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Beaufort Securities Breakfast Alert Kibo Mining, Advanced Oncotherapy, Foxtons and Easyjet

Beaufort Securities Breakfast Alert Kibo Mining, Advanced Oncotherapy, Foxtons and Easyjet

The Markets

Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 22.10 up at 7:00 am.

New York: Wall Street declined amid worse-than-expected corporate earnings and lower business equipment orders in the US. The S&P 500 fell 1.3%, primarily dragged down by technology and industrial sectors.

Asia: Markets are trading higher ahead of the outcome from the two-day FOMC review meeting due later today. Meanwhile, exporters in Japan were optimistic due to a weaker yen. The Nikkei advanced 0.2%, whereas the Hang Seng was trading 0.2% higher at 7:00 am.

Continental Europe: Equities ended sharply lower as several major corporate companies in the US missed earnings estimates due to a stronger dollar. Moreover, investor sentiment was impacted on a potential confrontation between Greece’s new government and its lenders. Germany’s DAX and France’s CAC 40 declined 1.6% and 1.1%, respectively.

Crude Oil: Yesterday, Brent and WTI crude oil prices increased 3.0% and 2.4%, respectively. The spread between the two varieties stood at US$3.4 per barrel.

UK small caps: The FTSE AIM All-Share index closed -0.78% lower yesterday at 689.01. To read our latest research click here.

Today’s breakfast menu:

- Beaufort Securities on Advanced Oncotherapy – Speculative Buy; Kibo Mining – Speculative Buy ; Foxton’s Group – Hold; Crest Nicholson – Buy; and Easyjet   - Buy

- UK GDP; US durable goods orders; US new home sales; and US consumer confidence index 

Today’s news

UK banks sanction fewer mortgages in December

The British Bankers’ Association revealed mortgages for house purchase in the UK fell to 35,667 in December compared with 36,657 in November. The December reading was the lowest since 2013.

Jobless total in France rises in December

France’s Labour Ministry stated the registered jobless individuals in France rose 8,100 in December to nearly 3.4 million. The jobless numbers increased 0.2% m-o-m and 5.7% y-o-y. Moreover, the amount of time individuals were jobless rose to an average of 539 days in December.

Company News

Advanced Oncotherapy (LON:AVO) – Speculative Buy

News that is extremely positive for both AVO shareholders and the international medical community!

Advanced Oncotherapy, the developer of next-generation proton therapy systems for treating cancer, this morning has announced that it has signed an agreement to lease a prestigious Harley Street location, which will become the UK’s first Proton Therapy Centre using the Company’s LIGHT System. The centre will become a hub where patient from London, the rest of the UK and others further afield can have their cancers effectively treated with a cutting-edge proton therapy system. Advanced Oncotherapy has signed an agreement with Howard de Walden Estates Limited granting a 50 year lease for the whole of 141 Harley Street and part of 143 Harley Street to the Company. The properties, which comprise of approximately 8,000 sq ft, will be converted for use as a Proton Therapy Centre, and will house the first LIGHT machine to be constructed and operated in the UK. The grant of the lease is subject to the relevant planning and other statutory consents being obtained for the redevelopment of the buildings. The total cost of the redevelopment will be borne by Howard de Walden Estates, and is estimated at between £6-7 million. Work will start in July 2015, with the property expected to be handed over to Advanced Oncotherapy by the end of 2016 when the first LIGHT System will be ready, enabling patients to start being treated in 2017. The Company also has an agreement with SUNY Upstate Medical University Hospital in Syracuse, Central New York State to build a US based proton therapy facility using the LIGHT facility. The facility in Harley Street will be constructed in parallel with the US installation, and the Company is in early discussions with private healthcare providers in the UK to operate this unique site.

