Markets
Europe
The FTSE-100 finished yesterday's session 1.05% lower at 7,447.21, whilst the FTSE AIM All-Share index was unchanged at 1,021.76. In continental Europe, the CAC-40 finished 0.37% lower at 5,374.89 whilst the DAX was 0.46% lower at 12,953.41.
Wall Street
In New York on last night, the Dow closed 0.48% lower at 23,329.46, the S&P 500 fell 0.47% to end at 2,557.15 and the Nasdaq was down 0.52% at 6,563.89.
Asia
In Asian markets this morning, the Nikkei was up 0.15% at 21,740.78, while the Hang Seng was 0.16% lower at 28,257.17.
Oil
In early trade today, WTI was 0.15% lower at $52.10 per barrel and Brent was down 0.12% at $58.37 per barrel.
Headlines
BT to cut landline costs for up to one million people
From April 2018, the telecoms company will reduce the price of its monthly line rental by £7, a 37% decrease from the current cost of £18.99. The reduction will save households £84 a year and customers will be protected from price increases with rental costs capped at the rate of inflation. Ofcom expects other providers to follow suit. Nearly two-thirds of BT customers with only a landline are over 65, and more than three-quarters have never switched provider, the regulator said. Ofcom said they had been getting poor value for money in recent years, compared to those who buy bundles of landline, broadband and/or pay-TV services. The regulator also said it wanted to help those who buy a phone service from one provider and broadband from another. BT said it welcomes "a balanced voluntary agreement with Ofcom" and that it had "listened to the concerns of our line-only customers".
Company news
Fox Marble (LON:FOX 8.75p) – Speculative Buy
The AIM listed company focused on marble quarrying and finishing in Kosovo and the Balkans region, yesterday announced that it has completed its first sale of polished marble slabs from its newly operational factory in Lipjan, Kosovo. The material was purchased by Marble Dino Sh.p.k. a division of a large, local construction company in Kosovo. As announced on the 29 June 2016, the Group signed an agreement with Marble Dino for the supply of €1,500,000 worth of resined and polished marble over a twelve-month period from the date the factory became operational. Marble Dino is a trader of marble and other commodities and is involved in the purchase, shipping and resale of the material in the Kosovo and the Balkans. The first consignment, of just over 13 tonnes of polished slabs of Bianco Illirico and Illirico Selene material, was collected from the factory site on the 24 October 2017. The Company expects to continue delivering marble against the agreement over the remainder of 2017 and the 2018 financial years. A short video showing the operation of the polishing line is available on its website at https://www.foxmarble.net/photos-and-videos/
Our view: More evidence that Fox’s revenues are set to increase sharply in coming years. Multiple order from multiple territories are now being quarried and/or undergoing value-added processing in its marble factory for both local and international delivery. The critical factor, of course, is conversion of the order book into sales and cashflow. Management has already advised shareholders to expects sales of around €2.0m for financial year 2017 (FY 2016: €801,040), but clearly, deals more recently struck with Marble Dino, OM Enterprises, Pristine Stone, etc. not only provide a springboard for much higher sustained activity from 2018E, but also provide a big ‘tick’ of credibility for Fox’s offering as a good proxy for the highest quality Italian stone. With the Group’s multiple ‘teething’ problems now dealt with, its state-of-the-art factory now has the capacity to produce up to 440,000 square metres per annum of cut and polished slabs; it also has stockpiled a large number of blocks, which can be cut and processed during planned quarry winter shutdown to fulfil orders for processed marble. The Group’s business model is based around a largely fixed cost operation, meaning higher activity levels will drop significantly to the bottom line. Indeed, Beaufort has long held confidence in Fox’s exceptional high grade, multiple type/colour dimensional stone (found on surface while remaining open at depth) effectively provides it with infinite resource to supply to a growing US$10bn+ global market. Positioning itself as a low-cost, high-quality wholesale supplier of choice with elementary open pit workings, low cost labour and excellent infrastructure against a backdrop of Kosovo’s prospective EU accession, Fox Marble dispels most of the fears normally associated with such early stage producers. If there has been a problem, however, it is that access to this giant, but overwhelmingly fragmented market, depends on reputation, foremost with international distributors and established wholesale buyers, who remain the key ‘door openers’. Achieve that, become a default supplier of choice for, say, half an acre of flawless Argento Grigio for a new corporate headquarters in Dubai, then Fox Marble’s quarries could become very profitable indeed. Clearly such foundations are now being built; repeat orders along with the new arrangement with Pristine Stone should ensure the starting point for 2018E revenues is something over €6m, with scope to more than double this the following year. Significant operational gearing will ensure gross margins make a step improvement. While the 2017E should be expected to remain in net losses, there is finally reasonable confidence that next year could actually produce modest net earnings for the first time. Hurrah!! The recent issue of an 8% CLN will remind investors that Fox still has a relatively weak balance sheet but there are nevertheless tangible signs that the Group’s extended run of bad luck might finally have run its course. Beaufort now has confidence that Fox Marble will deliver on its promises and so repeats its ‘Speculative Buy’, with a price target of 12p/share. We have a Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to Fox Marble plc
Jubilee Platinum (LON:JLP 4.28p) – Speculative Buy
Jubilee has published its 3Q operations update. In terms of financials, at Jubilee’s processing subsidiary level, quarterly revenues were up 48% to £2.7m and earnings up 193% to £0.85m of which recently commissioned Hernic contributed £0.5m. Dilokong’s contribution of £0.36m was broadly in line with 2Q, however in 4Q this should increase as the operation is now processing third party ore and as of September 1st, all earnings are split 50:50 between Jubilee and DCM.
Our view: Steady production at Dilokong and a larger contribution from Hernic have delivered an excellent result, as expected. Hernic is still being optimised and the new third party ore business at Dilokong should result in an even stronger quarter in 4Q. We look forward to improving revenues and earnings plus progress on Jubilee’s three development projects, Kabwe lead zinc, high grade PlatCro, and the platinum recovery at Dilokong. We view Jubilee as a good quality business which continues to deliver technically, operationally and strategically - through both acquisition and negotiation. We maintain our Speculative Buy recommendation.
Beaufort Securities acts as a corporate broker to Jubilee Platinum PLC
Savannah Resources (LON:SAV 5.38p) – Speculative Buy
Savannah announced yesterday that it raised gross proceeds of £3.91m through the issuance of 74.4M new ordinary shares at a price of 5.25p to new and existing shareholders. In addition, one warrant for every two new Subscription shares was issued with an exercise price of 6p and a term of three years. Proceeds will be used to advance Savannah’s portfolio of projects including further drilling on the Mina do Barroso lithium project in Portugal, completion of the scoping study ahead of commencement of mining in H1 on its Oman copper project and advancing the PFS and commissioning of the pilot plant project at the Mutamba heavy mineral sands project in Mozambique.
Our view: We are encouraged with the continued support from Savannah’s existing and new shareholders particularity its cornerstone shareholder Al Marjan Ltd, which now holds 29.39% of Savannah’s ordinary shares. We look forward to further updates on Savannah’s projects as the Company continues to advance its diversified portfolio. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Savannah Resources Plc