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Beaufort Securities Breakfast Alert Kibo Mining, Advanced Oncotherapy, Audioboom, Horizon Discovery Group and others

Last updated: 09:07 21 Apr 2015 BST, First published: 08:07 21 Apr 2015 BST

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The Markets

Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 22.40 points higher at 7:00 am.

New York: Wall Street rebounded, after a sharp decline on Friday, amid better-than-expected corporate earnings and China’s central bank stimulus to boost the country’s economy. The S&P 500 closed 0.9% up in yesterday’s trading session.

Asia: Markets joined the global rally to trade higher today following the surprise move by China’s central bank. The Nikkei 225 ended 1.4% higher on strong corporate earnings and a weaker yen, while the Hang Seng was trading 1.8% up at 7:00 am.

Continental Europe: Equities rose sharply as investors disregarded Greek concerns to focus on the unexpected cut in the reserve requirement ratio by China’s central bank. Germany’s DAX and France’s CAC 40 advanced 1.7% and 0.9%, respectively.

Crude Oil: Yesterday, prices of WTI crude oil increased 1.1% whereas that of Brent Crude Oil remained unchanged. The spread between the two varieties stood at US$7.1 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.08% lower yesterday at 749.05. 

Today’s news

IMF official expects positive development between Greece and its creditors

Poul Thomsen, Director of the IMF’s European Department and head of its programme with Greece, informed positive developments have taken place in the negotiations between Greece’s government and its creditors in the past few days. The Greek government’s finances are likely to last until June, he further added.

Miton UK MicroCap Trust Share Offer – Now Open!

Miton UK MicroCap Trust has announced its intention to proceed with an IPO on the London Stock Exchange and Beaufort have been appointed as an intermediary for private investors. The Share Offer is now open, but is currently scheduled to close at 5:00pm, Friday 24th April 2015 so you need to act fast to make your subscription. Click here for more information.

Bristol Beaufort Investor Evening – 13th May 2015 

We are delighted to invite yout to join us at our first Britsol Investor Evening of the year, co-hosted with Hardman & Co. Click here to book your FREE place now. The event will take place on WEDNESDAY, 13th MAY 2015 at the Bristol Marriott Royal Hotel, College Green, Bristol and will feature presentations from the following listed companies…

- Primary Health Properties (LON:PHP)

– United Cacao (LON:CHOC)

– Strat Aero (LON:AERO)

– PLUS one further to be confirmed

Click here for more information and to register your place for FREE now!

Company News

Advanced Oncotherapy (LON:AVO) – Speculative Buy

In an announcement on Monday, the Board of Advanced Oncotherapy noted the sharp rise in the Group’s share price during last week. It confirmed that it is not aware of any fundamental reasons for this movement and that there had not been any change in its activities since its last update on 2nd April 2015. The Board noted, however, that it is currently considering an equity issue to complete its first proton therapy LIGHT machine which is due to be fully assembled and tested by the end of 2016 and to accelerate the development of further machines in its pipeline.

Our view: Given such a dramatic escalation in the share price over the past few days, any suggestion of a new equity raise, be it either through a rights issue to all shareholders or through a discounted private placing, is bound to temporarily knock the share price as shorter-term investors lock in profits. That said, this news probably creates the best opportunity for shareholders to take advantage of high trading liquidity in order to enlarge their longer-term holdings at, what has become, something of a bargain price. The simple fact that AVO is now considering financing the entire LIGHT prototype installation at its Harley Street site is a clear sign of the confidence management has in its ability to deliver this ground-breaking new technology. A fund raise, being in the range of an estimated £15m to £20m to ensure the project is financed through to completion, would also open the opportunity for larger institutional buyers who have been seeking ways to significantly enter the capital. This is important, given that they will prospectively become AVO’s principle sponsors as the Group moves toward capturing its potentially enormous global opportunity. This opportunity has already been significantly detailed in Beaufort initiation research of September 2014; the note declared that if AVO delivers exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation proton therapy devices all but obsolete. Its principal limitation would then become simply its capacity to deliver to a global opportunity that will grow dramatically beyond its current US$2.5bn, size as it will also becomes the natural replacement for the more antiquated X-ray radiation machines that are installed in huge numbers around the globe. Given such an outcome, of course, major international competitors wishing to remain in the game will almost certainly be willing to pay a handsome price, one way or another, to get their hands on AVO’s proprietary technologies. Advanced Oncotherapy plc remains one of Beaufort’s key investment picks for 2015. We maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Advanced Oncotheraphy plc

