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Beaufort Securities Breakfast Alert - Trump's choice Jerome Powell approved as Federal Reserve head

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Markets

Europe
The FTSE-100 finished yesterday's session 0.21% higher at 7,731.83, whilst the FTSE AIM All-Share index was also up 0.21% at 1,072.67. In continental Europe, the CAC-40 finished 0.12% lower at 5,535.26 whilst the DAX was up 0.71% at 13,559.60.

Wall Street
Last night in New York, the Dow Jones closed 3.79 points lower at 26,210.81, the S&P-500 added 6.16 points to 2,839.13 and the Nasdaq gained 52.26 points at 7,460.29.

Asia
In Asian markets this morning, the Nikkei 225 was 157.99 points lower at 23,966.16 heading into the close, whilst the Hang Seng was little changed at 32,931.43. Meanwhile, the Shanghai Composite was up 15.61 points, or 0.44%, at 3,562.12. 

 

Oil
In early trade today, WTI crude was 0.03% lower at $64.45 per barrel and Brent was down 0.20% at $69.82 per barrel.

 

 Headlines

Trump's choice Jerome Powell approved as Federal Reserve head
Donald Trump's choice for the next head of the US central bank - the world's most powerful economics job - has been approved by US senators. Jerome Powell, a multi-millionaire, was backed in a 84-13 vote as chair of the Federal Reserve with support from Republicans and many Democrats. Mr Powell, who was named as Mr Trump's nominee in November, is a Republican who is seen to back low interest rates. Janet Yellen, the current Fed chair, will see her term expire in February. She was appointed by President Obama in 2014 and has been the first woman to hold the position. The appointment marks the end of a decades-long tradition that has seen presidents stick with the Federal Reserve chair who was in charge when they took office. Mr Powell has served on the Fed's board since 2012, and is expected to take over when Ms Yellen leaves her post on 3 February. Among the candidates President Trump was considering, Mr Powell, a 64-year-old lawyer, was seen as a safe choice who would provide continuity for existing US monetary policy, and not rattle markets. He has been supportive of gradual interest rate rises and of the consensus that the Fed should slowly decrease the asset holdings it gathered as part of its efforts to battle the financial crisis.

Source: BBC News

 

Company news

 

Altus Strategies (LON:ALS) 8.38p – Speculative Buy
Altus Strategies announced results from its initial exploration programme on its 100% owned Zolowo licence in north-western Liberia. Zolowo is highly prospective for greenstone gold deposits as it is located along the same regional trend as the New Liberty gold mine owned by Avesoro Resources (ASO.L). Initial reconnaissance has identified over 50 alluvial mining sites with the largest covering an area of 250m x 50m and the licence hosts a 33km long Archean goldstone belt which is interpreted to be the gold source. A systematic stream sediment sampling programme is planned for the next phase of exploration.

Our view: The number of artisanal mining sites within the Zolowo licence is significant and suggests “there’s gold in them there hills”. Zolowo contains 33km of the same geological domain as Avesoro’s New Liberty mine as well as numerous gold showings. Altus’ next step is a systematic stream sediment sampling programme. As such, we look forward to further updates from the Zolowo exploration programme. In the meantime, we maintain a Speculative Buy recommendation.

Beaufort Securities acts as corporate broker to Altus Strategies plc

 

Cradle Arc (LON:CRA) 10.00p– Speculative Buy

Cradle Arc the copper mining company with an operating mine in Botswana and a gold development project in Zambia was admitted to AIM this morning. Cradle Arc has circa 200m shares and at 10p (the latest placing price) a £20m market cap. Cradle Arc started life as Alecto Minerals, however the copper mine acquisition was effectively a reverse takeover. Alecto shareholders now have an interest in a producing copper mine with a large resource and excellent upside potential in an environment of strong copper prices. The company is also planning to offer Alecto shareholders on the register in December 2016 up to £500k in new equity at the 10p placing price.

Beaufort Securities acts as corporate broker to Cradle Arc plc

 Benchmark Holdings (LON:BMK) 69.00p – Speculative Buy

Benchmark Holdings (LON:BMK.) the aquaculture health, nutrition and genetics business has reported its full year results to 30 September ‘17, which highlight how the business is gaining traction in its global markets.

Revenues advanced some 28% (13% like-for-like) to £140m, with Adjusted EBITDA up 9% to £10m, as two of its three divisions, Genetics and Advanced Nutrition delivered strong double digit growth. The Animal Health division recorded lower sales, but BMK expect this to recover in FY-18.

Importantly, BMK operates in high growth, high margin markets, with a target EBITDA margin of 25% by 2021 ( 7% in FY-17). Barriers to entry are high and BMK has strong IP protection for its technologies. Speculative Buy (Target price: 80p)

>>Read Beaufort's Benchmark Holdings research note published yesterday

 

easyJet (LON:EZJ) 1,643.50p – Hold
easyJet yesterday provided a trading update for the first quarter ended 31 December 2017 (‘Q1 FY18’). Revenue advanced by +14.4% to £1,140.1m, against comparative period (Q1 FY17), driven by +8.0% growth in passenger number to 18.8m, +8.4% rise in revenue per seat to £55.99 (+6.6% at constant currency), and +20.4% increase in ancillary revenue. Capacity grew by +5.5% to 20.4 million seats and load factor improved by +2.1% to 92.1%. Due to its ongoing focus on cost saving, headline cost per seat improved by +1.6% to £54.34 (ex-fuel -1.0% to £42.53), leading to total headline cost of £1,106.6m (+3.8%). Net cash at the period end stood at £357m (end-FY17: £357m). On the operational front, the company said it now completed the acquisition of Air Berlin’s operations at Berlin Tegel airport with first flight commenced on 5 January 2018.

Our view: easyJet’s Q1 performance came ahead of the expectations. Revenue growth was stronger than expected as revenue per seat rose by +6.6% compared to previous guidance of low to mid-single digits. This was helped by +5.3% increase in passenger revenue due to capacity reduction (flights cancellations at Ryanair and bankruptcies of Monarch, Alitalia and Air Berlin), plus +12.3% growth in ancillary revenue. Looking ahead, forward bookings for both Q2 and H2 are ahead of last year at 60% and 20%, respectively. The revenue per seat guidance for Q2 was upgraded to mid to high single digits (previously: low to mid) due to c.£35m-£40m positive impact from the timing of Easter. For the FY18, guidance for headline cost per seat (ex-fuel) was maintained at +1%, capacity growth at 5%-6% and passenger number to “around 90 million” (FY17: 80.2m). Altogether, these were strong set of results and confident outlook. The shares are currently traded at FY18 P/E multiple of 17.2x with dividend yield of 2.7%. Given slight upgrade in full year expected earnings, we increase our target price to 1,530p (from 1,460p) while maintaining our Hold rating as market capacity expansion expected to accelerate from H2.

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