Today's edition features:
• DekelOil (LON:DKL)
• IP Group (LON:IPO)
Markets
Europe
The FTSE-100 closed 0.19% lower at 7,390.22 whilst the FTSE AIM All-Share index was up 0.12% at 956.84. In continental Europe, the CAC-40 finished 1.09% down at 5,173.27 whilst the DAX finished 1.25% lower at 12,430.39.
Wall Street
In New York last night, the Dow Jones fell 0.25% to 21,574.73, the S&P-500 firmed 0.06% to 2,460.61 and the Nasdaq gained 0.47% to 6,344.31.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.01% to 19,997.94, while the Hang Seng firmed 0.51% to 26,660.69.
Oil
In early trade today, WTI crude was down 0.26% to $46.28/bbl and Brent was down 0.25% to $48.72/bbl.
Headlines
Credit and debit card surcharges to be banned
Consumers are no longer to be charged extra for paying by debit or credit card, the government has said. From January next year, businesses will not be allowed to add any surcharges for card payments. The worst offenders currently are airlines and food delivery apps, and small businesses which typically add a fee for cards. In 2010 alone consumers spent £473m on such charges, according to estimates by the Treasury. It follows a directive from the European Union, which bans surcharges on Visa and Mastercard payments. However the government has gone further than the directive, by also banning charges on American Express and Paypal too. Campaigners welcomed the move, saying it was great news for consumers.
Source: BBC News
Company news
DekelOil Public Limited (LON:DKL, 11.38p) – Buy
The operator and 100% owner of the profitable and vertically integrated Ayenouan palm oil project in Côte d'Ivoire yesterday provided a production update for the half year ended 30 June 2017. Management confirmed a 22.1% increase in product sales (including CPO, Palm Kernel Oil and Palm Kernel Cake to €18.8 million (H1 2016: €15.4 million) is expected to be reported in the half year to 30 June 2017, primarily due to stronger CPO pricing resulting from higher global prices and increased CPO storage capacity at the Project (from 5,000 to 8,000 tonnes) which enabled the Group to improve local pricing terms. Record like-for-like CPO production was recorded in Q1 2017, which was followed by curtailed production at the Mill in Q2 due to now rectified mechanical issues during May and June. H1 production of CPO was therefore marginally lower at 26,947 tonnes (H1 2016: 28,550 tonnes).
Our View: Further excellent progress! Management has confirmed its expectation for another set of record half yearly figures, in terms of revenue, EBITDA, and net profit after tax. The mechanical issues which prevented the Mill from being fully operational during Q2 and resulted in marginally lower year on year CPO production in H1 was frustrating, but the plant has since been restored to full operational capacity. As well as stronger international prices, DekelOil’s strong financial performance is also due to the commissioning of an additional storage tank which assisted in maximising pricing during the period. This means that last year's first half EBITDA of €3.1 million is set to be exceeded and that Ayenouan is proving to be a highly cash generative platform upon which a leading West African focused palm oil company is now being built. This experience, also provides the Board with confidence to move forward with plans to develop a second project in Côte d'Ivoire at Guitry, with discussions continuing regarding the proposed acquisition of Norpalm, a producing palm oil project in Ghana. Norpalm owns some 4,000 hectares of mature palm plantations and operates a 30 tn/hr mill which also purchases FFB from local producers. As such, it sells 15,000 tonnes of crude palm oil into the domestic Ghanaian market, and also operates a PKO press which produces c.2,000 tn of PKO in the Ghanaian market. Given that the discussions are still ongoing, 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, is not expected to constitute a Reverse Takeover, and so publication of a prospectus should not be required. The Group will make further announcements in due course. In the meantime, based on Beaufort’s forecasts of DekelOil producing 2017E and 2018E operating profits of €6.9m and €8.3m respectively, leading to attributable profits of €5.3m and €7.0m, the shares trade on Price/Earnings multiples of just 6.8x and 5.2x. This remains much too cheap, particularly give shareholders can expect to collect dividend yields of 1.8% and 2.0% for the two years. Beaufort retains its Buy recommendation on DekelOil Public Limited with a price target of 23p/share.
