The Markets
Market opening: The FTSE-100 opened 34 points lower this morning as of 8:02 am.
New York: Wall Street has fallen the most in the previous six week as of yesterday. Lower commodity prices have been weighing on energy and raw materials providers, in occurrence with investors bracing the first interest rates rise since 2006. The Dow Jones dropped 1.44%, similarly the S&P fell 1.4% and Nasdaq dropping 1.22%
Asia: With a slump in the commodities market on Wall Street deterring investors from higher risk assets and expectations of higher interest rates, shares have declined in Asia. The Japan Nikkei dropped by a slight 0.8% and Hong Kong’s Hang Seng fell 1.9%.
Continental Europe: With a commodities sell off dragging Asia lower overnight and with the likelihood of rising interest rates in the US. Euro markets have showed to be opening lower today.
UK small caps: The FTSE AIM All-Share index closed 0.78% lower yesterday at 736.95.
Today’s news
Rolls-Royce shares sink as profits are hit from a lower demand
Shares in aerospace group Rolls-Royce sank 19.6% as it is warned that profits will be hit by a fall in demand. This year’s profits are to fall at the lower end of expectations along with projected ‘headwinds’ of £640 million for next year. With a business review being carried out, it is said there will likely be jobs lost within its current 2,000 senior managers.
Company News
Savannah Resources (LON:SAV) – Speculative Buy
Savannah Resources, the diversified mining group focused on exploration and development of mineral sands in Mozambique and copper-gold projects in Oman, announced today that drilling is underway on the high-grade copper zones identified around the Mahab 4 deposit on the Block 5 permit in Oman. Savannah owns a 65% shareholding in Al Fairuz Mining, the owner of the Block 5 permit. The diamond drill programme is testing for continuity of high-grade copper mineralisation in both up-dip and down-dip extensions from the high-grade (>5% Cu) core of the Mahab 4 deposit. Previous drill result returned 54.86m grading 6.32% Cu (in B5MB4D071 from 63m), 51.58m grading 5.17% Cu (in GRB5D035 from 44m), 20.06m grading 5.62% Cu (in GRB5D032 from 67m) and 20.4m grading at 5.49% Cu (in GRB5D047 from 99m). The current mineral resource estimate at Mahab 4 is 1.5Mt grading 2.1% Cu containing 30,150t of copper. A total of four drill holes are planned approximately 20m from previously intercepted mineralisation to test for continuity above and below the known high-grade core.
Our view: We are encouraged with the potential for continued high-grade copper mineralisation at Mahab 4 and expect an increase the current resource estimate once drilling and assay results are completed. Savannah now has two drill programmes underway and we look forward to positive drill results from Mahab 4 as well as the new VTEM targets and historical copper targets around the Aarja prospect in Block 4 permit area. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Savannah Resources.
Carillion, a leading integrated support services company with extensive construction capabilities, yesterday announced that it has won, with its subsidiary the Bouchier Group, support services contracts worth £100m over a period of up to 5 years for a number of oil sector companies. The contracts includes 3 year contract for Shell starting from this month, contract extensions with Canadian Natural Resources Limited (‘CNRL’) and maintenance and hard facilities management contract for the Department of National Defence Canada.
Our view: Carillion has further expanded its existing attractive order book worth £1.7bn won since 30 June 2015. The contract with Shell shows the effective strategy of delivering support services through the Bouchier Group, one of the leading aboriginal businesses in Canada. This contract further demonstrates the long-term strong relationship with Shell who Carillion already deliver facilities management services in the UK and the Middle East. As per the results for H1 2015 announced on 26 August 2015, the Group witnessed higher margins, strong revenue and cash flows. Going forward, Beaufort expect Carillion to achieve its target for the year owing to rise in the number of orders, an increase in pipeline contracts and an expected improvement in market conditions. Beaufort maintain a Buy rating on the stock.
Avanti Communications Group (LON:AVN) – Speculative Buy
Avanti Communications Group (‘Avanti’), a leading provider of satellite data communications services in Europe, the Middle East and Africa, yesterday released its trading update for the period ended 30 September 2015 (Q1 2016). Revenue fell by 11.7% year-on-year to US$13.7m (Q1 2015: US$15.5m) and EBITDA reduced to US$(2.9) million from US$(2) million. On a constant currency continuing business basis, revenue represent 23.4% sequential growth over the previous quarter. The average fleet utilisation remained on a positive trend at the top end of the 20%-25% range during the period and revenue growth in the top-20 customer bandwidth was at 57.5% increase on a constant currency basis. Cash at the end of the period was US$219.3m.
Our view: Avanti’s core revenue growth were evident by the record increase in revenue growth by the top-20 customer bandwidth. Revenue remained flat compared to Q1 2015 on a constant currency continuing business basis. The Group recently informed that it has been awarded a contract by Telkom SA to offer national high-speed broadband coverage in South Africa. The company will deliver the service using its existing HYLAS 2 Ka-band satellite, which provides 100% coverage to South Africa. Avanti won several distribution partners and improved existing relationships to access the huge latent demand for connectivity in high growth markets. The company is progressing well on the planned launch of HYLAS 3 and HYLAS 4 satellite during 2017 and plans to invest in the sales and marketing activities to cater to the markets covered by HYLAS 4. The Group is fully funded to meet all its medium-term financial commitments. Given its strong position and incremental opportunities in the pipeline, we expect the company to maintain its operational momentum in the near future. Beaufort reiterate a Speculative Buy rating on the stock.