The Markets
Market opening: The FTSE-100 is expected to start the session around 35-points higher this morning.
New York: Wall Street ended in the red on losses in retail stocks. Investors await key economic data releases and the Fed’s comments later this week. The S&P 500 fell 0.5%, with the healthcare sector losing the most.
Asia: Equities are trading higher. The Nikkei 225 added 1.3%, taking positive cues from the data indicating increased spending on equipment and factories in the third quarter. The Hang Seng was trading 2.1% up at 7:00 am.
Continental Europe: Markets ended in the green amid speculations of additional stimulus measures by the European Central Bank to boost the economy. Additionally, a weak euro supported export-driven stocks. Germany’s DAX and France’s CAC 40 rose 0.8% and 0.6%, respectively.
Crude Oil: Yesterday, Brent and WTI oil prices decreased 0.6% and 0.1%, respectively. The spread between the two varieties stood at US$3.0 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.72% higher yesterday at 737.32.
Today’s news
UK mortgage approvals rise in October
As per data from the Bank of England, mortgage approvals for house purchases rose to 69,630 in October from 69,012 in September. The value of mortgage lending grew by £3.62bn from £3.56bn in September, the biggest increase since April 2008. Meanwhile, consumer credit rose 8.2% y-o-y in October, matching the nine-and-a-half-year high in September.
Chinese manufacturing slows in November
The official purchasing managers’ index (PMI) in China fell to 49.6 in November from 49.8 in October, the lowest in three years. The manufacturing PMI has fallen consecutively for four months, adding to the economic slowdown.
Company News
Ariana Resources (LON:AAU) – Speculative Buy
Ariana Resources, the gold-silver exploration and development company with several projects in Turkey, announced today drill results from its Kiziltepe mine project, part of the Red Rabbit joint venture with Proccea Construction Co. Once mine construction is completed in H216, Ariana will hold a 50% interest in the Red Rabbit joint venture. Reverse circulation (RC) drill holes at the Arzu South vein have returned encouraging intercepts, including 11m grading 4.07g/t Au equivalent (based on a gold:silver price ratio of 60:1) in hole KTP-RC05-15 and 7m grading 2.96g/t Au equivalent in hole KTP-RC02-15. The recent drilling programme has increased confidence in the presence of plunging ore-shoots extending beyond the base of the optimised pit for Arzu South. Further deep drilling will be required to systematically test for potential underground mining targets. These results, in addition to drilling currently on going, will be undertaken to support a revision of the mineral resource estimate for Kiziltepe project.
Our view: We are encouraged with the latest results from the Kiziltepe drill programme and the increased confidence in the current resource model as well as continuity of high-grade ore-shoots extending beyond the current optimised Arzu South pit base. Whilst further drilling is required to evaluate and define potential underground mining resources, we are optimistic given the initial high-grade assay results over relatively wide intervals and look forward to a revised mineral resource estimate which may extend the current mine schedule for Kiziltepe. In the meantime, we maintain a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Cyan Holdings (LON:CYAN) – Speculative Buy
Yesterday, Cyan Holdings (Cyan) informed that it has received purchase order from Enzen Global Solutions for a commercial smart metering implementation for Paschimanchal Vidyut Vitran Nigam Limited (PVVNL) in Uttar Pradesh, India. The company would act as Enzen’s solution provider and supply more than 13,000 smart meters and related hardware and software. Cyan’s head end software would be offered as a managed service hosted by Cyan and charged on a per meter per year basis. The order currently has an initial value of £0.5m, including revenues from Cyan software. The first meters are expected to be installed and commissioned in the first half of 2016.
Our view: This news indicates strengthening relationship between Cyan and Enzen. This second order received in 2015 from Enzen, enables Cyan to enhance its presence in India and cater to the growing needs of public utilities. PVVNL has more than 3.5 million customers in Uttar Pradesh, which clearly reflects the potential and scope for future orders. This is the second order wherein Cyan would use its advanced metering infrastructure (AMI) technology for serving public utilities in India. Recently, the company reported excellent performance in the first half of 2015 as it won some promising contracts and witnessed a substantial rise in revenues. Recent orders of smart metering and lighting solutions strengthen Cyan’s novel technology and capability to provide comprehensive solutions to the customers. Furthermore, the company raised £4.6m that would help to expand its customer base across new geographies and improve existing commercial relationships. We maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Cyan Holdings plc
Aberdeen Asset Management (LON:ADN) – Buy
Yesterday, Aberdeen Asset Management (Aberdeen) declared its unaudited results for the year ended 30th September 2015. Net revenue advanced 5% to £1,169.0m in 2015 (2014: £1,117.6m). Pre-tax profit increased to £491.6m (2014: £490.3m), while EPS fell to 22.2p against 23.5p in the previous year. Assets under management at the end of period stood at £283.7bn (2014: £324.4bn). Operating cash flow and cash at the end of period stood at £531.7m (2014: £543.8m) and £567.7m (2014: £653.9m), respectively. On the operational front, the company acquired FLAG Capital Management for a consideration of £62.6m. Aberdeen expects to complete the acquisition of Arden Asset Management and Parmenion Capital Partners by the end of 2015. The company completed the acquisition and integration of the SWIP business. Aberdeen issued £100 million of non-voting, perpetual, non-cumulative, redeemable preference shares during the year. The company has proposed a final dividend of 12p, taking the total dividend for the year to 19.5p, 8.3% higher than the last year, to be paid on 3rd February 2016.
Our view: Aberdeen delivered excellent performance in the financial year 2015 despite the challenging market conditions. The company remained focused on its strategy to rebalance and diversify business lines. Aberdeen’s acquisition of SWIP business turned fruitful as it delivered cost synergies outpacing initial estimates. Additionally, the companies acquired by Aberdeen during the financial year 2015 complement its existing business, providing additional growth opportunities. Though AUM declined in financial year 2015 due to periodic correction in Asia and emerging countries, the company is undertaking strategic measures to mitigate this risk and remains positive on the long term growth potential of these markets. Meanwhile, Aberdeen used the proceeds from the issue of shares to increase the seed capital as it gears to generate organic growth through the launch of new funds. Aberdeen’s healthy balance sheet with enhanced cash position paved way for higher dividend payments. Overall, the company’s business is well balanced with sufficient capital and cash to generate long term returns for the investors. In light of the above argument, we maintain a Buy rating on the stock.
Economic News
Germany CPI
Consumer price index (CPI) in Germany increased 0.1% m-o-m in November after a flat reading in October, in line with the market expectations, as per the preliminary estimates published by the Federal Statistics Office yesterday. On y-o-y basis, prices increased 0.4% in November after rising 0.3% in October, in line with the market expectations.
US Chicago purchasing manager
The Chicago purchasing managers’ index (PMI) slipped to 48.7 in November from a reading of 56.2 in October, data from MNI Indicators suggested yesterday. The markets expected a reading of 54.0.