The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 5.40 points down at 7:00 am.
New York: Wall Street reported losses, with investors remaining on the sidelines ahead of Friday’s jobs report and amid Greek concerns. The S&P fell 0.9% yesterday.
Asia: Equities are trading in the red this morning. The Nikkei 225 tracked global equities to close 0.1% lower. The Hang Seng was trading 0.8% down at 7:00 am.
Continental Europe: European markets closed in the red after a pick-up in bond yields led to selling in companies with high levels of debt. Greece’s debt crisis remained in focus. France’s CAC 40 and Germany’s DAX lost 0.8% and 0.7%, respectively.
Crude Oil: Yesterday, prices of Brent and WTI crude oil slipped 2.8% and 2.7% respectively. The spread between the two varieties narrowed to US$4.0 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.10% lower yesterday at 777.33.
Today’s news
Fed should consider raising interest rates in 2016: IMF
The International Monetary Fund (IMF) has urged the US Federal Reserve to wait until 2016 to raise interest rates. The agency said that despite continued growth and job creation in the US, conditions are still not suitable for a rate hike.
BoE holds interest rate steady, leaves QE unchanged
The Bank of England (BoE) held its key rate at 0.50%, maintaining the level since March 2009. It also left the stock of assets purchased under the quantitative easing (QE) programme unchanged at £375bn
Company News
MySQUAR – AIM IPO of a Myanmar-based Internet-build group, focussed on Mobile Social Media Services
You may have seen reference in the Financial Times and other press sources of this upcoming AIM IPO in which Beaufort is sole broker.
MySQUAR is a technology group focussed on internet-content build in Myanmar, a country which until recently had been effectively cut-off from the rest of the world. Its first main product now rapidly building users is ‘MyCHAT’, a free to use social media and mobile chat service. The Company has recognised that offering local language and locally-derived content is the best route to acquisition and retention of massed users still very new to the worldwide web. Within a short 15 months its services could be accessible by over 40m residents. MySQUAR is positioned to be the local platform of choice in what will shortly become Southeast Asia’s fastest growing online territory. The Company is expected to have over 1m users by the end of the year with rapid growth continuing into the foreseeable future. With users comes monetisation opportunities, including gaming, news, information, financial and payment services.
Should wish to have more information or are interested in getting involved, please contact your Beaufort Broker on 020 7382 8300 (London) or 0117 910 5500 (Bristol).
Audioboom (LON:BOOM) – Speculative Buy
Yesterday, Audioboom announced its key performance indicators (KPIs) for the second financial quarter from 1st March to 31st May 2015. During the period, the company registered growth in content partners, registered users and application downloads. The company added 650 new content partners to the audio-on demand mobile platform, which includes US podcast ‘Undisclosed: The State Vs Adnan Syed’, the 2015 FIFA Women’s World Cup and BBC Hindi, MCM Comic Con and the Bob Harris Legend Series. Also, the total active content partners, who posted content during the period, stood at over 3,000. Moreover, the company added nearly 600,000 new registered users, taking the total user base to be 4 million at the end of May. There was also a significant increase in mobile app downloads; 1.28 million mobile application installations in the period which includes more than 0.55 million added during May.
Our view: The company seems to be on track to meet or exceed full-year expectations on all its performance measures including content partners, registered users and application downloads. Increase in the number of “listens” (i.e. the number of times users consume Audioboom content through the website, the iOS and Android apps, and via the embeddable content players) in the future would positively contribute to company’s growth as it will ultimately drive advertising revenue. Also, activities such as tie-ups with major content partners to provide depth and variety to the audio content and continuous efforts to seek newer ways of popularize its app among the customers augurs well for the company’s future prospects. Thus, we retain a Speculative Buy on the stock.
Stratex International (LON:STI) – Speculative Buy
Yesterday, Stratex announced that Goldstone Resources Limited, in which it holds 33.45% interest, has an addendum to its agreement with joint venture partner Cherry Hill Mining Company Ltd to expedite the increase of its interest in the Homase licence. As per the terms, Goldstone’s interest will increase to 90% in Homase licence from current 65% on payment of US$25,000 to Cherry Hill. Moreover, for the consideration of US$25,000 the company would attain ownership of attributable mineral resources of 101,750 oz of gold. This would provide several added advantages to Goldstone such as removal of contractual hurdles to earn the 90% interest, which includes the requirement of expenditure towards a feasibility study to earn an 85% interest and further development expenditure to earn an additional 5% interest. Also, this would allow Cherry Hill to contribute to development costs to have its 15% interest in the licence. After a successful feasibility study a final US$60,000 participation fee will also be due to Cherry Hill. Meanwhile, Goldstone is undertaking auger sampling to identify the targets for a drilling programme.
Our view: We accept that with the decision of Goldstone Resources to take almost full control of the Homase gold licence in Ghana will prove to be a significant growth driver for the company. Goldstone seems well on track with its approach towards auger sampling which would add to the company’s existing 602,000 oz JORC complaint gold resource for the Homase/Akrokerri project. Moreover, the company’s gold project revaluation in Ghana also highlighted significant potential for further oxide resources at the site that may enhance the existing oxide resource. Separately, the company is engaged in exploration of gold assets and other high-value base metals across Turkey, East Africa and West Africa that offer scope for important upside potential. Thus in view of the above, we maintain a Speculative Buy on the stock.
