Today's edition features:
• Bushveld Minerals (LON:BMN)
• Premier African Minerals (LON:PREM)
• Finsbury Foods (LON:FIF)
"The trigger will be pulled on the 29th March – two days before Theresa May’s own self-imposed deadline. Under Article 50 treaty provisions this should theoretically see Britain out of the EU at the end of a two-year negotiating period, although the Prime Minister has already suggested to the House of Commons that the complication of the exercise it see could take longer. In an otherwise quiet day for the London markets, during which financials softened and miners were knocked by falling minerals prices, equities still managed to tick upward curtesy of the Pound slipping against both the US$ and Euro on the news. Just a fractional move by the close, but still enough to push the FTSE-100 to a new record high, as defensives and income stocks including consumer staples found favour. US equities, by comparison, were again struggling to maintain the record pace set during the first 10 weeks of the year, as the US$ fell a further 0.1% having just posted its worst week against the international basket since July. Janet Yellen’s less hawkish than expected tone last week is now reflected by Fed Funds discounting just 1.5 remaining moves for this year followed by two next, compared with her existing guidance of 5 hikes over the duration. Given that equity valuations are heady right now and until President Trump can convincingly demonstrate his ability to ‘walk-the-walk’, negotiating Congress’ arch-conservatives through major tax, policy and budgetary proposals, sceptical investors do not need much convincing to take a little money off the table. U.S. government bond yields, meanwhile, fell to their lowest level in more than two weeks on Monday, extending last week's slide as the Federal Reserve soothed expectations of a spike in yields; the benchmark 10-year Treasury note was 2.472% in late trading, compared with 2.5% Friday, its lowest since March 1. This leaves the European markets to be the ones that could surprise on the recovery front, with traders now increasingly pondering the European Central Bank's next policy step, which could begin an exit from quantitative easing, as opposed to more loosening, which in turn has lifted the Euro and added to US$ pressures. German central bank President Jens Weidmann is the latest to stir this particular expectation, suggesting yesterday that the ECB should slowly start to retreat from its easy-money policies, even though Greece’s ongoing talks with creditors have still provided no breakthrough regarding labour reforms and threaten to derail the country’s bailout. Stocks were modestly mixed in the Asia-Pacific region, with Japanese equities knocked by a stronger Yen while the Chinese markets drifted mildly positive in the absence of new stories. A busy economic calendar today, however, may help provide this, with a large batch of UK releases including February Retail and Producer and Consumer Prices, as well as Public Sector Net Borrowing and the CBI’s March Industrial Trends Survey. Later in the afternoon, the US is scheduled to contribute its Redbook index plus Q4 Current Account data, while speeches are expected from the Fed’s Ester George and the FOMC’s Loretta Mester. UK corporates due to release earnings or trading updates include Bellway (BWY.L), Mears Group (MER.L), 888 Holdings (888.L), Fevertree Drinks (FEVR.L), Smart Metering Systems (SMS.L) and SCS Group (SCS.L). Save for any particular surprises from this quater, London is expected to take its hint from the lacklustre overnight markets, with the FTSE-100 seen gaining around 5 points in early trade."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday session 0.06% higher at 7,429.81, whilst the FTSE AIM All-Share index fell 0.08% to stand at 926.48. In continental Europe, the CAC-40 finished down 0.34% at 5,012.16 whilst the DAX was off 0.35% at 12,052.90.
Wall Street
In New York last night, the Dow Jones shed 0.04% to 20,905.86, the S&P-500 lost 0.2% to 2,373.47 and the Nasdaq gained 0.01% to 5,901.53.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.35% to 19,455.88, while the Hang Seng rose 0.35% to 24,588.17.
Oil
In early trade today, WTI crude was up 0.35% to $48.39/bbl and Brent was up 0.41% to $51.83/bbl.
