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Beaufort Securities Breakfast Today including Northcote Energy, Wishbone Gold, Amedeo Resources and Tiziana Life Science

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The Markets

 

Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 1.5 points down at 7:00 am.

 

New York: The S&P 500 closed broadly flat as upbeat home sales data helped offset the impact of a poor gauge of factory activity in Chicago. The benchmark index advanced 1.9% in June and 4.7% during Q2 2014, marking its sixth successive quarter of gains.

 

Asia: An improved gauge of manufacturing activity in Japan and China boosted sentiment. However, the end of unilateral ceasefire between Ukraine and pro-Russian rebels led to concern among investors. The Nikkei advanced 1.1%. The Hang Seng was shut due to the SAR Establishment Day.

 

Continental Europe: Equities exhibited marginal movement on Monday as encouraging economic data for the Eurozone and gains in chemicals stocks offset the decline in shares of travel companies. Germany’s DAX rose 0.2%, whereas France’s CAC 40 slid 0.3%.

 

Crude Oil: On Monday, prices of Brent and WTI crude oil fell 0.8% and 0.3%, respectively. The spread between the two varieties stood at US$7.0 per barrel.

 

UK small caps: Yesterday the FTSE AIM All-Share index closed 3.35 points (+0.43%) higher at 785.39. 

 

Today’s news

 

China’s factory activity expands in June

 

A survey by the China Federation Of Logistics & Purchasing and the National Bureau of Statistics revealed the manufacturing purchasing managers’ index (PMI) rose to its six-month high of 51 in June from 50.8 in May, matching market estimates. Moreover, the final manufacturing PMI released by Markit Economics and HSBC Bank rose to 50.7 in June from 49.4 in May, below the flash estimate of 50.8.

 

Japan reports better-than-expected manufacturing PMI

 

Survey results from Markit Economics and the Japan Materials Management Association (JMMA) showed manufacturing PMI rose for first time in three months to 51.5 in June, up from the preliminary estimate of 51.1 and May’s reading of 49.9.

 

Annual ISA Allowance increases to £15,000 from today

 

From 1st July 2014 (that’s today!) the annual ISA allowance increases to £15,000 from £11,880 for the remainder of the 2014/2015 Tax Year. This means if you have already invested £11,880 in your ISA since 6th April 2014 you can now invest a further £3,120 into the tax-free wrapper. To find out more about Stocks & Shares ISAs with Beaufort, please telephone us on 020 7382 8300 (London) or 0117 910 5500 (Bristol). Alternatively you can find further information and a short video demonstrating how quick and easy it is to open an ISA account on our website here.

 

Tiziana Life Sciences (LON:TILS)

 

Yesterday, Tiziana Life Sciences announced that it has entered into an exclusive license agreement with TTFactor S.r.l. (licensor) covering the use of twenty defined stem cell markers (TOP 20) for diagnosis of breast cancer. The TOP 20 model can predict disease aggressiveness and prognosis among breast cancer patients. As per the agreement, the licensor would be paid a total of €600,000 over four years by Tiziana for research aiming towards the development and commercialization of products and services derived from the model. Tiziana would also pay the licensor a royalty rate of 1.5%, based on commercial sales of products developed under the agreement, for exclusive license to patents on the model. The licensor is acting on behalf of the Italian Foundation for Cancer Research Institute for Molecular Oncology and the European Institute of Oncology (IEO). The stock climbed 17% in yesterday’s trade.

 

Our view: The TOP 20 model would boost Tiziana’s foothold in the area of breast cancer treatment by providing access to an advanced stem cell technology. Earlier this month, the company had strengthened its balance sheet by issuing convertible loan notes valuing £1.5m. The fundraising had also helped the company promote its Bcl-3 gene, a drug for metastatic breast cancer. The recent appointment of Dr. Ferrara, with significant contribution in the field of cancer treatment, as the Chairman of its Scientific Advisory Board is likely to accelerate Tiziana’s development activities. An enhanced financial base could significantly bolster the company’s research & development activities in the wake of growing commercialisation opportunities in the field of breast cancer treatment. We maintain a Speculative Buy.

 

Beaufort Securities Limited acts as corporate broker to Tiziana Life Sciences plc.

 

Wishbone Gold (LON:WSBN)

 

Yesterday, Wishbone Gold announced its full year results for the period ended 31st December 2013. Revenues remained nil, while operating loss more than doubled to US$662,041 from US$284,162 due to a sharp increase in the exploration and administrative costs and a US$17,143 abortive acquisition costs. However, net loss for the year dropped to US$ 662,041 from US$821,208, weighed by US$537,046 costs related to Wishbone’ AIM-listing in the preceding year. Wishbone’s conditional agreement with General Resources Investment Trust (GRIT) for issue of 45.8 million shares at £1 per share, in return for the latter’s 1.0 million shares, became unconditional in March 2014. The company granted five million share options to the newly appointed CFO Clive Hyman. On 4th April 2014, an open offer was announced, which was underwritten by Black Swan FZE; 33.7 million new shares were admitted for trading on the AIM on 28th April 2014. Proceeds from underwriting shares are expected in the first week of July 2014. During the year, the company secured Exploration Permits for Mining (EPMs) for Wishbone III and Wishbone IV wells. Exploration results from the Wishbone II and White Mountains prospects were also encouraging. Soil sampling at the Oaky Mill Prospect discovered significant areas of copper and gold mineralisation and return robust grades. The stock was up 9.1% yesterday.

