Today's edition features:
• DekelOil Public Limited (DKL.L)
• Dixons Carphone (DC..L)
"You can't keep a good market down. Despite its long list of woes, ranging from the IMF's growth forecast downgrade, the Senate delaying the Healthcare Bill, the second global Cyber Attack and Google's EU fine, US equities yesterday were firm from the start, recouping losses on Tuesday which saw the Dow Jones suffered its biggest drop in more than a month, to finish with all three-major average closing near the session's highs. They even shrugged off a National Association of Realtors report showing pending home sales in the US unexpectedly decreased for the third consecutive month in May, which is the latest in a long list of data that suggests US economic momentum is finally slipping. The Nasdaq led the way once again, with most giant tech stocks bouncing while its biotech index was also sharply up. In the wider market, Steel was an outstanding sector, driving the NYSE Arca Index up by 3.9% on hopes the White House will soon impose penalties on countries dumping in the US; Financials were also boosted following the Fed's approval of 34 banks' capital plans, which is now expected to release capital for higher dividend payouts; elsewhere Trucking and Housing saw strength, moving higher along with most of the other major sectors, while also Oils benefitted from an EIA reported detailing a sizeable weekly stock decline. Sceptical analysts, however, pointed out that any output decline was probably more the result of Tropical Storm Cindy which knocked out activity in the Gulf of Mexico last week, but has since come back on stream. Treasuries meanwhile continued to see modest weakness, taking the benchmark ten-year yield up by 3 basis points at 2.228%. Asia celebrated the US market performance, putting in convincingly gains across all its regional bourses. Australia's S&P/ASX 200 advanced over 0.9%, building on Wednesday its largest one-day gain in two weeks, with its banks amongst the best performers. Elsewhere, the Hang Seng was powered by demand for HSBC (HSBA.L) and Standard Chartered (STAN.L). The Nikkei gave back some of its early strength due to a firming Yen, while US tech advances boosted the demand for the heavily weighted South Korean KOSPI index. This optimistic mood was not shared during yesterday's European session, however, with Eurozone markets pulled down by a strong Euro, as it headed for its highest level in a year on traders interpreting Tuesday's ECB President's speech as paving the way for a scaling back of monetary stimulus, even if most still consider tapering itself is unlikely to commence before Q1'2018. Picking up the mood from Tuesday's falling overnight markets, the STOXX Europe 600 opened sharply down with techs, utilities and basic materials under most pressure. The surprise US rally, however, rebuilt confidence sufficient for the Index to eventually claw its way back to unchanged, led by recoveries in the FTSE MIB and IBEX 35, although the DAX and CAC-40 still closed with modest losses. The mood in London deteriorated once again as the Bank of England echoed its continental peer by hinting at a reduction in monetary stimulus. Sparking a 1% rise in Sterling by noting "some removal of monetary stimulus is likely to become necessary", the Governor also made it clear that economic conditions need to improve first. With lower oil prices seen taking the sting out of inflation figures, most traders still consider he will continue to do his utmost to defer such a move into 2018. UK macro data due today includes May Consumer Credit, Mortgage Approvals, and M4 Money Supply; traders will also be listening out for feedback from today's BBA Annual Retail Banking Conference, which lists senior speakers from both Government, BoE and FCA. The EU offers June Services Sentiment, Consumer and Industrial Confidence, Economic Sentiment Index and Business Climate data. The US will detail weekly Initial Jobless, Q1 GDP and Personal Consumption Expenditures, while the Fed's James Bullard is due to make a speech. UK corporates due to release earnings or trading statements include DS Smith (SMDS.L), Purplebricks (PURP.L), JD Sports (JD..L), Greene King (GNK.L), John Wood (WG..L) and John Laing (JLG.L). Theresa May's meeting with German Chancellor Angela Merkel in Berlin today ahead of the G20 summit in Hamburg may also provide some interesting Brexit soundbites, ahead of which London equities are seen simply riding on the back of the overnight markets. The FTSE-100 is seen rising 35-plus points during this morning's early trading."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.63% lower at 7,387.80 whilst the FTSE AIM All-Share index was down 0.36% at 963.53. In continental Europe, the CAC-40 finished down 0.11% at 5,252.90 whilst the DAX finished 0.19% lower at 12,647.27.
