Today's edition features:
• Ariana Resources (LON:AAU)
• Hummingbird Resources (LON:HUM)
• MySQUAR (LON:MYSQ)
• Angle (LON:AGL)
"US equities further extended their gains on Monday. All principal indices once again chalked-up new record closings, following more modest gains in Asia and Europe, after having confidence boosted by recently strong earnings reports, rising commodity prices and, most importantly, hints of a proposal for a significantly more accommodating US corporate tax regime later this month from President Trump. The US$ also spiked higher as investors anticipated today's start of a two-day semi-annual testimony to the US Senate from Federal Reserve Chairwoman Janet Yellen, who is scheduled to speak at 15:00hrs GMT. Fed Funds futures suggest the markets are not expecting another rate increase to actually be delivered until June, but any hints or deviation from her commitment to gradually normalise monetary policy will be scrutinised by traders determined to ensure they are not caught by surprise. Meanwhile, the European Commission, which updates its projections three times every year, said that the 19-country Eurozone economy is expected to grow 1.6% this year, slightly higher than the 1.5% it forecast in November, despite uncertainties raised by Brexit and Trump's election. Somewhat spoiling the party first thing on Tuesday, however, has been news from Asia that January Consumer Prices in China grew at their fastest pace for over two years, driven by rising energy prices and Lunar New Year buying. This follows faster than expected Producer Prices, which hit 6.9% year-on-year when detailed last week, providing evidence of Beijing own efforts to stimulate credit and inject growth while remaining reluctant to burst obvious asset bubbles, such as real estate. This news sucked enthusiasm from the Asian equity session, leaving most bourses to close unchanged to fractionally down, although a sharp rise in the Yen:US$ surprised late afternoon traders enough to knock the Nikkei down more than 1% as the market ended. A good batch of UK macro data is due for release this morning, including January Retail, Consumer and Producer Price, along with the DCLG House Price Index. Eurozone Q4 GDP and December Industrial Production data is also due, while the US provides its own Consumer Prices and Industrial Production numbers. UK corporates expected to provide earnings or trading updates include Acacia Mining (ACA.L), Pendragon (PDG.L), Rolls-Royce (RR..L) and TUI AG (TUI.L). London is seen taking the hint from Far Eastern markets to give back some of yesterday's rise during this morning's early trading, with the FTSE-100 seen opening down 15 to 20 points."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.28% higher at 7,278.92, whilst the FTSE AIM All-Share index declined 0.02% to stand at 900.41. In continental Europe, the CAC-40 finished up 1.24% at 4,888.19 whilst the DAX was 0.92% higher at 11,774.43.
Wall Street
In New Yorklast night, the Dow Jones was flat at 20,412.16, while the S&P-500 gained 0.52% to 2,328.25 and the Nasdaq added 0.52% to 5,763.96.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.91% to 19,282.6, while the Hang Seng slipped 0.2% to 23,664.36.
Oil
In early trade today, WTI crude was up 0.09% to $52.98/bbl and Brent was up 0.13% to $55.66/bbl.
Headlines
Rolls-Royce reports record loss of £4.6bn
A bribery settlement and the fall in the pound have pushed engineering giant Rolls-Royce (RR..L) to a record loss. The jet engine maker reported a loss before tax of £4.6bn for 2016. Earlier this year, the company agreed to pay £671m to settle corruption cases with UK and US authorities. As most aerospace deals are done in dollars it was hit hard by the post-Brexit vote slump in the pound, and it has written off £4.4bn from currency related contracts. In its statement, the firm said the outlook for this year was for a "modest performance improvement", while chief executive Warren East said more needed to be done to improve profit margins. "We must ensure our wide ranging business transformation programme delivers the full benefits expected, not only in terms of cost savings but also the cultural and behavioural changes necessary to ensure the transformation is sustained and high standards of business conduct are maintained," said Mr East. "These are essential if we are to become a more trusted, resilient company."
Source: BBC News
Company news
Ariana Resources (LON:AAU, 1.90p) – Speculative Buy
Ariana Resources, the gold-silver exploration and development company, announced today completion of the interim Stage One Tailings Storage Facility (TSF) at the Kiziltepe gold mine in Western Turkey. Kiziltepe is being advanced towards production through a JV agreement (50:50) with Proccea Construction, the mine site and processing plant are now fully operational and formal production is expected to be announced in the coming weeks. Technical approvals for the TSF followed by grating of an Operations Permit are the final hurdles before formal production can commence. In the meantime, Ariana is advancing work programmes on its other projects to enhance future production at Kiziltepe.
Our view: Unseasonable weather has unfortunately delayed initial start-up at Kiziltepe. However, now that the geomembrane has been installed, the TSF is ready for initial production pending final approvals. We expect technical sign-off for the TSF and approval of the Operations Permit to be granted imminently followed by announcement of commercial production. In the meantime, management can focus on further enhancements to the project through resource extension and upgrades to reach its production target of 50,000oz of gold per annum. We look forward to formal start-up at Kiziltepe in the coming weeks and maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Hummingbird Resources (LON:HUM, 25.75p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced today that the existing bridge loan facility with Taurus Funds Management has been fully drawn down. As announced on 6 December 2016, the bridge loan had been increased from US$15m to US$25m.
