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Beaufort Securities Breakfast Alert: Dekeloil Public Ltd, Hummingbird Resources Ltd,, Jubilee Platinum PLC, Obtala Ltd, Solo Oil PLC

Beaufort Securities Breakfast Alert: Dekeloil Public Ltd, Hummingbird Resources Ltd,, Jubilee Platinum PLC, Obtala Ltd, Solo Oil PLC

Today's edition features:

• DekelOil Public Limited (LON:DKL)

• Hummingbird Resources (LON:HUM)

• Jubilee Platinum (LON:JLP)

• Obtala Limited (LON:OBT)

• Solo Oil (LON:SOLO)





The FTSE-100 finished yesterday's session 0.38% higher at 7,313.51 whilst the FTSE AIM All-Share index was up 0.43% at 995.10. In continental Europe, the CAC-40 finished 0.25% higher at 5,281.96 whilst the DAX was up 0.41% at 12,657.41.

Wall Street

In New York last night, the Dow Jones closed 0.25% higher at 22,340.71, the broader-based S&P-500 climbed 0.41% to 2,507.04 and the Nasdaq jumped 1.15% to tand at 6,453.26.


In Asian markets this morning, the Nikkei 225 was 0.52% higher at 20,372.35, while the Hang Seng was down 0.31% at 27,556.22.


In early trade today, WTI crude oil was 0.31% lower at $51.98 per barrel and Brent was down 0.31% at $57.72 per barrel.



Ryanair threatened with legal action by UK regulator

Ryanair has been threatened with legal action for "persistently misleading" passengers about their rights following thousands of flight cancellations. The Civil Aviation Authority said it had launched "enforcement action" against Ryanair, the first step towards court action. Ryanair was wrong to claim it did not have to re-route passengers on rival airlines, it said. The action comes after Ryanair cancelled a further 18,000 flights. The fresh round of flight cancellations will be between November and March and affect the travel plans of a further 400,000 customers. A total of 34 routes will be suspended this winter, including Stansted to Edinburgh and Glasgow, Gatwick to Belfast and Newcastle to Faro. Earlier this month, the airline cancelled up to 50 flights a day through to the end of October, also affecting 400,000 passengers. The regulator said that on both occasions Ryanair had failed to provide customers with "necessary and accurate" information about their rights. The CAA said information provided on Ryanair's website failed to make it clear that the airline was obliged to refund all expenses incurred as a result of the flight cancellation. Those expenses included meals, hotels, as well as transfer costs to re-route passengers on other airlines when there was no suitable alternative, the CAA said. The aviation authority said it had already written to Ryanair asking it to make a public statement to ensure customers were not misled after the first wave of flight cancellations. But it said the airline had so far not complied with its request.

Source: BBC News


Company news

DekelOil Public Limited (LON:DKL, 12.25p) – Speculative Buy

The operator and 100% owner of the vertically integrated Ayenouan palm oil project in Côte d'Ivoire, yesterday announced its interim results for the six months ended 30 June 2017. It reported a record H1 performance due to stronger pricing and the increase in Crude Palm Oil ('CPO') storage capacity from 5,000 to 8,000 tonnes, which enabled the Company to sell CPO at a premium to international prices. A 22.6% increase in revenues to €19.6 million for the period (H1 2016: €16.0 m), included sales of CPO, Palm Kernel Oil ('PKO'), Palm Kernel Cake ('PKC') and Nursery Plants. 26,947 tonnes of CPO produced in H1 2017 (H1 2016: 28,550 tonnes), failed to match record Q1 like-for-like production, having seen Q2 volumes hit by now rectified mechanical issues during May and June. The overall impact on CPO volumes produced during the half year was limited to a shortfall of 1,603 tonnes and management are working hard to ensure similar issues do not occur again. Coupled with stronger CPO pricing, however, DekelOil achieved a 30.4% year on year increase in average CPO prices to €707 per tonne in H1 2017 (H1 2016: €542/tonne), a 5% premium to average international level of €674/tonne during H1 2017. This resulted in a 19.4% increase in EBITDA to €3.7 million (H1 2016: €3.1 m) and a 33.3% increase in net profit after tax to €2.4 million (H1 2016: €1.8m). Importantly, this demonstrates, Ayenouan's cash flow generative credentials. Having built up a track record of significant revenue and profit growth, management are confident enough to embark on the next leg of DekelOil's development, one which involves using Ayenouan as a platform from which to fund the Company's transformation into a multi-project palm oil producer, while at the same time rewarding shareholders through the adoption of a progressive dividend policy. Major progress has already been made on both fronts. In July, DekelOil announced the formal commencement of operations at Guitry, its second project in Côte d'Ivoire, in which it holds a 100% interest. As with Ayenouan, the plan to develop Guitry into a vertically integrated palm oil operation including nursery, company-owned estates and a mill producing CPO from FFB grown by both the Company and local smallholders. Secondly, earlier this month DekelOil paid out a maiden final dividend of 0.17 pence per ordinary share for the year ending 31 December 2016.

