Today's edition features:
Bezant Resources (LON:BZT)
Advanced Oncotherapy (LON:AVO)
"This morning, the Supreme Court is expected to rule on whether or not Theresa May needs approval from Parliament in order to trigger Article 50 and kick-off negotiations for the UK's formal separation from the EU. Whatever their decision, it is unlikely to affect the Prime Minister's plans to commence talks from end-March. Given that neither the UK nor the EU can truly afford divorce without reasonable accommodation, the question now really is whether or not the EU will choose to 'cut off their nose to spite their face' in order to force a punishingly hard Brexit. The price it would pay, in terms of trade and supply disruption, loss of access to City of London financial services and support from a significant member of the UN Security Council, could result in permanent damage, especially if the UK then took the route, as Phillip Hammond put it, into another business model. His threat potentially sees the UK evolving as an offshore low-tax and open business haven, that would create a veritable pain in Europe's side as it becomes the western destination of choice for US and other global enterprises. Such an outcome would effectively heighten disunity amongst the 27 remaining members that, in any case, now appears to be living on borrowed time. Mr Trump meanwhile has been getting on with fulfilling his campaign pledges; his withdrawing the US from the proposed TPP deal was, in any case, largely symbolic given that Obama's administration had already concluded there was no remaining basis to move forward. Whatever, the US$ slump gathered pace as the implication of his protectionist policies drove home, leaving somewhat anticlimactic markets considering a statement from the Fed's Jeffrey Lacker, in which he suggested the central bank risked getting behind the inflationary curve and called for more immediate, aggressive rate action. This evaporated enthusiasm on Wall Street, leaving all three principal equity indices fractionally in the negative by the close, with the Asian region feeling similarly lacklustre ahead of the week-long Chinese New Year holiday that commences on Saturday. The Nikkei was again the main loser on Yen strength, while the ASX reversed its losing streak to record the territory's best performance. Macro data due from the UK this morning includes December Public Sector Net Borrowing, while the Eurozone releases both Services and Manufacturing PMI; later this afternoon, the US will provide its Redbook along with Existing Homes Sales numbers. UK corporates due to provide earnings or trading updates include Crest Nicholson (CRST.L), Dixons Carphone (DC..L), easyJet (EZJ.L), Horizon Discovery (HZD.L), IG Group (IGG.L) and Laird (LRD.L). But without significant lead from the overnight markets, London equities are seen trying to recoup some of yesterday's losses, with the FTSE-100 expected to gain some 20 points at the open."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.66% lower at 7,151.18, whilst the FTSE AIM All-Share index closed 0.01% higher at 873.64. In continental Europe, the CAC-40 finished 0.60% down at 4,821.41 whilst the DAX was 0.73% lower at 11,545.75.
Wall Street
In New York last night, the Dow Jones closed 0.14% lower at 19,799.80, the S&P-500 dropped 0.27% to stand at 2,265.20 and the Nasdaq fell 0.04% to finish at 5,552.94.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.55% to 18,788.00, while the Hang Seng was up 0.20% at 22,944.28.
Oil
In early trade today, WTI crude was down 0.89% to $52.75/bbl and Brent was down 0.47% to $55.23/bbl.
Headlines
Australia and New Zealand to pursue 'TPP 12 minus one'
Australia and New Zealand say they are hopeful of pressing ahead with the Trans Pacific Partnership trade deal, despite America's formal withdrawal. The US-led, 12-nation agreement was set to cover 40% of the world's economic output. Pulling out of the TPP was one of Mr Trump's first executive orders and fulfils a long-held campaign promise. Australia has already devised a name for a possible new agreement: TPP 12 Minus One. The country's trade minister Steve Ciobo said Australia would not abandon the TPP just because it would require "a little bit of elbow grease" to keep it alive. The trade agreement was negotiated by former US President Barack Obama and was aimed at deepening economic ties between member countries, including Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.
Source: BBC News
Company news
Bezant Resources (LON:BZT, 2.12p) - Speculative Buy
Bezant Resources has published an operations update from its Choco Gold-Platinum project in Colombia, where it has been trial mining since November. The update includes links to photographs of the trial open pit and gold and platinum grains recovered on site. The trial mining programme is split into two phases: Phase 1 (completed in December) has been testing shallow areas and Phase 2 (recently started) will sample deeper gravels. 105 samples were tested in Phase 1 and average grades of 300 milligrams per tonne are in line with historic mining reports on the property and management expectations. A Scoping Study has been commissioned to a Colombian mining consultancy with Choco alluvial experience. It should be completed before the end of 1Q.
Our view: Bezant is making good progress towards becoming a commercial scale gold and platinum producer in Colombia. Once the Scoping Study is published we will know the likely parameters of an operation and how attractive the economics are. Certainly Bezant's CEO is excited by the potential "my belief is that our model will ultimately unlock a new concept for producing economic platinum and gold" while his partner at alluvial miner Exumax believes "the potential is second to none." These CEO's (Bernard Olivier and Judd van den Brenk) both have extensive alluvial mining experience and are very well placed to judge the potential. We are encouraged by their confidence and look forward to the Scoping Study results.