Headlines
Bill Gates tops Forbes' rich list but Trump's wealth slips
Microsoft founder Bill Gates again tops Forbes' list of the world's richest people, in a year when the number of billionaires rose 13% to 2,043. According to the magazine's annual rich list, Mr Gates' fortune rose to $86bn, from $75bn, followed by investor Warren Buffett, up $14.8bn to $75.6bn. It was bad news for US President Donald Trump, who slipped 220 spots to 544 and must now rub along on just $3.5bn. Forbes said the $1bn fall in his wealth was due to the slow US property market. There were 183 tech billionaires on the Forbes list, with a combined $1tn in wealth. The list is dominated by US billionaires. Others in the top 10 included Amazon founder Jeff Bezos, who moved up to number three with the biggest gain of any person on the planet, a $27.6bn rise in his fortune of $72.8bn. Facebook founder Mark Zuckerberg was number five and Oracle co-founder Larry Ellison was number seven.
Source: BBC News
Company news
Bushveld Minerals (LON:BMN, 5.28p) – Speculative Buy
Bushveld Minerals announced yesterday that it has signed a US$9m financing agreement with Wogen Resources, which will be used towards acquiring Strategic Minerals Corporation and its 78.8% interest in Vametco Holdings Limited. As such, Wogen will become the exclusive marketer and distributor of Vametco’s Nitrovan production. As part of the agreement, Wogen will make a US$3m prepayment, payable by the end of 2018, and provide an inventory and receivable financing package of US$6m to optimise operations at Vametco.
Our view: The above transaction takes Bushveld one step closer to completing the transformational acquisition of SMC’s interest in Vametco while providing working capital for optimised production of its Nitrovan product. We are encouraged with Wogen’s commitment to the project and look forward to the completion of the of the SMC acquisition. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Bushveld Minerals plc
Keras Resources (LON:KRS, 0.40p) – Speculative Buy
Keras Resources announced today an update on the proposed listing of the Company’s Australian gold assets on the ASX. Keras has entered into a binding agreement with Pharmanet Group (PNO.ASX) to acquire 100% of its subsidiary Keras (Gold) Australia. Following the transaction Pharmanet intends to change its name to Calidus Resources. Under terms of the proposed transaction, PNO will acquire 100% of the issued share capital of Keras Australia for 225M shares of PNO. A further 525M shares will be issued to Keras following certain milestones, namely a JORC-compliant resource estimate of at least 500,000oz (Measured or Indicated) for the Klondyke gold project and completion of a positive pre-feasibility study demonstrating the commercial viability of the project. In conjunction with the transaction, PNO will complete a capital raising, by way of prospectus, targeting A$8m to fund a major drilling and exploration programme as well as working capital. The funds raise will also be used to repay the finance facility arranged by Riverfort Global Capital of a total of US$2.2m and any additional interest up to a maximum of US$0.24m via the issue of Keras shares. Keras will retain its 85% interest in the Company’s Nayega manganese project in the Togo.
Our view: The above transaction, subject to all regulatory and shareholder approvals, fulfils Keras’ strategy to list its Australia gold assets as a standalone ASX-listed company and can be considered as project level funding for the Klondyke project. Should all milestones be achieved Keras would hold A$15m in shares of PNO and have majority ownership of the company. We also note that finance facility agreement with Riverfort has now been extended by two months to allow for completion of the transaction and associated capital raising, which will be used to repay the finance facility. We look forward to further updates on the Klondyke gold project once the transaction has been finalised. In the meantime, we maintain our speculative buy on the stock.
Beaufort Securities acts as corporate broker to Keras plc
Premier African Minerals (LON:PREM, 0.58p) – Speculative Buy
Premier African Minerals, the South and Western Africa focused mineral explorer and developer, announced today an update on its Zulu lithium and tantalum project in Zimbabwe. Recent assay results confirm wide intersections of lithium mineralisation up to 45m in drill hole ZDD-13. The best intercepts from ZDD-13 include 1.4m grading 2.76% Li2O, 5.3m grading 1.6% Li2O, and 24.7m grading 1.3% Li2O. The Company stated that it is now focusing on completion of a maiden resource estimate and furthering discussions with interested parties on participating and/or acquisition of the Zulu project.
