The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 1.40 points down at 7:00 am.
New York: The Wall Street ended in the green amid mixed US economic data. In April, consumer spending remained flat, but construction spending hit a near six-and-a-half year high. Likewise, the national factory activity index was higher in May. S&P climbed 0.2% yesterday.
Asia: Equities are trading lower this morning. The Nikkei 225 initially traded higher, as weak yen lifted exporter sentiment, but slipped in the second half to close 0.1% lower for the day. The Hang Seng was trading 0.7% down at 7:00 am.
Continental Europe: European markets reported modest gains, as investors lapped up shares of healthcare and real estate companies. France’s CAC 40 and Germany’s DAX rose 0.3% and 0.2%, respectively.
Crude Oil: Yesterday, the prices of Brent and WTI crude oil slipped 1.0% and 0.2%, respectively. The spread between the two varieties stood at US$4.7 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.42% higher yesterday at 775.83. To read our latest research click here.
Today’s news
Germany, France, along with other lenders, agree to work closely on Greece’s debt
German Chancellor Angela Merkel and French President Francois Hollande, along with the leaders of international creditor institutions, such as the International Monetary Fund, the European Central Bank and the European Commission, have agreed to work closely on Greece’s debt. Greece is due to make a €300m repayment to the IMF on Friday.
Company News
Kefi Minerals (LON:KEFI) – Speculative Buy
Kefi Minerals, the gold exploration and development company with projects in the Democratic Republic of Ethiopia and the Kingdom of Saudi Arabia, announced today an update on the Definitive Feasibility Study (DFS) and financing for its Tulu Kapi gold project in Ethiopia. The 2015 DFS remains on schedule and is expected to be completed during Q2 2015. According to management, drafts have been submitted for review by lenders’ technical consultants to ensure plans are aligned with financiers’ expectations. Final tender documents for the mining operation and construction of processing plant as well as infrastructure are now being prepared. Progress is also being made on the $120m project financing, Kefi has a targeted funding mix of up to approximately $100m from senior-secured finance and the remainder in equity at parent or project level from contractors and/or investment institutions.
Our view: Since acquiring the project in December 2013, Kefi has significantly improved the overall economics. We are encouraged with the steady progress being made on the DFS and project financing for the Tulu Kapi project. With the mining licence and all other major permits approved we believe project financing will not be an issue. As such, Kefi is on track to commence development of Tulu Kapi in 2015 leading to plant commissioning in 2016 and gold production in 2017. Thus in view of the progress to date, we maintain a Speculative Buy on the stock.
Beaufort Securities acts as a corporate broker to Kefi Minerals plc.
DDD Group (LON:DDD) – Speculative Buy
Yesterday, DDD Group signed a distribution agreement for its TriDef® SmartCam™, an innovative real time background replacement solution for popular Windows PC applications, with SplitmediaLabs for use in its popular XSplit Broadcaster and XSplit Gamecaster applications. The agreement is a two-year non-affiliate agreement which operates on a revenue share basis between DDD and SplitmediaLabs. The product is designed to turn a conventional PC webcam into a powerful compositing tool that can replace the user’s immediate environment with alternative background images and filter effects in real time. The TriDef® SmartCam’s real time background segmentation capabilities would allow the users to overlay the webcam image of themselves into the game or broadcast video they are preparing before broadcast or streaming. The agreement primarily states that DDD Group and SplitmediaLabs would work together to integrate the SmartCam capabilities into the XSplit products to create easy user experience. It would also lead to SplitmediaLabs promoting free download of TriDef® SmartCam™ on DDD’S website. After a seven day free trial, XSplit users will be able to purchase TriDef SmartCam for US$9.99.
Our view: The agreement signed with SplitmediaLabs’, one of the leading developers of broadcast and streaming tools, is expected to strengthen the product offering and growth potential of DDD Group. TriDef® SmartCam™ is the company’s first software solution and finds its applications in the 2D video conferencing and game video creation markets. Moreover, partnership with SplitmediaLabs would prove to be beneficial and would significantly help to bring the TriDef® SmartCam™ capabilities to a new and rapidly growing audience that is hooked onto game video sharing, particularly on Twitch and YouTube. In view of the above and the company’s progress in the 2D software solution base, we retain a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to DDD Group plc
Motif Bio (LON:MTFB) – Speculative Buy
Yesterday, Motif Bio announced that Motif BioSciences Inc., its wholly-owned subsidiary has signed Letters of Intent (LOIs) and interim agreements with a leading global Clinical Research Organisation (CRO). This is the first step towards key clinical trials for getting Motif Bio’s Iclaprim developmental antibiotic. As per the agreement, the CRO would start preparation for two Phase III randomised, double-blind, multi-centre clinical trials to evaluate the efficacy and safety of intravenous Iclaprim versus Vancomycin. This proves to be the company’s first major step in successfully completing Phase III clinical trials with Iclaprim. The company is investing over US$950,000 for the project under the agreement, which is to be paid by 31st July 2015. Moreover, the two parties are also further negotiating for a formal agreement for the conduct of the studies. The management claims that the selected CRO is among the world’s top five providers of Phase I-IV clinical trial management services and has contributed for the development of all the top 50 prescription medicines and also carried out more than 150 infectious disease studies.
