Today's edition features:
• Bezant Resources (LON:BZT)
• Eurasia Mining (LON:EUA)
• Angle (LON:AGL)
"Having ended Q1 on a downbeat note, the same sentiment extended yesterday into April's first day of trading. In the US, various of the stocks thought to most likely to benefit the most from the Trump administration's legislative agenda appear to be slowly unwinding some of this year's gains. The principal indices all closed modestly down with General Motors one of the biggest fallers on evidence that the auto sector boom may finally be slowing. Asia meanwhile was more mixed with Chinese equities staying positive for the bulk of the session, while the Nikkei was knocked by a strengthening Yen. With this in mind, it's possible that the star turn of first quarter passed many western investors by. It was, in fact, the MSCI benchmark Emerging Markets index, which rose 11% during the period, rebounding from the depths plunged after November 8th on fears of punishing new import tariffs players, potentially making way for a global trade war following Trump's aggressive Presidential campaign. The subsequent softening of tone and Congress' blocking of his Heathcare Reform Bill, however, meant investors flowed back in, although valuations still remain well below the level they were prior to the financial crisis. The Dow Jones, for its part put on 5.7%, having lost a net 1.2% during March, while the Stoxx Europe 600 rose 5.5%, but still is some way off breaching the peaks it touched back in Q2'2015. Numbers out yesterday for U.S. factory activity showed a slight deceleration in March although continuing to expand at a solid pace broadly in line with consensus, this was its seventh consecutive month of industrial expansion. Meanwhile, total spending on construction in the U.S. rose a seasonally adjusted 0.8% in February from January to reach the highest level since April 2006. This side of the pond, the European Union's statistics agency yesterday released its unemployment rate across the 19 countries that use the euro, showing a fall from 9.6% to 9.5% in February, its lowest level since May 2009. Good news, but the high level of available workers continues to keep wage settlements low which is, in itself, is holding back inflation. UK macro data due today amounts to only March PMI Construction followed late evening by the BRC Shop Price Index, while the Eurozone releases February Retail Sales. The US by comparison provides a large batch of numbers, ranging from its February Trade Balance, Redbook Index, March ISM New York Index and IBD/TIPP Economic Optimism for April; later the Fed's Daniel Tarullo is due to make a speech. UK corporates scheduled to release earings or trading updates tpoday include ASOS (ASC.L), Shield Therapeutics (STX.L), Topps Tiles (TPT.L), Utilitywise (UTW.L) and ITE Group (ITE.L). The FTSE-100 is seen opening 5 points either side of unchanged in this morning's early trading."
- Barry Gibb, Research Analyst
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The FTSE-100 finished yesterday's session 0.55% lower at 7,282.69, whilst the FTSE AIM All-Share index lost 0.04% to stand at 929.04. In continental Europe, the CAC-40 finished down 0.71% at 5,085.91 whilst the DAX was 0.45% lower at 12,257.20.
In New York last night, the Dow Jones fell 0.06% to 20,650.21, the S&P-500 fell 0.16% to 2,358.84, and the Nasdaq shed 0.29% to stand at 5,894.68.
In Asian markets this morning, the Nikkei 225 had fallen 1.0% to 18,793.51, while the Hang Seng added 0.62% to 24,261.48.
In early trade today, WTI crude was down 0.14% to $50.17/bbl and Brent was down 0.13% to $53.05/bbl.
Tesla's market value overtakes Ford
Tesla's market value has overtaken that of Ford after shares in the electric car maker added more than 7%. At the close of trading Tesla had a market value of $49bn (£38bn), compared with Ford's value of $46bn. Tesla's shares rose on Monday after the company announced record vehicle deliveries in the first three months of the year. The firm delivered more than 25,000 cars in the first quarter, up 70% on the same quarter last year. While Tesla's sales are growing fast they are still a fraction of Ford's, which sold almost 6.7 million vehicles in 2016. Tesla delivered 76,000 electric cars last year.
Source: BBC News
Bezant Resources (LON:BZT, 1.20p) – Speculative Buy
Bezant has published good results from phase 2 of its bulk sampling programme. For us the highlights include an average combined grade of 0.33 grams per m3 versus the scoping study's breakeven grade of 0.24 g/m3, and highest grades of 1.72 g/m3 (equivalent to 1.23g/t) from an area of virgin platinum and gold gravels. The programme also indicated that the base of the mineralised gravels are on average 18-30m deep i.e. as expected and not too deep. Apart from these depth and grade data, the most important news is that Bezant is now targeting mine development, plant acquisition and first production during 2Q17.