Wall Street
In New York last night, the Dow Jones rose 0.68% to 21,454.61, the S&P-500 firmed 0.88% to 2,440.69 and the Nasdaq gained 1.43% to 6,234.41
Asia
In Asian markets this morning, the Nikkei 225 had improved 0.45% to 20,220.09, while the Hang Seng firmed 0.88% to 25,910.58.
Oil
In early trade today, WTI crude was up 0.56% to $44.99/bbl and Brent was up 0.4% to $47.50/bbl.
Headlines
Tax software blamed for cyber-attack spread
A global cyber-attack that affected companies around the world may have started via corrupted updates on a piece of accountancy software. Fingers are increasingly pointing to a piece of Ukrainian tax-filing software, MEDoc, as the source of the infection, although the company denies it. Malware generally infiltrates networks via email attachments that users click on in error. Microsoft described the method as "a recent dangerous trend". The cyber-attack has caused disruption around the world and infected companies in 64 countries, including banks in Ukraine, Russian oil giant Rosneft, British advertising company WPP and US law firm DLA Piper.
Source: BBC News
Company news
DekelOil Public Limited (LON:DKL, 11.75p) – Buy
The operator and 100% owner of the vertically integrated Ayenouan palm oil project in Côte d'Ivoire yesterday announced a maiden final dividend of 0.17 pence per ordinary share for the year ended 31 December 2016. This is in line with the Company's proposed dividend of £500,000 announced on 17 January 2017. A scrip alternative is being offered with this dividend to those investors who wish to receive additional DekelOil securities in lieu of a cash payment. By electing for the scrip dividend alternative, shareholders can increase their shareholding in the Company, in most cases without incurring stamp duty or dealing expenses. The scrip dividend elections will need to be received as instructed by 4 August 2017 from those investors who wish to receive shares in lieu of cash; the calculation period for this exercise will be between 13th and 19th July and certificates will be posted on 1st September, with payment date itself on 4th September. The Board also announced the date of its AGM as 3rd August.
Our View: No surprises, but shareholders will be pleased to receive their first, of what should now become a progressive regular dividend payment. This one alone provides shareholders with a 1.45% yield. Full year results published on 6th June confirmed excellent progress, albeit knocked by an aberration just as the period came to a close. Revenues were a little ahead of expectations, but gross margins had been impacted by reduced availability of fresh fruit bunches during November and December. EBITDA accordingly came out at €4.1m compared with expectations of €4.8m. The new year, however, has started well with availability returning to normal and suggesting the Q4'2016 hit was a simple one-off. Meanwhile, positive steps are being taken with development of the Group's own plantations which, together with World Bank assistance, should improve feedstock visibility going forward. Indeed, Beaufort considers DekelOil's current share price still fails to recognise prospective upside from the ramping up its CPO production from now wholly-owned Ayenouan, where c.30% of the mill's operational capacity is yet utilised (maximum capacity 70,000 tonnes per annum). Moreover, the management is far from standing still, having confirmed on 10 May 2017 that it is in discussion with Norpalm Ghana Limited (subsidiary of Norpalm AS) and certain Norpalm AS shareholders in relation to the potential acquisition of all or the majority of the shares in Norpalm by DekelOil to build out its operations in neighbouring Ghana. Norpalm is an owner and operator of c.4,000 hectares of mature palm plantations and operates a 30 tn/hr mill which also purchases FFB from local producers. Norpalm sells 15,000 tonnes of crude palm oil sold into the domestic Ghanaian market, and also operates a PKO press which produces c.2,000 tn of PKO in the Ghanaian market. Such discussions are still ongoing and therefore there can be no guarantee that it will proceed. The Board intend, however, that it would be financed through a combination of DekelOil's existing cash resources, new equity partners at project level and debt financing. The potential acquisition, if it were to proceed, would not constitute a Reverse Takeover, and so publication of a prospectus is not required. The Group will make further announcements in due course. Even if Beaufort now takes the prudent step, based on recent commodity trading, of factoring slightly lower CPO price projections into its forecast model, this has not changed its price target for the shares. Currently valued at FY2017E and FY2018E P/E multiples of just 7.8x and 5.8x, along with dividend yields of 1.5% and 1.7% respectively, Beaufort retains its Buy rating on the Shares with target price of 23p.
