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Beaufort Securities Breakfast Alert: Hummingbird Resources and Fox Marble Holdings

Beaufort Securities Breakfast Alert: Hummingbird Resources and Fox Marble Holdings

"No surprises there then. The Labour front bench crumbled into disarray following last night's overwhelming vote in support of Article 50, with 13 shadow ministers coming out against and two resigning less than an hour before the ballot while, on the other side of the Atlantic, the Fed held rates unchanged but offered no hints regarding the timing of its next move. This left the Dow industrials and Nasdaq Composite to cling onto meagre gains supplied by a rally in Apple shares a day after the iPhone maker reported strong earnings. Being the largest US company by market cap means Apple enjoys a heavy weighting in the major US indices, offsetting more broadly-based weakness outside the tech sector yesterday despite US factory activity in January reportedly accelerating to its fastest pace in more than two years. The index rose to 56.0 in January, its highest since peaking at 57.5 in November 2014, against a Wall Street Journal poll suggesting consensus expectation of 55.0. Raw material prices, however, were also up rising for the 11th straight month, compounding other evidence that higher inflation is now in the system, with the sub-index spiking sharply to 69 in January, up from 65.5 a month earlier. Such fears may well become the focus of Janet Yellen's scheduled testimony before Congress on 14th and 15th February from which investors will be looking for a clear signal before the FOMC's next meeting on 14th and 15th March. Early enthusiasm from Asia this morning quickly dissipated, leaving all the region's principal bourses to close in the negative; with the Shanghai Composite still closed for the Lunar New year, markets were led down by the Nikkei as funds continued to deserted the US$ in favour of safe-haven Yen, with the Hang Seng and ASX also tumbling into the red as the session drew on. The Bank of England today is also due to make its own interest rate decision, which is due at 12:00hrs GMT along with its Quarterly Inflation Report, although this will be preceded by PMI Construction figures for January while the EU releases its Producer Price index for December. Data due from the US this afternoon includes Initial Jobless Claims and Unit Labour Costs. Following last night's vote, Theresa May is scheduled to publish the Brexit White Paper today, which will face more debate before it can become law. UK corporates due to release earnings or trading updates include AstraZeneca (AZN.L), Compass Group (LON:CPG), Glencore (LON:GLEN), Royal Dutch Shell (RDSA.L) and Vodafone (LON:VOD). In a somewhat anticlimactic mood, London equities are expected to open quietly this morning edging slightly into the negative, with the FTSE-100 see down between 5 and 10 points in opening trade."
- Barry Gibb, Research Analyst

Markets

Europe
The FTSE-100 finished yesterday's session 0.12% higher at 7,107.65, whilst the FTSE AIM All-Share index closed 0.35% better-off at 886.65. In continental Europe, the CAC-40 finished up 0.96% at 4,794.58 whilst the DAX was 1.08% higher at 11,659.50.
Wall Street
In New York last night, the Dow Jones rose 0.14% to 19,890.94, the S&P-500 gained 0.03% to 2,279.55 and the Nasdaq rose 0.5% to finish on 5,642.65.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 1.35% to 18,889.66, while the Hang Seng lost 0.75% to stand at 23,143.3.
Oil
In early trade today, WTI crude was down 0.46% to $53.63/bbl and Brent was down 0.32% to $56.62/bbl.

Headlines
Facebook loses $500m Oculus virtual reality case
A US court has ordered Facebook and other defendants to pay $500m (£395m) after finding they unlawfully used a firm's virtual reality technology. The jury found Oculus, which Facebook bought in 2014, used computer code belonging to video game developer Zenimax to launch its own VR headset. Oculus said it was "disappointed" and would appeal against the ruling. The case threatened to overshadow Facebook's latest results, which showed it enjoyed a strong end to the year. Facebook's net profit more than doubled to $3.6bn in the fourth quarter. The social network was helped by 53% growth in advertising revenues, and said it was on course to hit two billion users in the first half of 2017.
Source: BBC News

Company news
Hummingbird Resources (LON:HUM, 24.00p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced today a shareholder agreement with the Government of Mali in respect of the Yanfolila project. The Government has confirmed that it is exercising its right to acquire an additional 10% of Société des Mines de Komana SA (SMK), the mining company incorporated in Mali and holding the mining permit for Yanfolila, which is 95% owned by Hummingbird. The Government will pay Hummingbird approximately US$11m for the additional 10% stake in the project, on top of its existing 10% free carry.

Our view: The signing of the shareholder agreement now confirms the terms of the Government of Mali's participation in the project as well as demonstrating the commitment and support in bring Yanfolila in production. We view the agreement as a stamp of approval by the Malian Government of the potential value accretion of Yanfolila over the long term. With the Government's support and commitment, Hummingbird can now focus on full-scale construction as it aims to bring Yanfolila into production by the end of 2017. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Hummingbird Resources plc

Fox Marble Holdings (LON:FOX, 8.25p) - Speculative Buy
The AIM listed company focused on marble quarrying and finishing in Kosova and the Balkans region, yesterday confirmed receipt of orders and specifications worth approximately €300,000 from leading property developments in the UK and Australia. This underscores the continued development of the Group's international customer base. Significant amongst these were Audley Square in Mayfair, London being developed by the Caudwell Collection which, once final plans for the property are complete Fox Marble expects to receive a formal purchase order; an exclusive residential property located in Point Piper, Sydney, Australia, for which materials were shipped in December 2016 and; a large residential mansion development in West London, have ordered marbles due for shipment in the next two months with the project due for completion in the spring of 2017.

Our view: Good but in reality, not good enough. Fox Marble mines effectively offer an infinite, high-grade resource in a low cost, EU-accession territory; it supplies a somewhat under-serviced US$10bn/year market which resembles a cottage industry offering multiple tiers of product value-added, that finds itself relatively insulated from the violent pricing swings that so often characterises commoditised minerals, like Oil or Iron Ore. With the new factory finally up and running, investors are now anxious to hear of progress being made with major distribution hubs in the US, Middle East and China, leading to long-term, high volume supply visibility. Certainly management announcing just €300,000 value of prospective demand is not enough to cut their mustard. Neither is their expectation that the 2017 realised order book remains broadly in line with what was announced in December. So something needs to change. Fox needs to fulfil its original promise of becoming a wholesale supplier of significant scale, which means the challenge is now to gain trust and credibility from a wide range global partners – whereby it becomes one of the default suppliers-of-choice should, for example, a San Francesco contractor receives an order for half an acre of pure white Sivec destined for a new Middle Eastern hotel. Having risen to this point, however, the rewards should become quite exceptional as low, largely fixed operating costs will see additional revenues trickle almost straight down to the bottom line. Management has already suggested this will be quickly returned to patient shareholders in the form of dividends. In the hope and expectation of the Board delivering a more confident message for its future with release of its finals in Q2'2017, Beaufort gives it the benefit of the doubt by retaining a Speculative Buy recommendation on Fox Marble's shares.



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