The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 24.2 points down at 7:00 am.
New York: Wall Street ended lower, as the investors grew anxious amid continued uncertainty over Greece. The investors are looking forward to the FOMC meeting due later this week. The S&P 500 shed 0.2% on Friday, while rising 0.1% for the week.
Asia: Equities started the new week on a weak note, as Greece bailout talks ended in a deadlock. Nikkei 225 shed 0.1% at close, whereas the Hang Seng was trading 1.3% down at 7:00 am, extending the losses from the Wall Street.
Continental Europe: Markets ended lower, as the dialogue impasse between Greece and its international creditors stepped up. Moreover, the modest rise in the Eurozone industrial output suggested that the boost from lower oil prices and a weaker euro had waned. France’s CAC 40 and Germany’s DAX contracted 1.4% and 1.2%, respectively.
Crude Oil: On Friday, Brent and WTI crude oil prices decreased 1.9% and 1.3%, respectively. The spread between the two varieties stood at US$3.9 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.13% higher on Friday at 774.45.
Today’s news
UK asking house prices soar in June: Rightmove
According to property tracking website Rightmove, the asking price per home in the UK jumped 3.0% to £294,351 in June 2015, after shedding 0.1% in May. On y-o-y basis, the house prices gained 4.5%, following a 2.5% rise in the previous month.
Greece’s final talks with its creditors end in a deadlock
Yesterday, Greece’s final talks with its creditors ended in a stalemate with the European Union officials rejecting the country’s latest reform package. The meeting of the finance ministers in Brussels on Thursday is likely to decide the fate of the nation.
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).
Gfinity (LON:GFIN) – Speculative Buy
On Friday, Gfinity informed that it generated an online viewership of over 30 million within three months of its 2015 eSports championship series which runs from March to September. The company expects to exceed 50 million views for the entire 2015 season. The 2015 Gfinity Championships comprise 25 weekly tournaments that would be held at the Gfinity Arena in Fulham, London and would also be streamed live on internet TV channels including Twitch, Gfinity.net and MLG.tv. The events over the first half of the year were broadcasted in 10 languages and viewed in over 25 countries. The period saw a large increase in tournament participants from professional teams, where, the top teams the company hosted including OpTic, Denial, Ninjas in Pyjamas, Fnatic and Team EnVyUs. In April 2015, Gfinity announced its first major sponsorship deal, with News Corp UK & Ireland. In addition, the company also announced the appointment of Mr Jonathan Varney, founder of the Pitch International Commercial, as the non-Executive Director to the Board. Mr Varney has extensive experience in building commercial partnerships between brands and rights holders, and has also worked as a commercial director of Premiership Rugby.
Our view: After achieving an excellent viewership during the first half of the season, the company looks to achieve a better than initially estimated viewership for the full season. The progress made so far reflects rapidly growing popularity of eSports in the UK and also the company’s ability to deliver gripping eSports events. The company’s success is evident from the fact that the final day of the tournaments of Call of Duty and Counter Strike: Global Offensive events were played out to a sold-out arena. On the other hand, Gfinity entered several sponsorship agreements with prominent media houses. It also entered a mutually beneficial deal with The Sun comprising branding and advertising opportunities for the newspaper while creating new revenue streams for eSports including development of an e-commerce platform to sell eSports related merchandise. Moreover, the addition of Mr Varney to the Gfinity Board would be an added benefit going forward as he brings exceptional experience and insight of the commercial rights and broadcast markets to the table. The company has an online user base of 300,000 and possesses an eSports-dedicated arena to host weekly professional gaming competitions. Thus, in view of the interesting prospects and huge investments in the business, we recommend a Speculative Buy on the stock.
Forte Energy (LON:FTE) – Hold
On Friday, Forte Energy provided an update on its operations in the Slovak Republic. The company informed the application of a new exploration licence for the Kuriskova uranium deposit area in Slovakia was being processes by the Slovak Ministry of the Environment. As per the company, the application is compliant to the Geology Act in all respects. Forte intends to update the market once it receives a formal response from the ministry.
Our view: The preliminary results from the Kuriskova uranium deposit have looked encouraging and demonstrated that the project would be among the highest-grade and lowest cost uranium producers in the world. The project also has the potential to expand the resource through its multiple exploration targets. However, the uncertainty over the receipt of the new exploration licence have somewhat dulled the prospects of the company. Forte has been witnessing a lull in the uranium market for quite some time especially in view of the overall challenging market conditions for the commodities. For instance a major commodity player such as Rio Tinto withdrew its support from Energy Resources of Australia in the wake of difficulties in the nuclear industry. Moreover, Forte is yet to prove its mettle through further milestones at its existing (the Mauritanian and Guinean) as well as newly acquired low cost exploratory projects. Thus we maintain our Hold rating on the stock.
