Today's edition features:
• DekelOil Public Limited (LON:DKL)
"Surprisingly resilient overnight markets again refused to be fazed by cautionary macro data and heightening international tensions. Trading in the US was choppy to start with, however, following release on Non-Farm Payrolls figures, which rose just 98k in March, only the fourth time since early 2013 the increase failed to achieve six digits, compared with a consensus of 175k. Some blamed the shortfall on severe winter weather that hit the east coast during March, following two months of mild conditions which had powered better that expected gains. Nevertheless, it was some compensation that unemployment itself fell to 4.5%, the lowest since May 2007, confirming that the country remains close to full employment while keeping the opportunity for another rate hike after June's FOMC meeting alive. The surprise US Air Strike in Syria met a predictable response, spiking safe-haven investments including the Yen, gold and triple A-rated government bonds, although the 2% that Brent crude initially put on was largely lost during the session as traders faced up to the fact that the territory's registered contribution to global supply has been pretty close to zero since the civil war got underway. The three principal US indices all closed just about unchanged, with six of the S&P's eleven major sectors in the red amid keen buying of defence-related stocks, prior of any formal statement from the White House regarding the highly sensitive talks between Trump and the Chinese leader Xi Jinping. When it came, progress appeared to have been made and the chemistry was okay, although no particular breakthrough was cited regarding trade gap negotiations or taming of North Korea's wild-child. This seemed enough to keep most of Asia's regional bourses in the positive, with the Nikkei higher to start the week, aided by a weakening Yen and Kuroda's confirmation that current stimulatory policy will remain until stable 2% inflation is achieved, while markets in Australia gained on strength in commodities and banks. The Shanghai Composite, however, was under pressure as the country's top insurance regulator apparently faces a graft probe. An investigation into the chairman of the China Insurance Regulatory Commission led to a Communist Party statement noting he was suspected of 'serious violations' of party discipline; Chinese insurers are very big buyers of domestic equities. Meanwhile, the Euro hit a one-month low against the Dollar in Asia in response to Mario Draghi's dovish statements at the end of last week and amid broad greenback recovery. Macro data due for publication today includes nothing from the UK, although the EU offers its April Sentix Investor Confidence figures, while the US details March Labour Market Conditions. UK corporates scheduled to release earnings or trading updates today include Safestay (SSTY.L), Empiric Student Property (ESP.L), and Centamin (CEY.L). Against this, London is seen opening modestly firmer, with the FTSE-100 rising between 5 and 10 points in early trade. Geopolitics remains to the fore, however, with investors keen to hear more regarding the US-China talks, especially following reports this morning that the US Navy has reportedly cancelled a planned port calls in Australia for the USS Carl Vinson and is instead sending the aircraft carrier toward the Korean Peninsula amid concerns about possible new weapons tests under the direction of Kim Jong-un."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished Friday's session 0.63% higher at 7,349.37 whilst the FTSE AIM All-Share index added 0.48% to stand at 934.50. In continental Europe, the CAC-40 finished up 0.27% at 5,135.28 whilst the DAX was 0.05% lower at 12,225.06.
Wall Street
In New York on Friday, the Dow Jones fell 0.03% to 20,656.1, the S&P-500 shed 0.08% to 2,355.54 and the Nasdaq slipped 0.02% to 5,877.81.
Asia
In Asian markets this morning, the Nikkei 225 had risen 0.65% to 18,785.43 and the Hang Seng firmed 0.03% to 24,273.6..
Oil
In early trade today, WTI crude was up 0.27% to $52.38/bbl and Brent was up 0.14% to $55.32/bbl.
Headlines
Libor: Bank of England implicated in secret recording
A secret recording that implicates the Bank of England in Libor rigging has been uncovered by BBC Panorama. The 2008 recording adds to evidence the central bank repeatedly pressured commercial banks during the financial crisis to push their Libor rates down. Libor is the rate that banks lend to each other and it sets a benchmark for mortgages and loans for ordinary customers. The Bank of England said Libor was not regulated in the UK at the time. Banks setting artificially low Libor rates is called lowballing. The recording calls into question evidence given in 2012 to the Treasury select committee by former Barclays boss Bob Diamond and Paul Tucker, the man who went on to become the deputy governor of the Bank of England.
Source: BBC News
Company news
DekelOil Public Limited (LON:DKL, 12.62p) – Buy
The operator and 100% owner of the vertically integrated Ayenouan palm oil project in Côte d'Ivoire announced this morning record quarterly production of crude palm oil for the three months ended 31 March 2017, along with a 36.6% like-for-like increase in total Q1 sales revenues to €9.7m. Record like-for-like CPO production registered for the first quarter of the current year, incrementing each month, with April production on track to exceed that reported in last year's comparable. Year-on-year sales quantities were marginally lower due to buyers anticipating lower pricing in April, although stock-on-hand at end-March of 4,633 tonnes included 1,000 tonnes pre-sold at March prices but not included in Q1 numbers. A 22.8% CPO extraction rate during Q1 2017 (Q1 2016: 23.1%) confirms lower oil content in the fresh fruit bunches and that the operation is milling efficiently. Towards the end of Q1, extraction rates increased considerably and are currently around 24% on a daily basis, suggesting the Group remains well on track to exceed H1 2016 levels of 23.1%.
Our view: Moving forward and confident! Significantly higher year-on-year sales prices for CPO and Palm Kernel Oil were sustained during Q1 2017. While in April 2017 they have softened slightly to approximately c.€700 per tonne, they still remain well above H1 2016 prices of €540 per tonne and new buyers are also entering the Cote d'Ivoire market on the back of growth in the country's CPO production. As a result, management expects its relatively high inventory levels to unwind at the beginning of H2 2017, with gross and EBITDA margins already tracking higher than those reported for H1 2016 of 26.0% and 19.4% respectively. While overhauling its balance sheet and materially decreasing the interest rate on its remaining obligations, management has ramped up operations while buying out remaining minorities in the Company's core asset. As a result, it has the opportunity to significantly increase overall profitability. As has been previously noted, DekelOil is also a Brexit winner with the appreciation of the Euro against the Pound of well over 10% post Brexit, which in turn translates into higher Sterling earnings. Having positioned itself so, Beaufort believes the Group will be able to support its long-term operational ambitions and paydown remaining debt while also producing a sustainable surplus. Shareholders will be rewarded by management with progressive payments commencing this year, with a maiden payment accompanying its interim results, which in itself remains key to investor confidence in what is now an obviously undervalued investment. Beaufort retains its Buy recommendation on the shares and repeats its price target of 23p.