Kibo Mining (LON:KIBO) – Speculative Buy

Yesterday, Kibo Mining announced that it has signed a Joint Development Agreement (JDA) in respect of the Rukwa Coal to Power Project (RCPP). The Joint Development Agreement signed with development partner, confirmed as SEPCO III of QingDao, China, one of the world’s largest and technically most experienced Engineering, Procurement and Construction organisations. SEPCO III is to contribute up to US$3m towards completing the remaining Definitive Feasibility Study (DFS) work by October 2015. Upon successful completion of the Definitive Feasibility Study, (and assuming the project is deemed feasible) the RCPP will be transferred into a Special Purpose Vehicle in which Kibo Mining will hold a minimum equity position of 85%, protecting and retaining maximum shareholder value in the RCPP as it develops. Under the agreement, Kibo is also able to further release value in the SPV by part disposal of its interest. This will generate cash which may be used to fund any ongoing RCPP cost contribution, allowing the project to be operationally self-financing for Kibo. Financial Close for RCPP is expected by December 2015, with construction mobilisation commencing during Q1 2016. Construction work expected to commence in Q2 2016, with completion and first power delivered into the grid, expected by Q1 2019. The JDA is subject to finalisation of Due Diligence, including a site visit which is scheduled for week commencing 20th April 2015. Subject to the two companies’ required internal approvals and any required governmental approvals, SEPCO III will invest in equity with respect to the RCPP to a maximum of 17% of total equity in the SPV, which will ultimately hold the RCPP asset as detailed below. This investment will take the form of a contribution toward the completion of the DFS and all related activities leading in effect to the point of financial close. It is anticipated that financing for the RCPP will be available at a 70% debt to 30% equity gearing ratio. The specific providers of both debt and equity capital will be identified during the course of 2015 but only confirmed during financial close in December 2015. Standard Bank, financial advisors for the RCPP, will play an integral role in the financing discussions and process.

Our view: Without doubt the JDA is good news indeed, and is the fulfilment of much due diligence and patience on behalf of the management of both partners and Kibo’s shareholders. It is noteworthy that Sepco III is contributing funding to complete the remaining RCPP feasibility study work and it demonstrates a belief in the commercial viability of the RCPP. As a consequence the RCPP will generate optimal returns for Kibo from any value created going forward. This is the very reason why the company held out for so long before it signed a Joint Development Agreement, since they had to make sure that a Joint Development Agreement on the RCPP rewards shareholders appropriately for current value, but most importantly secures shareholders’ position for maximum returns on the RCPP’s future value. The announcement of the JDA brings forward the development of the Rukwa Coal to Power Project and look forward to the development phase in 2016. We reiterate or Speculative Buy on Kibo.

Beaufort Securities acts as corporate broker to Kibo Mining plc

Audioboom (LON:BOOM) – Speculative Buy

Yesterday, Audioboom provided an update on its key performance indicators (KPI) for the month of March. The company added 150 active content partners taking its total tally to 2400 by the end of the month, including prominent partners such as BBC Radio 4’s Six O’Clock News, the All Blacks, the ATP Tour and the Wimbledon Tennis Championships. Besides the active content partners, the company has over 1600 content partners. The month also saw the addition of 200,000 new registered users along with over 244,000 mobile app installations. Separately, the number of unique visitors to the site and app stood at 22.8 million for March.

