The Markets
Market opening: The FTSE-100 is expected to open around 32 points higher this morning.
New York: Wall Street in the green, as minutes from the Fed’s meeting raised the possibility of an interest rate hike in December. The S&P 500 advanced 1.6%, led by the healthcare sector.
Asia: Equities are trading higher, taking positive cues from the Wall Street. In addition, an improvement in commodity prices lifted investor confidence. The Nikkei 225 rose 1.1%, as the Bank of Japan maintained its interest rates. The Hang Seng was trading 1.2% up at 7:00 am.
Continental Europe: Markets ended in the red amid security worries surrounding the Paris attacks last week, with the travel and leisure stocks incurring losses. France’s CAC 40 and Germany’s DAX shed 0.6% and 0.1%, respectively.
Crude Oil: Yesterday, Brent and WTI oil prices rose 1.3% and 0.2%, respectively. The spread between the two varieties stood at US$3.4 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.05% higher yesterday at 729.23.
Today’s news
Eurozone construction output drops in September
As per the data released by Eurostat, construction output in the Eurozone fell 0.4% m-o-m in September, the first decline in three months, after a 0.5% rise in August. The weak data indicates struggle in the construction sector despite positive environment across other sectors.
Company News
DekelOil Public (LON:DKL) – Buy
Yesterday, DekelOil Public (DekelOil) informed that it has started commercial production and sales of Palm Kernel Oil and Palm Kernel Cake. The production follows pilot testing of the Kernel Crushing Plant (KCP). The company recently reported 29,137 tonnes of crude palm oil (CPO) production at Ayenouan palm oil project in Côte d’Ivoire. DekelOil plans to increase the production at the KCP to its installed capacity of 60t/day in the coming eight weeks.
Our view: The aforementioned news is an important milestone in DekelOil’s growth story. As the company commenced production at the Ayenouan palm oil project in line with the schedule, its sales and profit margins are set to expand going forward. DekelOil holds 51% stake in this project, which is having a capacity of 70,000 tons of CPO. Additionally, DekelOil possesses a nursery with a capacity of 1 million seedlings per year. Furthermore, the company delivered solid performance for the latest quarter offsetting the difficult CPO pricing environment. The company’s CPO production in the first nine months of 2015 was more than double of the total production reported in the fiscal year 2014. DekelOil benefitted from an upgrade of logistics ensuring timely supply of feedstock, thereby enhancing overall efficiency. Going forward, the company plans to continue with its planting programme in the Ayenouan region and start operations at the second project based out in Guitry. We believe DekelOil’s earnings growth is likely to accelerate going forward given its substantial resources and prospective plans. Therefore, we maintain a Buy rating on the stock.
Beaufort Securities acts as corporate broker to DekelOil Public plc
Advanced Oncotherapy (LON:AVO) – Speculative Buy
Yesterday, Advanced Oncotherapy (AVO) informed that it has disposed of its subsidiary, Oncotherapy Resources Ltd (ORL), for a consideration of £100,000. The company has already received payment of £75,000 and would receive the remaining amount after one year of the disposal.
Our view: The aforementioned sale of ORL is in line with AVO’s strategy to focus on the development of its Proton Therapy technology. The company plans to dispose of the Folkestone property to complete the process of reorganization. Earlier this week, AVO informed of the successfully completed the high power testing of two Coupled Cavity Linac (CCL) modules at its facility in Geneva. The result validates the use of modules under necessary environment to provide high energy protons for effective treatment of patients. Last month, the company received second LIGHT purchase order from China, along with the prospect of construction of further four Proton Centres in the country (with an overall cost of around £800m) that will also use AVO technology. The Chinese market provides the company a huge opportunity owing to the rise in newly diagnosed cancer cases and deaths due to cancer in China. Furthermore, AVO has signed a joint venture agreement with CircleHealth to operate the Company’s proton beam cancer therapy centre in Harley Street. In view of the continuous developments surrounding AVO, we believe the company has bright prospects going ahead. Therefore, we retain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc
StratMin Global Resources (LON:STGR) – Speculative Buy
Yesterday, StratMin Global Resources (StratMin) released an update in relation to its funding partner Bass Metals Ltd. Bass informed that it would make the payments for the first tranche of transaction before 31st December 2015. Post the discussions, the second tranche amounting to £1,500,000 would be deferred until Q1 2016.
Our view: The aforementioned news is encouraging for StratMin as it is all set to receive payments from Bass. The company plans to utilize the funds to increase its graphite production by investing in Graphmada graphite project located in Madagascar. Meanwhile, StratMin is progressing well at its Loharano project as the plant moved into 24-hour operation period. Throughout the month of September, the processing plant operated for 24 hours a day, six days a week allowing one day for planned maintenance, while the drying plant operated non-stop for seven days a week. Whilst there remain areas of improvement, we are confident that management can achieve its production goal of 6,000 tonnes per annum. We look forward to sustained earnings growth on the back of continued improvement in performance at Loharano. In light of the above argument, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to StratMin Global Resources plc
Falcon Oil & Gas (LON:FOG) – Speculative Buy
Yesterday, Falcon Oil & Gas (Falcon) informed that it has completed drilling operations at the Amungee NW-1H horizontal well. The well was drilled to a depth of 3,808m including 1,100m horizontal section in the ‘B Shale’ interval of the Middle Velkerri Formation. The Amungee NW-1H well is the first horizontal well drilled in the Beetaloo basin. The favourable shale properties from the Amungee NW-1 vertical well qualify the area as a potential and laterally wide sweet spot in the north of the Beetaloo basin. The brilliant gas shows throughout raise the possibility of high levels of gas across the entire horizontal section. In addition, steady lithology, clay mineral composition, and total gas readings recorded throughout the drilled B Shale section offer a good platform for multi-stage hydraulic fracturing scheduled for 2016. The Beetaloo Joint Venture (JV) now plans to carry out evaluation program and petrophysical analysis of all the technical data gathered on the three wells drilled till now.
Our view: The completion of drilling at the Amungee NW-1H horizontal well is a positive development for Falcon. Results have been encouraging with excellent gas shows indicating the potential prospects in the Beetaloo region. The decision to target the B Shale area before schedule turned fruitful as the well satisfied all the exploration purposes. Going forward, the JV partners plan to conduct Diagnostic Fracture Injection Tests (DFIT) on all of the vertical wells drilled in 2015 and 2016. DFIT is the most suitable tool to get reservoir quality data, such as pressure and permeability, and completion quality data. Additionally, the evaluation program would help the JV with technical expertise to design and plan the 2016 program. This program comprises of two vertical wells and the multi-stage hydraulic fracturing of the Amungee NW-1H horizontal well. In light of the above argument, we maintain a Speculative Buy rating on the stock.
Economic News
US MBA mortgage applications
US home mortgage applications, including both refinancing and home purchase, rose 6.2% in the week ended 13th November, after a 1.3% fall in the preceding week, the Mortgage Bankers Association said yesterday.
US housing starts
US housing starts tumbled 11.0% to a seasonally adjusted annual rate of 1.06 million units in October, after climbing 6.7% in the previous month, the Commerce department said yesterday. Housing starts were reported at a revised 1.191 million units in September. The reading missed the market expectation of 1.16 million units.