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Beaufort Securities Breakfast Alert: Hutchison China MediTech Limited, Jubilee Platinum PLC, Karelian Diamond Resources Plc

Beaufort Securities Breakfast Alert:  Hutchison China MediTech Limited, Jubilee Platinum PLC, Karelian Diamond Resources Plc

Today's edition features:

• Jubilee Platinum (LON:JLP)

• Karelian Diamond Resources (LON:KDR)

• Hutchison China MediTech (LON:HCM)

 

Markets

Europe

The FTSE-100 finished Friday's session 0.05% higher at 7,372.00 whilst the FTSE AIM All-Share index was up 0.08% at 983.93. In continental Europe, the CAC-40 finished 0.73% lower at 5,093.77 whilst the DAX finished down 0.37% at 12,118.25.

Wall Street

In New York on Friday, the Dow Jones closed 0.28% higher at 21,891.12, while the S&P 500 fell 0.07% to 2,470.3 and the Nasdaq eased 0.42% to 6,348.12.

Asia

In Asian markets this morning, the Nikkei 225 was 0.29% higher at 19,982.15 and the Hang Seng was up 0.73% at 27,524.07.

Oil

In early trade today, WTI crude was up 0.22% to $50.28 per barrel and Brent was 0.15% higher at $52.8 per barrel.

 

Headlines

Bank of England urged to share Brexit plan details

The Bank of England has been urged to share details of how prepared banks and insurance firms are for Brexit. Newly-appointed Treasury select committee chairwoman Nicky Morgan demanded the information, in one of her first moves since taking on the role. In a letter to the bank's Prudential Regulatory Authority, she asked for the key risks of a "no deal" scenario. Sam Woods, the head of the body, which regulates banks and insurers, has been asked to reply by 2 August. "The cliff edge facing businesses in April 2019 is a cause for concern, particularly in the financial services sector," Ms Morgan said, commenting on the letter. In April, the PRA asked all the firms it regulated for a summary of their contingency plans for the UK's exit from the EU. The firms had until 14 July to respond.

Source: BBC News

 

Company news

Jubilee Platinum (LON:JLP, 3.30p) – Speculative Buy

Jubilee has published its quarterly update which highlights increased chromite concentrate production at its Dilokong Chrome Mine (DCM) and stable PGM production at the Hernic project. Hernic achieved design throughput in June 2017 and has produced 1,697oz of PGM since April with 49% occurring in July. At Dilokong, Q2 2017 production was 17,659t of chrome concentrate, up 18% from Q1 2017. This generated Jubilee attributable earnings of ZAR 6.5m (£0.4m), down 5% versus Q1 2017. The increase in chromite production has essentially offset the drop in chrome prices.

Our View: It is good to see operations at Dilokong performing well and that Hernic has achieved design throughput to a fully operational status. Now that commissioning and ramp-up have been completed we look forward to steady state production and detailed financial results from Hernic. To offset the fall in chrome prices Jubilee has been able to increase production at DCM, we understand the Company is aiming for further increases in production during the second half of the year through treatment of third party ore. We retain our speculative Buy recommendation.

Beaufort Securities acts as a corporate broker to Jubilee Platinum PLC

 

Karelian Diamond Resources (LON:KDR, 0.50p) – Speculative Buy

Karelian Diamond Resources, the diamond exploration company focused on Finland, announced today results from a Preliminary Scoping Study (PEA) on its Lahtojoki diamond project. The 1.6ha Lahtojoki diamondiferous kimberlite pipe is located win the Kuopio – Kaavi district in south east Finland where the Company holds a mining concession. The PEA was completed by consultant Brennan Mining Services and is based on analysis of microdiamonds and mini-bulk sample data. Results suggest that +1mm recoverable grade of 39.7 carats per hundred tonnes (cpht) and the presence of high-quality stones from the diamonds recovered to date. Drilling indicates that 5.6Mt of kimberlite is present to a depth of 160m. A non-JORC compliant resource estimate of 2.2M carats using a US$100/c valuation and a 95% recovery gives a gross value of US$211m. Initial capital cost estimates of US$22m have been given for the proposed open pit operation. Based on the above parameters a NPV(8%) of US$39.1m has been estimated.

