The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 187.3 points down at 7:00 am.
New York: Wall Street was largely flat, as investors considered earnings reports while waiting for a resolution to the Greece’s financial crisis. The S&P 500 closed flat on Friday, but declined 0.5% during the week.
Asia: Markets are trading in the red, as the Greek debt crisis worsened after the country failed to strike a deal with its international creditors over the weekend. The markets declined despite the announcement of a stimulus package by the People’s Bank of China. The Nikkei 225 ended 2.9% lower due to a 2.2% fall in the industrial production for May. The Hang Seng was trading 2.1% down at 7:00 am.
Continental Europe: Equities ended in the green, driven by optimism over a resolution to the Greek issue on Friday. France’s CAC 40 and Germany’s DAX added 0.4% and 0.2%, respectively.
Crude Oil: On Friday, the prices Brent Crude Oil increased 0.1% whereas those of WTI crude oil declined 0.1%. The spread between the two varieties stood at US$3.6 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.50% lower on Friday at 768.54.
Today’s news
Capital controls imposed in Greece; banks to remain closed
After the breakdown of talks between Greece and its lenders, the ECB froze essential funding to the country’s banks. This forced Greece’s government to shut down the financial system, including banks, and impose a cash withdrawal restriction of €60 per day.
Lagarde refuses further assistance if Greece misses deadline
In line with the rules, the International Monetary Fund (IMF)’s Managing Director Christine Lagarde stated the institution would not provide any additional financial assistance to Greece if the latter misses the June 30 deadline to pay US$1.7bn.
Company News
DekelOil Public Limited (LON:DKL) – Speculative Buy
On Friday, DekelOil informed that the equipment and components required to construct the Kernel Crushing Plant (KCP) have arrived at Abidjan port, Côte d’Ivoire on 23rd June 2015. Following clearance from the custom authorities, the equipment will be transferred to Ayenouan. Once operational in Q4 2015, the KCP will operate at 60 tpd (tonnes per day). It has a capacity to produce palm kernel oil at a rate of 80tpd.
Our view: The installation of the KCP is likely to enhance the company’s profitability at Ayenouan, and also increase the production of Crude Palm Oil. With an initial capital expenditure of €1.1m, the KCP seems to offer an attractive return on the investment as the follow-on benefits are expected to far outweigh the costs involved. Once operational, the new KCP is expected to add a significant revenue stream to the project by enabling the sale of palm kernel oil and animal feed for the local market at factory gate. Meanwhile, plans are underway to roll out Guitry, the company’s second vertically integrated palm oil project in the Ivory Coast. DekelOil has more than met its historic targets – exceeding production targets earlier than expected, as well as building the Mill within the stipulated budget. In addition, West Africa continues to attract the attention of major palm oil developers who are looking to secure future expansion. The company is well placed for future growth with a defined strategy to build Ayenouan into a profitable and cash generative asset. We believe that the valuation does not reflect this success and there is a considerable scope for upside potential. We retain our Speculative Buy rating.
Beaufort Securities acts as corporate broker to DekelOil Public Limited plc
Condor Gold (LON:CNR) – Speculative Buy
On Friday, Condor’s wholly-owned Nicaraguan subsidiary Condor S.A. was granted a 25 year exploration and mining concession over a 32 sq. km area on the western side of La India Project called the Tierra Blanca Concession. The field visit by the company’s geologists has suggested that the concession offers an excellent greenfield exploration potential based on historic exploration data. Tierra Blanca covers the central part of a 10km wide, circular geological structure identified in satellite imagery, topography and Condor’s airborne geophysics data. This is interpreted as a caldera and partially bridges the gaps between the La India Project and its other neighbouring projects. The addition of the Tierra Blanca Concession expands the La India Project concession package to a total of 313 sq.km.