Our view: Hummingbird is fully funded to production and with the Government of Mali's recent support and commitment, management can focus on full-scale construction as it targets production by the end of 2017. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Hummingbird Resources plc
Keras Resources (LON:KRS, 0.48p) – Speculative Buy
Keras Resources announced today an initial inferred resource at the Copenhagen deposit, which is near the Company's flagship Klondyke gold project and comprises part of the Warrawoona gold area, located in the Pilbara Region of Western Australia. An Inferred resource of 180,000t grading 6.1g/t Au was reported covering a strike length of 140m and calculated to a depth of 100m. Copenhagen comprises 6.07ha and is owned by Haoma Mining. Keras is assuming operator by way of its five year right to mine, with accompany right to purchase the Hoama tenements. On aggregate, the mineral resource estimate for Warrawoona project now stands at 5.8Mt grading 2.2g/t Au (Inferred) for 410,000oz.
Our view: We are encouraged with the initial resource from the Copenhagen deposit demonstrating the potential high-grade mineralisation of the area. We are also encouraged with the shallow depths and additional upside as the deposit remains open along strike and down-dip. We look forward to further updates on Copenhagen and the surrounding Warroona area. In the meantime, we maintain our speculative buy on the stock.
Beaufort Securities acts as corporate broker to Keras plc
MySQUAR (LON:MYSQ, 1.75p) – Speculative Buy
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 a new hardcore game called MyCombo that will be fully launched on 15 February 2017. MyCombo is a role-playing combat game that allows users to create unique characters and fight combinations choosing from among 50 warriors and 300 skills. The game features enhanced animation as well as modern visual effects. The initial response to the new game, which will work on both Android and iOS devices, has been positive. MyCombo is expected to benefit from the existing user base of other games and of MyChat, the chat and social networking application of MySQUAR. Hardcore games (such as Chakra Ninja and MyCombo) are those require a longer time commitment of 30 minutes or more while casual games are easier to play and can be played for a shorter time.
Our view: Another important addition to the games portfolio! MyCombo will use the 'freemium' model, which allows free play up to a certain level, after which players have to pay for purchasing in-game assets. Mobile gaming remains a key source of revenue for the Group, which it expects to release new games on a regular basis further solidifying its leading position in the mobile-based value added services in Myanmar. 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. This is in addition to its ongoing efforts to accelerate monetisation of hardcore games, where the management recently noted 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, MySQUAR is scheduled to release additional games in March 2017 with more expected to follow. 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 remaining issued CLNs do at this time continue to create a potential stock overhang which some fear are acting as a drag on the share price.
Beaufort Securities acts as corporate broker to MySQUAR Limited
Angle (AGL.L, 50.50p) – Speculative Buy
ANGLE, the specialist medtech company, yesterday announce that it has been selected for CANCER-ID to validate blood-based biomarkers for cancer. CANCER-ID is a European consortium aiming to establish the standard protocols for and clinical validation of blood-based biomarkers to enable liquid biopsies to become routine clinical practice. It currently has 38 partners from 13 countries, funded by the Innovative Medicines Initiative ('IMI'), with a total budget of over €14m. ANGLE will contribute to the programme by providing a number of its Parsortix instruments and associated consumables for evaluation. The evaluation will assess the suitability of the Parsortix system being adopted as a standard circulating tumour cell ('CTC') harvesting system to be used alongside a variety of different molecular analysis techniques in standard operating protocols. Running until 2020, an initial evaluation phase will be followed by a clinical phase to establish the use of liquid biopsies in treating lung and breast cancer.
Our view: The news further demonstrates the accelerating level of interest that ANGLE's Parsortix system is drawing from both industry and academic leaders in the field of liquid biopsy. CANCER-ID is coordinated by the University Medical Center Hamburg-Eppendorf, University of Twente, Bayer AG and Menarini Silicon Biosystems, with the latter two representing as the lead participants. The CANCER-ID offers the potential for Parsortix to be specified as a standard CTC harvesting system for clinical use in patients with lung cancer and breast cancer in Europe, including the opportunity for collaboration with multiple downstream analysis companies. This validation fits ideally with ANGLE's goal to seek sector approval and endorsement of its unique solution, which not only enables cancer detection but also harvests the CTC for personalised cancer care. Last months, for example, ANGLE announced positive interim evaluation for its two independent 200 patient ovarian cancer clinical studies in Europe and the US. These interim evaluations demonstrated an accurately of Parsortix system for the first 50 patients sufficient to differentiate between women with a malignant pelvic mass and those with benign tumours. As at 26 January 2017, the Group confirmed patient enrolment (for ovarian) is over 90% complete in Europe and 70% complete in the US with headline data from the full studies expected in Q2 FY2017. Its analytical study work for metastatic breast cancer for FDA clearance is also underway with completion of analytical and clinical studies expected in 2017 to enable FDA submission. Beaufort's current financial model sees ANGLE achieving limited revenues and remaining in quite deep losses until FY2018, before ramping sharply upward during the following year to become cash flow positive for the first time by period end. Based on a cash position of around £6.5m (31 October 2016: £9.7m) by the end of the current year, Beaufort considers the Group will be in the position to demonstrate to shareholders a strong sales growth trajectory and modest positive earnings before considering tapping shareholders or, indeed, industrial partners, once again for additional funding. During this time, Beaufort also believes that ANGLE will have been recognised as the most suitable of the various non-invasive cancer detection tests that are presently undergoing trials for hospitals and medical institutes. This will accrue significant value to Parsotix. Beaufort retains its Speculative Buy recommendation on the stock.