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Beaufort Securities Breakfast Alert Falkland Oil and Gas, Savannah Resources, Fox Marble, Motive Television and others

Last updated: 08:43 13 Apr 2015 BST, First published: 07:43 13 Apr 2015 BST

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The Markets

Market opening: Markets are lkely to open flat today. FTSE 100 futures were trading unchanged at 7:00 am.

New York: Wall Street ended in the green, led by rebound in energy prices. Moreover, a better-than-expected jobless claims report aided the rally. The S&P 500 advanced 0.5% in yesterday’s trading session.

Asia: Markets are trading mixed even as consumer inflation in China remained at 1.4% y-o-y in March, exceeding market expectations. The Nikkei 225 pulled back after breaching the 20,000 mark to close 0.2% lower, while the Hang Seng was trading 0.1% up at 7:00 am.

Continental Europe: Equities closed higher amid a recovery in Germany’s exports and improved industrial output in the country. Meanwhile, Greece repaid €450m to the IMF as part of its bailout agreement. France’s CAC 40 and Germany’s DAX rose 1.4% and 1.1%, respectively.

Crude Oil: Yesterday, Brent and WTI crude oil prices increased 1.8% and 0.7%, respectively. The spread between the two varieties stood at US$5.8 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.94% higher yesterday at 732.36. To read our latest research click here.

Today’s news

UK trade deficit widens in February

The Office for National Statistics (ONS) revealed the UK’s trade deficit for goods and services widened to £2.86bn in February, a seven-month high, from £1.54bn in January. Moreover, export of goods declined to £23.16bn, the lowest since September 2010.

UK house prices rise in March 

According to a survey conducted by the mortgage lender Halifax, house prices in the UK increased 0.4% m-o-m in March. However, the price rise slowed to 8.1% y-o-y in March compared with a gain of 8.3% y-o-y in February.

Company News

Motive Television (LON:MTV) – Speculative Buy

Yesterday, Motive Television announced the launch of TabletTV (TTV) Europe following an approval by the Apple App store. The new App allows UK travellers to view locally broadcast channels in Europe on their tablets wherever digital terrestrial television uses the DVB-T broadcast standard in MPEG2 format. The app is freely downloadable for the UK TTV users to their iPads, thereby enabling them to take their TTV along on trips without any additional cost. Moreover the company’s future plans include providing the local language versions of TabletTV in European countries.

Our view: Motive Television has been making great strides in improving its technology and finding new and innovative ways of popularizing its content among the end users. TTV Europe entails features such as recording and playback, home network, and social networking when connected to a home network. Firstly, the company came up with the novel idea of providing the video on demand movies and live TV programmes to the travellers on ships, ferries and yachts without the need for an internet access. And now, the company went a step ahead and launched an app based TV viewing to its customers. Given the manner in which Motive Television is trying to capture newer markets, we expect the company to witness substantial growth in the near term and add significant value to its shareholders. Thus eyeing the potential of the company’s new maritime platform (Bring your own device) BYOD technology and the TabletTV Europe app, we reiterate a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Motive Television Plc

Fox Marble (LON:FOX) – Speculative Buy

Fox Marble, the AIM-quoted group focused on marble quarrying and finishing in Kosovo and the Balkans region, yesterday announced it had received orders from the prestige home division of Berkeley Homes Plc, for two different types of marble (white and grey). This will be supplied to its Chelsea Creek development throughout the rest of 2015. This order has a total value of €570,000 of cut and polished slabs and is in addition to the previous orders for 900sqm of polished slabs of the Company’s grey Argento Grigio marble, which was announced in January 2015 and has already been delivered to site. Fox also reported initial small scale orders for its red, Rosso Cait, marble have been received and fulfilled for customers in Egypt. The Company’s order book now stands in excess of €2.8 million of which €2 million is expected to be realised during 2015. The Group’s factory building is now nearing completion, requiring a further 10 or so days of uninterrupted work in Pristina, whereafter time equipment will start to be shipped from Italy for installation in the building.

Our view: Marble is not a mineral that can be commoditised and multi-graded like oil or gold. Although its global market is valued at around US$15bn annually, the fact is that sales are driven more by desirability and availability than need or utility, which means that it remains something of a ‘cottage industry’ (as is often the case with luxury or bespoke value-added goods). The fact that Berkeley Homes has now extended its order is clear testament of the both the premium quality and volume consistency that Fox’s quarries are able to provide. Marble buyers, of course, operate in a conservative manner, understanding that above all their reputation for delivery on time, on price and in the quantities promised is all. As a wholesale provider, this is what has restrained the Group over the past couple of years. But with its factory finally nearing completion while commencing a quite dramatic ramp-up of production in tandem with rising buyers confidence, sales targets envisaged in Beaufort research of the past year now look set to be met or exceeded. Fox Marble effectively has an infinite on-surface resource across a wide range of rare and unblemished marbles. It is presently cash rich, while capital costs have already been committed with little further expenditure anticipated going forward. Labour and transportation costs are low, yet global demand continues to increase while pricing remains firm and rising. Against this, Group operations looks set to become exceptionally cash generative very quickly, with management committed to distribute any the surplus in the form of dividends. The first result of this could even be seen this financial year. The reality is that the value of Fox’s licences, which place an in-situ value of €16.5bn on just four of its eight quarries, dramatically exceed the Group’s market value. When it has demonstrated its ability to routinely turn production into significant profit, the market should start to recognise this fact and power a re-rating of the shares. We maintain a Speculative Buy on the stock.

