The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 9.2 points down at 7:00 am.
New York: Wall Street declined after strong jobs data led to a rally in bond yields, fuelling speculation of a rate hike later this year. The S&P 500 shed 0.1% on Friday and 0.7% for the week.
Asia: Equities are trading mixed. The Nikkei 225 closed flat after the current account balance narrowed to ¥1.3tr, despite better-than-expected GDP growth of 3.9% y-o-y in Q1 2015. Meanwhile, the Hang Seng was trading 0.4% up, tracking the monthly trade surplus in China.
Continental Europe: Markets ended in the red amid postponement of debt repayment by Greece and better-than-anticipated jobs data from the US. Germany’s DAX and France’s CAC 40 declined 1.3% each.
Crude Oil: On Friday, prices of Brent and WTI crude oil climbed 2.1% and 1.9%, respectively. The spread between the two varieties stood at US$4.2 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.20% lower on Friday at 775.74.
Today’s news
CBI trims growth outlook for UK
The Confederation of British Industry (CBI) downgraded its growth forecast for the UK to 2.4% from 2.7% for 2015 and to 2.5% from 2.6% for 2016. The agency warned against further risks to the economy in view of the Greek crisis and the ambiguity over the EU referendum that may delay investment spending.
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).
Company News
Xtract Resources (LON:XTR) – Speculative Buy
Xtract Resources, the diversified exploration and development company focused on production from its Chepica copper and gold mine in Chile, announced Friday its final results for the period ending 31 December 2014. The company received its first revenue from concentrate totalling £1.14m. Net loss for the period was £2.95m (or 0.09p/share) compared with £0.13m in 2013, mostly due to start-up operations and development of four new levels at Chepica. As at 31 December 2014, Xtract had a cash balance of £0.16m (£0.6m in 2013) and net assets totally £1.6m (£2.7m in 2013). Post year end the company has raised gross proceeds of £4.75m to fund continued underground development at Chepica as well as costs associated with acquisition of copper tailings deposits in South Africa.
Our view: Xtract has made significant process since acquiring Chepica and turning around mine operations into generating profits. A new ball mill was commissioned in October 2014 and will increase mill capacity from 5,500t per month to 9,500t per month. Although the company posted a net loss of £2.95 for the period, we note that that this was mostly due to start up mining operations and development of four new levels at Chepica. As a result, we see consistent production delivery and increased mine flexibility which should have a positive impact mine profitability moving forward. We maintain our Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Xtract Resources plc
Ariana Resources (LON:AAU) – Speculative Buy
Ariana Resources, the Anglo-Turkish gold exploration and development company, announced Friday encouraging results from its soil geochemical programme on the Karakavak prospect, located at the Kiziltepe Sector of its near term production Red Rabbit gold project in western Turkey where fully-financed mine construction will commence shortly. Twelve geochemically anomalous gold zones (>20ppb Au) were identified across the Karaavak prospect with five of the zones representing new anomalous zones. These new zones are largely coincident with anomalous silver in soils (>150ppb Ag). In addition to the soil geochemical work, 1,242 new soil samples covering an area of 7km2 were collected for X-Ray Fluorescence (XRF) analysis. Anomalous pathfinder elements define an E-W corridor 2km long, where veins and extensive silicification have been identified. At the eastern end of the anomalous zone, historic drill hole intercepts include 53m grading 0.4g/t Au and 143m grading 0.2g/t Au and 143m grading 0.2g/t Au. Systematic drill testing will be required to follow up on the anomalous zones.
Our view: While the above represents early stage exploration results, we note that the anomalous gold in soil samples have identified twelve target areas with five of them being previously unknown. In addition, the XRF results indicated a new corridor of potential mineralisation 2 km long, extending westwards from historical drill intercepts of gold mineralisation. The above results indicate the prospectively of the area which could lead to additional resources to feed the planned Kiziltepe mine, which is fully permitted and financed to begin construction. We reiterate a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Northcote Energy (LON:NCT) – Speculative Buy
On Friday, Northcote Energy announced that it has entered into a participation agreement with Indonesia’s CEB Resources, presenting an opportunity for the company to participate in oil & gas exploration activities in Indonesia and expand its international portfolio. According to the terms of the agreement, the company is entitled with an option to obtain a benefit of a maximum of 12.5% of any transaction in oil & gas sector or any concession that CEB is likely to obtain within the next five years. In addition, the company has subscribed to 50 million ordinary shares of CEB at a price of £0.4 per share, translating into a total investment of £200,000. On Friday, CEB also signed an agreement with Corsair Petroleum (Singapore) Pte Ltd, whereby CEB will have the opportunity to consider application for two oil and gas concessions in Indonesia, through a participating interest. Corsair has two oil & gas concession agreements with PT Wangsa Energi Prakarsa. As per the agreement, CEB will fund 100% of the due diligence, acquisition and development costs and will be entitled to receive 90% share of all distributions to participating interests in the projects until all investments have been paid back.