Our View: Impressive stuff! The first half of 2017 saw DekelOil acquire 100% of Ayenouan, further strengthen its balance sheet, pay out a maiden dividend and report record sales and profits. There is clear momentum behind the business, both at the operational and corporate level and Beaufort expects this to be maintained going forward. Having proven its business plan, management is now keen to roll-out its vertically integrated model, which includes a state of the art nursery, mill, and company-owned estates, elsewhere in the region. At Guitry, operations have already formally commenced and the Board remains in discussions to acquire an interest in Norpalm Ghana Limited ('NGL'), a vertically integrated palm oil producer in Western Ghana which has approximately 4,000 hectares of mature palm plantations under ownership and produces some 15,000 tonnes of CPO a year from a 30t/hr mill. In addition to the revenue it generates from selling this produce into the domestic Ghanaian market, NGL also operates a palm kernel oil press which produces approximately 2,000 tn of PKO. There can be no guarantee current discussions will result in DekelOil acquiring NGL, but they nevertheless demonstrate management's confidence in its ability to replicate success already achieved. Having proven both the operating model and ability to implement it, shareholders should be reasonably confident of further progress as DekelOil seeks to transform itself into a leading West African palm oil producer. Indeed, Beaufort considers DekelOil is capable of producing as much as £2.7m free cashflow during 2017E, followed by around £6m the year after. Importantly also, yesterday's update demonstrates management willingness to move its ambitious planning forward without exposing shareholders to a higher risk profile. Based on 2017E and 2018E revenues estimates of €33.1m and €36.8m, delivering fully-diluted earnings 1.77p and 2.42p respectively, the shares trade on forward multiples of just 6.9x and 5.1x respectively while offering yields of 1.6% and 1.8%. Beaufort retains its Buy recommendation on DekelOil, while repeating its price target of 23p/share.

Beaufort Securities acts as a corporate broker to DekelOil Public Limited


Hummingbird Resources (LON:HUM, 33.75p) – Speculative Buy

Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced that it has signed a conditional agreement to acquire 50% interest in African Gold Group's Kobada gold deposit in Mali. Kobada has a combined 2.2Moz gold resource, including 0.5Moz of Reserves and is located near Hummingbird's Yanfolila processing plant. Under terms of the agreement, Hummingbird will make an initial investment of C$3.6m (£2.2m) for 9.9% stake in African Gold Group and has the right to increase its stake to 19.2% for a further consideration of C$4.4m (£2.6m). Upon successful completion of a DFS, Hummingbird has the right to acquire 50% interest in Kobada by funding the capex required to produce a high-grade gold concentrate and would receive 70% of the cashflows until the capex has been recovered and 50% of cashflows thereafter. Hummingbird believes that Kobada could potentially add approximately 50,000oz gold per annum to Yanfolila's annual production.

Our View: The conditional acquisition is positive news for Hummingbird by allowing it to potentially increase Yanfolila's average annual production from 107koz to 150koz, which should significantly increase the mine's NPV. Based on African Gold Group's feasibility study (February 2016), Kobada has the potential to be a low-cost openpittable and free-digging operation with simple gravity separation as 56% of the resource occurs as oxide. Hummingbird has a 120-day exclusivity period to complete its due diligence. We look forward to completion of the DFS on Kobada as well as the continued ramp up to full scale mining and commissioning in the coming months at Yanfolila. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Hummingbird Resources plc


Jubilee Platinum (LON:JLP, 4.30p) – Speculative Buy

Jubilee has announced that the notification of Hernic Ferrochrome Proprietary voluntary business rescue plan to facilitate the restructuring of some of its business has no current effect on Jubilee's operations at Hernic. Jubilee stated that normal operations are expected to continue at Hernic for the foreseeable future with stable chrome market conditions persisting. Jubliee's platinum and chrome operation is processing Hernic's mining operations as well as reprocessing Hernic's vast surface stocks for platinum. Management stated that its Hernic platinum and chrome operations have in the past week achieved production levels in excess of 1,900t of feed material per day.

Our View: Although Hernic Ferrochrome going into business rescue raises questions and some uncertainty, we expect Jubilee's Hernic operations to continue as normal. Note that Jubilee's Dilokong "hosts" also went into business rescue and this has resulted in additional opportunities for Jubilee. Jubilee notes that it has already offered its "services wherever appropriate within this process". Based on the experience at Dilokong we see this as a potential opportunity for Jubilee. We retain our Speculative Buy recommendation.