Our view: We are encouraged by initial drill results from the Zulu project and note the wide lithium-mineralised intercepts in drill hole ZDD-13. We look forward to results from the pending metallurgical test work as well as a maiden resource estimate from the Zulu project. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Premier African Minerals plc
Finsbury Food Group (LON:FIF, 111.00p) – Hold
Finsbury Food Group ("Finsbury Food"), the UK speciality bakery manufacturer of cake, bread and morning goods for the retail and foodservice channels, yesterday announced its interim results for the 26 weeks ended 31 December 2016 (H1 FY2017) . During the period, revenue remained flat at £156.6m; comprised of -2.9% fall in the UK Bakery division and +31.7% growth in the overseas division (Group's 50% owned European business), against the comparable period (H1 FY2016). Operating profit grew by +4.0% to £8.3m, supported by +0.2% improvement in margin to 5.3% (+0.3% margin improvement in UK Bakery division, slightly offset by -0.2% margin decline in overseas division). Pre-tax profit rose by +5.3% to £7.9m, leading adjusted diluted earnings per share to climb by +4.5% to 4.6p. Cash inflow improved slightly to £12.0m, due to organic profit growth, while net debt at the period end marginally reduced to £21.0m, implying net debt to EBITDA of 0.8x (H1 FY2016: 0.9x). On the operational front, the Group have invested c.£5.0m in capital projects, including new artisan bread facility, enhanced product innovation and secured new license. The Group has won 2016 "Celebration Cake Business of the year" (Bakery Industry Awards) and "Quality Food Awards" for a number of its products. Finsbury Food's CEO, John Duffy, commented "the Group's track record of exceptional growth and diversification over the prior years illustrates that it has the right strategy in place to continue to deliver growth and improved shareholder value over the coming years." The Group declared an interim dividend of 1.0p per share, up +7.5%, to be paid on 21 April 2017.
Our view: Finsbury Food delivered a resilient result for H1 FY2017, broadly in line with management expectations given its financials improved modestly due to increased operational efficiencies amid muted top line growth at the Group level. Although revenue remained flat, this was against an exceptionally strong H1 FY2016 comparative which saw +46% growth year-on-year. The flat outcome was due to a -2.9% fall in the UK Bakery division (FY2016: 88% of revenue), which slightly eased from -4.0% seen during the first 4 months and was offset by strong growth in its oversea division (FY2016: 12% of revenue) of +31.7%. Growth for overseas division accelerated further from that seen last year, at +18.8% (or +36.5% for the first 4 months of FY2017). While we do recognise that the Group's ongoing investment continues to bear fruit, leading to a resilient H1 performance, the Board's guidance towards a "steady performance" in H2 is now expected to restrain the share price until investors can once again see opportunity to achieve premium growth. UK market condition remains challenging for grocery Cake (volume -4.8%, value -1.5%, Source: IRI Infoscan) and Bread & Morning Goods grocery market (volume +0.6%, value -0.2%, Source: Kantar Worldpanel). Moreover, persistent cost pressure due to US dollar or Euro-led commodity price inflation (such input costs are globally priced in dollars or euros) and the planned National Living Wage increases, suggests the Group will have to deliver something more in order to impress the ever-cautious investors. This suggests Beaufort's 12-month forward target share price of 140p is now a little ambitious. Based on Beaufort's revised projections, the shares are presently valued on a FY2017E P/E earnings multiple of 11.3x, EV/EBITDA of 6.6x, along with dividend yield of 2.7%. Beaufort remains as a long-term supporter of this high quality business but, for now, awaiting signs of improved opportunity, has decided to lower its price target to 125p. Given that the shares now trade within 10% of this price, the recommendation has also been downgraded to Hold from Buy.