The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 8.9 points down at 7:00 am.
New York: Wall Street ended modestly higher amid upbeat retail sales, which offset the negative developments regarding Greece’s bailout negotiations. The S&P 500 added 0.2%, with utilities leading the gainers and energy declining the most.
Asia: Equities are trading higher. The Chinese index advanced on data reports that matched market expectations and the release of IPOs next Friday. The Nikkei 225 added 0.1%, whereas the Hang Seng was trading 0.5% higher at 7:00 am.
Continental Europe: Markets pared initial gains as hopes of a deal between Greece and its creditors declined after the IMF’s exit from the talks in Brussels. France’s CAC 40 and Germany’s DAX climbed 0.7% and 0.6%, respectively.
Crude Oil: Yesterday, WTI and Brent crude oil prices decreased 1.1% and 0.9%, respectively. The spread between the two varieties stood at US$4.3 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.04% lower yesterday at 773.41.
Today’s news
IMF quits Greece negotiations in Brussels
The International Monetary Fund (IMF) abandoned the negotiations over the Greece bailout in Brussels after major differences with the country. The IMF is upset over the bundling of all four debt repayments for the month and Greece’s stance on pensions and labour market reforms. In the absence of a deal, Greece is likely to default on its over €1.5bn debt repayment to the IMF.
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).
Cyan Holdings (LON:CYAN) – Speculative Buy
Yesterday, Cyan Holdings announced that the company has conditionally raised £490,000 gross though the placement of 245 million new Ordinary Shares at a price of 0.2 pence per share. The placement comes in line with an earlier announcement and placement on 8th June 2015 and has an identical pricing to it. The Placing Shares will rank pari passu in all respects with the Ordinary Shares. The placement is conditional to the approval of the Resolutions at the GM and completion of the placing on 8th June. This placing is in addition to the conditional placement of over 2 billion shares for raising approximately £4.1m at 0.2p per share. The shares are expected to be admitted to the AIM on 1st July 2015 and the company’s expanded share capital would stand at 6.8 billion ordinary shares. The company would also post a notice for the general meeting on or around 12th June 2015 and the annual general meeting would be held on 16th June 2015. Furthermore, the terms of the placing entail an issuance of 4,165,000 warrants to Beaufort in addition to the commissions. The warrants would allow subscription to new Ordinary Shares during the six months following Admission exercisable at 0.27p per new Ordinary Share.
Our view: With the additional fund-raising, the management has reaffirmed its ability to attract substantial investor interest in Cyan and its prospects. The numerous recent commercial orders for the company’s smart metering and lighting solutions are testimony to the acceptance of Cyan’s novel technology’s and its capability to provide comprehensive metering solutions to the customers. The company received a Letter of Intent from the EI Sewedy, for Cyan’s mesh based solution for their utility customer in Ghana. This follows the successful meter tests conducted in Brazil, India and parts of Africa. The company’s plans remain in line with its strategy to expand in new markets that offer better scope of expansion for its advanced meters that provide an accurate measurement of energy consumption, increase energy security and reduce costs. Plans are underway for incremental investments in the software solutions to add new functionalities. Thus, eyeing the overall optimism and the wide range of opportunities available, we reiterate a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Cyan Holdings plc
Angle (LON:AGL) – Speculative Buy
Yesterday Angle announced the new results for its Parsortix system from Barts Cancer Institute (BCI) that is investigating the clinical use of the system in prostate cancer patients. The results are based on an initial study of 52 prostate cancer patient samples, out of which 44 were with metastatic and 8 were with localised diseases. The researchers at the BCI were able to successfully harvest CTCs from all the patients using Angle’s Parsortix system. Apart from capturing the CK+ cells (epithelial cells) (which can be captured using traditional antibody-based capture systems), the systems managed to capture the CK- Vimentin+ cells (mesenchymal cells) that are primarily responsible for cancer metastatis. The mesenchymal cells lead to secondary cancers and cannot be captured using the traditional systems. Though the system has limitations in cancer detection but the mesenchymal cells have shown a strong correlation with the prostate-specific antigen (PSA) levels that are an indicator of prostrate cancer progression.
