Markets
Europe
The FTSE-100 finished yesterday's session 0.18% higher at 6,284.53, whilst the FTSE AIM All-Share index closed 0.14% better-off at 744.39. In continental Europe, markets ended in the green, driven by a rally in oil prices. Furthermore, positive comments from the Fed’s Chair Janet Yellen on the US economy lifted investor sentiment. Germany’s DAX and France’s CAC 40 increased 1.6% and 1.2%, respectively.
Wall Street
Wall Street ended marginally higher, led by improvement in oil prices, which settled above US$50 per barrel for the first time in almost a year. However, healthcare stocks declined due to weak corporate results and news. The S&P 500 rose 0.1%, with energy stocks advancing the most.
Asia
Equities are performing mixed, as poor Chinese export data offset gains in energy stocks. The Nikkei 225 gained 0.9%, while the Hang Seng was trading 0.1% lower at 7:00 am.
Oil
Yesterday, Brent and WTI oil prices surged 1.8% and 1.3%, respectively. The spread between the two varieties stood at US$1.1 per barrel.
Headlines
World Bank cuts global growth forecast for 2016
The World Bank reduced its global growth forecast for 2016 to 2.4% from the estimated 2.9% in January. The primary reason for the downgrade was ascribed to low commodity prices, weak demand in major economies and poor business sentiment in advanced economies. Moreover, the bank lowered its growth forecast for 2017 to 2.8% from 3.1%.
Company news
Tiziana Life Sciences (LON:TILS, 129.50p) - Speculative Buy
Tiziana Life Sciences (‘Tiziana’), a clinical stage biotechnology company focused on targeted drugs to treat diseases in oncology and immunology, yesterday announced its final results for the year ended 31 December 2015. During the period, operating loss expanded to £8.6m compared to £3.3m in FY2014, largely due to much increased research and development cost of £6.3m (FY2014: £0.8m). Loss per share stood at -9.5p. As a result of successful fund raisings during the period, the Group has raised £12.8m (gross) through combination of placing of shares and investor convertible loan notes. Cash and cash equivalents at the period end was £8.9m (FY2014: £2.3m). On the operational front, the Group has signed license agreements; i) with Nerviano for milciclib, which is now completing phase II clinical trials for thymic carcinoma in patients previously treated with chemotherapy, ii) with University of Cardiff for their anti-cancer stem cell technology capable of targeting aggressive tumour forming cells originating from the breast, pancreas, colon and prostate, and iii) foralumab, the only fully human engineered anti-human CD3 antibody for treatment of autoimmune diseases. Tiziana’s Chairman, Gabriele Cerrone commented “We also remain on-track to progress our lead candidate in our Bcl-3 programme into the clinic in late 2016 or early 2017. The funds raised throughout the year demonstrate the confidence our shareholders have in Tiziana and we look forward to generating further shareholder value going forward”.
Our view: Tiziana progressed well during the FY2015. It strengthened its portfolio by acquiring exclusive licence for both milciclib and foralumab which brings the Group two research projects and two clinical programmes together plus research into a cancer stem cell diagnostic. Group’s successful fund raisings during the period demonstrated Board’s confidence as well as shareholders’ continuing support. Post the period, the Group raised a further £709,406 through the issue of unsecured convertible loan notes to existing shareholders, further expanded its highly experienced clinical development team and announced plans for additional development of foralumab in two clinical indications: i) graft vs host disease, and ii) ulcerative colitis. Moreover, the research agreement with Cardiff University has led to the identification of lead clinical candidate, CB1, a Bcl-3 inhibitor with potent anti-metastatic activity and impressive in-vivo efficacy and safety profile. An Investigational New Drug Application for CB1 will be filed in 2016, with clinical trials expected to begin before the year end. The strengthened balance sheet will support Tiziana to progress its existing and new clinical trials and give Group the resources to expand its presence internationally. We are encouraged by the Group’s performance last year and the commitment by existing investors. Beaufort sees good potential in the Group and reiterates its Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Tiziana Life Sciences plc
KEFI Minerals (LON:KEFI, 0.52p) - Speculative Buy
KEFI Minerals announced yesterday that it has appointed Lycopodium as its preferred contractor for the Tulu Kapi gold project in Ethiopia. Lycopodium has an excellent track record of building gold mines in Africa and have committed to the current timetable for development of the Tulu Kapi project with construction to start in Q4 2016. Lycopodium have also agreed to pay for the initial US$2.5m of the programme of works in exchange for KEFI shares at market prices. Subject to legal documentation and completion of finance syndication both Lycopodium and mining contractor, Ausdrill Ltd, are set to be significant shareholders in KEFI of under 10% each.