Our view: The agreement seems to be the first major step for the company in order to achieve its goal and successfully complete trails for the Phase III programme for the formation of Iclaprim. In addition to this, the safety and efficacy of this broad spectrum antibiotic has already been proven in many patients. A successful outcome to the trials programme could prove to be a turning point for the company and set a platform for the company to create research and invest in the development of such medicines. Future benefits may include large up-front phased payments directed to Motif along with an exceptional stream of royalties. With the process of undertaking effective trials with the partnership of CRO, company’s positive growth outlook, PART and expected future benefits, we maintain a Speculative Buy on the stock.
Beowulf Mining (LON:BEM) – Speculative Buy
Beowulf Mining, an exploration and development company primarily focused on the Kallak iron ore project in Sweden, announced its unaudited interim statement for quarter ended 31st March 2015. During the period, loss before taxation reduced to £154,000 from £264,000 as compared to same period a year earlier. Accordingly, loss per share decreased to 0.044p from 0.093p. During January 2015, the company mutually agreed to accelerate the settlements under the equity swap agreements with Lanstead. In March 2015, the company raised £350,000 through the issue of 29.2 million shares. There have been certain changes to its board members; Bevan Metcalf will become non-executive chairman from his previous role as non-executive director. The board has also appointed Liam O’Donoghue, a qualified lawyer, as the company secretary. The company seems to be confident that the exploitation concession for Kallak North has met the requirements of the Swedish regulations.
Our view: Beowulf Mining seems to be on track to receive an exploitation concession soon, as per the CEO, some form of notification is likely to come before the summer. The company seemed to be positive overall due to funds raised in March which will enable it to develop an advanced understanding of Kallak North and bring in strategic partners and investors. While keeping its focus on Kallak North the company also seeks to utilise other opportunities within Scandinavia for adding exploratory assets. With a strong productivity showcased across multiple prospects and a rapid pace of development of these assets, we are confident about the underlying growth potential of the company. We assign a Speculative Buy to the stock.
Avanti Communications (LON:AVN) – Speculative Buy
Yesterday, Avanti Communications signed a new contract with TTCL, Tanzania’s national telecom operator, to help expand the latter’s high-speed broadband network to customers beyond the bounds of fibre infrastructure. As per the deal, TTCL will supply a new satellite broadband offering to its consumer, enterprise and government customer base by deploying Avanti’s HYLAS 2 satellite which will give full coverage across the country. As per the CEO, Avanti’s Ka-band satellite fleet would prove to be successful in providing high-speed broadband to TTCL’s national customer base.
Our view: Avanti is experiencing continuous growth in the order book from contracts with organisations including Orange Telkom Kenya and African service provider, iSAT. Avanti, now, was successful in winning the order from Tanzania’s incumbent national telecom operator so as to support its high-speed broadband network. The company is largely supported by its Ka-band satellite fleet that provides high-capacity, high quality data connections. Further added advantages of this satellite fleet are that they can cater to a greater range of applications and users compared to the legacy satellite technologies. The company has been highly successful in continuous development of its distribution platform through new and extended contracts with the larger telecom companies. The company is also in a position to see considerable growth in the orders after the service providers are fully on-board the technology platform. Thus, given the company’s ability to increase distribution platform and incremental opportunities in the pipeline, we reiterate a Speculative Buy rating on the stock.
Economic News
Germany PMI
Germany manufacturing PMI dropped to 51.1 in May from the preliminary reading of 51.4 and final reading of 52.1 in March, data from the Markit Economics and Chartered Institute of Purchasing & Supply showed yesterday.
Eurozone PMI
Eurozone manufacturing PMI edged down to 52.2 in May from the preliminary reading of 52.3, data from the Markit Economics and Chartered Institute of Purchasing & Supply showed yesterday. Final reading for March was 52.0.
US personal income and spending
US personal income increased 0.4% m-o-m in April, higher than the market forecast and ahead of the previous month’s revised rate of 0.1%, according to the Bureau of Economic Analysis. Meanwhile, personal spending was flat in April after registering 0.5% increase in March.
US manufacturing PMI
The final Markit PMI for the US stood at 54.0 in May, just above the preliminary estimate of 53.8, though lower than 54.1 in April.
US ISM manufacturing
Manufacturing PMI in the US increased to 52.8 in May from 51.5 in April, the Institute of Supply Management (ISM) reported yesterday. Economists had forecast a reading of 52.0. The ISM prices paid index jumped to 49.5 from 40.5 in the previous month, exceeding the expected reading of 43.0.