The Markets
Market opening: The FTSE-100 is expected to start the session and the week around 35-points lower this morning.
New York: Wall Street ended in the green, led by gains in the healthcare and consumer stocks. Investors digested a mixed set of corporate earnings reported on Friday. The S&P 500 improved 0.4%. The market rose 3.3% during the week.
Asia: Equities are trading lower, as falling commodity prices dented investor confidence. The Nikkei 225 remained closed on the Labor Thanksgiving day in Japan. The Hang Seng was trading 0.3% down at 7:00 am.
Continental Europe: Markets ended mixed. Germany’s DAX advanced 0.3%, taking positive cues from European Central Bank’s possibility of additional stimulus measures, while France’s CAC 40 closed 0.1% lower.
Crude Oil: On Friday, Brent oil prices increased 1.1%, whereas WTI prices fell 0.4%. The spread between the two varieties stood at US$4.3 per barrel.
UK small caps: The FTSE AIM All-Share index closed flat at 730.63 on Friday.
Today’s news
UK public borrowing rises in October
As per the Office for National Statistics, UK’s public borrowing rose to £8.2bn in October, the highest in six years, from £7.1bn a year earlier. The government’s borrowing stands at £54.3bn till date and has to restrict the borrowing to £15bn between now and April to meet the Office for Budget Responsibility’s (OBR) forecast.
Company News
SerVision (LON:SEV) – Speculative Buy
On Friday, SerVision informed that it has won two new orders from its existing distribution partners, valued at around €230,000. The first order is to supply 150 MVG400 units for a fleet of buses in Portugal, through its distribution partner, ENA Portugal – Telecommunications Systems. The value of the order is €111,750 and the company has already received 25% of payment and the remaining to be received at the time of shipment. SerVision received the second order from its partners Tedas Security Solutions, to install 300 HVG400 units in customized mobile trailers that are deployed at construction sites in the Netherlands. The value of the order is €119,500 and the company has received cash payment for the order.
Our view: The aforementioned update is encouraging for SerVision as it receives two new orders from its distribution partners. It is an exciting phase for the company as it continues to enhance its order book. Recently, SerVision’s fully owned subsidiary SerVision UK Limited was selected as a supplier for a major global logistics firm. The company uses advanced video compression technology which permits (CCTV) to be streamed directly and live from moving vehicles. SerVision expects to generate regular revenue stream from this contract. In September, the company successfully raised £797,684 gross through the issue of 22,790,972 new ordinary shares. These funds would cater to its rapidly growing order book. In the past one year, SerVision has been working to improve its pipeline, particularly in the UK market. Furthermore, the company won a contract with Gatwick airport, UK’s second busiest airport, to supply its live mobile CCTV systems and monthly data services to enhance, secure and protect the mobile assets of the airfield operations. Going ahead, SerVision plans to look for such potential opportunities and improve its market position. In light of the above argument, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to SerVision plc
StratMin Global Resources (LON:STGR) – Speculative Buy
StratMin Global Resources, the graphite production and exploration company with assets in Madagascar, announced today results from its ongoing exploration programme. The company initiated an extensive exploration programme over its Loharano and Mahefadok project areas in August 2015 with the aim to: create a detailed topographical survey of the area, confirm continuity of known mineralisation and improve grade control. Topographical mapping has now been completed with will assist in operations and expansion planning. Geophysical surveys were conducted over the areas with anomalies being highly correlated with known mineralised zones. In additional, new anomalous zones were identified and will be subject to further testing to confirm mineralisation. A detailed high-resolution model of the mine area has now been completed and will enable detailed mine planning and grade control resulting in improved consistency in the plant feed.
Our view: We are encouraged with the results from the extensive exploration programme and the identification of new anomalous zones. We look forward to confirmation of additional mineralised zones which should support the planned expansion programme of 12,000tpa flake graphite concentrate plant adjacent to the current plant. We also look forward to sustained profitability on the back of continued improvement of grade consistency leading to better efficiency and performance at Loharano plant. In the meantime, we maintain our Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to StratMin Global Resources plc
Fuller, Smith & Turner (LON:FSTA) – Buy
On Friday, Fuller, Smith & Turner (Fuller) declared its unaudited results for the half year ended 26th September 2015. Revenues advanced 10% to £177.7m in H1 2015. EBITDA increased 8% to £33.3m (H1 2014: £30.7m). Pre-tax profit rose 10% to £21.6m resulting in an EPS of 29.84p against 25.33p in H1 2014. On the operational front, the company acquired two new freehold pubs, plus the freeholds of three existing sites including The Barrowboy & Banker on London Bridge. Post the end of the period, Fuller has bought two new pubs – The Great Northern Railway Tavern in Hornsey, North London, and The Sutton Arms, Farringdon, London. The company declared an interim dividend of 6.90p, 8% higher than the same period last year, to be paid on 4th January 2016.
Our view: Fuller delivered solid performance in the first half with improved revenues and higher margins. The company’s biggest part of the business, Managed Pubs and Hotels continued to outpace the industry peers as it reported a like-for-like (LFL) sales growth of 5.6%. The growth in the segment is mainly due to Fuller’s excellent customer service and introduction of the service coach programme. Fuller’s other segments that is the Tenanted Division and the Beer Company continued to progress well and reported positive LFL sales growth. Meanwhile, the company continued to expand as it acquired and opened new pubs across the UK. Fuller remains focused to provide the best drinks range, the most delicious, freshly-cooked food, fantastic surroundings and service. We believe the company has bright prospects going ahead owing to its strong financial and operational position. Therefore, we maintain a Buy rating on the stock.