Amur Minerals (LON:AMC) – Hold

Amur Minerals Corporation announced that the Kubuk maiden resource estimate has been re-evaluated and subsequently upgraded. The newly defined 3.5 million tonnes of Indicated resource represents 17% of the total Kubuk resource estimate and contains 23,400 tonnes of nickel (0.68%) and 6,100 tonnes of copper (0.18%). The maiden Kubuk resource estimate conducted by SRK Consulting in December 2013 contained 20.6 million tonnes of ore averaging 118,900 tonnes of Nickel (0.58%) and 32,900 tonnes of copper (0.16%). Henceforth, the Inferred resource following the upgrade has been reduced to 17.1 million tonnes of ore comprising 95,500 tonnes of Nickel (0.56%) and 28,600 tonnes of copper (0.16%) copper.

Our view: Following the recent update at Kubuk prospect, Amur would be required to carry out much lower in-fill drilling (nearly 50% less) of the Kubuk open pit than initially anticipated. The conversion of Inferred to Indicated resource represents nearly 20% of the contained nickel at the prospect and over 50% of the ore tonnage outlined at the Conceptual Pit Study stage. The prospect overall looks promising and has the potential to generate substantial return for its shareholders. However, the company’s production license is awaiting the final nod from the Russian government for quite some time, despite the submission of all the requisite documents. In addition, the share price of the company recently witnessed a dramatic rise in anticipation of the production commencement. Thus, in view of this added uncertainty we retain a Hold rating on the stock for now.

Savannah Resources (LON:SAV) Speculative Buy

Yesterday, Savannah Resources reported that Mr Remy Welschinger has increased his overall stake in the company to 11,425,597 shares, representing 5.04% of the company’s issued share capital. Following the transaction, Mr Welschinger’s direct and indirect voting rights in the company in stood at 3.13% and 1.9%, respectively.

Our view: Savannah Resources had a great start to the year 2015 with new areas of gold as well as copper identified at Block 4 in Oman, when the ten-hole diamond drilling programme was just midway in March. Moreover, the company has also commenced the VTEM (Versatile Time Domain Electromagnetic) survey at the prospect as this has historically discovered new copper mineralisation in the nearby blocks. Meanwhile, the drilling results at the Jangamo prospect in Mozambique have encountered several high grade HMS mineralization zones. The company is favourably placed as both the projects are well supported by good infrastructure comprising access to grid power, proximity to highways and ports. Thus, given the promising results to date and the encouraging support from the governments of these countries, we reiterate a Speculative Buy on the stock.

Falkland Oil & Gas (LON:FOGL) – Speculative Buy

Falkland Oil and Gas Limited announced that the 14/20-1 Isobel Deep exploration well was spudded, by the operator Premier Oil on 8th April 2015. The well is the primary target of the Isobel prospect and is located on licence PL004a, where FOGL has a 40% working interest. At the well, the F3 fan systems in the south east of the basin comprising a sequence of stacked reservoirs would be tested. The Isobel/Elaine complex is projected to contain mid case un-risked gross prospective resources of 243 million barrels of oil (mmbbls). The drilling is expected to last around 30 days while no coring or testing is planned for this well. As per the various carry arrangements, FOGL is carried through the costs of this well by Premier Oil and Rockhopper Exploration.

Our view: The test drilling at the Isobel is an important step forward at the prospect as it would unlock its true potential. Despite the gloom surrounding the oil industry, the company has decided to strategically invest the low period in building its asset profile and carrying on with the exploratory work. The Isobel Deep lies in the untested area approximately 40km to the south of Sea Lion and has the potential to discover one of the best wells in the rig’s North Falklands Basin. The seismic surveys of the prospect resemble the scale of the nearby Sea Lion prospect that is expected to contain reserves of around 300 mmbbls. A success at this fan may verify the geological model for the rest of the fans. Meanwhile, FOGL expects to participate in the drilling campaign of at least five well in 2015 and is either partially or fully carried on four out of five wells. Thus the spudding of a second well in quick succession to the Zebedee oil and gas discovery, drives us to retain our Speculative Buy rating on the stock.

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