Today's edition features:
• Bushveld Minerals (LON:BMN)
• Fox Marble Holdings (LON:FOX)
• Jubilee Platinum (LON:JLP)
• KEFI Minerals (LON:KEFI)
• Hastings Group Holdings (LON:HSTG)
The FTSE-100 finished yesterday's session 0.59% lower at 7,498.06 whilst the FTSE AIM All-Share index was down 0.49% at 1,003.45. In continental Europe, the CAC-40 finished 1.40% lower at 5,145.70 whilst the DAX finished down 1.12% at 12,154.00.
In New York last night, the Dow Jones ended 0.17% lower at 22,048.7, the S&P-500 closed 0.04% lower at 2,474.02 and the Nasdaq was down by 0.28% at 6,352.33.
In Asian markets this morning, the Nikkei 225 was 0.19% lower at 19,700.74 and the Hang Seng was down 1.59% at 27,315.13..
In early trade today, WTI crude was down 0.08% at $49.52 per barrel and Brent crude was 0.04% lower at $52.68 per barrel..
North Korea Guam missile strike plan 'ready by mid-August'
North Korea says its plan to fire four missiles near the US territory of Guam will soon be ready, as a war of words with Washington intensifies. State media said Hwasong-12 rockets would pass over Japan and land in the sea about 30km (17 miles) from Guam, if the plan was approved by Kim Jong-un. It denounced Donald Trump's warnings of "fire and fury" and said the US leader was "bereft of reason". The US has warned the North its actions could mean the "end of its regime". US Defence Secretary Jim Mattis said Pyongyang would be "grossly overmatched" in any war against the US and its allies. The BBC's Rupert Wingfield-Hayes, who is in Guam, says there is a sense that the North Korean threat is rhetorical, as most people feel that if they really did strike with missiles it would be suicidal for the North Korean regime.
Source: BBC News
Bushveld Minerals (LON:BMN, 9.88p) – Speculative Buy
Bushveld Minerals, the diversified mineral development company with a portfolio of vanadium, titanium, iron ore, tin and coal in southern Africa, announced yesterday an update from its Vametco vanadium operations. Bushveld Vametco, which is 45% and 55% owned by Bushveld and Yellow Dragon respectively, holds a 78.8% interest in Strategic Minerals Corporation (SMC) which is the holding company of Vametco. Operational and financial highlights for the first half of 2017 include: production of 1,441 metric tons of vanadium (MTV) with revenues of ZAR439.1m (US$33.2m) and production costs of US$15.58/kg V resulting in EBITDA of ZAR85.5m (US$6.5m). Currently the Vametco plant has a capacity of 3,000MTV per annum and Bushveld expects to increase this to 5,000MTV over the next three years. Bushveld's share of the above financials is c 35%.
Our View: The above announcement is an important milestone for Bushveld reporting its first operational update from Vametco having recently completed the acquisition with Yellow Dragon. We are encouraged with H1 2017 production rates and relatively low production costs. We note that the vanadium market has improved significantly since Bushveld acquired its share of Vametco with prices currently over US$45/kg V. Assuming prices and production costs remain at current levels Bushveld and its partners should be able to generate high margins. We look forward to further updates from the Vametco mine and plant as Bushveld focuses on its expansion initiatives. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Bushveld Minerals plc
Fox Marble Holdings (LON:FOX, 8.00p) – Speculative Buy
The AIM listed company focused on marble quarrying and finishing in Kosovo and the Balkans region this morning announced it has signed a Memorandum of Understanding with Pristine Stone ('Pristine Stone'), a natural stone importer and distributor in the USA, in order to establish a new distribution outlet for Fox Marble products in the country. Under the three-year agreement, Fox Marble will take a 5% share in Pristine Stone for nil consideration. Pristine Stone will act as a marketing, sales and distribution agent for the marble material produced by the Company from its quarries in Kosovo and Macedonia. The marble supplied to Pristine Stone will be cut and polished into slabs and tiles at Fox Marble's own facility in Lipjan, Kosovo, before being shipped to the United States. In consideration, and subject to achieving minimum sales volumes of US$1.5 million over the three years as determined by the Company, (i) Pristine Stone will be granted priority rights to sell Fox Marble material in the United States and, (ii) Pristine Stone will be granted 750,000 warrants issued in equal instalments over three years at a 2p over market price on the day of issue. Pristine Stone's management has over twenty years' experience in the stone industry including sales, fabrication, and installation. Pristine Stone will serve as a primary distributor for Fox Marble as the company looks to grow its presence in the United States with a team that has the ability to sell into the world's largest end market for slabs. Pristine's founding principals, Frank Kaloshi and Tim Seymour, have built a company that leverages the combined expertise of Mr. Kaloshi in the high-end marble market, and Mr. Seymour as a well-known financial market participant, and long-time successful investor in Eastern European companies focused in the materials sector. Chris Gilbert, Chief Executive of Fox Marble, said: "This agreement builds on our strategy of increasing our global footprint as we continue to develop further as a fully integrated production, processing and distribution company of pre-eminent quality marble. As such we look forward to working with Pristine Stone which, through our incentivized distribution agreement is structured to help deliver maximum sales penetration of our marble product into the American market."