Our view: BCI is one of the leading cancer research centres in the UK. According to World Cancer Research Fund International, Prostate cancer is the second most common cancer in men and the fourth most common overall with over 1.1 million cases of this cancer being recorded in 2012. The company’s Parsortix system possesses the unique ability to harvest the CTCs from the patient’s blood sample that can be combined with other technologies to discover personalized care to cancer patients. The breakthrough results from the study indicate that the harvested cells from the Parsortix system are clinically important, thereby offering an opportunity for the systems to be used to provide repeatable, non-invasive liquid biopsy for prostate cancer patients. Moreover, the research team at the BCI continues to study the possibility of culturing the harvested CTCs in order to examine the effectiveness of the proposed treatment before administering it to a patient. Recently, the company extended its patent protection in the Chinese and the Australian markets as these major markets that are witnessing a growing interest in the liquid biopsies. The above developments testify Angle’s successful transition from a support services company to a specialist med-tech company. Thus eyeing the rapid progress of the Parsortix product, we believe this is an opportune time to invest in the company and therefore reiterate a Speculative Buy rating on the stock.
Mariana Resources (LON:MARL) – Speculative Buy
Yesterday, Mariana Resources announced the signing of a subscription and option agreement with Asset Chile Exploración Minera Fondo de Inversión Privado (AC) to advance Doña Ines Gold-Silver and Exploradora East Copper-Molybdenum-Gold projects, in northern Chile. As per the agreement, Asset Chile may earn up to 50% of Mariana’s 100% interest in the projects through a total of US$1.65m in a two-stage earn-in process. Mariana needs to contribute a total of US$250,000, of which US$50,000 would be given in the Phase 1. The stage 1 work programme aims further target generation and a preliminary reverse circulation drill testing of the primary targets at both Doña Ines and Exploradora East. The stage 2 programme would depend on the results of stage 1 and focus on resource definition. Mariana would remain the operator of the properties, with Mariana and AC as shareholders of AMG Chile SpA that holds the properties. In January 2015, Mariana acquired these properties under the Aegean Metal Group Inc Scheme of Arrangement.
Our view: The decision to farm-out the key projects in the northern Chile region by the company is important from the strategic point of view. The company has ensured significant participation in the upside of the project while limiting the downside risk in case the project fails. The company recently received encouraging updates from the Hot Maden project in the northern Turkey following the completion of the drilling at the first four holes and also gained a better understanding of the high grade Au-Cu mineralization zone that is expected to be surrounded by a Zn halo. The drilling indicated extensions of the mineralized zone and the company has plans to drill further for better understanding of the prospect. A farm-out at this stage would free up funds for the company to invest in the assets that have greater certainty. The company’s strategy focuses on acquiring prospective land packages offering the high probability for economic returns. Thus, in view of the company’s pro-business moves and the promising asset base, we maintain a Speculative Buy rating on the stock.
Home Retail Group (LON:HOME) – Hold
Yesterday, Home Retail Group published a trading statement for the 13 weeks to 30th May 2015. Total sales at Argos narrowed 2.6% to £846m with the net new space contributing 1.3% and the total store estate increasing by a net 33 stores to 788. Like-for-like (LFL) sales declined 3.9% in the quarter owing to a decline in the sale of the electrical products. Internet sales as a percentage of the total Argos sales increased to 44% y-o-y from 42% in 2014 while the mobile commerce sales grew 15% for quarter. Meanwhile an increased level of promotional sales offset the improvement in the gross profit margin with the impact of favourable currency movements. On the other hand, sales at Homebase declined 1.6% to £438m. Closed space sales lowered 7.0% due to 17 store closures, thereby reducing the total store portfolio to 279. However, LFL sales for the period improved 5.4% due to trade transfer and the stock clearance sales. Here too, the gross profit margin declined 175 basis points on stock clearance activity and an increased level of promotional sales.
Our view: Home Retail delivered a resilient trading performance for the year despite facing sales contraction during the quarter. The company’s fortunes were severely impacted by the decline in the key electrical and the seasonal product categories. The internet and the mobile platform proved to be an important driver for sales conversion. Recently, the company announced overhauling plans for the Argos and Homebase through Argos Transformation Plan and the Homebase Productivity Plan over the next three years. Though Homebase had a good start to the year, Argos continued to face growth-related challenges. The company expects a stronger performance in the second half of the year but we believe that the issues plaguing the company would take some time before the company can return to growth. Thus, considering the meek growth indicators, we maintain our Hold rating on the stock
Economic News
US retail sales advance
US advance retail sales increased 1.2% m-o-m in May after rising 0.2% in April, the Commerce Department said yesterday. The reading came in line with the market expectations. Excluding the sales of motor vehicle and parts, retail sales were up 1.0% in May, above the expected improvement of 0.8%
US initial jobless claims
Initial jobless claims in the US inched up by 2,000 to a seasonally adjusted 279,000 in the week ended 6th June, the Labor Department reported yesterday. Last week’s claims stood at 277,000. Economists, on the other hand, had expected a decline to 275,000. The four-week moving average rose to 278,750 from the previous week’s revised average of 275,00.