Our view: Bezant is moving ahead with the development of its Choco Platinum-Gold Project and is targeting first production as soon as this quarter with name plate capacity in 2H17. The upfront capital is sub $1m (Bezant recently raised $1.24m) and assuming this goes well, Bezant will look to roll out multiple plants across its large Choco Province land package. Bezant is expecting costs to be in the region of $768/oz of gold and platinum which should equate to a c.30% margin at current prices (depending on the final gold-platinum split and the refining cost). Bezant is one of the very few AIM mining companies moving into production this year and we reiterate our Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Bezant Resources plc
Eurasia Mining (LON:EUA, 0.60p) – Speculative Buy
Eurasia announced yesterday that the feasibility study for its 80% owned Monchetundra project, submitted on 22 December 2016, has been approved by the State Commission on Mineral Reserves. An official protocol confirming this decision will now be submitted for final approval to Rosnedra, the Russian federal agency that is responsible for issuing licences for subsoil use. The Feasibility Study describes the economic extraction of PGM reserves at two proposed open pits, Loipishnune and West Nittis, located approximately 2km apart. Further details will be released when the reserves are officially released by Roznedra, which is in the final stages for approval under the Russian Standard.
Our view: Monchetundra has been somewhat under the radar while the Company focuses on mining its West Kytlim project. However, the West Nittis Area is highly prospective for shallow, high-grade PGM mineralisation. Nearly 16,000m have been drilled and approximately US$20m spent (mostly by Anglo American). The above announcement is positive news and we look forward to final approval of the formal licence from Rosnedra. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Eurasia Mining plc
Strat Aero (LON:AERO, 0.10p) – Under Review
The international aerospace company focused on the rapidly emerging Unmanned Aerial Vehicle ('UAV') sector, yesterday announced a trading update ahead of its full year results to 31 December 2016. It detailed a significant increase in full year revenue to approximately US$810,000 (2015: US$433,001), although this was primarily due to the full year impact of the acquisition of Geocurve, a specialist in the provision of UAV operated surveys and inspection services to a blue-chip customer base. Management also went on to remind shareholders that its FY2016 financial performance had been affected by the Aero Kinetics acquisition and reported litigation, resulting in an anticipated loss before and after taxation of approximately US$3.5 million (2015 loss before and after taxation: US$5.9 million) - a Rule 11 settlement agreement was entered into in Q4 2016. Strong progress was reported, however, on cost reduction during H2 2016, while its cash position was also strengthened in Q1 2017 through the successful completion of two placings totalling US$1.23 million (cash balance at 31 December 2016: US$ nil with an unutilised borrowing facility of about US$270,000). The Group's drive during 2017 will come from Training & Education, following the recently completed and launched Strat Aero AutQ course, which was awarded NQE status by the UK Civil Aviation Authority in the UK during 2016. A newly appointed Director of Training who is now overseeing its roll-out via the Company's franchise partners in China and in Malaysia. In Survey & Inspection, Geocurve continued to grow organically from existing contracts and was awarded the CH2M contract to work on the Thames 2100 Flood Defence Project on behalf of the Environment Agency. This significant contract, which involved innovative solutions being developed and implemented, was won while management also undertook a structural review of Geocurve's operations leading to cost reduction and other changes from which it is starting to benefit.
Our view: Making all the right noises! CEO, Ian McLure, is reporting good progress refocussing the Group's jumble of drone-related operations and participations that were thrown together by its previous management. 2017 clearly is going to be a year of consolidation, while identifying growth opportunity from within Strat's skill set and expertise across the two distinct areas of Commercial Training and the Survey & Inspection solutions business. The Board is now sufficiently confident that the platform it established in H2 2016 is capable of delivering a strong foundation for future growth for the CEO yesterday to confirm that "…, it is my intention to achieve breakeven at the operating profit level in the near term." Moreover, shareholders now at least know the likely extent of the damage that will be detailed through the Group's full year accounts (released last year on 30th June). Given that there never been in any doubt as to the enormity of the long-term opportunity presented through UAV and UAS operation, having gone a long way up the sector learning curve and now equipped with a reasonable balance sheet, the Group's management has the opportunity to impress investors with high visibility, long-term profitable growth. That's the upside vision but, back on earth it still has to provide tangible evidence that the steps it has taken will bear fruit and that its model can become self-financing. Shareholders will then be able to focus back on the scale of its global opportunity and the Group's early mover advantage. Recognising the potential it has to deliver this following it refinancing along with the steep fall in the share price, Beaufort continues to review its 'Hold' recommendation on Strat Aero with a view to upgrading on receipt of further positive news.
Beaufort Securities acts as corporate broker to Strat Aero plc
Angle (LON:AGL, 46.50p) – Speculative Buy
Angle, the specialist medtech company focused on cell separation technology called the Parsortix system for detection and harvesting of cancer cells, yesterday announced that according to the research done by University of Athens and Attikon University Hospital in Greece, ANGLE's Parsortix system showed better gene expression analysis in head and neck cancer (HNSCC). The results were based on a study of blood samples taken from 40 cancer patients, where the Parsortix system demonstrated higher sensitivity and greater purity in harvesting Circulating Tumor Cells ('CTCs') for analysis compared to leading alternative approaches. The alternative antibody-based approaches failed to detect information regarding the expression of key genes in any of the 40 samples. Gene expression of biomarkers provides key information regarding likely patient response to immunotherapies and has the potential to be of significant clinical importance for the therapy selection and follow-up of patients. ANGLE's founder and CEO, Andrew Newland, commented "The University of Athens is a leader in CTC research and the successful completion of this work by a customer validates a key element of our roll-out strategy of using research-use sales to drive the development of clinical applications for the Parsortix system".
