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Markets
Europe
The FTSE-100 finished yesterday's session 1.03% higher at 6,273.40, whilst the FTSE AIM All-Share index closed 0.13% better-off at 743.34. In continental Europe, markets ended higher as improvement in oil and commodity prices boosted basic resource stocks. Investors awaited Janet Yellen's comments on the health of the US economy. Germany's DAX rose 0.2%, while France's CAC 40 closed broadly flat.
Wall Street
Wall Street ended in the green as investors cheered reassuring comments by Fed Chair Janet Yellen on the strength of the US economy. The S&P 500 advanced 0.5%, with energy stocks leading gains, led by a rally in oil prices.
Asia
Equities are trading higher, taking cue from positive comments by Janet Yellen on the state of the US economy. The Nikkei 225 rose 0.6% as a weak yen resulted in gains for export-driven stocks. The Hang Seng was trading 0.7% higher at 7:00 am.
Oil
Yesterday, WTI and Brent oil prices surged 2.2% and 1.8%, respectively. The spread between the two varieties stood at US$0.9 per barrel.
Headlines
UK retail spending picks up in May: BRC
As per the British Retail Consortium (BRC), retail spending in the UK rose 1.4% y-o-y in May following a flat reading in the previous month. The increase was ascribed to higher clothes sales. On a like-for-like basis, sales expanded 0.5% in May, compared with a 0.9% fall in April.
Company news
Ariana Resources (LON:AAU, 1.55p) - Speculative Buy
Ariana Resources, the gold-silver exploration and development company operating in Turkey, announced today an update on construction of the Kiziltepe Mine within the Red Rabbit gold-silver project. Kiziltepe is being advanced towards production through a Joint Venture agreement (50:50) with Proccea Construction. Approximately US$18.7m of expenditure has occurred on the project since construction start-up. Foundations for the processing plant and chemical storage building as well as structural steel work installation have been completed. Mine administration, accommodation and canteen facilities are fully operational with 160 people currently on site. Connection to grid-power has been completed with a total capacity of up to 5.5MW. Stripping and storage of topsoil is now complete and open-pit access development is currently underway by the mining contractors. The Ministry of Environment and Urban Planning has recently approved the tailings storage facility (TSF) and construction will commence imminently.
Our view: We are encouraged with the construction progress at Kiziltepe. With most of the major construction of the processing plant nearing completion, work on the TSF will now commence. The project remains on schedule for commissioning in Q3 2016 and production in Q4 2016. We look forward to further updates and commissioning of the plant in Q3 2016. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Cyan Holdings (LON:CYAN, 0.22p) - Finals
Cyan Holdings PLC, the integrated system and software design company delivering mesh based flexible wireless solutions for utility metering and lighting control, yesterday announced its audited results for the year ended-December 2015. A 70% hike in R&D expenditure (to £3.13m) along with a 27% rise in other costs (to £1.89m) did, as expected, spike operating losses by 50% to £4.90m. During the period, however, the Group recorded a number of important product orders and endorsements, including an initial £1m from Enzen Global Solutions which was followed by additional demand for 13,000 smart meter units, a US$3m letter of intent from Ghana and successful deployment of a Cyan solution at Tata Power Mumbai, along with a strategic partnership with Newcapec to enter the Chinese market. Post year-end, the Group received a transformational £10m purchase order for smart metering in Iran, along with a follow-on order for Tata Power. Given that the Chairman detailed in his full year report an expectation that the majority of sales from both Enzen contracts in India (combined order value £1.5m) will be booked in 2016, with a significant element in the first half, this is a strong signal that 1H'2016 revenue should be significantly greater than the total reported for 2015. Although Cyan remained cash-rich (£2.46m) at the 2015-year end, recognising the significant momentum, traction and scalability its products are now achieving, in May 2016, management informed the market that the Board is now considering financing options with regard to both working capital and a potential acquisition. John Cronin, Cyan's Executive Chairman, recorded an audio interview to accompany his Group's 2015 results, which can be accessed by clicking here.
Our view: Smart metering is a giant, unfulfilled and highly scalable global long-term growth opportunity which provides an exceptionally sticky customer base. Cyan has a unique and fully developed product with protected IP. Its revenue streams include hardware and software sales during installation/roll-out along with recurring license fees collected on revenue-based long-term contracts. The Group has strategically focused its initial marketing efforts on emerging markets which are now building out their infrastructure and modernising their approach to consumer distribution in order to gauge capacity demand and maximise efficiencies, while identifying power leakage and theft. The fact that it has secure contract wins from India, the Middle East, Africa, Brazil, China and Eastern Europe, highlights both the need for and the uniqueness of Cyan's systems approach. The potential to scale early sales to these territories is clearly enormous; in reality, the transformational purchase order worth £10m from Iran's Micromodje is potentially just a small part of the National Smart Metering Program of Iran that has a stated goal to replace the electricity meters for all customers, representing approximately 33 million meters, in seven years with funding provided by the Iran Power Generation, Transmission and Distribution Management Company; Cyan has already started a dialogue on the next planned rollout of 1 million units. Prospectively, India is an even larger opportunity with prime minister, Modi, in 2015 projecting a phased consumer rollout of smart meters beginning in 2017, with 35 million units installed by 2019; more recently India's power minister, Goyal, cited a proposition for as many as 250 million smart meters. With a good number of large international territories now also reviewing similar options, the business potential for a supplier capable of installing and supporting comprehensive national smart meter implementation programmes is clearly huge.
