Today's edition features:
• Bushveld Minerals (LON:BMN)
• Karelian Diamond Resources (LON:KDR)
• Stellar Diamonds (LON:STEL)
• Saga (LON:SAGA)
Markets
Europe
The FTSE-100 finished Friday's session 0.64% higher at 7,310.64 whilst the FTSE AIM All-Share index was up 0.30% at 994.67. In continental Europe, the CAC-40 finished 0.27% higher at 5,281.29 whilst the DAX was down 0.06% at 12,592.35.
Wall Street
In New York on Friday, the Dow Jones closed 0.04% lower at 22,349.59, while the S&P-500 added 0.06% at 2,502.22 and the Nasdaq gained 0.07% to finish the week at 6,426.92.
Asia
In Asian markets this morning, the Nikkei 225 was 0.46% higher at 20,390.49, while the Hang Seng was 1.04% lower at 27,591.05.
Oil
In early trade today, WTI crude oil was 0.28% lower at $50.52 per barrel and Brent was down 0.12% at $56.79 per barrel.
Headlines
Labour pledges law to cut credit card debt
Legislation limiting the amount of interest that can be charged on credit card debts is being promised by the Labour Party. Under the changes, nobody would pay more in interest than they had originally borrowed. Shadow chancellor John McDonnell says more than three million people are "trapped" by credit card debt. He will unveil the planned change in the law in a speech at Labour's conference in Brighton. Labour said the changes would work in a similar way to measures on payday loans, which came into force in 2015. The Financial Conduct Authority has called for new measures to help people in "persistent debt" as a result of credit cards. The regulator says over three million people are in persistent debt, which it defines as having paid more in interest and charges than they have repaid of their borrowing over an 18-month period. Labour said its "total cost cap" would help "tackle the persistent debt spiral", claiming growing consumer debt was becoming a "threat to our economy".
Source: BBC News
Company news
Bushveld Minerals (LON:BMN, 9.25p) – Speculative Buy
Bushveld Minerals, the diversified mineral development company with a portfolio of vanadium, titanium, iron ore, tin and coal in southern Africa, announced today that it has agreed to issue up to £8m of unsecured convertible bonds to Atlas Capital Markets. The bonds have a coupon of 7.5% per annum and a maturity date two years from date of issuance. The convertible bond will be issued in two tranches, the first of £4.5m and the second of £3.5m. Bushveld Vametco, which is 45% and 55% owned by Bushveld and Yellow Dragon respectively, holds a 78.8% interest in Strategic Minerals Corporation (SMC) which is the holding company of Vametco. Currently the Vametco plant has a capacity of 3,000metric tonnes of vanadium per annum and Bushveld expects to increase this to 5,000t over the next three years.
Our View: The convertible bonds will provide Bushveld with the necessary capital to deliver on its strategy to build the largest, lowest cost and vertically integrated vanadium platform. We note that the vanadium market has improved since Bushveld acquired its share of Vametco with prices currently around US$22/kg V. Assuming prices and production costs remain at current levels Bushveld and its partners should be able to generate healthy margins. We look forward to further updates from the Vametco mine and plant as Bushveld focuses on its expansion initiatives as well as development of its tin platform. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Bushveld Minerals plc
Karelian Diamond Resources (LON:KDR, 0.48p) – Speculative Buy
Karelian Diamond Resources, the diamond exploration company focused on Finland, announced it has received results from 22 kimberlite indicator mineral (KIM) analyses on samples taken from of the Kuhmo region of Finland. These were taken from the target around were a diamond was discovered within a till sample as reported on 31 January 2017. One sample returned 36 KIM comprising 10 peridotitic garnets (G9/G10), 19 chromite grains, 1 fosterite grain (0.25 to 0.5mm in size) and 3 chromite grains (in the 0.5 to 1.0mm size range). These results suggest that the sample is within a couple hundred meters of the kimberlite source. The anomaly has been closed off 500m in an up-ice direction.
