has improved its drilling technique so we expect all future Bay State holes to be on target.

Acacia Mining (LON:ACA, 531.18p) - Buy
The strong third quarter operational and financial results represent another significant step forward for Acacia, particularly considering some of the headwinds experienced during the quarter. North Mara performed particularly well delivering 112,523 ounces at an all-in sustaining cost (AISC) of US$655 per ounce sold. This more than offset the impact of operational stoppages at Bulyanhulu and the deferred access to higher grades at Buzwagi. Group all-in sustaining cost for the quarter of US$998 per ounce, including a US$97 per ounce of share based valuation charges, was 16% lower than Q3 2015. Net cash position has increased by a further US$32 million to US$203 million, which means Acacia has nearly doubled its net cash in 2016. Gold production amounted to 204,726 ounces, 25% higher than Q3 2015. Operationally, gold sales of 206,488 ounces were 24% higher than Q3 2015, and 1% above production and the AISC of US$998 per ounce sold (US$901 per ounce before the impact of the share based payment valuation charge), 16% below Q3 2015. Cash costs of US$598 per ounce sold was 26% lower than Q3 2015. Financials include revenue of US$285 million, 48% higher than Q3 2015, driven by increased gold sales and higher net realised gold price and EBITDA of US$125 million wasUS$104 million higher than Q3 2015, despite share based valuation charges of US$20 million. Adjusted net earnings of US$51 million (US12.4 cents per share) was US$64 million higher than Q3 2015 and operational cash flow of US$100 million was US$96 million higher than Q3 2015. Capital expenditure of US$53 million, was 2% higher than Q3 2015 due to a focus on capitalised development at Bulyanhulu and North Mara.

Our view: These are excellent figures and testament to the quality of the assets and credit to the Management and all the personnel at Acacia. This is one of Beaufort’s tips of the year and they have performed extremely well to date and after Friday’s share price rise, whilst we retain our Buy stance, investors should consider taking some profits.

InterContinental Hotels Group (LON:IHG, 3,157.63p) - Buy
InterContinental Hotels Group, a global organisation with a broad portfolio of hotel brands, on Friday provided third quarter trading update (‘Q3 2016’). During the period, revenue per available room (‘RevPAR’) advanced by +1.3% (0% at actual exchange rates), rate increased by +1% and occupancy improved by +0.3%. For the year-to-date, RevPAR advanced by +1.8% (+0.2% at actual exchange rates), rate increased by +1.2% and occupancy level improved by +0.4%. In Americas, RevPAR was up +1.9% in Q3, and +2.2% year-to-date with US demand remained record high. Its exposures in oil producing markets continued to have negative impact, with its RevPAR down -7.3%, against +2.5% growth in the rest of the estate. Europe, RevPAR was 0% in Q3, and up +1.2% year-to-date. Although the growth in Q3 remained flat, IHG’s 3 key markets, Germany, Russia and UK made a good growth. In Asia, Middle East & Africa, RevPAR was down -0.1% in Q3, and down -0.2% year-to-date, dragged down by the poor Middle East performance due to the ongoing impact of low oil prices. In Greater China, RevPAR was up +0.9% in Q3, and +1.8% Q3 year-to-date, driven by strong mainland China, especially by tier one cities. On the operational front, the Group opened 7,333 rooms and closed 2,789 rooms in the Q3, bringing total number of rooms to 754,265 rooms. For the year-to-date, number of rooms grew +3.8%. IHG also signed 18,894 rooms (128 hotels) during the period (53,406 rooms year-to-date), taking total pipeline to 229,895 rooms where c.45% is currently under construction. InterContinental Hotel’s CEO, Richard Solomons commented “Looking ahead, while industry RevPAR growth has slowed, the fundamentals for the sector, and particularly for IHG, remain compelling. This, combined with our winning strategy and the strength of our cash generative business model, will enable us to drive sustainable growth into the future. Despite the uncertain environment in some markets, we remain confident in the outlook for the remainder of the year.”