Our View: The above results are very preliminary in nature as the resource estimate is not JORC-compliant and much more work is required to learn the size frequency distribution as well as the diamond quality. That said, we note that the Lahtojoki kimberlite is diamondiferous based on a previous 1.8t drill sample that recovered 1,096 stones (of which 23% were macro diamonds) for a grade of 44cpht which therefore warrants additional exploration work. We look forward to more detailed analysis and the continued development at the

Beaufort Securities acts as a corporate broker to Karelian Diamond Resources Plc

 

Hutchison China MediTech (LON:HCM, 3,387.50p) – Buy

Hutchison China MediTech (‘Chi-Med’), the China-based healthcare group, yesterday announced its interim results for the 6 months ended 30 June 2017 (‘H1 FY2017’). During the period, Group revenue (excluding JVs) advanced by +21% to US$126.6m, comprised of; Commercial Platform (China pharmaceutical business), up +26% to US$103.9m, and Innovation Platform (R&D) revenue to US$22.7m, up +2%, against the comparative period (‘H1 FY2016’). Commercial Platform’s operating profit grew by +12% to US$27.8m due to improved profit margins in SHPL's coronary artery disease Prescription Drug business and a one-time Shanghai government subsidy, which partially offsets the loss of US$14.8m (H1 FY2016: loss US$13.8m) in Innovation Platform as a result of expansion of clinical development activities and investment in the expansion of small molecule manufacturing operations. Overall, the Group’s operating profit rose by 19% to US$6.3m, net income attributable to Chi-Med of US$1.7m (H1 FY2016: US$0.5m), leading to net income attributable to ordinary shareholders of US$0.03 (H1 FY2016: US$0.01). Available cash resources at the period-end stood at US$192.5m (end-FY2016: US$173.7m). On the operational front, Innovation Platform submitted its first ever China New Drug Application ("NDA") on fruquintinib and initiated first global Phase III registration study on savolitinib, while five other pivotal Phase III studies underway or completing with three more preparing to start. Commercial Platform’s high-performance drug marketing and distribution platform now covers c.300 cities/towns in China with over 3,300 sales people. Chi-Med’s Chairman, Simon To, commented “Chi-Med's consistent strategy over the past 16 years has generated considerable shareholder value, and we believe it is now poised to deliver substantially more”.

Our View: Chi-Med has reported further strong progress during the H1 FY2017. Its Commercial Platform contributed to the Group performance with +14% growth in net income to US$25.2m, continuing to fund its Innovation Platform. China’s giant pharmaceutical industry, which comprised a market value of US$196bn in 2015, is forecast to grow at a CAGR +15% between 2016 to 2020, having expanded +17% CAGR between 2011 to 2015, according to Frost & Sullivan. The Ch-Med’s Innovation Platforms achieved two particularly important milestones during the period 1) the formal NDA submission for fruquintinib in third-line CRC in China, and 2) the initiation of first global Phase III registration study of savolitinib in c-MET-driven metastatic PRCC. The Group is currently targeting to launch fruquintinib for colorectal cancer in 2018. Colorectal cancer is the second most common type of cancer in China, with approximately 380,000 new patients per year (CA Cancer Journal for Clinicians 2016), while there currently has no drugs available in third-line colorectal cancer in China. Globally, there was c.1.5 million new patients in 2015, which are estimated to increase to c.1.7 million patients per year by 2020, according to Frost & Sullivan. Upon NDA approval, the fruquintinib drug has potential to significantly enhance the patients’ quality of life, which should reflect to Chi-Med’s financials in coming years. Chi-Med currently estimates the potential deliverable peak sale of US$110-160m which as per the agreement with Eli Lilly and Company (‘Eli Lilly’), net income attributable to Chi-Med amount to US$20-35m. Looking ahead, the Group has reiterated its guidance for FY2017, with revenue in a range US$225-240m, administrative expenses, interest & tax at US$18-19m and net loss of US$13-28m. Net loss was forecasted for FY2017 as a result of increased adjusted R&D expenses (US$85-90m), and lower one-time property gains of US$3-16m (FY2016: US$40.4m). This guidance remains subject to licencing deals and other factors (e.g. Eli Lilly may decide to exercise its global rights on recently NDA submitted fruquintinib). The Group’s R&D pipeline remains deep currently, with 8 oncology drug candidates in 31 active clinical trials globally; right now, there are 4 pivotal Phase III trials now underway, while targeting initiation of a further 3 such advanced clinical studies during 2017. Chi-Med has a strong balance sheet with period-end cash resources of US$192.5m, having been boosted by proceeds from its NASDAQ listing last year. This suggests the Group has sufficient financial resources to fully fund its development needs “well into 2019” which , in turn, should enable it to secure better deals from prospective partnership negotiations that might be anticipated. In light of the Group’s positive progress, Beaufort reiterates its Buy recommendation on the shares.



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