Parkmead Group (LON:PMG) – Speculative Buy
On Friday, Parkmead Group (Parkmead) announced its preliminary results for the year ended 30th June 2015. Revenues fell to £18.6m from £24.7m in 2014. Pre-tax loss stood at £30.8m as compared to a pre-tax profit of £1.0m in 2014. Total assets and cash balance at the end of period stood at £105.6m (30th June 2014: £127.4m) and £41.1m (2014: £46.3m). On the operational front, the company achieved first commercial gas production at the Diever West gas field in the Netherlands. The Diever-2 discovery well was flow tested at 29 million cubic feet per day. The company won nine new oil and gas licences in the UKCS 28th Licensing Round, covering 12 offshore blocks. Parkmead entered into a Heads of Agreement outlining the structure of a joint development of the Perth, Dolphin and Lowlander fields. The company holds 2P reserves of 26.1 million barrels of oil equivalent as of 30th June 2015.
Our view: The year 2015 has been difficult for energy companies and Parkmead was no exception. The company’s performance was hurt by prevailing low oil pricing environment. However, Parkmead continued to improve operationally as it won a series of new licences during the period. The company now holds a new gas field at Diever West, which is likely to enhance the gas production and improve cash flows. The 28th Round of awards proved successful for Parkmead it now possesses a Total of 12 offshore blocks in the UK following the grant of the new licences. These blocks would add to the company’s present solid asset base of oil and gas and are expected to improve the exploration prospects along with development of its main Perth-Dolphin-Lowlander (PDL) oil hub. In addition, the company plans to take advantage of its technical expertise in these regions as it has previously worked in these regions with considerable success in the Southern Gas Basin with gas discoveries at Platypus and Pharos. Going ahead, Parkmead plans to look for additional acquisition opportunities to maintain its market in the challenging oil sector. In view of the above argument, we maintain a Speculative Buy rating on the stock.
Melrose Industries (LON:MRO) – Buy
On Friday, Melrose Industries (Melrose) released a trading update for the ten months to October 2015. During the period, the company’s sales were 14% higher as compared the previous year at constant currency. Melrose expects to complete the sale of Elster to Honeywell in Q1 2016. The company’s Brush business has been facing challenging conditions resulting in the first half sales 26% down at constant currency against last year. However, there has been improvement since the first half, with revenues for the first ten months down by 17%.
Our view: The aforementioned update is a positive one for Melrose as it reported higher sales figures. The company’s Brush business has shown improved performance since the half year. Recently, Melrose informed that it plans to implement a corporate reorganization to efficiently and promptly return the proceeds of the disposal of the Elster Group to the shareholders. This proposal strengthens Melrose’s business strategy of buying, improving and selling. The company has more than doubled its equity investment in Elster, enabling it to offer a £2.0 to £2.5bn return of capital to investors. Over the past 10 years the company has distributed more than £2bn to the shareholders showcasing its constant efforts to enhance shareholder value. Additionally, the company paid an interim dividend of 2.8p Totalling to £27.9m on 3rd September 2015. Meanwhile, the company continues to invest in research and development to enhance the earnings from its Brush group. The first set of generators in China are nearing completion and testing phase for delivery is expected to be completed by this year. Going ahead, we expect Melrose to have better opportunities as it seeks for acquisitions and continues to increase the shareholder wealth. Therefore, we maintain a Buy rating on the stock.
Deltex Medical Group (LON:DEMG) – Speculative Buy
On Friday, Deltex Medical Group (Deltex) announced that the Big Data study of variation in fluid management conducted during surgery in the USA is published in a leading online medical journal. This study was conducted by Deltex in partnership with Premier Inc. The study examines data in the Premier Research Database on 650,000 patients in around 500 hospitals based out in the USA which are undertaking rectal, colonic and hip/knee surgery. As per the analysis, there was a wide variation in fluid practice on the day of surgery, after surgery and between institutions. In addition, the association between fluid management and poor outcomes is the same for both open procedures and reduced blood loss laparoscopic procedures.
Our view: The aforementioned study conducted by Deltex, a UK based manufacturer of fluid management devices, is the first Big Data study conducted to examine the influence of variation in fluid management. The company aims to make oesophageal Doppler monitoring (ODM) a standard of care for patients. The Big Data study validates that efficient fluid management would help in improving patient outcomes and costs. Recently, the company added a new platform programme account in the USA, taking the Total to 13. Deltex is progressing well to add 30 US-based hospitals on its platform programme by mid-2016. Furthermore, as per the interim results for the first half of 2015, the company delivered solid performance with improvement in the US and International probe revenues. Deltex has shifted its focus on the exports market, where the company has reported higher sales ahead of its initial estimates. In light of the above argument, we reiterate a Speculative Buy rating on the stock.
Economic News
Eurozone consumer confidence
The gauge of Eurozone consumer confidence improved to -6.0 in November from -7.6 in October, the European Commission said on Friday. The markets expected a reading of -7.5.