Our view: Today’s announcement is extremely positive for both AVO shareholders and the international medical community. Following on from yesterday’s news that the manufacture of its first CCL (Coupled Cavity Linac) module has been successfully completed, it is now clear that AVO’s Board together with its long-list of high-brow scientists and academic advisors are now confident in their ability to demonstrate a working LIGHT prototype before end-2016. The project development is running comfortably ahead of the time milestones set just some 9 months back. While various parts of the control software, that will overseeing final accurate calibration of the linear accelerator and the side-coupled drift tube LINAC remain in testing, AVO appears set to deliver what will amount to a revolution, a truly market disruptive solution, to the world of proton beam therapy. The new Centre proposed for London will run in parallel with the Group’s ongoing collaboration with the Upstate Medical University in Syracuse, NY. Both are expected to become commercially available for cancer patients by Q1’2017. An installation in central London, however, brings numerous advantages, in that it will be located right in the middle of one of the world’s pre-eminent international medical venues, while perfectly demonstrating the highly compact nature of the LIGHT system (as opposed to being the size of a four-story football pitch) and the fact that it can operate safely in the absence of the major radiation hazard inherent to first generation systems. Being outside the USA, commercial operation in London would require the system to be awarded a CE Mark (with regard to relevant European health, safety and environmental protection legislation), as opposed gaining FDA Certification. Whilst both will most certainly be gained, the new Centre effectively provides insurance against any unexpected delays in gaining approval through the routinely onerous deliberations of the US Food and Drug Administration assessment process. AVO management also appear to have struck an excellent deal for shareholders. The cost of refurbishing the Harley Street location is being borne by landlord, Howard de Waldren Estates Limited and become available in time for the commercial activity to commence early in 2017. AVO Management are also in discussions with different UK healthcare providers with a view to their operating the unique site. Realistically, this could be with BMI or Spire Healthcare, from which the Group has already collected formal letters of intent in order to guarantee their early delivery of the final product. Investors might anticipate further news releases on this point in the relatively near term. In summary, the reality is 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. The Group’s principal limitation would then become simply its capacity to deliver to a global opportunity that will likely grow dramatically beyond its current US$2.5bn size. 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 is one of Beaufort’s key investment picks for 2015.

Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc

Kibo Mining (LON:KIBO) – Speculative Buy

Yesterday, Kibo Mining provided a geochemical update on its Haneti Nickel Project located at the Mihanza Hill prospect in central Tanzania. Presence of anomalies in the detailed soil and rock analysis, establish the presence of nickel sulphide potential at depth. The company plans to extract maximum information from the available geological, geochemical and geophysical data in order to start the next stage of exploration by drilling the priority targets. The assessment was carried out by Dr Nigel Brand Geoservices Pty Ltd of Perth Western Australia.

Our view: The confirmation of nickel sulphide potential at the Mihanza Hill prospect is an important development for Kibo Mining. The company plans to commence the exploration process following proper assessment of the prospect. Recently, the company signed a memorandum of understanding with the Metal Tiger to forge a joint venture partnership for uranium exploration in Tanzania. Moreover, possession of diversified assets ranging from thermal coal deposit at Rukwa to gold interests in Lake Victoria Goldfields and Morogoro projects, ensure sustained value creation for shareholders. The company also stands to benefit from internal asset development, joint ventures or asset disposals on attractive terms. Thus in view of the above, we maintain a Speculative buy on the stock.

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Foxtons Group (LON:FOXT) – Hold

Foxtons Group released a trading update for the year ending 31st December 2014. Revenues grew 3.4% for the year and the property sales commission increased 3.6% to £70m. Adjusted EBITDA is expected to be around £46m (2013: £49.6m) while the EBITDA margin is likely to be over 30%. In Q4 2014, revenues declined 12.1% y-o-y due to lower property sales commission (by 25.7%) compared to previous year. However, residential lettings saw a rise of 7.7%, which form nearly half of the company’s revenues. The company paid an interim and special dividend totalling £12.8m and plans to propose a final dividend totalling £14.5m for the year. Going forward, the company expects slower sales and plans to announce the audited final year results in March 2015.

Our view: Foxtons Group witnessed overall revenue growth for 2014; however, mixed results in the final quarter impacted the final numbers. Of late, the London luxury housing market somewhat softened due to property tax reforms and probable inclusion of the mansion tax. The taxes kept several potential buyers at bay due to the uncertainty ahead of the general elections in May this year. On the other hand, the long term perspective of the company and the London property market remains robust. The company enjoys a strong balance sheet with low debt and has also paid out dividends at regular intervals. In view of the above, we expect the company to report high margin profits once the market recovers. Thus we maintain a Hold on the stock for now.

