Proactive Investors - Run By Investors For Investors

Sunrise Resources, Bovis Homes Group

Sunrise Resources, Bovis Homes Group


The FTSE-100 finished yesterday's session 0.36% higher at 6,941.19, whilst the FTSE AIM All-Share index closed 0.61% higher at 784.66. In continental Europe, markets ended mixed on weak economic data from Japan, which overshadowed the improvement in oil prices. Germany's DAX gained 0.2%, driven by gains in auto stocks. France's CAC 40 ended 0.1% lower.
Wall Street
Wall Street ended in the green as a rally in oil prices led to gains in energy stocks. Additionally, positive corporate earnings releases boosted investor sentiment. The S&P 500 closed 0.3% higher in yesterday's trading session.
Equities are trading lower as investors remain concerned over the health of the global economy. The Nikkei 225 fell 1.6% as a strong yen exerted pressure on export-driven stocks. The Hang Seng was trading broadly flat at 7:00 am.
Yesterday, Brent oil prices increased 2.9% to US$48.35 per barrel, while WTI prices rose 2.8% to US$45.74 per barrel.

UK house prices fall in August

As per property tracking website Rightmove, the average asking price for a house in the UK dropped 1.2% m-o-m in August to £304,222, after declining 0.9% in July, marking the biggest drop since November 2015. On a y-o-y basis, house prices advanced 4.1% following a 4.5% rise last month.

Company news

Sunrise Resources (LON:SRES), 0.21p) - Speculative Buy
Sunrise published an update which discussed steady progress at its diatomite and pozzash projects in Nevada. The pozzash is progressing nicely, test work has shown its suitability for use in cement with further tests expected to see how the clay content can be reduced. The diatomite project is being progressed by its partner EP Minerals a private equity backed industrial minerals business with diatomite filter operations in the same area. EP Minerals has recently paid its dues on Sunrise's licences for 2016 so is expected to progress with its evaluation/exploration activities. It's next payment to Sunrise is $450k due in June 2017.

Our view: Sunrise picked up these two industrial minerals projects in Nevada for virtually nothing (the cost of pegging the ground) and both could become very profitable. If EP Minerals takes the diatomite into production Sunrise will receive an undisclosed revenue royalty, which we think is likely to be 5% - 10% and potentially more (a standard 1.0% to 2.5% royalty would have probably been disclosed). Whatever the royalty, Sunrise generated the project for virtually no cost. The Pozzash is a similar story but earlier stage. Sunrise also has silver, copper-gold, and a carlin style gold project, all acquired for low cost, all prospective and potentially valuable.

Beaufort Securities acts as corporate broker to Sunrise Resources Plc

Bovis Homes Group (LON:BVS, 813p)– Buy
Bovis yesterday announced its half year results for the six months ended 30 June 2016. Operational highlights included, growth in legal completions of 5% to 1,601 new homes (H1 2015: 1,525), average sales price on legal completions increased by 14% to £254,500 (H1 2015: £222,300), while holding consented land bank of 19,477 plots across 138 sites plus strategic land bank of 25,484 plots across 90 sites. Management detailed the fact that over 90% of planned home sales for 2016 had been achieved as at 12 August, and that successful launches of new show homes in recent weeks had met with strong customer interest. During the first six months of 2016, the Group generated an operating cash inflow before land expenditure of £135.2 million (H1 2015: £79.0 million), demonstrating strong underlying cash generation from its asset base and the volume growth delivered. As a result of the Group's land investments, payments in H1 2016 associated with land purchases less cash recoveries on land sales were £120.0 million (H1 2015: £95.3 million). With a cash outflow from non-trading items totalling £52.8 million including the dividend payment of £35.3 million (H1 2015 dividend payment: £30.8 million), the overall net cash outflow for the six months ended 30 June 2016 was £37.6 million (H1 2015: £64.0 million). In accordance with the Group's stated intention, it is maintaining a progressive payout, this amounts to an interim dividend of 15.0 pence per share (2015 interim dividend: 13.7 pence). It will be paid on 18 November 2016 to holders of ordinary shares on the register at the close of business on 23 September 2016. The dividend reinvestment plan, introduced in 2012, gives shareholders the opportunity to reinvest their dividends.

Our view: In response to Brexit, Bovis is chorusing the same 'it is too early to say, but so far everything looks all right to us' already provided by the other UK housebulders. Beaufort has taken a more optimistic view on current valuations commenting, in other recent reviews of sector peers, that they all seem to have been in something of a 'phoney bear market' for more than a year now, and the absurd further dive in share prices that took place on June 24th appeared to discount just too much when one considers the forward visibility, still excellent fundamental background and the embarrassing amounts of cash they all continue to throw off. Although Bovis itself has regained about half of its 'Referendum result' losses, the shares are still priced below tangible net book value which, by this measure, means it is trading at a 25% discount to its sector. Offering a 5.5% yield on a sub-10x 2017E P/E, the shares seem too cheap given that Westminster appears to be doing everything possible to make the way for a soft landing before pressing the Article 50 'button' to enter a 2-year period of negotiation, while the Bank of England is also playing its part by keeping interest rates 'lower for longer' while pumping excessive amounts of liquidity into the system. This means that attractive mortgage conditions will remain available to house buyers for some time to come, which is music to the ears of housebuilders. Beaufort remains overweight in the sector and keeps Bovis on its Buy list.

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 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use