Proactive Investors - Run By Investors For Investors

Beaufort Securities Breakfast Today including Berkeley Group and Ophir Energy


The Markets

Market opening: Markets could open lower today. FTSE 100 futures were trading 103.5 points down at 7:00 am.

New York: Wall street ended lower on Ben Bernanke’s comments that the Fed may start tapering its stimulus programme towards the end of 2013 if the economic condition continues to improve. The S&P 500 fell 1.4%.

Asia: Markets are trading sharply lower, dragged down by Chinese manufacturing data, which fell to its lowest level in nine months in June. The US Fed announcing possibility of a stimulus cut later this year accelerated the downtrend. The Nikkei declined 1.8%, while Hang Seng was trading 2.6% lower at 7:00 am.

Continental Europe: Equities closed in the red, as anticipation of the Fed’s likely announcement of a stimulus cut by the year-end weighed on investor sentiment. Germany’s DAX and France’s CAC 40 fell 0.4% and 0.6%, respectively.

UK small caps: The FTSE AIM All-Share index closed 0.1% higher yesterday

Today’s news

China’s manufacturing activity declines to nine-month low

The preliminary estimate China’s manufacturing HSBC Purchasing Manager’s Index (PMI) dropped to a nine-month low of 48.3 in June, below the final reading of 49.2 in May. New orders and new export orders contracted at a quicker pace during the month.

IMF urges Spain to act urgently

In its review report, the IMF urged Spain and Europe to take immediate action to boost growth and jobs, stating that Spain’s unemployment level is ‘unacceptably high’ and the outlook remains tough. The international lender stressed on the need to move faster towards a full banking union, which would allow Spanish firms to compete for funds on their own merits. Meanwhile, Spain’s trade deficit fell 51.1% y-o-y to €1.64bn in April, the Commerce Ministry said yesterday.

Company News

Ophir Energy (LON:OPHR)

Yesterday, Ophir Energy announced the spudding of Starfish-1, its first well in Offshore Accra PSC, Ghana. The well will be drilled by Stena DrillMax drillship, the company informed. The well is located in water depths of 1,500 metres (m) and has a target depth of 3,850m. As per Ophir’s estimates, the Starfish prospect has a mean prospective resource of 292 million barrels of oil equivalent (mmboe) with a 20% probability of success. Drilling at the well would be completed in around 40 days. Ophir Energy holds a 20% equity stake in Offshore Accra PSC.

Our view: Ophir announcing the commencement of drilling operations in Ghana is positive news for the company, enabling it to further expand its geographical footprint. In recent months, Ophir has successfully completed evaluation and testing programs across its Tanzanian assets The completion of Drill Stem Test (DST) at the Mzia-2 prospect was a significant milestone for the company, increasing the estimated recoverable resources from the Mzia field to 4.5 trillion cubic feet (tcf). Furthermore, the Jodari flow test has shown excellent reservoir deliverability potential of the younger Tertiary reservoirs in Tanzania, with the mean recoverable resource estimate increasing by 700 billion cubic feet (bcf) to 4.1 tcf. Furthermore, the additional seismic programmes acquired over the last one year are expected to start reaping positive results with the identification of significant new plays and prospects which could materialise once drilling commences later this year. Considering Ophir’s strong position in deep water acreage in the African region and high drilling success rates, we maintain our Buy rating on the stock.

Berkeley Group Holdings (LON:BKG)

Yesterday, Berkeley Group Holdings announced its preliminary results for the year ended 30th April 2013. Revenues rose 31.8% to £1.4bn, boosted by the sale of 3,712 new homes (2012: 3,565) at a significantly higher average selling price of £354,000 (2012: £280,000). Operating profit was up 27.3% to £280m. Profit before tax was at £270.7m, up 26% compared to £214.8m during the last year. Lower net financing costs and decrease in the effective tax rate from 26.4% to 22.5% also contributed to the improved profitability. Profit after tax jumped 32.6% to £209.7m for the year. The company undertook investments to the tune of £314.6m, acquiring 3,021 residential plots. Basic EPS soared 32.2% to 160p, while Net Asset Value per share was up 20.2% to 1,009.1p. Berkeley has assets comprising 25,684 plots in the land bank, a small dip from 26,021 plots in the last year. The average selling price in the land bank also rose to £378,000 from £345,000 on 30th April 2012. The Board announced the payment of an interim dividend of 59p, payable in September 2013. Berkeley is on track to achieve its long-term strategic plan of returning £1.7bn to shareholders by meeting three milestone payments of £568m in 2015, and £567m in 2018 and 2021.

Our view: Berkeley delivered another resilient performance for the full year recording significant increase in revenues as well as profits. The strong profitability could be attributed to company constructing houses on land purchased at huge discounts during the economic downturn. The healthy housing momentum seen in London and South England, where Berkeley has a solid exposure, augurs well for the company. The ‘Help to Buy’ scheme has also imparted a strong impetus to housing sales and present market conditions, in terms of consumer demand and mortgage supply, has been encouraging. The siginificant reduction in net debt level reflects the company’s focus on operational improvement. The company is on a rapid expansion path, having committed £315m last year to acquire ten new sites and currently has 73 of its 87 sites now under construction. This in turn underpins Berkeley’s ability to boost future earnings. Taking into account these positive factors, we believe the stock has room for a further meaningful appreciation. Thus, we remain Buyers of the stock.

Economic News

US MBA mortgage applications

US Mortgage applications dipped 3.3% in the week ended 14th June, after rising 5% in the preceding week, the Mortgage Bankers Association said yesterday. The number of refinancing applications fell 3.4% for the week, while its share in the total mortgage activitiy remained unchanged at 69%. The seasonally adjusted index for loan requests was down 3%.

US FOMC rate decision

The US Federal Reserve Open Market Committee maintained the pace of its US$85bn monthly bond purchasing programme and held the benchmark interest rate at effectively zero. The Fed said it would wait for a more significant decline in unemployment before tapering its asset purchase programme. Late last year, the Fed policymakers had committed to maintaining its monetary policy support until unemployment falls below 6.5%. Fed officials do not expect to reach that mark until sometime in 2014 at the earliest.

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. 


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 

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 2015