Beaufort Securities acts as corporate broker to DekelOil Public Limited
Dixons Carphone (LON:DC, 293.70p) – Buy
Dixons Carphone ('Dixons'), the Europe's leading specialist electrical and telecommunications retailer and services company, yesterday announced its preliminary results for the 12 months ended 29 April 2017 ('FY2017'). During the period, on a statutory basis, revenue advanced +9% to £10,585m (Constant currency: +3%, like-for-like ('LFL'): +4%), pre-tax profit soared by +47% to £386m and basic earnings per share jumped by +62% to 25.3p, against the comparative period (FY2016). On a headline basis, EBIT increased by +8% to £517m, pre-tax profit grew by +10% to £501m, leading to basic earnings per share rose by +12% to 33.8p. Free cash flows stood at £160m (FY2016: £202m), while net debt was broadly flat at £271m. On the operational front, the Group said it has made the decision to exit its iD mobile operations in the Republic of Ireland. The Group has also reached mutual agreement with Sprint in June that Sprint JV stores to transfer to Sprint Inc and that Connected World Services ('CWS') to focus on the deployment of the Honeybee platform (software business) across the entire Sprint estate. Sprint will acquire the CWS 50% share of the distribution joint venture. Dixons' CEO, Seb James, commented "Over the last few years a great deal of work has been done to make the company stronger, lower risk and more resilient. We are seeing the upside of these efforts now as we declare record headline profits before tax of over half a billion pounds - up 10%". The Group declared a final dividend of 7.75p per share, taking total full year dividend to 11.25p, up +15%, to be paid on 22 September 2017. The Group is scheduled to release Q1 trading statement on 7th September 2017.
Our View: Dixons Carphone delivered a good performance for the FY2017, achieving record headline pre-tax profit a touch ahead of the consensus forecasts with positive LFL growth across all divisions, further supported by the translational benefits of weaker Sterling. Group LFL revenue growth of +4%, was comprised of UK & Ireland +4%, Nordics +1% and Southern Europe +6%. In UK & Ireland (62% of revenue), its electricals business expanded its market share across consumer electronics, white goods, computing and multiplay. The mobile business also witnessed an increase in number of active customers to over 600,000 from 325,000 last year, despite a challenging mobile market. In the Nordics (30% of revenue), growth was achieved across all countries with strong audio and mobile sales more than offsetting a decline in tablets. New store openings also contributed to the revenue, delivering +5% growth on a constant currency basis. Southern Europe (6% of revenue), saw strong LFL growth driven by excellent performance in Greece. CWS (2% of revenue) also showed strong growth helped by contracts with EE, TalkTalk and Sprint. Looking ahead, CEO noted that the UK consumer environment remain challenging with changes in customer's purchasing behaviour, however, he went on to say "change always represents opportunity" maintaining his optimism in its prospect, which is also reflected in +15% increase in dividend. The Shares are valued at FY2018E and FY2019E P/E multiples of 9.0x and 8.5x with dividend yield of 3.9% and 4.2%, respectively, continue to represent hefty discount against its peers. Given positive progress, Beaufort reiterates its Buy rating on the Shares, while keeping an eye on domestic and international trends in consumer confidence which is key to maintaining momentum in such discretionary purchases.