Our view: This is another positive news for ANGLE. The research by The University of Athens suggest potential, for the first time, to assess gene expression of head and neck cancers using a Parsortix non-invasive liquid biopsy. Head and neck is the sixth most common cancer worldwide causing more than 350,000 deaths every year, while adding over 600,000 new patients per annum. Over 90% of head and neck cancers are squamous cell carcinomas (HNSCC), accounting for 5%-10% of all new cancer cases in Europe and North America. The Parsortix system's epitope independence, high sensitivity and purity characteristics in head and neck cancer brings clear advantages over the existing antibody-based approaches (which have been unsuccessful in this indication). This altogether broaden the market opportunity available to ANGLE. ANGLE's goal is to seek sector approval and endorsement of its unique solution, which not only enables cancer detection but also harvests the Circulating Tumor Cells for personalised cancer care. In January 2017, for example, ANGLE announced positive interim evaluation for its two independent 200 patient ovarian cancer clinical studies in Europe and the US, where Parsortix system demonstrated an accurately for the first 50 patients sufficient to differentiate between women with a malignant pelvic mass and those with benign tumours. As at 26 January 2017, the Group confirmed patient enrolment (for ovarian) is over 90% complete in Europe and 70% complete in the US with headline data from the full studies expected in Q2 FY2017. Its analytical and clinical study plan, involving 200 metastatic breast cancer patients and 200 healthy volunteers is also underway, with completion of studies expected during this year to enable FDA submission. FDA clearance would not only allow sale of the product for clinical use in the US but would also validate the performance of the system, thereby influencing system adoption globally. Beaufort's current financial model sees ANGLE achieving limited revenues and remaining in quite deep losses until FY2018, before ramping sharply upward during the following year to become cash flow positive for the first time by period end. Based on a cash position of around £6.5m (31 October 2016: £9.7m) by the end of the current year, Beaufort considers the Group will be in the position to demonstrate to shareholders a strong sales growth trajectory and modest positive earnings before considering tapping shareholders or, indeed, industrial partners, once again for additional funding. During this time, Beaufort also believes that ANGLE will have been recognised as the most suitable of the various non-invasive cancer detection tests that are presently undergoing trials for hospitals and medical institutes. This will accrue significant value to Parsortix. Beaufort retains its Speculative Buy recommendation on the stock and considers its relative share price weakness of the past 3 or 4 months presents an opportunity.
Watkin Jones (LON:WJG, 154.00p) - Speculative Buy
The leading UK developer and constructor of multi occupancy property assets, with a focus on the student accommodation sector, yesterday announced its pre-close trading statement for the half year ended 31 March 2017. The Board reported a successful first period with trading in line with its expectations. In the year to date, five student accommodation developments in Bournemouth, Ipswich, Belfast, Cardiff and London, representing 2,347 beds in total, were sold with a gross development value of £192 million. All the developments planned to be completed by September 2017 and five of those planned to be completed by September 2018 have been forward sold. Watkin Jones has a further six developments totalling over 1,705 beds under offer and in legal negotiations which, when concluded, would see all the developments planned to be completed by September 2018 forward sold. In total, 16 developments, representing 5,679 beds, for delivery before September 2019 have now been sold. The Group has 11,098 targeted beds in its secured pipeline, with 9,390 of these having planning consent. Planning applications have been submitted in respect of the remainder. Fresh Student Living now have 12,117 beds under management across 43 schemes and are contracted to increase this to 16,526 beds under management across 55 schemes from the start of the 2017/18 academic year. Management also confirmed the Group is making good progress with its drive into the Private Rented Sector having completed its first PRS scheme in Leeds of 322 units and has secured a 132-unit development site in Sutton. The Group is also working on a number of planning applications and other site acquisition opportunities.
Our view: Right time, right place. Watkin Jones' current development pipeline is encouraging and the Board remains confident in its outlook for the full year. The big positive can be found in the Board's end-to-end business model to institutional investors against a market for UK purpose built student accommodation that continues to grow and for which demand for its product remains strong. Investors have become increasingly confident that the negotiated outcome of Brexit will not result in the currently advantageous conditions offered to EU students disappearing, while Sterling devaluation (and US$-strength) has made the UK a more attractive location for those from other international favoured high-education locations (such as the United States). This means that Watkin Jones continues to find very keen demand for its developments which almost without exception are then forward sold – an elegant business model considering the principal risk it therefore takes is that of planning and so allows it to operate surprisingly 'capital light'. The fact that professional parties are now also taking an increasing interest in the PRS, amid a continuing and obvious housing shortage across the UK, things can only get brighter still. Watkin Jones' shares started to recognise this situation early in 2017, since when the shares have quite dramatically outperformed. Beaufort has not adjusted its 2017E or 2018E forecasts as a result of yesterday's update, although clearly with continuing confidence from the Chairman's statement that will accompany its formal full year release on 1st June could well result in an upward adjustment for the current year. In the meantime, Beaufort retains its Speculative Buy recommendation on Watkin Jones and re-confirms its price target of 190p/share.