Our view: The participation agreement struck by Northcote Energy is expected to extend the international exploration opportunity for the company, with new interests in Indonesia, alongside the existing holdings in Mexico and the US. This would likely help the company to diversify its risk exposure and take advantage of one of the most premier oil & gas regions in South East Asia. Considering the expertise of CEB and Corsair in the Indonesian oil & gas market, this participation agreement carries significant upside potential for the company. Thus in view of the above, we reiterate a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Northcote Energy plc
Tiziana Life Sciences (LON:TILS) – Speculative Buy
On Friday, Tiziana Life Sciences announced its final results for the year ended 31st December 2014. The company reported a pre-tax loss of £3.6m and operating loss of £3.3m. Tiziana Life Sciences ended the year with a cash balance of £2.7m. During the year, the company raised £2.55m by issuing 3.4 million ordinary shares. On the operational front, Tiziana acquired licence of another clinical asset from Novimmune, called foralumab, which is the only fully human engineered anti-human CD3 antibody in clinical development. In addition to the licences with the University of Cardiff for Bcl-3, the company undertook licence agreement with TTFactor S.r.l. to develop stem cell based breast cancer diagnostics. In January 2015, Tiziana entered into a license agreement for milciclib which is currently in phase II clinical trials for thymic carcinoma in patients previously treated with chemotherapy. Recently, the company signed an agreement with University of Cardiff to license their anti-cancer stem cell technology. During the year, the company made some additions to the board. Dr Napoleone Ferrara was appointed as Chairman of the Scientific Advisory Board, and Professor Pier Paolo Di Fiore and Professor Roberto Pellicciari were appointed as members of the Scientific Advisory Board. Some of the recent additions to the Board include Professor Chris McGuigan and Dr Kunwar Shailubhai.
Our view: 2014 proved to have significant developments and marked good progress with successful company programmes which aim to address and develop new approach for treatment of cancer. Also, efforts towards advancing foralumab also has a great potential in a number of indications and markets. Moreover, the company seems to be successful in raising substantial amount at an important stage of the portfolio lifecycle when it is conducting clinical trials of milciclib for thymic carcinoma, and its potential application in breast and liver cancer. Tiziana has persistently broadened its product offerings to include relevant and important biotechnology products that could help it become a clinical stage company shortly. Besides, with the latest in-licensing of anti-cancer stem cell technology from the University of Cardiff (c-FLIP) has helped the company garner an innovative research portfolio with two clinical assets. Given its rising importance in the field of cancer metastasis diagnostic capability, we believe this is an opportune time to invest in the company. Thus we reiterate a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Tiziana Life Sciences plc
W Resources (LON:WRES) – Speculative Buy
On Friday, W Resources announced that it has completed approximately 950 metres of diamond infill drilling at its La Parrilla Fast Track Mine. The fast-track mine has an Australasian Joint Ore Reserves Committee (JORC) Inferred Resource of 46.92 million tonnes (Mt) at 0.09% WO3. The drilling programme is not just intended to help define the plan for the company’s initial mining operations but also evaluate any increase in the size and quality of the resource. The company mentioned that in the area adjacent to the original mining pit, holes ranging in depth from 90m-120m are also being drilled.
Our view: The company seems to be well on track and is gathering momentum on the operational front with rapid progress made in the infill drilling programme with good tungsten intersections at the La Parrilla fast track mine. Also, the exploration at the CAA/Portalegre has also shown good progress and the company is in the process of seeking partners. In addition to this, 2015 is likely to be an exciting year as the company is seeking farm-out options for the gold assets. Given the overall optimism, we believe that company has significant scope for an upside potential. We retain our Speculative Buy rating on the stock.
On Friday, Bellway provided an Interim Management Statement (IMS) for the period from 1st February to 31st May 2015. The company expects its housing completion to rise at the close of its financial year (31st July 2015) and to be around 850 units higher than the 6,851 reported last year. Moreover, Bellway expects its full-year operating margin to increase by around 300 basis points to over 20%, as compared with 17.2% a year earlier. The company also highlighted that its forward sales position is strong, to be 22% higher in value and to increase to £1.27bn from £1.04bn last year. With the land market in UK to remain competitive, Bellway has spent around £500m on land and land creditors, up as compared to £400m last year. Moreover, the company resorted to sale of its entire interest in 2,376 shared equity loans for cash proceeds of £32.5m, resulting in a profit of £6.9m
Our view: Low impact of UK’s General Election held in May on the consumer sentiment coupled with strengthening consumer confidence driven by the favourable mortgage market as well as the government’s ‘Help to Buy’ initiative are key growth catalysts for the company. Further, positive market conditions, implementation of growth strategy, disciplined investment in land, and continuous focus on return on capital employed prove to be the growth drivers for Bellway allowing it deliver a further increase in volume and a significant rise in profitability. Although the labour constraints have hit the housebuilding industry, the company expects to increase completions this year and anticipates making further progress in its 2016. Though of late, there has been some cooling in the growth rate of the house prices, but the overall macroeconomic scenario aided by the rise in the real wages of the citizens and the low inflation is likely to keep the housing sector in the forefront. We believe that a strong order book and disciplined investment strategy warrant further volume and profit growth in the current financial year. We reiterate a Buy rating on the stock.
Economic News
US change in non-farm payrolls
US non-farm payrolls rose by a seasonally adjusted 280,000 jobs in May, the US Labour Department said on Friday. Markets were expecting payrolls to increase by 220,000. The rise in payroll numbers for April was downwardly revised to 221,000 from 223,000 reported earlier. The unemployment rate for May increased slightly to 5.5% from 5.4% previously.