Brokers are queuing up to slap Gemfields (LON:GEM) on the back after the coloured gems specialist's latest emeralds auction.
“This is a good result for Gemfields with carat per value up 30%,” suggested mining specialist SP Angel.
“With one high quality and one low quality auction for FY 2016 already done, the company has netted US$53.9mln against our full year forecasts of US$68.8m from Kagem. This gives them 78% of assumed sales from Kagem and means they are well placed ahead of their next emerald auction,” the broker said.
It has factored in lower prices and higher volumes in its assumptions and will review this as sales progress through the year, but for now the shares, which have come back in line with the sector of late, look good value all the way up to 82p in SP Angel's view which, coincidentally, is also finnCap's target price. The shares currently trade at around 43p.
Investec observed that the company's bread & butter is the auctions of high stones, but the solid result for a low quality emerald auction adds a bit of gravy.
“We note that the company indicates a mixed ruby auction planned for next month. Management is still very much going through a price discovery process for rubies recovered from Montepuez with a broad range of product being extracted and appropriate mix yet to be determined,” the broker added.
Results from IronVeld (LON:IRON) are essentially academic, house broker Shore Capital notes.
The South Africa-focused iron ore explorer is “busy with due diligence with the senior debt providers and providers of the balance of funds required” for the 15 megawatt DC smelter project.
“In the meantime, we note that the South African rand has continued to depreciate, which means that project economics will be looking ever more attractive to South African institutions. We are therefore optimistic that all funding requirements can be met this calendar year.,” said Shore analyst Yuen Low.
The baffling US retail practice Black Friday approaches but the best retail bargain out there may well be Argos owner Home Retail Group (LON:HOME).
The Sunday Times reports that the retailer is in play, with private equity firms giving it the eye.
Cantor Fitzgerald is quick to play the smug card, pointing out it observed at the end of September that the company has one of the strongest balance sheets in the General Retail sector, and a break-up value of 266p per share.
“We are not surprised with the bid rumours in The Sunday Times and reiterate our BUY recommendation and our TP of 195p (based on a blended average of break-up value, P/E and EV/EBITDA multiples),” the broker said.
The broker's veteran retail analyst Freddie George visited a number of Argos stores over the weekend and they appeared to be trading well.
"Our sense is that sales, particularly of toys and electricals, were trading above company expectations helped by an increase in advertising, on-line being boosted by the Paris attacks and Black Friday offers being scheduled one week early. The web site was reported to have crashed on Friday impacted by a significant upsurge in traffic,” George notes.
Investec also professes to be unsurprised by the reports, given the recent weakness in the shares and “the valuation support that lies within the group”.
“We continue to see HOME as a value play in its own right, notwithstanding potential interest, through its Homebase restructuring and Argos’s multi-channel capabilities,” Investec said.
The broker rates the shares a 'buy' and has a target price of 155p. The shares were up 6.4% at 110p in mid-morning trading.
Freddie George's colleague Mike Dennis is less enamoured of another High Street stalwart, Mothercare (LON:MTC), which he reckons is falling short of its long-term targets based on the recent interim results, which Dennis regarded as disappointing.
The Cantor analyst said the substantial increase in full-price sales on low in-store like-for-like (LFL) growth rates implies lower transaction volumes due to a combination of fewer people visiting the stores and a lower proportion of those visitors actually buying something.
“The higher average selling prices provides for a higher UK gross margin but looks less sustainable due to improving competition, plus cost growth has been more than offset by closed stores which are not continuing next year. This is despite the majority of high street Mothercare stores still not contributing positively to EBITDA [underlying earnings],” Dennis said, as he reiterated his 'sell' recommendation and 135p price target.
Deutsche Bank is high on Dixons Carphone (LON:DC.) after a recent meeting with the electrical goods retailer's management.
The focus of the meeting was on the Connected World Services (CWS) division, which currently only contributes 2% of group profits but which Dixons' top brass thinks could grow into a £1bn business, generating high return on capital employed.
The CWS division's joint venture with US mobile phone network operator Sprint has launched well, with the first eight stores in Miami and Chicago exceeding budget by around one third, Deutsche reported, as it reiterated its 525p target price; the shares currently trade at 463p.
Dixons updates the market on 16 December and the Deutsche team is expecting some commentary on the Black Friday price-cutting bonanza.
Liberum Capital notes the approach of Black Friday has caused yet another week of poor sales. After reaching near-term lows last week, LFL sales in the retail space fell 5.8% this last week, according to consultancy BDO.
“A recent survey unsurprisingly found that 28% of retailers were not in favour of the sales event and thought it to be unprofitable and unsustainable,” the broker notes.