Crest Nicholson (LON:CRST) – Buy

Yesterday, Crest Nicholson declared the annual results for the year ended 31st October 2014. Revenues increased 21% to £636.3m (2013: £525.7m) and the operating profit widened 32% to £128.1m (2013: £91.2m). Pre-tax profit stood at £116.7m, up 34% from £80.9m in 2013. Consequently, basic earnings per share also improved 34% to 39.3p. The company completed 2,530 homes (2013: 2,172) in the year with the open-market average selling prices (ASP) of £287,000, up 15%. On the operational front, the company added 3,730 plots to the short-term land pipeline, across 25 sites. Focus remained on the strategic land bank that fulfilled 44% of the short term land pipeline. Mid-January forward sales stood at £399.8m (2013: £329.5m), reflecting 41% bookings of the annual forecast. Subject to approval from shareholders, the company plans to declare a dividend of 10.2p per share. The company expects a revenue growth of 70-80% over 2013 by 2016.

Our view: Crest Nicholson reported strong set of numbers with expansion across all profit lines. The growth momentum is expected to continue for the rest of the year given the robust forward booking till date. New partnerships are being sought to streamline the supply chain while the strategic land bank is being continuously built to provide potentially attractive returns. Additionally, the above house sales figures were achieved in a shorter timeframe than initially estimated. Given the above, we feel that the company remains in a strong position to create long term wealth for the shareholders and therefore reiterate a Buy on the stock.

Easyjet (LON:EZJ) – Buy

Yesterday, Easyjet released its interim management statement for the quarter ended 31st December 2014. On a reported basis, revenues grew £34m to £931m whereas the revenue per seat improved 0.8% to £56.16. Seats flown and passengers carried increased by 2.9% and 4.1%, respectively. The load factor also rose 1% to 89.7%. The company continued to enhance operational efficiencies with the cost per seat declining 0.2% excluding fuel costs (decline of 2% including fuel) while increasing the flight frequency on busy routes. The first half bookings remain in line with the previous year. The company expects to report a pre-tax half yearly loss between £10m and £30m, compared to the £53m million loss reported last year.

Our view: Everything seems to be working in favour of Easyjet, as the economy airline expects a reduction in first half losses, driven by growth in capacity and business passengers. The airline currently operates 675 routes across 135 airports and is on track to improve frequency on busy routes with higher number of seats. Moreover, the falling fuel prices bode well for the company that may see a rise in customer numbers given the lower airfares. The company, however, may not benefit much from oil price fall as they have hedged these prices against price fluctuations. Furthermore, Easyjet is likely to experience the benefits of capacity expansion at the Gatwick airport in the next peak season. In light of the above developments and a better than anticipated outlook, we reiterate a Buy rating on the stock.

Economic News

UK GDP

UK GDP grew 0.5% q-o-q during Q4 2014, compared to 0.7% growth in Q3 2014 and the market expectations of 0.6%, the Office for National Statistics revealed yesterday. On an annual basis, GDP advanced 2.7% in the quarter, below the market forecasts of 2.8% growth. Meanwhile, the GDP growth for the full year stood at 2.6%.

US durable goods orders

As per the Commerce Department, US durable goods orders declined 3.4% m-o-m in December, after contracting a revised 2.1% in November. The reading fared much below the economists’ forecast of a 0.5% gain. However, excluding transportation equipment, orders edged down 0.8% in December after falling 1.3% in the previous month.

US new home sales

New home sales in the US surged 11.6% to a seasonally adjusted annual rate of 481,000 units in December, the Commerce Department said yesterday. The annualised sales figure for November was revised down to 431,000 from the previously reported 438,000. Economists had expected new home sales to increase at a slightly slower pace to 450,000. The median price of a new home stood at US$ 298,100 in December, marking 8.2% y-o-y increase. 

US consumer confidence index

As per the Conference Board, US consumer confidence index rose to 102.9 in January, from an upwardly revised 93.1 in December. Economists had forecasted a climb to 95.5. The present situation index grew to 112.6 in January from 99.9 in December, whereas the future expectations index increased to 96.4 from 88.5.

Important Risk Warnings and Disclaimers 

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