Beaufort Securities acts as a corporate broker to Jubilee Platinum PLC


Obtala Limited (LON:OBT, 16.12p) – Speculative Buy

The African forestry and agriculture operators this morning released its interim report and consolidated financial statements for the half year ended 30 June 2017. During the period, profit was driven by a gain on the acquisition of 100% of the shares and voting interests in WoodBois International ApS, including biological assets valued at US$53m. As a result, the Group generated a profit after tax of US$22.7m (June 2016: loss of US$3.8m) during the six-month across the Group. As expected, forestry revenues in Mozambique were not material during the period due to the annual closed season (Jan-March) which was extended by three months in 2017, although increased stockpiling of wood in the cutting season will facilitate higher H1 revenues in future years; similarly, the Agricultural division's first substantial harvest was not expected to commence in Tanzania until after June. Accordingly, revenues generated amounted to US$149k (June 2016: US$381k), excluding WoodBois, while operating costs rose less than anticipated to just US$1.1m (June 2016: US$0.6m). The acceleration of operating costs, however, reflects the infrastructure assembled within the Group, positioning it for substantial revenue growth from all areas of the business during H2 2017 and thereafter. Obtala's net equity position of the Group increased from US$115.4m in December 2016 to US$144.8m due to a combination of profit on asset purchase from, and issuance of equity to, the owners of WoodBois International as well as the exercise of warrants by Weiss Asset Management. Along with its financial results, Obtala also detailed a number of significant Board changes that took place during the period. These included Jessica Camus, who joined the Obtala Board in March as a Non-Executive Director, bringing a wealth of experience on measuring social impact and experience working with various funding bodies from her time at the World Economic Forum. Martin Collins joined the Board as Deputy Chairman, with a specific focus on the Agriculture Business, replacing COO Warren Deats, and Carnel Geddes as Group CFO.

Our View: Putting everything in place. All business lines have now been streamlined and are scalable without a requirement to add layers of management; a significant upgrade of management personnel has been achieved without creating run-away administrative expense that are regularly encountered when building out such complex operations. In fact, recent director changes, including those announced this morning, will result in an annual saving of around US$100k. Meanwhile, in Mozambique, the Group acquired a 10.5-hectare site for a new sawmill in Nampula, completing land acquisition process and commencing construction within three months. In Tanzania, it upgraded its existing packhouse with a significant increase in cold packing and storage area and a new loading bay. The Group is now able to handle increased harvest levels required for its business plan while maintaining the cold chain necessary for developing a high value fruit and vegetable export-driven business. Having significantly expanded geographical footprint (including Denmark, West Africa, and Asia), the second half is already witnessing a ramp-up in revenues. Management remain highly confident on the prospects for African forestry and agriculture given the growing supply-demand imbalances with the growth of the global middle class led by the African and Asian regions. While the investment market must factor in a higher risk for such ambitious geographical plans, the giant continent is nevertheless poised to commence its own green revolution. And Obtala's timing, given projected global demand growth for timber at a time when international efforts to control illegal logging have the potential to create something of a 'super cycle' for premium hardwood pricing, looks almost perfect. Modelling Obtala's business opportunity, fair value still appears to be multiple of the current share price, even after applying punitive discount rates. Beaufort retains its Speculative Buy rating on Obtala.

Beaufort Securities acts as a corporate broker to Obtala Limited


Solo Oil (LON:SOLO, 5.75p) – Speculative Buy

Solo has published its interim results to June which show £451k of revenue versus £450k of G&A costs, and a small loss of £306k due to non cash FX and share payment charges. Operating cashflow was a positive £237k. Highlights of the period also include the drilling success at Ntorya 2 and the subsequent resource upgrade to circa 1.3tcf of gas in place. Solo's 25% has an attributable 335bcf gas in place or 200bcf of 2c contingent resources. In the period Solo also invested in Helium One and it now owns 10% of a vey exciting helium deposit. We understand that Helium One has the stand out helium acreage in Tanzania which shows signs of being large and very high grade, albeit at the pre drilling stage.

Our View: These are a solid set of results held together by production and gas sales at Kiliwani North (produced 15mmcf per day in 1H17), plus the exploration success at Ntorya. Ntorya is now a strategic gas asset for Tanzania and being onshore is distinct from Tanzania's other large gas discoveries. Aminex and Solo have submitted a Ntorya development plan to the ministry and should get the opportunity to develop an early production system. They could also drill a Ntorya 3 well which if successful should take Ntorya to a globally significant scale. We also note Solo's multiple other valuable assets including its 6.5% interest in Horse Hill and a 30% interest in a oil discovery on the Isle of Wight. We have a Speculative Buy recommendation.