Our view: KEFI Minerals continues to progress and refine the Tulu Kapi gold project as it looks to secure funding. Management continues to de-risk the project and the above announcement reflects the commitment of contractors in their support of the project. Over the coming weeks and months, we look forward to updates regarding finalisation of project financing combined with the recently announced US$20m equity investment by the Government of Ethiopia. In the meantime, we maintain our Speculative BUY recommendation.
Beaufort Securities acts as corporate broker to KEFI Minerals plc
esure (LON:ESUR, 285.30p) - Hold
Yesterday, esure announced a strategic review of Gocompare.com Holdings and the appointment of Matthew Crummack as CEO of Gocompare.com, subject to regulatory approval. Post the acquisition of Gocompare.com by esure, the marketing strategy has been revived driving growth in insurance comparison, the cost base restructured, and focus given to a wider range of products. Owing to these changes, the Board expects a 20-30% improvement in Gocompare.com's profitability in 2016. The Board has decided to review strategic opportunities for the business. The Board has therefore begun a strategic review of Gocompare.com, including a potential demerger, and would update shareholders on this review as and when appropriate.
Our view: The decision to review strategic opportunities for Gocompare.com is a good initiative considering the positive results anticipated from the latter’s business. In the past one year, esure has taken a lot of steps to boost the business of Gocompare.com. The possible demerger of the business would enhance the value delivered to shareholders. The appointment of Mr Crummack would also support Gocompare.com’s business as it expands in insurance companion and focusses on a range of products. Nonetheless, the claims environment for the motor market remains weak which may hamper the earnings of esure. In light of the mixed outlook, we maintain a Hold rating on the stock.
Stratex International (LON:STI, 1.82p) - Speculative Buy
Yesterday, Stratex International (Stratex) revised its loan agreement with Goldstone Resources, in which Stratex has a 33.45% interest. Stratex has increased the amount of the unsecured short-term loan facility to Goldstone from US$100,000 to US$350,000. All other terms of the agreement remain unchanged, with the loan being repayable on or before 31st December 2016 and interest accruing on the outstanding amount of the loan at 5.0% per annum that is to be payable quarterly in arrears.
Our view: Stratex continues to support Goldstone, as it increased the loan amount provided to the latter. Goldstone would use the money for general working capital as it progresses in its portfolio of West African gold projects. Goldstone would also use the funds to provide settlement to former CEO Mr Jurie Wessels. Recently, Stratex secured financing for Tembo Gold licence, which is a positive move considering the rising gold price and the recent awakening interest in gold projects and gold stocks. The Tembo tenements adjacent to Acacia Mining's Bulyanhulu Mine have yielded multiple gold intersections from previous drill programmes and it now remains to deliver a coherent resource with further drilling. Furthermore, Stratex is directing its future efforts and expenditures towards opportunities in West Africa, a region where management remains focused on exploration and the potential acquisition of new projects. Stratex also continues to consider opportunities in Turkey and the wider region where it already has a footprint in terms of intellectual and operating experience along with a successful exploration team. In light of the above argument, we maintain a Speculative Buy rating on the stock.
Economic news
Germany industrial production
Industrial production in Germany grew 0.8% m-o-m on a seasonally adjusted basis in April, reversing a revised drop of 1.1% in the previous month, the Federal Ministry of Economics and Technology said yesterday. This was the first increase in three months. Economists forecasted a 0.7% growth in production. On y-o-y basis, industrial production increased 1.2% in April from 0.4% in March. The markets expected a growth rate of 1%.
Eurozone GDP
The Eurozone GDP grew 0.6% in Q1 2016, higher than the earlier estimate of 0.5%, the Eurostat revealed yesterday. On a y-o-y basis, Eurozone GDP grew 1.7%, better than the earlier estimate of 1.5%.