Our View: Fox shares took a further beating following the revenue warning that resulted from Pisani's appointment of Administrators and Beaufort's downgrade to Hold (from Speculative Buy) early in July. Indeed, the shares have all but halved from the peak achieved about six months ago. So the question now has to be: Have the shares now fallen too far? It does look that way! Beaufort has long held the opinion that Fox's exceptional high grade, multiple type/colour dimensional stone (found on surface while remaining open at depth) effectively provides it with infinite resource to supply to a growing US$10bn+ global market. Positioning itself as a low-cost, high-quality wholesale supplier of choice with elementary open pit workings, low cost labour and excellent infrastructure against a backdrop of Kosovo's prospective EU accession, Fox Marble dispels most of the fears normally associated with such early stage producers. If there has been a problem, however, it is that access this giant, but overwhelmingly fragmented market, depends on reputation, foremost with international distributors, who remain the key 'door openers'. Achieve that, become a default supplier of choice for, say, half an acre of flawless Sivic White for a new corporate headquarters in Dubai, then Fox Marble's quarries could become very profitable indeed. It certainly is not there yet, but it is making progress. Today's announcement is an important step in this right direction. Right now, various new orders plus agreements signed with buyers from India, Turkey, etc. suggest revenues of between €3m and €4m are already 'in the bag' for the current year. Repeat orders along with the new arrangement with Pristine Stone should ensure the starting point for 2018E is something over €6m. Given that the new factory is now complete, gross margins are set to make a step improvement, while operational expenses will also start to reduce. While the 2017E should be expected to remain in net losses, with a high level of costs fixed there is finally reasonable confidence that next year will actually produce some (albeit modest) positive earnings. Hurrah!! The recent issue of an 8% CLN will remind investors that Fox has a relatively weak balance sheet and could, potentially resort to further equity issuance to plug the gap but, nevertheless, there are signs that the Group's extended run of bad luck and disappointing news might finally have run its course. Beaufort is willing to give Fox Marble the benefit of the doubt once more, moving its recommendation from 'Hold' back to 'Speculative Buy', with a price target of 12p/share.
Beaufort Securities acts as corporate broker to Fox Marble Holdings PLC
Jubilee Platinum (LON:JLP, 4.05p) – Speculative Buy
Jubilee announced yesterday that it has secured a US$50m project funding agreement in support of its metals recovery business. Project funding will be provided by Riverfort Capital and structured at the project level to minimise dilution to existing shareholders. Riverfort had previously provided funding to Jubilee for its chrome and platinum recovery at Hernic. The funding commitment is for an initial 33 month period (with flexibility for mutual extension) and will allow Jubilee to target multiple surface based metal recovery projects. In recognition of the funding commitment, Riverfort has been granted the right to exercise a 2.5% maximum preference equity stake in the subsidiary Jubilee Processing.