Beaufort Securities acts as corporate broker to Cyan Holdings plc
Keras Resources (LON:KRS, 1.1p) - Speculative Buy
Keras Resources, the Australian gold mining company, announced yesterday that it has secured an additional deposit under the current tribute agreement (Grants Patch lease) from Paddington Gold, a subsidiary of Norton Gold Fields. Ore from the Royal Standard North lease, located some 20km from the Grants Patch lease will also be processed at Norton's Paddington processing plant. Keras estimates that the deposit contains 25,000 to 50,000t grading around 2g/t Au and will now commence detailed grade control drilling. Initial drilling returned encouraging intercepts including 10m grading 2.2g/t Au from 12m (RSTGC0002) and 16m grading 1.87g/t Au from 14m (RSTGC003).
Our view: This is positive news for Keras giving the company access to additional resources that can be extracted easily and converted into near term cash flow assuming positive grade control results and final approval of the Project Management Plan by the Department of Mines. We look forward to further updates as Keras continues to grow its inventory of low cost gold deposits. In the meantime, we maintain our speculative buy on the stock.
Beaufort Securities acts as corporate broker to Keras plc
ValiRx (LON:VAL, 9.5p) - Speculative Buy
ValiRx, a life science company with a focus on cancer diagnostics and therapeutics for personalised medicine, provides a quarterly update on clinical progress today. ValiRx commented today that its lead compound, VAL201 continues performing exceptionally in its Phase l/ll Clinical Trial in patients with hormone resistant prostate cancer and the Company confirmed in February 2016 that VAL201 is well tolerated and has shown a high degree of safety. To date no drug related significant adverse events are being reported. Dose escalation has reached therapeutic levels, and the studies have shown early indications of efficacy. The primary and secondary endpoints of the clinical trial have been further refined and confirmed and continue to show no drug related adverse events. Additional Clinical Trial Centres are being integrated into the study to assist with the dose expansion stage of the trial and this enlargement will expedite the production of data in order to complete the trial within the projected and regulatory agreed time frame. ValiRx has also begun the process of designing the follow-up full efficacy study of VAL201 in prostate cancer. The will include a review of the most appropriate jurisdiction in which to undertake the work. This process and the development of the actual protocol, with costings and partnerships in place, is expected to be completed and in place by the time that the current Phase I/II trial reports. In light of the excellent results shown by the compound and the promising pre-clinical evidence of the compound's effect on endometriosis, the Company is continuing the design of the protocol for this indication and to test VAL201 for its in-human potential in the treatment of this debilitating female condition. The protocol and associated partnerships - both commercial and technical - are expected to be in place before the final reporting of the current 'safety and tolerability-focused' clinical trial. Furthermore, the opportunity for developing and exploiting the compound for a further indication in the treatment of endometriosis or hormone induced abnormal cell growth in women, via partnering and collaboration, is similarly fast approaching and the necessary preparatory steps and conversations are underway.
VAL401
Within the quarter, ValiSeek Limited, the joint venture between ValiRx and Tangent Reprofiling Limited, has made progress on both commercial and scientific fronts. Regulatory documentation has been prepared for clinical Phase II efficacy study. The trial will take place in Georgia, with sites, investigators and facilities now confirmed. Initial site visits have been carried out and key criteria for the selection of the principle investigators have included their enthusiasm for ValirX's treatment paradigm, as a result of their understanding of the Company's pre-clinical results to date. Scientific progress has included the manufacture of clinical grade VAL401 capsules and this production is a crucial step in VAL401's progression towards the dosing phase of its clinical trial: (VAL401-001: A Phase II study to assess the efficacy, safety and tolerability of VAL401 in the treatment of patients with locally advanced or metastatic Non-Small Cell Lung Cancer (NSCLC) after failure of at least one prior chemotherapeutic regimen). A second US patent – in this case covering the use of the VAL401 formulation as a treatment for adenocarcinoma - has been allowed by the US patent office. With this patent providing IP protection in the largest oncology market in the world, ValiSeek consider this patent to be a substantial asset, both validating and underpinning ValiSeek's potential future valuation. ValiSeek anticipates the confirmation of further international patent protection to be confirmed in the coming months. The next steps in the VAL401 regulatory pathway will include receipt of local ethics committee approval prior to ValiSeek receiving the final regulatory go-ahead to recruit patients.