Our view: During analysts’ conference call, the management said third quarter was “tough com” referring stronger Q3 2015 comparatives where RevPAR, rate and occupancy level at that time improved +4.8%, +3.6%, and +0.9%, respectively. Since then, there was number of economic and political uncertainties, ranging from terrorists attack, volatile oil prices to Brexit discouraging its customers. Having considered this, we believe IHG has delivered resilient growth in the Q3 and year to date. Looking ahead, the Group said due to weaker comparative, Q4 2016 in the US will be in better read. In the UK, however, Q4 2016 will be tougher as the same period last year was boosted by the Rugby World Cup. On top of this, the management confirmed that overall supply of rooms in the UK is continue to grow in 2017. In mainland China, Q3 RevPAR was up +2.2% and was c.+6% in the tier 1 cities as overall demand remain greater than the supply. Importantly, the Group signed a global partnership with Alipay, China's leading 3rd party online payment solutions company, in August which will make IHG the first global hotel company with ability for customers to pay via Alipay, potentially encouraging more Chinese customers. Moreover, its IHG Rewards Club, which providing preferential member pricing initiative, 'Your Rate', to over 100 million members, together with Alipay is likely to create more royal customer base. The Group confirmed that its financial position remains “robust” and in August it issued a £350m, 10-year bond at a 2.125% coupon rate, the lowest rate IHG has achieved in the Sterling bond market. With current volatile exchange rate, the Group’s RevPAR in the Q3 was 0% due to stronger US Dollar. On the other hand, this also benefits the Group as it has c.50% of gross central overhead and c.40% of Europe regional overhead are in Sterling with c.70% of its debt denominated in Sterling at 30 June 2016 exchange rates. Despite the surrounding uncertainties, the Group remains confident in the outlook for the remainder of the year. The Q3 performance was slightly weaker and consensus Analysts’ estimate currently indicates FY2016E and FY2017E P/E of 20.3x and 17.5x with dividend yield of 2.4% and 2.6% respectively. Seeing recent good share price performance, we are inclined to recommend to short-term investors to consider realising some of the profit, whilst Beaufort retains its Buy rating amid its operational progress.



Important Risk Warnings and Disclaimers 

This report is published by Beaufort Securities Ltd ("Beaufort Securities"). Beaufort Securities Ltd is Authorised and Regulated by the Financial Conduct Authority and is a Member of the London Stock Exchange. 

RELIANCE ON THIS NOTE FOR THE PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE YOU TO A SIGNIFICANT RISK OF LOSING ALL OF THE FUNDS, PROPERTY OR OTHER ASSETS INVESTED OR OF INCURRING ADDITIONAL LIABILITY. 

This document is not an offer to buy or sell any security or currency. This document does not provide you with individually tailored investment advice. It has been prepared without regard to the your financial circumstances and objectives The appropriateness of a particular investment or currency will depend on your individual circumstances and objectives. The investments and shares referred to in this document may not be suitable for you. 

This research is non-independent and is classified as a Marketing Communication under FCA rules. As such it has not been prepared in accordance with legal requirements designed to promote independence of investment research and it is not subject to the prohibition on dealing ahead of the dissemination of investment research in COBS 12.2.5. However Beaufort Securities has adopted internal procedures which prohibit analysts from dealing ahead of non-independent research, except for legitimate market making and fulfilling clients' unsolicited orders. 

By receiving this document, you will not be deemed a client or provided with the protections afforded to clients of Beaufort Securities. When distributing this document, Beaufort Securities is not acting for you and will not be responsible for providing advice to you in relation to this document. Accordingly, Beaufort Securities will not be responsible to you for providing the protections afforded to its clients. 

Beaufort Securities may effect transactions in shares mentioned herein and may take proprietary trading positions in those shares, and may receive remuneration for the publication of its research and for other services. Beaufort Securities may be a shareholder in any of the companies mentioned in this report. Accordingly, this document may not be considered as objective or impartial. Additionally, information may be available to Beaufort Securities or the Group, which is not reflected in this material. The remuneration of the author of this report is not tied to the recommendations on any shares mentioned nor to the any transactions undertaken by Beaufort Securities or any affiliate company. Further information on Beaufort Securities' policy regarding potential conflicts of interest in the context of investment research and Beaufort Securities' policy on disclosure and conflicts in general are available on request. Please refer to http://www.beaufortsecurities.com/important-info. 

Past performance is not a guarantee of future performance. Investments may go down in value as well as up and you may not get back the full amount invested. The listing requirements for securities listed on AIM or the ICAP Securities & Derivatives Exchange are less demanding and trading in them may be less liquid than main markets. This may make it more difficult to buy and sell these securities. 

 

This document includes certain statements, estimates, and projections with respect to the anticipated future performance of securities listed on stock exchanges and as to the market for these shares. Such statements, estimates, and projections are based on information that we consider reliable and may reflect various assumptions made concerning anticipated economic developments, which have not been independently verified and may or may not prove correct. No representation or warranty is made as to the accuracy of such statements, estimates, and projections or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and may change without notice. Other third parties may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them. This report has not been disclosed to any of the companies mentioned herein prior to its publication. 

This document is based on information Beaufort Securities has received from publicly available reports and industry sources. Beaufort Securities may not have verified all of this information with third parties. Neither Beaufort Securities nor its advisors, directors or employees can guarantee the accuracy, reasonableness or completeness of the information received from any sources consulted for this publication, and neither Beaufort Securities nor its advisors, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document (except in respect of wilful default and to the extent that any such liability cannot be excluded by the applicable law). You should not rely on this document and should not use it substitution for the exercise of the independent judgment of yourself or your adviser. 

The information contained in this document is confidential and is solely for use of those persons to whom it is addressed and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose. Other persons who receive this document should not rely on it. Beaufort Securities, its directors, officers and employees may have positions in the securities mentioned herein.

 

© Proactive Investors 2017

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use