Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 4.5 points down at 7:00 am.
New York: Wall Street remained largely unchanged ahead of the extended weekend amid weak jobs data and Greece’s highly anticipated referendum on Sunday. The S&P 500 closed flat in yesterday’s trading session.
Asia: Equities are trading mixed. Chinese stocks plunged, with investors avoiding risky positions ahead of the Greece vote. The Nikkei 225 gained 0.1% at close paring initial losses, whereas the Hang Seng was trading 0.2% down at 7:00 am.
Continental Europe: Markets ended in the red, with looming uncertainty ahead of Greece’s referendum on Sunday to accept or reject further bailout by creditors. France’s CAC 40 and Germany’s DAX shed 1.0% and 0.7%, respectively.
Crude Oil: Yesterday, prices of WTI crude oil decreased 0.1% whereas those of Brent Crude Oil increased 0.1%. The spread between the two varieties stood at US$5.1 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.08% lower yesterday at 761.31.
UK house price growth slows to two-year low
As per Nationwide’s latest report, house prices in the UK dropped 0.2% m-o-m in June, due to which the annual growth rate decelerated to 3.3% y-o-y from 4.6% y-o-y in May. However, the chief economist at the agency maintains that house prices are likely to be firm over the second half of the year amid improving activity. The agency expects prices to rise 6% y-o-y in 2015.
UK construction PMI rises in June
Markit’s monthly survey of the UK construction sector revealed that the PMI rose to 58.1 in June from 55.9 in May, marking its largest increase in a year. The growth was led by the house building sector, followed by civil engineering and commercial works. Meanwhile, confidence in the UK construction sector hit an 11-year high.
Advanced Oncotherapy, the developer of next-generation proton therapy systems for cancer treatment, yesterday announced that the first tests have begun on its LIGHT system’s Side Coupled Drift Tube Linac (SCDTL). This news confirmed that development remains in line with the Group’s expected timetable. The SCDTL modules are being constructed in Italy by T.S.C. Srl (TSC). When combined, the four SCDTL modules used in the LIGHT system will accelerate protons from 5MeV to 37.5MeV. The SCDTLs are a key component in the company’s next generation proton therapy system, and sit between the Radio Frequency Quadruple (RFQ), which first accelerates the protons to 5MeV, and the Coupled Cavity Linac (CCL), which accelerate protons from the SCDTL to the speeds needed to effectively treat radiosensitive tumours. The news that TSC has commenced testing of the SCDTL at its facility in Fiumicino, near Rome, follows on from the successful completion of RF Power testing of the first CCL module in May and is in line with the timetable provided by the Company to shareholders in November 2014.
Our view: This news marks another important step forward in delivery of the next generation of proton accelerators. The fact is that AVO’s ground-breaking big science and is, as promised, progressing at an exceptional pace toward commercialisation.The formation of a management team to deliver LIGHT through to launch and patient application has already been completed. Key supply chain partners have been appointed: ScandiNova (RF Power), Toshiba (Klystron), VDL (CCL module), Pyramid (beam focusing nozzle) and ICT (software). An oversubscribed placing following the year end raised £20 million (net) to develop and install first the UK’s first Proton Therapy Centre using the LIGHT System in Harley Street, which will be followed by the first commercial sale to Sinophi Healthcare. The enormity of this opportunity and the market potential it presents has already been significantly detailed in Beaufort initiation research of September 2014 and subsequent updates. In simple terms, if AVO delivers exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation proton therapy devices all but obsolete. Its principal limitation would then become simply its capacity to deliver to a global opportunity that will grow dramatically beyond its current US$2.5bn size, as it will also becomes the natural replacement for the more antiquated X-ray radiation machines that are installed in huge numbers around the globe. Given such an outcome, of course, major international competitors wishing to remain in the game will almost certainly be willing to pay a handsome price, one way or another, to get their hands on AVO’s proprietary technologies. Advanced Oncotherapy plc remains one of Beaufort’s key investment picks for 2015.
Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc
Motive Television (LON:MTV) – Speculative Buy
Motive Television, the technology provider to broadcasters and pay television operators, yesterday announced that it has developed a Mobile Personal Video Recorder (PVR), which the Company believes is the world’s first ATSC format PVR for mobile devices. Unlike other personal video recorders, Mobile PVR is entirely based on proprietary Motive software. This new product provides the ability to time shift over-the-air programmes seen on tablets and mobile devices, and works with the TabletTV app and TPod in the United States. Mobile PVR uses an intuitive functionality and interface, similar to the functions consumers have used in the home for the past 20+ years. Users can schedule to record programmes up to seven days in advance and then watch them for their personal use at a later time. TabletTV in the United States already has the One-Touch Recording feature which permits pausing, playing, and recording a current programme, however, the new Mobile PVR will extend that capability to recording future programmes for later viewing. Mobile PVR will be introduced as a Beta version this month to existing users of TabletTV in the U.S. and made available to the general market in September. In the future, Motive plans to licence its Mobile PVR software to other vendors of consumer electronics and app providers.
Our view: Motive is one again demonstrating it has the exceptional ability to both identify and produce software products and applications that should be of significant interest for many international users. The additional functionality of Mobile PVR for TabletTV/TPod enhances the offering’s sophistication and confirms Motive’s position as the market leader in mobile free-to-air television viewing. Having said that, however, ensnaring the right distribution/enfranchisement with both hardware manufacturers and broadcasters, still remain the key to the technology’s success. Mass international uptake appears likely to require at least one mainstream tablet producer to start the ‘ball rolling’ by committing to incorporate the tuner into its device and, presumably, embed the TabletTV App into its system after having licensed it or formed some other usage agreement with Motive. This would, of course, require the tablet designer to accept that analogue reception can comfortably co-exist alongside ‘paid for’ digital streaming. In so doing, this should also speed transition of the Group’s business proposal from one dependent on one-off unit sales, to a significantly more profitable subscription or advertising-based model. Elsewhere, with product development now largely paid for, a giant maritime opportunity can be identified for the Group’s BYOD TV, while its Content Express also finds itself positioned to penetrate important new territories. Both of these could accrue new streams of revenue and longer-term contacts within the current year, whereas TabletTV possibly remains hindered by a 2-year or more tablet production cycle before being able to gain significant momentum. Motive’s lowly valuation presently discounts a further round of equity funding in order to support, perhaps, two more years of quite substantial, albeit declining, losses. Beyond this, however, it is possible to perceive quite considerable value within Motive’s IP that is capable of being monetised either through outright sale/licensing of one or more of its different technologies or expansion of product revenues. Thus, we maintain a Speculative buy on the stock.
Beaufort Securities acts as corporate broker to Motive Television Plc
Yesterday, San Leon Energy, announced that it has signed a rig contract with Entrepose Drilling for the Cabot 750 rig, to drill the El Aaiun-4 well on the Tarfaya conventional licence, located onshore Morocco. The company expects to spud the well in the latter half of August 2015. It would take nearly 30 days to reach total depth (TD) of around 2000 metres below rotary table.
Our view: With the contract for the rig in place, the company has come a step closer to the commencement of drilling at Tarfaya conventional license. The well is likely to have significant potential given its structural location updip of gas encountered in an older well and the proximity to the gas market. In addition, the company’s recent results suggest that San Leon made great strides in the year 2014 as its Rawicz-12 well on the Rawicz gas field in Southwestern Poland, was tested at a highly successful 4.5 million standard cubic feet per day and may commence production in 2016. In July 2014, the company entered an agreement with Palomar Natural Resources around its Rawicz and Siekierki fields that involved significant work programmes and positioned San Leon for near-term production. The company moved considerably closer to production and cash flow, that was further aided by the placing in June 2015. Meanwhile San Leon’s others prospects seem to be gaining momentum following the spudding of the Gierałtowice prospect and the oil discovery at the Sidi Moussa block in Morocco. With the impending spudding at the Tarfaya license we believe the company is well placed to drive its future growth. Thus in light of the above developments, we retain a Speculative Buy on the stock.
Yesterday, Audioboom announced that it has entered an agreement with US-based Cumulus Media Holdings to use its fully featured SaaS platform tools for the entire Cumulus radio network. The radio network is said to comprise over 450 stations, over 100 nationally syndicated shows and over 240 million unique listeners. As pert of the deal, Cumulus would use Audioboom’s platform to embed content across its network’s websites and mobile applications. The two companies are also likely to partner in the commission and production of original audio content that would be distributed through new podcast networks covering news, sports and country music. Further, Audioboom would appoint Westwood One Inc, Cumulus’s media sales division as its advertising sales representative to sell adverts embedded in the audio content made through the above agreement, and the additional US content provided by Audioboom. The company also provided a trading update suggesting that it expects to achieve its long-term plan for substantial growth in advertising sales following the above agreement and other developments in other areas. The company expects lower revenues for 2015 in wake of more time taken to conclude the discussions with Cumulus but expects the company to deliver the expected performance for the year ending 30th November 2016. In addition, the company has increased the marketing budget by nearly £800,000 for the fiscal in order to capitalize on the strong growth in KPIs in the first half of the year.
