Today's edition features:
• Hummingbird Resources (LON:HUM)
"Energy companies and industrials were Monday's principal drivers amid a slow trading session for US equities in what turned out to be the lightest daily volumes so far this year. During a speech yesterday the Fed Chair, Janet Yellen, did little more than raise an eyebrow when she indicated that the era of extremely stimulative monetary policy was coming to an end, leaving the principal indices to all end little changed, as investors instead looked ahead to the corporate-reporting season. U.S. oil futures gained 1.2% shortly after opening, as chatter continued around the airstrike in Syria, the ongoing civil conflict in Libya and potential for a further international production limiting agreements arranged by OPEC. Market expectations are already high regarding for US Q1'2017 earnings, with Factset suggesting a consensus 9% year-on-year gain is already discounted, indicating a double-digit outcome will now be needed to leave pundits impressed. The Euro continued the decline initiated by Mario Draghi's dovish speech last week, with reports of the sudden rising popularity of the far-left politician Jean-Luc Melenchon ahead of the April 23rd French Presidential Election. The Bank of France downgrading its economic growth outlook for the first quarter further contributed to the Stoxx Europe 600 closing little changed on Monday. Most Asian markets, however, were marked lower during Tuesday's early morning trade, with rising crude prices unable to compensate for increased geopolitical concerns emanating from the Korean Peninsula, which had already been seen to spike the VIX volatility index over 9% on Monday. This left only the ASX to sufficiently confident to reverse early losses and end in the positive, while the lacklustre Shanghai Composite and Hang Seng also remained nervous following the lack of obvious breakthrough from the Trump-Xi Jinping meeting in Florida last week as the Nikkei again was hindered by Yen strength. London this morning will open nervous following release of BRC retail sales data for March, which reportedly declined for the first time since August 2016, adding to concerns that Britons are reining in their spending amid accelerating inflation and meagre wage growth. Otherwise, a wealth of additional macro-economic news is due for release today, including from the UK Retail, Consumer and Producer Price indices for March along with the DCLG House Prise Index; from the EU expect February Industrial Production and its ZEW Survey of economic sentiment; later the US releases its NFIB Business Optimism Index, its Redbook and JOLTS Job Openings. The FOMC's Neel Kashkari is also scheduled to make a speech this evening. UK corporates due to provide earnings or trading updates include Vedanta Resources (VED.L), XP Power (XPP.L) and JD Sports Fashion (JD..L). London is expected to have a relatively quiet trading session today, with the FTSE-100 seen marked down between 15 and 20 points in early business."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.01% lower at 7,348.94 whilst the FTSE AIM All-Share index added 0.28% to stand at 937.15. In continental Europe, the CAC-40 finished down 0.54% at 5,107.45 whilst the DAX was 0.20% lower at 12,200.52.
Wall Street
In New York last night, the Dow Jones rose 0.1% to 20,658.02, the S&P-500 firmed 0.07% to 2,357.16 and the Nasdaq gained 0.05% to 5,880.93.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.6% to 18,685.54, while the Hang Seng slipped 0.86% to 24,054.39.
Oil
In early trade today, WTI crude was down 0.23% to $52.96/bbl and Brent was down 0.13% to $55.91/bbl.
Headlines
Shell admits dealing with money launderer
Shell (RDSA.L) has admitted for the first time it dealt with a convicted money-launderer when negotiating access to a vast oil field in Nigeria. It comes after emails were published showing Shell negotiated with Dan Etete, who was later convicted of money laundering in a separate case. Shell and an Italian oil company paid $1.3bn (£1bn) to the Nigerian government for access to the field. Investigators claim $1.1bn was passed to a firm controlled by Mr Etete. Shell and the Italian firm ENI agreed a deal with the Nigerian government for the rights to exploit OPL 245, a prime oil block off the coast of the Niger Delta. The government passed on $1.1bn of the money to a company called Malabu, which was controlled by Mr Etete, according to Italian prosecutors. Documents filed by the Italian prosecutors claim that $466m of that sum was then laundered through bureau de change and passed on to the then president, Goodluck Jonathan, and members of his government.