Our View: We are encouraged with identification of G9 and G10 garnets within the samples given that these indicator minerals are associated with diamonds. The above results combined with the previously announced discovery of a diamond within a till sample adds to the prospectivity of the Kuhmo region. We look forward to further updates as Karelian continues to search for a kimberlite source in the region. In the meantime, we maintain a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Karelian Diamond Resources Plc
Stellar Diamonds (LON:STEL, 3.15p) – Speculative Buy
Stellar Diamonds announced it has paid for its Tongo environmental licence ($150k) and as a result should soon be issued the Tongo Mining Licence. The mining licence has already been approved but was contingent on the environmental licence. Stellar has also agreed with Octea Mining to extend the longstop date for the agreement over Tonguma (now called the "binding Tribute Mining and Revenue Agreements"). As a reminder, the Tongo-Tonguma agreement gives Stellar operational control and the majority of the economics over the two properties, in return for Stellar finding the capital to build the mine.
Our View: Stellar is moving forwards at the Tongo-Tonguma project and Tongo's environmental and mining licenses are major milestones we now anticipate happening soon. Also, thus far Stellar has been able to extend the longstop date as required. We believe it is reasonable to expect this to be the case until Stellar can secure funding. We have a Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Stellar Diamonds PLC
Saga (LON:SAGA, 196.90p) – Buy
Saga, the UK's leading provider of products and services primarily tailored for the over 50s, on Friday announced its interim results for the 6 months ended 31 July 2017 ('H1 FY2018'). During the period, revenues fell by -0.4% to £435.4m against the comparative period (H1 FY2017) owing to the accounting for the quota share agreement in motor insurance. Trading Profit increased by +4.9% to £123.8m while underlying pre-tax profit advanced by +5.5% to £110.2m supported by lower net finance costs and amortisation of acquired intangibles. Reported pre-tax profit fell by -6.3% to £103m, due to derivative losses that have impacted the business with the weaker Sterling and one-off costs associated with the unamortised facility fees of its previous banking facilities, leading to basic earnings per share of 7.5p, down -5.1%. Net debt at the period-end reduced to £460.4m (FY2017: £464.8m), implying net debt to EBITDA of 1.8x from 1.9x. Available operating cash flow was £89.6m (H1 FY2017: £97.3m) and cash and cash equivalents at the period end stood at £275.9m (FY2017: £221.5m). On the operational front, core insurance policies fell by -7.8% to 1,444k; comprised of 661k in Motor Broking, 602k in Home Broking and 181k in Other Broking. The fall in number of policies sold was due to strategic decision to close Direct Choice brand and decision to reduce home policies, while travel policies were impacted by FX movements. The number of holiday passengers increased by +1.1% to 96k, while cruise passengers hiked by +18.2% to 13k. Solvency II coverage ratio stood at 169% (FY2017: 143%). Saga has announced the launch of 'Saga Possibilities' new membership programme, designed to build stronger relationship with its member through a range of exclusive benefits. The Group declared an interim dividend of 3.0p per share, up +11.1%, to be paid on 17 November 2017.
Our View: Saga's results for the first half of FY2018 were encouraging. The Group delivered consistent underlying pre-tax profit growth of +5.5%, supported by +4.7% rise in retail broking profit (led by strong motor broking) and robust travel profit growth of +63% benefitting from solid trading and less ship maintenance days against the comparative period. Its available operating cash flow also remained strong and ended the year with reduced net debt, implying a net debt to EBITDA multiple of 1.8x, positioning comfortably within its medium-term target range of 1.5x to 2.0x. Looking ahead, Saga said it has "good momentum" and is on track to deliver full year performances in line with current market expectations. Saga's new ship, Spirit of Discovery, is in advanced stage of design, and construction is due to commence in February 2018 with delivery for maiden cruise expected in June 2019. Given strong pre-sales demand, the Group's second new ship, Spirit of Adventure, has bring forward the delivery to August 2020. Having hit by change in Ogden rate in February 2017 relating to its motor insurance broking (the rate is used to set the value of lump sum settlement of claims), the recent announcement by the UK government to make reform on the rate indicates that if the legislation is enacted, it might increase from its current level of -0.75% to between 0% and 1% which would reduce the Group's net exposure to insurance contract liabilities by between £4m and £9m as at 31 July 2017. The shares are currently valued at FY2018E and FY2019E P/E multiple of 13.6x and 12.7x along with dividend yield of 4.7% and 5.3%, respectively. In view of the delivery of ongoing consistent profit growth and management's confidence over the full year, Beaufort reiterates its Buy rating on the Share.