Today's edition features:
• Andalas Energy & Power (LON:ADL)
• UK Oil & Gas Investments (LON:UKOG)
• DekelOil Public Limited (LON:DKL)
• Tertiary Minerals (LON:TYM)
The FTSE-100 finished yesterday's session 0.36% higher at 7,542.87 whilst the FTSE AIM All-Share index was down 0.52% at 1,027.00. In continental Europe, the CAC-40 finished 0.42% higher at 5,383.81 whilst the DAX was 0.37% higher at 13,043.03.
In New York last night, the Dow closed 0.7% higher at 23,157.6, the S&P 500 added 0.07% at 2,561.26, while the Nasdaq was little changed at 6,624.22.
In Asian markets this morning, the Nikkei was up 0.26% at 21,418.54 but the Hang Seng fell 0.13% at 28,674.84.
In early trade today, WTI was down 0.12% at $51.98 per barrel and Brent was 0.07% lower at $58.11 per barrel.
UK banks exposed to money laundering in South Africa
UK banks may have been used to launder money stolen from South Africa, a former cabinet minister has alleged in a letter to Chancellor Philip Hammond. Lord Peter Hain said a South African whistle-blower had indicated the banks "maybe inadvertently have been conduits for the corrupt proceeds of money". The Labour peer is due to raise the issue in the House of Lords later. The Treasury said it had sent his letter to financial regulator the Financial Conduct Authority (FCA). "We take allegations of financial misconduct very seriously, and have passed Lord Hain's letter on to the Financial Conduct Authority and relevant UK law enforcement agencies, including the National Crime Agency and Serious Fraud Office, to agree the right action," a spokesperson said.
Source: BBC News
Andalas Energy & Power (LON:ADL, 0.05p) - Speculative Buy
Andalas has signed a (24-month) memorandum of understanding with Pertamina Power Indonesia and Siemens AG. The agreement is to develop a gas to power operation at the Pupsa field in Sumatra and includes binding provisions relating to exclusivity, costs and the joint pursuit of the project.
Our View: This news demonstrates the reality of Andalas’ Indonesian gas to power activities and the credibility of its management team. Siemens has broad Indonesian power experience and will bring financial muscle and expertise to the consortium. Andalas’ partners now include Pertamina (279 in global Fortune 500), Siemens (€ 100b market cap) and PT PP Persero (US$1.4b market cap). We have a Speculative Buy recommendation and 0.2p price target.
Beaufort Securities acts as corporate broker to Andalas Energy & Power plc
UK Oil & Gas Investments (LON:UKOG, 5.52p) - Speculative Buy
UKOG announced yesterday afternoon that Surrey council has granted Horse Hill Developments planning permission to carry out an extended flow test at HH-1 well and drill and test two new holes. A sidetrack at HH-1 and new well HH-2. Shortly after the Broadford Bridge flow test is complete (due to commence shortly) the Horse Hill appraisal will begin.
Our View: UKOG has a busy period ahead and all being well multiple positive catalysts, BB-1 flow test, HH-1 flow test, HH-1 S/T and HH-2. The BB-1z flow test is expected to start sometime next weekend (30th) and last through November into December. Light oil has been flowing to surface with associated gas and management expect BB-1z to flow strongly once completed (with harmless acid stimulation as used in water wells). Lots to look forward to. We have a Speculative Buy recommendation.
DekelOil Public Limited (LON:DKL, 10.38p) – Speculative Buy
The operator and owner of the profitable and vertically integrated Ayenouan palm oil project in Côte d'Ivoire (the 'Project'), yesterday provided a production and sales update for the quarter ended 30 September 2017. Q3 2017 sales and production figures for Crude Palm Oil ('CPO'), Palm Kernel Oil ('PKO') and Palm Kernel Cake ('PKC') at the Project, which includes one of West Africa's largest extraction mills, detailed Product Sales (excluding nursery) of €6.4m (against €6.5m in the 2016 comparable period), with CPO Production falling by 19% to 4,734 tonnes on an average selling price of €640/tonne (€612/tonne). PKO Sales amounted to 704 tonnes (719 tonnes) on an average price of €904/tonne (€832/tonne). Production for the nine months totalled 31,681 tonnes of CPO, 2,112 tonnes of PKO, and 2,866 tonnes of PKC compared to 34,323 tonnes of CPO and 2,520 tonnes of PKO in the comparable nine-month period in 2016.
Our View: Yesterday’s share price overreaction provides a buying opportunity. Agricultural harvests are never predictable and, in any case, lower anticipated Q3 production due to a relatively poor harvest in what is typically a low season in Côte d'Ivoire had already been discounted by a sharp setback in the shares from early in May. What this, nor yesterday’s hit prices-in, however, is management’s success in offsetting irregular harvest outcomes by both offering premium product quality along with advantages created by installation of a 3,000 tonnes storage facility earlier this year. This allows DekelOil to time release its volume offer to coincide with higher demand trends and upward moving prices. In managing to sell CPO at €640 for the quarter (an 11% premium to international benchmark prices), for example, it achieved total product sales for the nine-month period to 30 September 2017 in line with the equivalent period last year despite lower year-on-year Q3 production. This validates management's ongoing strategy to maximise value from each fruit processed, which will also utilise the remainder of the low season to embark on further value-adding initiatives in time for the start of the next peak harvesting period. 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 £2.0m free cashflow during 2017E, followed by around £5m the year after. Importantly this demonstrates management’s willingness to move its ambitious planning forward without directly exposing shareholders to a higher risk profile. Based on modestly revised 2017E and 2018E revenues estimates of €31.1m and €35.8m, delivering fully-diluted earnings 1.60p and 2.20p respectively, the shares now trade on forward multiples of just 6.5x and 4.7x respectively while offering yields of 1.7% and 1.9%. Beaufort retains its Buy recommendation on DekelOil, while repeating its price target of 23p/share.
Beaufort Securities acts as corporate broker to DekelOil Public Limited
Tertiary Minerals (LON:TYM, 0.48p) - Speculative Buy
Tertiary Minerals published an update describing operations over the last few months. Permitting work continues in Sweden, metallurgical testwork is happening on the MB Project, while management also looks to acquire an additional project - probably fluorspar and with near term production potential. On the macro front the fluorspar market is firm with prices improving in China and Asia.
Our View: This is a positive update, progress being made on most fronts. The CEO commented on the acquisition strategy: "Advanced discussions and technical due diligence are in progress and we look forward to releasing further news in due course”. We have a Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Tertiary Minerals plc