Our view: The La India Project is situated at the south-eastern end of a 75km long gold corridor while the Tierra Blanca Concession is situated within this corridor. As per the revelations of the geological tests, the concession’s location within a wide corridor of gold mineral zone and its proximity to the known gold mineralisation, indicate the presence of gold mineralised fluids earlier in the region. Recently, the company has been benefitted from the important drilling revelations at the La India Project that indicated an extension of high-grade gold mineralisation on La India Vein. In addition, the geological setting from Tierra Blanca remains highly prospective and we expect the company to witness growth through the extension of high-grade gold mineralization. In view of the above developments we remain optimistic about the company’s future prospects and therefore retain our Speculative Buy on the stock.
CityFibre infrastructure Holdings (LON:CFHL) – Speculative Buy
On Friday, CityFibre provided an update on the progress of its Peterborough CORE project. Nearly 126 local businesses entered service contracts with CityFibre’s service provider partners, reflecting a 3.2% penetration of the total addressable business market. The number has doubled since 2014 with a 12.6% conversion rate from the base of businesses which took part in the company’s pre-registration campaign. In addition, the total contract value (TCV) associated with these 126 business contracts stood at £1.7m, and represents 43% rise in the cumulative TCV on the network asset since the initial public sector anchor contract.
Our view: The strong uptake of CityFibre’s network services in the Peterborough is a result of the company’s successful registration campaign and its strong relationships with local service providers. With a market penetration of 3.2% since taking the project to the ground in 2014, the company shows that it can play a major role in providing supportive services to the city’s local businesses. The above update indicates that CityFibre remains well on track in progressing towards commercialisation and providing future-proof internet connectivity through its fibre optic infrastructure. The company already has some impressive contracts and national level partners, and joint ventures with UK’s leading broadband service providers to cover a large customer base. In addition, the company recently informed about the 20% deployment of fibre network in Kirklees where the company aims to bring the gigabit connectivity by September 2015. The company’s strong financial position is likely to facilitate the future growth of the fit-for-purpose local access broadband infrastructure. In view of the above and the rising demand for the ultra-fast connectivity fibre optic network, we retain a Speculative Buy on the stock.
Hummingbird Resources (LON:HUM) – Speculative Buy
On Friday, Hummingbird Resources informed that it has entered a subscription agreement to raise £500,000 gross through the placement of 1,515,152 New Ordinary Shares at 33p each with a long term shareholder who is an affiliate of Sprott Inc. The proceeds are expected to fund the near-term production and working capital requirements of the company’s Yanfolila Gold Project in Mali. The arrangement follows the placing announcement on 17th June 2015. The new shares are expected to be admitted to LSE’s AIM on or around 30th June 2015. Following the placement, the company’s enlarged issued capital stands at around 106 million ordinary shares.
Our view: The receipt of additional funding from Sprott, an important shareholder in Hummingbird Resources, is testimony to the company’s clever strategy. Sprott, an asset management firm, has a long track record of successful investments in the natural resources sector. Elsewhere, the company continues to make progress with the technical studies at the Yanfolila gold project and the additional funding is likely to provide an added boost. The improved pit slope design for Komana East and Komana West should significantly increase recoverable ounces thereby allowing Hummingbird to focus on the two initial pits and simplify the mining process during early mine life while leaving the additional three pits (Sanioumale East and West and Guiren West) to be developed later. Hummingbird continues to technically de-risk Yanfolila while potentially improving the overall project economics. With the 1.8Moz (million ounce) Yanfolila project continuing towards near term production and the 4.2Moz Dugbe project providing additional upside, we maintain a Speculative Buy rating on the stock.
Economic News
Eurozone M3 money supply
Eurozone’s M3 money supply decelerated at an annual pace of 5.0% in May after growing 5.3% in the previous month, missing the market forecast of an improvement to 5.4%, the European Central Bank said on Friday. Loans to the private sector and households remained increased 0.5% and 0.9% respectively. On a three-month average from February to April, growth in money supply stood at 5.0% y-o-y.
US university of Michigan sentiment
US University of Michigan Consumer Sentiment Index improved to 96.1 in June from 90.7 in May, data showed on Friday. Economists were expecting a reading of 94.6. The Consumer Expectations Index, which closely forecasts the direction of consumer spending, rose to 87.8 from 84.2., and the Current Economic Conditions Index increased to 108.9 from 100.8.