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Beaufort Securities Breakfast Alert Beowulf Mining, Cluff Natural Resources, Horizon Discovery Group and Motive Television

Published: 08:02 21 Jul 2015 BST

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The Markets

Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 3.4 points up at 7:00 am.

New York: Wall Street remained upbeat amid positive earnings reports. However, a dip in oil prices hurt companies in the energy sector. The S&P 500 advanced 0.1%, primarily led by the information technology sector.

Asia: Markets are trading higher, extending overnight gains from global indices. However, a drop in commodity prices pared gains as the Nikkei 225 closed 0.9% higher, whereas the Hang Seng was trading 0.7% up at 7:00 am, tracking its peers from mainland China.

Continental Europe: Equities ended in the green as the IMF confirmed Greece’s payment of US$2bn. Furthermore, the opening of banks in Greece after a three-week shutdown improved market sentiments. Germany’s DAX and France’s CAC inched up 0.5% and 0.4%, respectively.

Crude Oil: Yesterday, the WTI and Brent Crude Oil prices declined 1.5% and 0.8%, respectively. The spread between the two varieties stood at US$6.5 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.16% higher yesterday at 758.01. To read our latest research click here.

Today’s news

IMF and ECB confirm Greece repayment

Greece repaid its arrears to the International Monetary Fund (IMF) and European Central Bank (ECB) after it received €7bn as a bridge loan from the EU. The country cleared overdue debt repayments of €2.05bn and €4.2bn to the IMF and ECB, respectively.

IMF appoints new chief economist

The IMF announced the appointment of Maurice Obstfeld as the agency’s new chief economist. He replaces Olivier Blanchard as Director of the IMF’s research department in September. Mr. Obstfeld has advised several governments and central banks, and his expertise is in optimal currency.

Company News

Motive Television (LON:MTV) – Speculative Buy

Motive Television, the technology provider to broadcasters and pay television operators, yesterday announced that its fully-owned subsidiary Motive Television Services Limited had signed a Memorandum of Understanding with MTN (Maritime Telecommunications Network) Satellite Communications of Miramar, FL USA (MTN). Under the MOU, the Company will provide Motive’s BYOD TV technology and paid engineering support to assist MTN in developing new services to be marketed by MTN to its worldwide clients. MTN is the leading provider of communications and content services for remote locations around the world serving the cruise, yachts, ferries, oil & gas, commercial shipping and government markets. On 13th July 2015, EMC announced it had completed its acquisition of MTN. The combined global company retains the name ‘EMC’ and is now headquartered at MTN’s Miramar, FL offices.

Our view: MTN appears to be the ideal partner for Motive’s BYOD TV technology. Supported by one of the world’s most secure networks, covering 99% of the world’s populated regions and the majority of all ocean regions, MTN provides communications and content services and extends its presence through a global network of Maritime Service Providers (MSPs) and Resellers to the maritime industry. These include end user products, enterprise and technical solutions, network management and bandwidth optimization. Under this MOU, Motive will make the modifications and customization necessary to make it possible for MTN to provide a demonstration of BYOD TV to its customers at a key trade exhibition in September 2015. Should MTN decide to go forward following the exhibition, Motive will complete a marketing agreement with MTN whereby MTN is licensed to market and offer such services to MTN clients and customers. This partnership should greatly extend the marketing reach of its BYOD TV technology to thousands of ships including ferries, cruise ships, yachts, and commercial vessels that are clients and customers of MTN for maritime communications services. This cooperation with MTN has the potential to make Motive’s BYOD TV an industry-leading solution; it also serves as a timely reminder that Motive has a wide portfolio of analogue TV technologies, rather than being the ‘one-trick pony’ that it is sometimes labelled. That said, disappointment that the Group’s innovative TabletTV App has so far failed to gain transaction has continued to overawe the share price and may, in turn, necessitate some alteration of the business plan in order capture its otherwise obvious opportunity. 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. In view of the above argument, we reiterate a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Motive Television Plc

Beowulf Mining (LON:BEM) – Speculative Buy

Yesterday, Beowulf Mining, the mineral exploration and development company focused on the Kallack iron ore project in Sweden, announced that it has granted options over 17 million ordinary shares at 1p to its directors. Mr. Kurt Budge, the CEO has been granted 9 million options under the Company’s Enterprise Management Incentive Scheme and Bevan Metcalf, the Chairman has been allotted 8 million options under the company’s Unapproved Share Option Scheme. The exercise price for the option is 1.66p per share, a premium of 32.8% over the closing market price on 17th July 2015. The options are vested over a period of two years, with a third of them being vested immediately on grant, one third on the first anniversary of grant and the remaining on the second anniversary. The options are valid for five years from the date of grant. Post the grant, there are 22.1 million options in the issue representing approximately 5.1% of the company’s issued share capital.

