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Beaufort Securities Breakfast Alert - Asian markets join global stock plunge

Beaufort Securities Breakfast Alert - Asian markets join global stock plunge

Markets

Europe
The FTSE-100 finished yesterday's session 1.46% lower at 7,334.98, whilst the FTSE AIM All-Share index was down 2.13% at 1,036.82. In continental Europe, the CAC-40 finished 1.48% lower at 5,285.83 whilst the DAX was down 0.76% at 12,687.49.

Wall Street
Last night in New York, the Dow Jones fell 1,175 points, or 4.6%, to end the session at 24,345.75 as inflation concerns continued to impact sentiment. The S&P-500 fell 113.19 points, or 4.1%, to close at 2,684.94 and Nasdaq finished the day 273.42 points weaker at 6,967.53.

Asia
In Asian markets this morning,the Nikkei 225 plunged 4.7% to close at 21,610.24. The Hang Seng was down 1,298.1 points at 30,947.12 and the Shanghai Composite by 95.83 points at 3,391.67.

 

Oil
In early trade today, WTI crude was 1.03% lower at $63.49 per barrel and Brent was down 1.02% at $66.93 per barrel.

Headlines

Asian markets join global stock plunge
Asian markets plunged on Tuesday as investors dumped stocks following heavy falls in the US. Japan's Nikkei 225 index saw its biggest one-day point drop since 1990. It ended down 4.7% at 21,610.24. It comes after the Dow Jones Industrial Average suffered its biggest loss in more than six years on Monday. The falls follow some good years for investors. In 2017 the Dow was up 25%, helped by a resurgent economy and strong corporate profits. But the sell-off began last week after a solid US jobs report fuelled expectations that the Federal Reserve will raise interest rates faster than expected. "Economic news from the US has been stronger than anticipated," said David Kuo, chief executive of financial services advisory Motley Fool. "So, perversely, the market correction has been caused by positive economic news." Markets in Asia typically follow the lead from the US. Elsewhere in the region, Hong Kong's Hang Seng dropped 4.5% and South Korea's Kospi index gave up 2.6%. Australia's benchmark S&P/ASX 200 lost 3.2%. US stock futures were pointing to more sharp falls when markets open on Tuesday.

 

Source: BBC News

Company news

 

Jubilee Metals Group (LON:JLP)  3.15p – Speculative Buy
Jubilee has announced, after a comprehensive technical due diligence, that it plans to exercise its option to earn 40% interest in the Kabwe zinc-lead-vanadium project in Zambia owned by BMR Group. This will, subject to final documentation, allow Jubilee to increase its effective interest to 57.41% (40% direct ownership and 17.21% indirectly as a shareholder in BMR Group). “The Jubilee Board has satisfied itself that the Kabwe Project is indeed a project worthy of development”.

Our view: Jubilee will now have, conditionally, 57.4% and effective control of Kabwe. We believe Jubilee has the technical expertise to design, build and operate a low capital cost, profitable Kabwe operation. As a reminder, Kabwe has a JORC-compliant resource of 164,000t of zinc and 272,000t of lead. A substantial quantity of contained metal which occurs as surface material and therefore does not require traditional mining with the associated costs and risks. We reiterate our Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to Jubilee Metals Group plc

 

Solo Oil (LON:SOLO4.50p – Speculative Buy

Solo announced yesterday a very significant 10x resource increase at Ntorya, its 25% owned gas development project onshore Tanzania. It also announced a study commissioned in 2H17 shows the feasibility of early production system with only one more well. Note that both consultants, RPS for the resource and io consulting (GE company) for the feasibility, are top of their industry. The Ntorya resource has increased to 2C contingent of 763 bcf (190 bcf net to Solo) and gross gas initially in place of 1.87 tcf. The early production system would require only one more well (NT-3) and the gas piped to the Madimba gas plant 33km away.

The RNS also has a positive update from Kiliwani North, including identifying a new drill target and an updated 2P reserve of 1.94 bcf.

Our view: This is a very significant announcement in our view for Solo, Aminex and indeed Tanzania. Ntorya is now a feasible onshore gas development project with both EPS and scale potential, in a country where most of the discovered gas is deep offshore. We are also encouraged by discussions we had yesterday in South Africa (mining conference) concerning operating in Tanzania. Feedback was that the government is open to business, returning VAT where due, and very supportive of foreign investment. For the miners the key is to have strong local relationships and no legacy issues. Solo and Aminex, as an oil & gas company focused in the south of the country, should have very few problems. We reiterate our Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to Solo Oil PLC

 

Ryanair Holdings (LON:RYAEUR15.84– Buy

Ryanair yesterday provided its results for the 3 months ended 31 December 2017 (‘Q3 FY18’). During the period, passenger traffic advanced by +6% to 30.4m customers, while the load factor improved +1% to 96%, against the comparative period (Q3 FY17). Despite average fares dropped by -4% to €32, passenger growth and +12% increase in ancillary revenues resulted in group revenues of €1,405m, up +4%. With a -1% improvement in unit costs (+3% excluding fuel) and lower tax on profit, PAT rose by +12% to €106m. Combined with €639m share buyback to date, basic EPS jumped +17% to €0.0893. Due to the capex of €1bn, share buyback of €639m and debt repayments of €300m, period-end net debt increased to €856.6m (31 March 2017: €244.2m). Group announced a further €750m share buyback to run between Feb to Oct 2018. On the operational front, the group said ‘MyRyanair’ membership is on track to reach 40m by March 2018 (Sep 18: 30m).

Our view: Despite Ryanair faced several complex issues during the period (including: strike, rostering failure, flights cancellations, pilot pay rises and union recognitions), +12% PAT growth came in line with guidance. Looking ahead, for the FY18, Ryanair upgraded its expected passenger traffic to 130m (previously 129m), ancillary spending now expected to increase by +2% per passenger (previously +1%) and eased the wording on average fares decline to “at least 3%” (from -4% to -6%). Unit costs reiterated to fall by -2% (ex-fuel: +3%) despite number of upward cost pressures (rising fuel bill, €25m one-off EU261 flights cancellation provision and €45m increased pilot pay). Overall, full year PAT guidance was kept unchanged in the €1.40bn-€1.45bn range (+8%), subject to normal level of disruptions. We are encouraged by Ryanair’s ability continuing to offer lower fares while improving its profit, backed by its “lowest costs” capability. Despite the group heavily warned over its FY19 average fares prospect, we see expected +6% growth in traffic to 138m would continue to drive profitability. We maintain our Buy rating on the shares with a target price of €19.

 

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