Our view: With the aforementioned KPI numbers, Audioboom has reported its best month till date with a substantial jump in customer visits to the website. The company’s registered user base stood at 3.6 million by the month end and more growth may be expected as the app’s popularity gathers momentum. Moreover, following the recent content-based partnerships with media houses across sports, news, business, and entertainment sectors, Audioboom seems to be on track to become a global social media platform. These partnerships would not only add the revenue through referral fees arrangement for the partner content but would also generate income through the advertisements embedded in the content. Recently, the company re-launched its Android app to replicate the success of the iOS platform app from the last year and also appointed Mr Nick Candy as a non-executive Director to the board. Thus, in view of the above developments and the company’s novel audio streaming platform, we reiterate our Speculative Buy rating on the stock.

Horizon Discovery (LON:HZD) – Speculative Buy

Yesterday, Horizon informed that it has signed a supply and commercialization agreement with Thermo Fisher Scientific. The agreement requires the latter to market and distribute Horizon’s X-MAN human haploid and diploid isogenic cell line collection, and also provide related services to the company’s worldwide customer base. The X-MAN cell line range aims to reduce the cost of developing personalised medicines for the complex genetic diseases by providing an extensive bank of genetically defined human cell lines. All these X-MAN cell lines have an ‘isogenic pairs’, where each modified cell has a matching control so that experimental results can be attributed to the specific genomic modification.

Our view: The supply and commercialization agreement not only underscores the acceptance and quality of Horizon’s haploid models but also provides a platform for the company to showcase its products at a global level. Thermo Fischer is an established player in providing most advanced technology products to researchers worldwide. Recently, the company reported remarkable progress towards becoming a fully integrated life sciences company with significant expansion in offerings, number of partners and customer base. The company has already achieved several milestones in providing innovative medicines and companion diagnostic tests for developing complex personalised medicines. Thus eyeing the expanding market of this type of treatment and the suitability of the company’s product for the same, we retain a Speculative Buy on the stock.

HSS Hire Group (LON:HSS) – Buy

Yesterday, HSS Hire Group announced the final results for year ended 27th December 2014 for Hampshire Topco Limited, its holding company prior to the listing on London Stock Exchange (LSE). Revenues climbed 25.5% to £284.6m, comprising an organic growth of 18.7% due to increased demand from both new and existing customers. The company also benefited from the acquisition of Apex Generators in March 2014. Operating profit was up 10.3% to £23.6m for the period. However, the pre-tax profit swung to losses of £8.5 m on financial expenses worth £30.9m. The company witnessed a strong rise in the hire fleet utilization and reported a return on asset of 26.6%. On the operational front, both the main divisions, Core and Specialist, saw robust volume growth and the company added 23 new local branches along with the development of larger key accounts. During the period, HSS Hire was successfully admitted to the LSE on 9th February 2015 and raised gross proceeds worth £103m. A progressive dividend policy is likely to be adopted with the first interim dividend in respect of the FY 2015. The company remains upbeat over the future prospects and remains on track to open 50 new local branches in FY 2015.

Our view: HSS Hire’s increased emphasis on reducing cyclical nature of their business to provide more stable revenues through maintain and operate segments, seems to have paid off well. On track to open more local branches to expand the business, the company is also seeking meaningful acquisitions for the same. A new equipment refurbishment facility would open in Q4 2015 that would improve the life of asset base and services to the customers. HSS Hire is the second largest tool hire provider in the UK and was listed on the LSE in February. The company has shown considerable capital discipline and enjoys a robust financial position. Though the company swung to losses following the issue of £200m senior secured notes in February, we expect the massive expansion plans to make up for the minor setback in the longer term. With focus on maintenance segment, the company’s broad range of services provides ample scope for growth potential. We reiterate our Buy rating on the stock.

Economic News

Eurozone construction output

Eurozone construction output fell 1.8% m-o-m in February following a growth of 1.6% in January, Eurostat reported yesterday. On a y-o-y basis, the construction output declined 3.7%, offsetting a 0.6% increase in January.

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