Our View: The above announcement is positive news as it will enable Jubilee to pursue its growth strategy for its metals recovery business. The funding combined with Jubilee's expertise in the metals extraction technology should enable the Company to unlock potential value from surface material projects without the risks normally associated with mining companies. We look forward to further announcements regarding the potential recovery projects in the near term. In the meantime, we retain our speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Jubilee Platinum PLC
KEFI Minerals (LON:KEFI, 5.15p) – Speculative Buy
KEFI Minerals, the gold exploration and development company with projects in the Kingdom of Saudi Arabia and the Federal Democratic Republic of Ethiopia announced today that its residual funding requirement for the Tulu Kapi gold project has been further reduced. This follows from the recently signed financing agreement (17 July 2017) with infrastructure specialist Oryx. The residual amount has now been reduced from US$32m to US$24m based on refinements to planned capital expenditure and contingency provisions. KEFI is now focusing on sourcing part of this residual requirement from a separate finance facility against ore stockpiles. These are estimated to include US$15m of contained gold during start-up of production. KEFI's preference to retain majority ownership and control of the project.
Our View: KEFI continues to drastically reduce the capital requirement for the development of Tulu Kapi while maintaining ownership and minimising dilution to existing shareholders. The above announcement continues this theme. We look forward further updates as the targeted date for financial close approaches in Q4 2017. In the meantime, we maintain our Speculative BUY recommendation.
Beaufort Securities acts as corporate broker to KEFI Minerals plc
Hastings Group Holdings (LON:HSTG, 320.00p) – Buy
Hastings, a general insurance provider, yesterday announced its interim results for the 6 months ended 30 June 2017 ('H1 FY2017'). During the period, gross written premiums advanced by +28% to £462m, net revenue climbed +22% to £345.2m and adjusted operating profit rose +22% to £86.5m, against comparative period (H1 FY2016). Profit after tax increased by +36% to £57.9m, leading basic and diluted earnings per share of 8.8p (H1 FY2016: 6.5p). Free cash flow generated improved by +34% to £65.8m, while net debt leverage multiple reduced to 1.7x (end-FY2016: 1.9x). Calendar year loss ratio was 73.4%, while solvency II coverage ratio stood at 173% (end-FY2016: 140%). On the operational front, the Group's live customer policies increased by +15% to 2.54 million and its market share of UK private car insurance rose to +7.0% (H1 FY2016: 6.2%). The Group has made continued investment in the business during the period, includes Guidewire, the next generation claims and broking platform, which the management said will enable future growth opportunities and operational efficiencies. Hastings' CEO, Gary Hoffman, commented "I am delighted that Hastings continues on its profitable growth trajectory. Supported by our 2,900 colleagues, we are well on course to deliver on our ambitious 2019 targets and continue our strong momentum into the second half". The Group declared an interim dividend of 4.1p per share, up +24%, to be paid on 10 November 2017 (ex-Dividend: 5 October 2017). The Group is scheduled to announce its third quarter trading update on 27 October 2017.
Our View: Hastings continues to deliver an impressive performance. The result for the half year were strong with +15% growth in live customer policies, driven by high retention as well as new customers. Hasting differentiates itself through its agile, digital and data-driven business model, whose approach focusses on price comparison websites ('PCW') to providing customer with the best suited and most attractive offerings. The net result is found in continued market share gains. Looking ahead, the Board confirmed that it is "on track" to continue its profitable growth and deliver against its FY2019 targets. Such targets includes; 1) calendar year loss ratio of 75-79%, 2) dividend payout ratio of 50-60% of adjusted profit after tax, 3) reach customer numbers of 3.0 million during FY2019 but not at the expense of profitability, and 4) net debt leverage multiple of 1.0x during FY2019. For the FY2017, the Group already achieved its customer count target of 2.5 million. With our slightly upgraded FY2017 forecast of revenue £715m, pre-tax profit £167m (from £156m) and EPS of 20.5p (from 19.4p), the Shares are presently valued at FY2017E and FY2018E P/E multiples of 15.6x and 13.2x along with dividend yields of 3.7% and 4.3%, respectively. Hastings remains a high visibility investment that fits well for investors seeking both capital appreciation and income. The Shares have performed extremely well rising +61% over the last 12 months, yet the growth momentum remains set to continue. Beaufort repeats its Buy recommendation on the shares.