Beaufort Securities acts as corporate broker to DekelOil Public Limited
IP Group (LON:IPO, 138.60p) – Buy
IP Group, the developer of intellectual property-based businesses, yesterday announced its results for the 6 months ended 30 June 2017 (‘H1 FY2017’). During the period, the value of the Group’s portfolio increased to £663.0m (H1 FY2016: £525.7m; FY2016: £614.0m), reflecting a net portfolio gains of £28.7m (H1 FY2016: loss £24.9m; FY2016: £6.5m) driven by strong net fair value increase in 3 sectors; Technology (+£12.7m), Cleantech (+£19.1m) and Biotech (+£8.2m). This resulted in profit for the period of £18.4m (H1 FY2016: loss £33.9m; FY2016: loss £14.8m) and a positive Return on Hard NAV (net assets excluding goodwill and intangible assets) of £21.3m (H1 FY2016: negative £30.6m; FY2016: negative £7.6m). Net portfolio gains have also led to an increase in net assets to £968.1m (H1 FY2016: £748.5m; FY2016: £768.7m), which excluding goodwill and intangible assets, giving Hard NAV of £890.5 (H1 FY2016: £683.5m; FY2016: £706.5m), implying Hard NAV per share of 127.8p (H1 FY2016: 120.9p; FY2016: 125.0p). Gross cash and deposits at the period end increased to £263.1m (H1 FY2016: £174.7m; FY2016: £112.3m), primarily due to net proceeds of £180.3m from issue of new equity in June. On the operational front, the Group provided £20.1m (H1 FY2016: £12.8m; FY2016: £69.7m) capital to portfolio companies and projects. At the period end, the Group had interests in 96 companies, strategic stakes in three multi-sector platform businesses as well as a further 18 de minimis holdings. IP Group launched IP Group Australasia and completed the acquisition of Parkwalk Advisors during the period. On a separate announcement, the Group announced the improved terms of offer for its intension for the whole of the issued and to be issued share capital of Touchstone Innovations Plc, valuing Touchstone at c.£490m (previously: c.£466m). Offer document, Prospectus, Circular, and Notice of General Meeting regarding this offer has been published this morning.
Our View: IP Group’s H1 FY2017 performance was encouraging with net assets substantially increased to £968.1m. This was led by the strong performance from its portfolio companies delivering a net portfolio gains of £28.7m (net unrealised fair value gain: £28.5m), together with the successful equity placing that raised £207m gross from both new and existing investors. Its ability to raise such capital illustrates the continuing support from its existing investors, as well as from new global investors ranging from Australia, China, Singapore and the UK. The Group has injected £20.1m of capital into its portfolio companies, while three of its portfolio companies completed significant funding rounds; Ultrahaptics (£17.9m), Actual Experience (£17.5m) and Creavo Medical Technologies (£13.4m). Regarding takeover of Touchstone, the Group has improved its offer following Touchstone’s Chairman, David Newlands, stated in its letter to shareholders on 28 June 2017 that its Board “cannot recommend the Offer on its current terms” and “advises the Company's shareholders to take no action in relation to the Offer”. With the revised term, IP Group said it has received a non-binding letter of intent from Imperial College of Science, Technology and Medicine, the 15.3% shareholder of Touchstone. Such addition leads to IP Group receiving aggregate supports from holders of 89.7% of Touchstone’s issued share capital. If the Offer is accepted in full, Touchstone Shareholders would own approximately 34% and IP Group Shareholders would own approximately 66% of the Combined Group. The Board of IP Group said it believes the Combined Group would create an “international leader in IP commercialisation and a combined business with substantial capabilities that is greater than the sum of the two parts”. Overall, a substantial cash position of £263.1m suggests IP Group has capacity to fully commit to existing commitments and new deployments without needing to realising any existing gains. Despite the ongoing performances, the shares have fallen significantly, underperforming the FTSE250 by nearly 24% year-to-date, to now trading at discount to NAV (FY2017E P/NAV of 0.95x). Beaufort retains its Buy rating on the Shares.