Beaufort Securities acts as a corporate broker to Solo Oil PLC (LON:BOO, 218.00p) – Buy ('boohoo'), one of the UK's largest online own-brand fashion retailers, yesterday announced its interim results for the 6 months ended 31 August 2017 ('H1 FY2018'). During the period, revenue advanced by +106% to £262.9m, or +101% on a constant currency basis ('CER'), against the comparative period (H1 FY2017). The revenue was comprised of three brands; boohoo £181.8m, up +43% (CER: +40%), PrettyLittleThing ('PLT') £72.7m (like-for-like: +289%) and Nasty Gal £8.4m. Group gross profit rose by +99% to £140.2m as a result of decline in gross margin by -200bps to 53.3%, primarily due to continued planned investments in the customer proposition (price & promotion). Operating profit grew +42% to £20m, adjusted EBITDA rose +68% to £27.8m and pre-tax profit increased by +41% to £20.3m, leading to basic earnings per share of 1.25p, up +24%. Net cash at the period end improved to £119.2m (H1 FY2017: £67.1m, FY2017: £58.4m) as a result of £50m share placing completed in June 2017. On the operational front, the Group said integration of PLT and NastyGal has been successful and has made significant investment in IT infrastructure and warehouse capacity. boohoo's joint CEOs, Mahmud Kamani and Carol Kane commented "We are pleased to report excellent progress for the group in the first half of the year across all our brands. The integration of the two new brands has been successful, adding diversity to our business whilst enabling us to draw upon our strengths in marketing, sourcing, operations and customer service to deliver profitable results and greatly increasing the group's potential. We will continue to invest in the customer proposition, further develop our brands and maximise the considerable opportunities that a global marketplace affords us. The strong performance in the first half-year and our expectations for the second half have given us confidence to raise guidance for the full year".

Our View: boohoo reported a continued strong performance for the H1 FY2018, powered by growth across all brands and geographic regions. On a constant currency basis, UK revenues increased by +100%, with rest of Europe +77%, USA +145% and rest of world +89%, demonstrating the brands' exceptional domestic and international expansion. Driving this was a broadened product offering (such as the launch of new Big & Tall range) along with a step-up in marketing expenditure (to 8% of sale). The Group continued with its 'influencer strategy' by collaborating with social media influencers to target "socially savvy shopping generation" to build an engaged customer base. During the Analysts' conference call, the management noted that they have witnessed "direct correlation" between the social media posts made by these 'influencers' and number of visitors to their website, thereby demonstrating the effectiveness of its marketing strategies. Across the three brands, the Group has increased its collective number of followers through Facebook, Twitter and Instagram, which now stands at 5.3 million, 1.0 million and 9.0 million respectively, since publishing its 2017 preliminaries. Looking at its Key Performance Indicators (KPIs) for the boohoo brand, the number of active customers increased by +29% to 5.8m, while its number of orders rose +26% along with a +20bps increase in conversion rate to 4.1%. Due to trialling of increased delivery cost (while continuing with promotional activity), order frequency was flat during the period, although number of items per basket rose +11% to 3.17 and average order value of £39.92, up +7%. For PLT, its KPIs also improved, most notably the number of active customers by +150% to 2.0 million and number of orders by +222%. Operationally, the Group continued its investment in IT and warehousing. This includes launch of regional mobile app and re-platforming of its international sites. For warehousing, the Group is currently constructing a second extension at its Burnley site, which is expected to be complete in January 2018 and provide sufficient capacity for a £1bn net sales. On top of this, the Group has also announced previously a new automated "super-site" warehouse expected to complete by FY2021 to support its medium to long term growth, which will further increase its net sales capacity by over £2bn. Looking ahead, the Group has upgraded its FY2018 revenue guidance to +80% from +60% previously, while adjusted EBITDA margin in the range of 9% to 10% (previously c.10%). The Group expects FY2018 capital expenditure to be £62m (previously £63m). This takes current FY2018E forecast to revenue £530.3m, EBITDA £50.4m, Pre-tax profit £42.6m and EPS of 2.97p. Beaufort believes that the worldwide market for internet fashion sales will continue to expand as shopping preferences shift towards convenience fashion and highly competitive pricing afforded by online retailers, such as boohoo. The shares have performed extraordinarily well over the past year, meaning some investors blamed at the modest lowering of EBITDA margin expectations for yesterday's -16% share price sell-off. Beaufort considers, however that boohoo's business plan remains intact and capable of delivering further growth. On this basis, Beaufort recommends treating any continuing weakness as a buying opportunity. Beaufort reiterates its Buy rating on the shares.

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. 

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