Source: BBC News
Company news
Hummingbird Resources (LON:HUM, 25.00p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced today that it has secured a new term debt facility up to US$60m with Coris Bank International Group, one of the largest banks in West Africa. The new facility will be used to fund on-going construction at Yanfolila, which remains on budget and on target for first gold pour by the end of 2017. The existing US$25m Bridge loan facility with Taurus Mining Finance Fund has now been fully repaid and the mandate for further finance has been terminated. The new facility has a four-year term, carries a 9% interest, a 12-month capital repayment deferral and has no royalty or hedging required. As such, Hummingbird's cost of debt has been reduced while maintaining flexibility for growth and development. The first instalment of US$25m (approximately) is expected to be completed shortly with the remaining US$35m (approximately) being drawn over the next five months.
Our view: We are encouraged with the above announcement as it provides Hummingbird with more flexibility and sufficient working capital as it continues with construction of the Yanfolila project while reducing the cost of capital. In addition, the new facility has no royalties nor hedging requirements which will result in material saving for Hummingbird over the life of mine. We continued to be encouraged with the progress being made at site and look forward to 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
MySQUAR Limited (LON:MYSQ, 1.12p) – 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 that it has conditionally raised GBP 2,000,000, before expenses, by way of an oversubscribed proposed placing of, and subscription for, new ordinary shares in the Company. The Placing Price represents a discount of approximately 33.3% to the closing mid-market price on 7 April 2017. The net proceeds of the Placing will be used for general corporate purposes and to terminate the Convertible Loan Note facility in place with Sandabel Capital L.P. Application will be made for the first tranche of Placing Shares, which will rank pari passu with the Company's existing issued Shares, to be admitted to trading on AIM and is expected to occur at 8.00 a.m. on 13 April 2017. The second tranche, which is conditional on the passing of a shareholder resolution expected at a General Meeting expected to be held on or around 28 April 2017, comprises the placing of 128,816,460 new ordinary shares raising GBP 1,094,939.91 (before expenses) and the subscription for 50,000,000 subscription shares raising GBP 425,000, and is expected to be completed on or around 4 May 2017. As one of the conditions of the Placing, the Company has agreed that during the next twelve months no member of its group shall enter into any convertible loan note or any analogous or similar financing arrangements.
Our view: The Sandabel CLN facility provided MySQUAR with exactly the facility it needed. It meant the Board was not forced to demand shareholders continually 'drip-feed' it with cash sufficient for it to build out its operations. Indeed, it permitted the Company to create a powerful branded unique local-language platform with a dramatically expanding number of user accounts and multiple monetisation opportunities which, realistically has the opportunity to generate its first net returns in the year ended June 2018. Given the discounted conversion terms attached to the Notes, however, investors began to perceive them as simply providing a large continuing equity overhang. The net result being for MySQUAR shares to fall significantly below fundamental value. Presumably some of the outstanding converted equity should still be expected to find its way back into the market but, notwithstanding this, termination of the facility now means shareholders can now at least expect true value of the enterprise to reassert once again, rather than the equity remaining dominated by technical issues. The £2m (gross) raised as part of this exercise should be sufficient to plug the foreseeable funding gap between now and being able to finance operations from cash flows and outstanding accounts receivable. Thereafter there should be available headroom on the credit facility provided by Rising Dragon Singapore Pte. Ltd for any reasonable needs. Beaufort considers current momentum within MySQUAR now significantly boosted by the recent Telenor agreement and with similar agreements also potentially being signed with MPT and Ooredoo in coming months, to be almost unstoppable. Yesterday's news should commence a significant re-rating of MySQUAR equity, notwithstanding which a predatory approach offering something like Beaufort's target price of 21p/share could potentially be forthcoming. Beaufort retails its Speculative Buy rating on MySQUAR.