Our view: There is little doubt about the Company's enthusiasm for the continuing safety results for VAL 201, with no significant adverse events being reported. Early indications of efficacy have also been shown. Following the promising pre-clinical evidence of the compound's effect on endometriosis the Company is continuing the design of the protocol for this indication and to test VAL201 for its in-human potential in the treatment of this debilitating female condition. The protocol and associated partnerships - both commercial and technical - are expected to be in place before the final reporting of the current 'safety and tolerability-focused' clinical trial. Indeed, the opportunity for developing and exploiting the compound for a further indication in the treatment of endometriosis or hormone induced abnormal cell growth in women, via partnering and collaboration, is similarly fast approaching and the necessary preparatory steps and conversations are underway. Scientific progress has included the manufacture of clinical grade VAL401 capsule and this production is a crucial step in VAL401's progression towards the dosing phase of its clinical trial. A second US patent – in this case covering the use of the VAL401 formulation as a treatment for adenocarcinoma - has been allowed by the US patent office. With this patent providing IP protection in the largest oncology market in the world, ValiSeek consider this patent to be a substantial asset, both validating and underpinning ValiSeek's potential future valuation. Reiterate our Speculative Buy Stance.
Beaufort Securities acts as corporate broker to ValiRx Plc
easyJet (LON:EZJ, 1,508.0p) - Buy
Yesterday, easyJet released passenger statistics for May 2016. During the month, passenger traffic rose 5.7% y-o-y to 6,861,040, while load factor fell 0.1 percentage points to 91.5%. On a rolling basis for the past 12 months, passenger traffic rose 7.3% to 71.5 million customers and the load factor improved 0.2 percentage points to 91.4%.
Our view: easyJet delivered good performance in May 2016, with increased passenger traffic. This was despite 173 cancellations for the month, with French ATC strikes and weather conditions accounting for most of those. The Egypt Air tragedy also occurred in this month (19th May). Recently, easyJet reported strong Q1 2016 performance despite disruptions by terrorists. The board expects pre-tax profit for FY 2016 to remain in line with market expectations, helped by prudent cost management, low fuel prices, disciplined capacity allocation and resilient trading. It estimated that at January's exchange rates and with fuel trading at US$350–450 per metric tonne, its unit fuel bill for FY 2016 would decrease £165–180m from the FY 2015 levels. Furthermore, the company plans to expand its services by increasing flight offerings. Recently, several strategic routes were launched, including Vienna and Basel, which are expected to carry 78,000 passengers annually. In view of this argument, we maintain a Buy rating on the stock.
FinnAust Mining (LON:FAM, 5.65p) - Speculative Buy
Yesterday, FinnAust Mining (FinnAust) appointed Royal IHC to provide primary support services on the Pituffik Titanium Project. IHC is a world leader in the provision of cost-effective wet mining solutions, dredging equipment, training, as well as maintenance and support for all marine-dredging and wet-mining activities.
Our view: IHC's appointment for the Pituffik project is a positive development. FinnAust and IHC would work to define an optimised development solution that includes in-house wet mining equipment and high-level cost estimation for Pituffik. IHC's good understanding and global experience in operating efficient and advanced dredging equipment in all types of environment complement FinnAust's work. Recently, the company appointed NIRAS Greenland A/S and Orbicon A/S to support the completion of various permitting and regulatory work at the Pituffik Titanium Project in Greenland. FinnAust also reported positive results from an offshore survey conducted at Pituffik. The results indicated significant titanium volumes extending over a large area, which further enhanced the potential resource base. In light of the positive developments surrounding Pituffik, we maintain a Speculative Buy rating on the stock.
Vodafone (LON:VOD, 231.70p) - Buy
Yesterday, Vodafone extended its partner market agreement with sub-Saharan Africa telecommunications provider Afrimax Group to cover Zambia. As per the deal, the two firms would offer 4G data services under the Vodafone Zambia brand. Afrimax has appointed Lars Stork as chief executive officer of Vodafone Zambia, which would be headquartered in Lusaka.
Our view: The extension of Vodafone's partnership with Afrimax would allow both the companies to explore market opportunities in sub-Saharan Africa. The firms have already partnered to launch 4G services in Uganda and plan to provide high-speed 4G data services to consumers and businesses in Zambia. Recently, Vodafone reported strong results for FY 2016, recording organic growth in revenue and EBITDA for the first time since 2008. Vodafone's Project Spring turned out very fruitful as service revenue in AMAP and Europe recorded strong growth. Looking ahead, for FY 2017, the company expects organic EBITDA growth of 3–6%, implying £12.4–12.8bn. Free cash flow for the period is expected to be at least £3.2bn, while capex (after Project Spring) is targeted to be in the mid-teens, as a percentage of annual revenue. We are encouraged by Vodafone's performance and confidence towards progressive dividend per share growth, demonstrating the board's optimism in future cash flow generation. Therefore, we maintain a Buy rating on the stock.
Economic news
Germany factory orders
German factory orders declined 2.0% m-o-m in April, following a revised increase of 2.6% in March, marking the biggest monthly drop since July 2015, as per data from the Federal Ministry of Economy and Technology. Economists had forecasted orders to decrease by 0.5%.