Beaufort Securities acts as a corporate broker to Bezant Resources plc
MySQUAR Limited (LON:MYSQ, 1.85p) – Speculative Buy
MySQUAR, the Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, yesterday announced that it has soft launched its new platform of multiple 'casual games' (games can be played for a short time) called Lucky Wingabar. The platform enables a user who have downloaded the platform to access all games within the platform without a need to download individual casual games separately. This will increase user engagement as users can easily change from one casual game to another all within the MySQUAR Lucky Wingabar platform. It has 5 casual games currently included, and the library of casual games will be added periodically. The platform and its games are run on the 'freemium' model, which allows free play up to a certain level, after which players have to pay for purchasing in-game assets such as virtual coins that enhance their gaming capability. MySQUAR's CEO, Eric Schaer, commented "The release of the platform helps MySQUAR solidify its leading position in the mobile-based value added services in Myanmar. The platform concept has been proven to have considerable competitive advantages in user acquisition and retention and marketing expense savings. We expect the platform and its further developments to contribute significant monetisation results to the Company in financial year 2017 and thereafter."
Our view: More good news, although in reality soft launch of Lucky Wingabar was actually in accordance with the announced schedule. Lucky Wingabar ('casual games') is different to 'hardcore games' (games such as Hawk Hero or ChakraNinja) where latter tend to require at least 30 minutes of attention for effective engagement. This addition gives users a broader range of gaming choices to fit their interests and lifestyle. Moreover, the 'casual games' category is estimated to have millions of players. With MySQUAR's rapidly-expanding 7.5 million registered users (as at 12 January 2017), the revenue generated from the platform is expected to be significant to the Group. This is in addition to the Group's ongoing efforts to accelerate monetisation of 'hardcore games', where the Group recently noted in its FY2016 final result that mobile game revenue has been growing strongly from US$27,674 in August to US$65,659 in September, US$73,113 in October and US$86,098 in November. Looking ahead, the Group is scheduled to release new Hardcore games in February and March 2017. MySQUAR has already formally noted its expectation of achieving monthly cash flow break-even or better before the end of the current financial year (ended-June 2017). By becoming a cash generator, rather than a cash consumer, the opportunity to wash out remaining CLN obligations along with the equity overhang they are perceived to create, should allow valuation fundamentals to reassert. A more realistic equity valuation might also provide management with the opportunity to secure various acquisitions opportunities that regularly become available with the potential to provide an additional step improvements in both user numbers and profitability. Considering MySQUAR's track-record of over-delivering on its operational promises, we believe this is something that is unlikely to have been missed by its numerous and very cash-rich global peer group, who remain determined to continue ensnaring players in virgin territories that have successfully participated in an online user 'landgrab'. In this respect, MySQUAR appears quite dramatically undervalued; Beaufort retains a price target of 21.0p/share and repeats its Speculative Buy recommendation, although it does recognise that the terms of the recently issued CLNs do at this time continue to create a potential stock overhang which some fear is acting as a drag on the share price.
Beaufort Securities acts as a corporate broker to MySQUAR Limited
Advanced Oncotherapy (LON:AVO, 74.00p) – Speculative Buy
The developer of next-generation proton therapy systems for cancer treatment, yesterday announced that in September 2016, it commenced discussions concerning a proposal it had received from a potential strategic partner that involves, inter alia, non-dilutive financing arrangements. Discussions with this potential partner are continuing and their scope has been expanded. The Group will keep the market informed of any developments accordingly.
Our view: This is good news. Investors are aware that investment spending on LIGHT, as it moves toward final finalisation and demonstration of its first prototype, is burning perhaps £1.3m/month. Last October's £14m (gross) subscription and open offer raise is rapidly disappearing, which suggests the balance sheet will find itself stretched again by Q3'2017, exactly the time when it could be disastrous for management to take their foot off the 'development pedal'. Wishing not to suffered a further hit from deeply discounted equity placing which, in any case, would likely just encourage short-termers to flip holdings back and again undermine shares that have recently badly hurt over the past six months, AVO's Board have sought an alternative solution. It did not see fit to identify the 'potential strategic partner' but there must be a strong likelihood that it is Thales Group, the giant French global technology leader for the Aerospace, Transport, Defence and Security markets that last year entered a manufacturing agreement with AVO. With 62,000 employees in 56 countries, having reported 2015 sales of €14 billion, Thales is an enviable partner; yet without irrevocable, binding agreements that formally lock the two enterprises together, both find themselves highly exposed. In the respect that Thales is creating series production lines, has trained up to 160 staff and even registered its own production IP for the manufacture of the LIGHT system, the agreement's termination would be both severely embarrassing and gather accusations of lost opportunity for such a high-brow enterprise; for AVO it could put the Group's ability to meet initial market demand back as much as two years and potentially even threaten its ability to continue operations. In a professional sense, the two Group's need to limit such exposure at the earliest opportunity and, realistically, this is what yesterday's announcement was all about. If true, the potential ramifications are significant; Thales could possibly agree to move their current manufacturing agreement, with all the cost burdens that AVO would need to shoulder before actually production commences, instead into a formal joint venture. This presumably would entail all such costs being borne by Thales in exchange for long-term exclusivity and a profit sharing arrangement. It would also underline the fact that Thales is both confident that LIGHT will be successfully demonstrated and will create a profit opportunity big enough to interest a business of its scale. On the other hand, such a deep cooperation, must mean that there could only ever be one single bidder for ownership of AVO's technology, so those waiting for an eventual, highly rewarding, take-out battle to be fought amongst first generation proton bean suppliers stand to be disappointed. Whatever, such a funding solution has to be better than its alternatives for AVO shareholders and Beaufort for one still firmly believes that the commercial opportunity for the LIGHT system remains far from recognised by the markets. Beaufort retains its Speculative buy recommendation on AVO in the firm belief that news over the coming months will confirm the true value of its technologies.