Our view: Beowulf’s grant of options not only strengthens the ownership of directors but also inspires them to work harder for growth of the company due to better alignment of interests. On the other hand, the options also ease some of the fixed compensation pressure on the company and allow it to use the available funds in an optimal manner. Meanwhile, Beowulf’s flagship Kallak iron ore project continues to develop with the aim to produce high quality ores. The results from its latest metallurgical testwork programme showed high grade and high purity magnetite concentrate with over 71% iron content and high grade hematite concentrate with over 68% iron content. These results bode well for Beowulf’s key market targets such as pellet production and direct reduction iron processing as well as potential high purity chemical industry applications. Therefore, we maintain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Beowulf Mining plc

Horizon Discovery Group (LON:HZD) – Speculative Buy

Yesterday, Horizon Discovery released trading update for the six months ending 30th June, ahead of its interim results on 22nd September 2015. The company’s revenues were around £8.6m, 112% ahead of the same period in previous year. The services segment was the leading contributor with revenues of around £5.4m. The company’s increased number of contracts and launch of new genetic screening services boosted the revenues in this division .The products business segment of the company had revenues of around £3.0m led by increase in the cell line and diagnostic reagent product inventory to around 16,500 products (six months to 30th June 2014: around 2,750). Horizon made improvement in its sales channel for cell line products by entering into an agreement with Thermo Fisher Scientific. The company also expanded its sales channel for diagnostic reagent products by Original Equipment Manufacturing (OEM) partnerships with ArcherDX, CareDx and Transgenomic. Horizon made significant investments to improve its R&D and expects to receive potential future R&D milestones of up to £158m in addition to future product royalties. The company also raised £25m through share placing and strengthened the Board by the appointment of Grahame Cook as a Non-Executive Director and Chairman of the Audit Committee.

Our view: Horizon’s strong half yearly performance was in line with its strategy to deliver sustainable core revenue growth, increasing the range of activities and entering into agreements to improve operations. The company’s recent launch of commercially available engineered mammalian cell line has already generated fruitful results and is expected to be a growth driver in the future. In addition, the launch of new genetic screening services, including Horizon’s CRISPR-Cas9 sgRNA technology platform is likely to increase the number of contracts and boost the earnings. Horizon also expects to make investments to link its commercial and operational infrastructure by development of new Enterprise Resource Planning (ERP) system, e-commerce platform and website. The company is expecting full year revenues to be in line with market expectations owing to the strength of the forward pipeline and robust demand for products and services growing across the business. In view of the above developments, we reiterate a Speculative Buy rating on the stock.

Cluff Natural Resources (LON:CLNR) – Speculative Buy

Yesterday, Cluff Natural Resources provided an update confirming the significant progress made under the Memorandum of Understanding (MoU) with Halliburton Manufacturing and Services Limited, for the development of Southern North Sea Gas and Underground Coal Gasification (UCG) assets in the UK. Both the companies are currently working on a structure to facilitate and accelerate the drilling of one or more wells on CLNR’s conventional licences in the Southern North Sea. Simultaneously, Halliburton is also providing technical and geological help for the development of CLNR’s Southern North Sea assets and it’s Kincardine UCG Project in the Firth of Forth, Scotland.

Our view: Cluff’s MoU with Halliburton remains on track considering the latest developments and progress made in the projects. The company has a UCG portfolio of nine licenses covering an area of 690 sq km, exposing it to five coal basins in Scotland, England and Wales. UCG provides huge opportunity to the company as it is unexplored due to its location and entrenched decline of UK’s mining industry. Cluff plans to leverage on the relationship with Halliburton and initially focus on Kincardine Project in Scotland to develop UK’s first deep offshore project. In addition, the company also holds five promote licenses having total eleven blocks in an emerging gas province of Southern North Sea for conventional gas exploration. These blocks are located in relatively shallow water, making easy development of new conventional gas discoveries. Therefore, in view of the above argument, we reiterate a Speculative Buy rating on the stock.

Economic News

Germany PPI

Germany’s producer prices fell 1.4% y-o-y in June compared with a decline of 1.3% in May, Destatis revealed yesterday. The reading came in line with the economists’ expectations. On an m-o-m basis, the producer prices declined 0.1% for the month, after remaining flat in May, matching the market expectations.

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