 

Our view: Wishbone witnessed an eventful year. A share exchange deal with GRIT has benefited the company in terms of an additional means of funding and by providing access to the former’s resources expertise. Encouraging exploration results at Wishbone II and White Mountains and a constant eye for lucrative assets with near-term production potential, across geographies like Australia, Indonesia, Vietnam and North America, provides a robust base for the company’s future growth. We expect Wishbone to record good operational progress in the year ahead and reiterate a Speculative Buy.

 

Beaufort Securities Limited acts as corporate broker to Wishbone Gol:d plc.

 

Amedeo Resources (LON:AMED

 

Yesterday, Amedeo Resources reported audited results for the year ended 31st January 2014. Revenues totalled £81,000 as against zero revenues last year, primarily driven by marketing and consultancy fee income from MGR Resources PTE (MGR). Loss from operations widened to £1.5m from £1.1m, owing to a sharp increase in the share of loss of associates and foreign exchange losses. However, net loss for the year contracted to £969,000 from £1.1m, majorly due to gain on purchase of associate and finance income. As a result, basic loss per share dropped to 0.04p from 0.07p. The construction of Jiangsu Yangzijiang Offshore Engineering Co. Ltd. (YZJ Offshore)’s new offshore vessel yard (New Yard) was completed and the yard became operational after the year-end. Progress towards build of YZJ Offshore’s first rig order, Explorer 1, at the New Yard was reported on track. The price of the rig was increased to US$175m from US$170m after the client raised the specification of the rig. In April 2013, Amedeo invested in MGR through purchase of 49% stake in the latter from Fortus PTE for £30,000 and also made a £1.18m convertible loan to MGR. During the year, MGR made a total payment of £311,000 to Amedeo. In March 2014, Amedeo raised ~£5.2m through the issue of 521.7 million shares at 1.0p each.

 

Our view: Amedeo’s investment into MGR has proven to be extremely fruitful. The investee company yielded £311,000 of total payments to the company in FY2014. YZJ Offshore is a customer of the large Chinese steel mills. Amedeo has also become a supplier of such mills after the MGR investment, which further strengthens the relationship between the two parties. Meanwhile, the rapid progress of its first rig order at YZJ Offshore is likely to attract the attention of prospective customers. With enhanced cash flows after the MGR investment, a stronger management team, and growing demand for highly sophisticated rigs, we expect the company to register a meaningful upside and thus, maintain a Speculative Buy.

 

Beaufort Securities Limited acts as corporate broker to Amedeo Resources PLC.

 

Northcote Energy (LON:NCT

 

Northcote Energy reported final results for the year ended 31st December 2013. Revenues climbed to US$989,000 from US$113,000, as the company reached its targeted production level of 100 barrels of oil equivalent per day (boepd) ahead of schedule. Pre-tax losses expanded to US$3.8m from US$181,000, on account of an increase in the administrative expenses to US$2.2m from US$241,000 and a US$1.3m impairment charge. In 2013, profitability was undermined by a high level of acquisition activity and costs associated with the company’s listing. Northcote expects to reach a targeted output of 250 boepd by 31st July 2014 and witness improved profitability as it transitions from acquisition phase to development phase. The company announced that its annual general meeting (AGM) would be held on 10th July 2014.

 

Our view: With an ongoing development of assets at Zinc Ranch, including recent initial results for the 8-A well, the company seems well-poised for future growth. The 14 recompletions at the project are expected to contribute an average gross increase of 10 boepd each in the overall production. A reduced dependence on single wells and a gradual progress towards transition into a sustainable exploration and production firm also bodes well for Northcote. A slew of strategic farm-outs and issue of convertible loan notes have provided a strong financial backing for the company’s future operations. We expect Northcote to successfully attain its targeted production of 250 boepd by July-end. In light of these positives and a rapid expansion strategy, we retain a Speculative Buy rating for Northcote.

 

UK mortgage approvals

 

The number of mortgage approvals for house purchases in the UK dropped to 61,707 in May, the lowest in 11 months, from April’s revised 62,806, the Bank of England said yesterday. The reading was slightly behind the market estimate of 61,800.

 

Eurozone M3 money supply

 

Eurozone M3 money supply expanded at an annual pace of 1% in May after rising 0.7% in April, and beat the market forecast of 0.8% gain, the European Central Bank said yesterday. Loans to private sector declined 2% y-o-y in May, while loans to households dipped 0.7%. Growth in M3 money supply stood at 0.9% y-o-y in the three months ended May, vis-à-vis 1% in the preceding three months.

 

Eurozone CPI estimate

 

The preliminary reading for consumer inflation in the Eurozone stood at a seasonally adjusted 0.5% y-o-y in June, in-line with forecasts, and unchanged from May’s reading, data from the EU’s statistical office Eurostat showed yesterday. Core inflation, excluding energy, food, alcohol and tobacco, improved slightly to 0.8% in June from 0.7% in May.

 

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