Pets at Home (LON:PETS) – Buy
Yesterday, Pets at Home announced its final result for the 52 week period ended 26th March 2015. Total revenue grew 9.6% to £729.1m with Merchandize growing 8.3% and Services adding 25.2%. The like-for like (LFL) revenue growth stood at 4.2% driven by Advanced Nutrition, Health & Hygiene, VIP Club, Services and Omni-channel. The Merchandise and Services segments reported LFL revenue growth of 3.7% and 10.7%, respectively. Also, fee income from the joint venture expanded 30.7% to £28.2m. The company’s pre-tax profit increased significantly to £87m from £52m in 2014. Consequently basic earnings per share also increased to 13.5p from 0.5p last year. On the operational front, the company opened 25 stores, taking the total aggregate stores to 400 along with 61 vet practise openings. The company is targeting 500 stores in UK, over 700 veterinary practices and 300 “groom rooms” in the medium term. Further, Pest at Home added 270,000 members in the final quarter to take the total members at the year end to 3.2 million. The company declared a final dividend of 3.6p per share, leading to a total dividend of 5.4p per share for the year. The company made certain changes in the management. Ian Kellett has been appointed as the CEO of the newly formed Retail Division, while Sally Hopson, who was previously Customer and People Director and CEO of the Vet Group, is now the CEO of the Services Division.
Our view: Stronger demand for the dog grooming products and services, growing popularity of VIP services and the company’s dramatic operational expansion in the UK led to significant improvement in the overall performance. Presently, Pets at Home operates from over 400 stores located across the country. The company opened around 50 groom room salons in 2015 along with at least 25 new stores and 61 veterinary practices. Similarly, the company has plans to open 20-25 stores, 5 barkers stores, 50-55 vet practices, and around 50-55 groom room salons by 2016. The above clearly testifies the underlying sound business strategies of the company, the aggressive nature towards expansion, and the innovative product offerings. With strength in both the merchandise and services segments, the company has broadened its range of growth drivers. Recently, the company also acquired a new financing facility, thereby strengthening its financial position. In view of the above, we retain our Buy rating on the stock.
Yesterday, Easyjet released the passenger statistics for the month of May 2015. The number of passengers increased 7.2% to 6.49 million from 6.05 million in the same month last year. Similarly, the load factor also advanced 220 basis points. On a y-o-y basis, the number of passengers increased 6.1% to 66.4 million and the load factor improved 130 basis points to 91.2% from 89.9%.
Our view: Easyjet was successful in increasing its customer numbers despite tough comparatives and the heavy disruption in April due to French air traffic control strikes. Also, the company has been going from strength to strength with better traffic and load factor data each month. Moreover, the declining oil prices have facilitated savings of nearly £130m in the annual fuel bill while the company already enjoys one of the best seat load factor of over 90% in the industry. Of late, the company has made some changes to the business model to attract the high-margin business passengers away from the full-service airlines. Strong balance sheet with cash and money market deposits of £976m (as of 31st March 2015) should support the replacement for the company’s aging fleet. We feel that the company is well placed for a significant upside potential along with its efforts for continuous improvements. We reaffirm a Buy rating on the stock.
FinnAust Mining (LON:FAM) – Speculative Buy
FinnAust Mining, the diversified exploration and development company with a multi-project copper, zinc and nickel portfolio in Finland and Austria, announced yesterday the resignation of Alastair Clayton, the Executive Director of the company with immediate effect. Despite changes at the board level, FinnAust remains focused on its three most advanced exploration projects in Finland: Hammaslahti, Keikka and Outokumpu. Recent drilling at the Hammaslahti project return 5.6m grading 3.2% Cu, 2.7% Zn, 0.7% Pb, 71g/t Ag and 0.76g/t Au. FinnAust also holds an 80% interest in the past producing Mitterberg copper project in Austria, which the company is currently evaluating.
Our view: Western Areas Limited, an A$832m market cap Australian listed nickel producer, is the major shareholder with circa 60% of FinnAust shares and has provided funding, senior management and technical support to ensure a high probability of exploration success. With Western Areas having substantially invested in FinnAust, we expect business to continue as usual despite the recent management changes. Given Western Areas expertise in nickel exploration and development we expect the high impact exploration strategy to continue on the highly prospective projects, which are located in close proximity to major historic and current deposits. We view FinnAust’s prospectively for high-grade copper, zinc and nickel more important than any member of the management team. As such, we maintain a Speculative Buy on the stock.
CORRECTION: Inspirit Energy Holdings (LON:INSP) – Speculative Buy
In Breakfast Today on 22nd May 2015 we published a note on Inspirit Energy that contained an error that we now wish to correct. We wrote that Inspirit had already obtained a significant manufacturing agreement with a major utility company. This was not correct. What we should have stated is as follows:
Non Disclosure Agreements have been signed and there are on-going discussions with several manufacturing partners and a major European utility to explore roll out across Europe and the USA.
To read the corrected original recommendation in full, please click here.
Beaufort Securities acts as a corporate broker to Inspirit Energy Holdings plc
Economic News
US initial jobless claims
Initial jobless claims in the US decreased by 8,000 to a seasonally adjusted 276,000 in the week ended 30th May, the Labor Department reported yesterday. Last week’s claims were revised upwards to 284,000 from the earlier reading of 282,000. Economists, on the other hand, had expected a smaller decrease to 278,000. The four-week moving average increased to 274,750 from the previous week’s 272,000.