Markets
Europe
The FTSE-100 finished yesterday's session 0.53% higher at 7,486.50, whilst the FTSE AIM All-Share index was up 0.50% at 1,026.89. In continental Europe, the CAC-40 finished 1.50% higher at 5,455.40 whilst the DAX was 1.39% higher at 13,133.28.
Wall Street
In New York on last night, the Dow Jones closed 0.31% higher at 23,400.86, the S&P-500 added 0.13% to end at 2,560.4, while the Nasdaq was down 0.11% at 6,556.77.
Asia
In Asian markets this morning, the Nikkei 225 was up 1.07% at 21,972.78 and the Hang Seng was 0.84% higher at 28,438.43.
Oil
In early trade today, WTI was 0.02% lower at $52.63 per barrel and Brent was up 0.15% at $59.39 per barrel.
Headlines
RBS sees £392m profit in third quarter
Royal Bank of Scotland has reported a £392m profit for the July-to-September period, bringing its profit for the year to date to £1.3bn. RBS said it was only the second time since 2008 that the bank had turned a profit for three consecutive quarters. However, the bank said it could not be sure of a full-year profit, since it was hoping to settle a dispute with the US Department of Justice. The cost of that settlement is likely to push RBS into a loss.The third-quarter profit compares with a loss of £469m for the same period last year. RBS said it had taken out £708m in costs as part of a simplification programme that had reduced the size of the business. The bank said it had made no further provision for mis-selling of payment protection insurance, while conduct and litigation costs were £125m for the quarter.
Company news
Karelian Diamond Resources (LON:KDR, 0.45p) – Speculative Buy
Karelian Diamond Resources, the diamond exploration company focused in Finland, announced that it has been granted an exploration permit in the Kuhmo region. The permit covers 601ha surrounding the area where Karelian discovered a diamond in a till sample earlier this year. The exploration permit is valid for four years and provides Karelian with an exclusive right to apply for a mining permit. An extensive work programme is currently underway to locate the kimberlite body from which the diamond originated.
Our view: The granting of an exploration permit surrounding the location of the diamond discovery is good news for Karelian. The presence of kimberlite indicator minerals combined with the extremely rare discovery of a diamond within 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 a corporate broker to Karelian Diamond Resources Plc
Kibo Mining (LON:KIBO, 4.50p) – Speculative Buy
Kibo Mining, the exploration and development company focused on energy and mineral projects in Tanzania, announced that an Environmental and Social Impact Assessment (ESIA) certificate has been awarded for both the Mbeya coal mining and the Mbeya power generation projects. The Mbeya coal to power project continues to benefit from strong local regional and governmental support. The Memorandum of Understanding (MoU), which is the precursor to the final Power Purchase agreement PPA, is progressing well and is expected to be finalised shortly. The MoU, once finalised, will provide a framework within which the fundamental commercial and technical components of the PPA will be negotiated and agreed.
Our view: Today's announcement is more positive news for Kibo as granting of the ESIA is a significant milestone for the development of the Mbeya coal to power project. We look forward to the finalisation of the MoU which will be the precursor to the all-important PPA. In the meantime, we maintain a Speculative Buy on the stock.
Beaufort Securities acts as corporate broker to Kibo Mining PLC
Bodycote (LON:BOY, 930.50p) – Buy
Bodycote, a global subcontract provider of heat treatment and specialist thermal processing services, yesterday provided its trading update for the 3 months ended 30 September 2017 ('Q3 FY2017'). During the period, Group revenue advanced by +16.6% to £169.0m (+12.9% at constant exchange rate basis 'CER') against the comparable period (Q3 FY2016). The organic growth during Q3 was +9.1%, reflecting +9.6% growth in Aerospace, Defence and Energy business and +8.7% growth in the Automotive & General Industrial business. This resulted in year to date organic constant currency growth of +6.2%. Individually, civil aerospace revenues rose +3.0% supported by continued growth in Western Europe, while defence revenues continued to decline in the period. The recovery in the North American onshore oil & gas market continued during Q3 and the overall energy revenues growth was +24.5%. The car and light truck market saw +8.3% growth with strong performance in Western Europe and emerging markets, while North American revenues declined. General Industrial achieved growth across all geographies with strong Western Europe, leading to revenue growth of +11.0% against a weaker comparative. Net cash at the period-end stood at £23.8m (end-Q2 FY2017: net cash £17.7m). The Group already declared its interim dividend of 5.3p per share, up +6%, on 27 July 2017, which is scheduled to be paid on 3 November 2017.
Our view: Bodycote reported strong revenue growth for the Q3, in line with expectations, helped by solid organic growth from both businesses, but in particular, due to Aerospace, Defence and Energy business (c.40% of revenue) where it was benefitted from continued recovery in onshore North American oil & gas market. Performance in Automotive & General Industrial business was also good with General Industrial against weaker comparative, while heavy truck market revenue remains volatile. Looking ahead, the Group reiterated its outlook for the full year, which is at the upper end of the £106.5m to £118.9m market expectations. The Group's strategy to invest in the higher value-added businesses, in particular, the Specialist Technologies, should ensure further potential improvement in its operating margin. The Shares are valued at FY2017E and FY2018E P/E multiple of 20.7x and 19.4x, with a dividend yields of 1.8% and 1.9% respectively. Given good operational progress, Beaufort maintains its Buy rating on the Shares.