Petra Diamonds (LON:PDL) – Hold
On Friday, Petra Diamonds announced a trading update regarding the expected results for the year ending 30th June 2015. The underground production at the Finsch and Cullinan witnessed variability in both the achieved ROM grade and the product mix. Moreover, the treatment of high levels of C-Cut project development waste material through the main plant at Cullinan also impacted the revenues. Though the company left the annual production target of 3.2 million carats unchanged, it revised the expected revenues for the year to US$430m due to higher volumes of smaller diamonds and thus reduced average prices. However, the challenge of the diluted ore is likely to be less prominent for FY2016 as the company looks forward to increased production from less diluted and new mining areas along with lower waste development tonnes. Apart, the company’s expansion plans to attain a long term target of around 5 million carats by FY2019, remain on track. Petra would announce the annual guidance for FY2015 on 27th July 2015.
Our view: The company’s prospects have been marred by the drop in the average diamond prices and the poor quality of stones being produced from the diluted ore at the Finsch and Cullinan. The mining at the mature caves have reduced the probability of finding high quality stones. Moreover, the lower prices for the smaller diamonds are expected to impact the total revenues for this fiscal. This is the miner’s third profit warning for the year due to unpredictability in grade and production mix. Though the company expects the production to bounce back in 2016 due to new mining areas, the environment for the pricing and demand of the rough and polished diamonds remains challenging. Thus in view of the recent revenue guidance revision, we downgrade the stock to a Hold for now.
GlaxoSmithKline (LON:GSK) – Buy
On Friday, GlaxoSmithKline announced the results of the meeting of the Pulmonary Allergy Drugs Advisory Committee of the US FDA with respect to the Biologics Licence Application (BLA) for mepolizumab as a supplementary maintenance treatment for severe asthma with eosinophilic inflammation. The FDA Advisory Committee unanimously supported the efficacy and safety of mepolizumab in adults above 18 years of age suffering from severe asthma. The medicine is to be administered as a 100mg fixed dose via a subcutaneous injection every four weeks. On the other hand, the committee voted against the use of mepolizumab in adolescents 12-17 years of age with severe asthma in the absence of further data for analysing this sub-population. The BLA for mepolizumab was submitted to the FDA in November 2014 for approval. The Prescription Drug User Fee Act (PDUFA) goal date for mepolizumab is 4th November 2015. Meanwhile, the company has made regulatory filings in several countries to get further approval for mepolizumab.
Our view: The outcome of the advisory committee meeting with respect to the mepolizumab as a targeted treatment for ‘difficult to treat adults’ with severe asthma, testifies the immense potential of this medicine. Whilst there are many products in the market for long-term maintenance treatment of asthma, there are no approved therapies for patients suffering from severe asthma and predefined eosinophil levels. Mepolizumab is an investigational monoclonal antibody, which stops IL-5 from binding to its receptor on the surface of eosinophils. The aforementioned treatment would add to the very few treatment options available to such patients. Recently, the company’s BREO ELLIPTA became the fourth drug on the ELLIPTA platform to be accepted in the past year and a half for asthma patients. The company’s highest selling medicine, Advair, is already witnessing a decline in sales and also faces a patent expiry in 2016. Hence the approval of new drugs is likely to add further to the company’s portfolio. Thus in view of the above, and the recent streamlining of the company’s portfolio, we expect GlaxoSmithKline to generate stable returns for its shareholders and therefore retain a Buy rating on the stock.
Economic News
US PPI final demand
The US producer price index (PPI) for final demand improved 0.5% m-o-m in May, after declining 0.4% in April, the Bureau of Labor Statistics stated on Friday. The reading was above market expectations of a 0.4% increase. Core producer prices, excluding food and energy, edged up 0.1% in May. On a y-o-y basis, PPI demand narrowed 1.1% in May following a 1.3% drop in April.
US University of Michigan sentiment
The US University of Michigan’s consumer sentiment index for June increased to 94.6, from a 90.7 in May, data indicated on Friday. Economists expected the reading to rise to 91.2. The consumer expectations index, which closely forecasts the direction of consumer spending, advanced to 86.8 from 84.2, whereas the current economic conditions index climbed to 106.8 from 100.8.