Our view: The deal with a leading radio group in the US is a remarkable one for the company and is expected to boost the company’s KPIs and revenues in a big way. Not only has the company has ensured stable revenue streams, but has also put the sales of the adverts under the expert guidance of Westwood. Though the full year revenue target may not be met as the deal took longer than anticipated to be finalised, yet the long term benefits from the arrangement cannot be ignored. Furthermore, an 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.
Yesterday, Persimmon provided a trading update for the half year to 30th June 2015. During the period, new home legal completion volumes increased 7% to 6,855 units and the total revenue was up 12% to £1.34bn, with the average selling price increasing 4% to £195,000. Cancellation rates remained low and the number of visitors to the company sites across UK remained steady in comparison to the previous year. On a y-o-y basis, the company’s weekly rate of sale and the forward sale into the private sale market was up 11% and 12%, respectively. Total forward sales value on 30th June increased 15% y-o-y to £1.36 bn. The company opened 122 new sites to increase its outlet network to 395 active sites, up 5%, and plans to add another 125 new sites during the second half of the year. During the six months, Persimmon acquired around 11,500 new plots of land across the UK and the consented land bank totalled 92,400 plots as on 30th June 2015. On 2nd April 2015, the company made the third payment of the Capital Return Plan of £291m, or 95p per share. During the period, the company’s total free net cash inflow before capital return stood at nearly £191m while the cash holdings were around £278m. The company plans to release the half yearly results on 18th August 2015.
Our view: Persimmon traded well in the first half of 2015 as is evident from the impressive trading update. The strong forward booking and the heightened activity at the sites was aided by the availability of competitive mortgage lending and continued growth in employment with rising real wages, despite the general elections in May 2015. Demand throughout the market has been resilient and the land market continues to provide attractive opportunities for investment to support the future growth of the business. The company continues to take advantage of these profitable opportunities to strengthen its land bank in important locations. The company possesses an enviable balance sheet and continues to repay the shareholders through its Capital Return Plan. Thus in view of the overall optimism, we retain a Buy on the stock.
Yesterday, Ryanair released its traffic statistics for the month of June 2015. The number of customer grew 14% y-o-y to 9.5 million for the month and the seat load factor improved 5 percentage points to 93%. On a rolling basis, the annual traffic to June grew 14% to 94.3m customers. In a separate announcement, the company informed that Hertz’s exclusive car hire supply agreement with Ryanair has been terminated with effect from 2nd July 2015. Ryanair would expect to have a replacement supplier linked to the Ryanair.com website by October 2015. The company also plans to take legal action against Hertz for the untimely termination of the contract.
Our view: Thanks to Ryanair’s low air fares and stronger forward bookings, the company witnessed a steep rise in the customer traffic and the seat load factor for the month of June. The company continues to build on the success of its ’Always Getting Better’ customer experience improvement programme, that sets apart the carrier as more than just a low cost airline. In addition the company has introduced new routes and increased frequencies, with additional services for business passengers. The new enhancements for the year 2015 are expected to include the launch of a new website, new app, new cabin interiors, new crew uniforms, and better in-flight menus. Ryanair would also provide unique features like hold the fare and price comparison services to its customers. Thus in view of the constant improvement in the services and the value provided, we reiterate a Buy on the stock.
US change in non farm payrolls
US non-farm payrolls rose by a seasonally adjusted 223,000 jobs in June, the US Labour Department said yesterday. Markets were expecting payrolls to increase by 233,000. The rise in payroll numbers for May was revised downwards to 254,000 from 280,000 reported earlier. The unemployment rate for June edged down to 5.3%, beating street expectations of 5.4%.
US factory orders
US factory orders declined 1.0% m-o-m in May after a revised drop of 0.7% in April, the US Department of Commerce said yesterday. The reading was much behind of the economists’ forecast of 0.5% decline. Excluding orders for transportation equipment, factory orders increased 0.1% in May.
US initial jobless claims
The number of Americans that filed their first initial claims for unemployment benefits increased by 10,000 to a seasonally adjusted 281,000 in the week ended 27th June, the Labor Department stated yesterday. Economists had forecasted a reading of 270,000. Last week’s unrevised figure stood at 271,000. The four-week moving average of jobless claims increased 1,000 to 274,750 for the last week.