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Beaufort Securities Breakfast Alert - Tesla reports record loss but says outlook is positive

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Markets

Europe
The FTSE-100 finished yesterday's session 1.93% higher at 7,279.42, whilst the FTSE AIM All-Share index was up 1.87% at 1,032.06. In continental Europe, the CAC-40 finished 1.82% higher at 5,255.90 whilst the DAX was up 1.60% at 12,590.43.

Wall Street
Last night in New York, the Dow fell 19.42 points, or 0.08%, to end the day at 24,893.35. The S&P 500 lost 13.48 points, or 0.5%, to close at 2,681.66 and NASDAQ finished 63.90 points lower at 7,051.98.

Asia
In Asian markets this morning,the Nikkei 225 was up 208.91 points, or 0.97%, at 21,854.28 heading into the close. The Hang Seng was 121.15 points, or 0.4%, to the good at 30,444.35.

 

Oil
In early trade today, WTI crude was 0.21% lower at $61.66 per barrel and Brent was down 0.08% at $65.46 per barrel.

Headlines

Tesla reports record loss but says outlook is positive
The firm's future hangs on the Model 3 sedan, but it has so far struggled with production bottlenecks. Tesla reported a loss of $675.4m (£487m) in three months to 31 December, compared with $121.3m a year earlier. But it said revenues rose to $3.29bn, up from $2.28bn, and that it was addressing Model 3 production issues. "At some point in 2018, we expect to begin generating positive quarterly operating income on a sustained basis," Tesla, which is yet to make a profit, said on Wednesday. Despite ongoing production bottlenecks, the electric car maker said it would continue to target Model 3 production rates of 2,500 by the end of the first quarter this year, and 5,000 by the end of the second quarter.

 

Source: BBC News

Company news

 

Armadale Capital (LON:ACP) 2.10p – Speculative Buy
Armadale announced yesterday a resource upgrade and update at its Mahenge Liandu graphite project in Tanzania. Resource has successfully been updated to 51.1Mt grading 9.3% Total Graphite Content (TGC) including 38.7Mt grading 9.3% TGC in the Indicated category and 12.4Mt grading 9.1% TGC in the Inferred category. On aggregate, this represents a 25% increase from the maiden resource and over 75% upgrade in to the Indicated category. Deposit remains open to the south, north and down-dip suggesting there is potential for further resource increases. Results to date confirm Mahenge Liandu as one of the highest-grade graphite deposits in Tanzania and thus has potential to produce high-quality graphite concentrates, which should be suitable for a number of commercial applications. The above results will be incorporated in the Scoping Study with results expected by the end of Q1 2018.

Our view: We continue to be impressed with the exceptional high-grade and shallow mineralisation coming from Mehange Liandu, reporting some of the highest grades from graphite deposits in Tanzania. The increased confidence of the resource from Inferred to Indicated will allow for more detailed feasibility studies, mine planning and overall economics of the project. Armadale is looking fast-track towards production in order to capitalise on the expected growth in the graphite market driven by increasing applications particularly in the energy storage market. We look forward to results from the upcoming scoping study by the end of Q1 2018. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Armadale Capital PLC

 Falanx Group (LON:FLX) 5.00p – Speculative Buy

Falanx, the global intelligence, security and cyber defence provider, announced yesterday that it has won a new 3-year Managed Service contract worth £700,000 of revenue from an “award-winning UK Top 20 International law firm”. The contract is for Falanx to provide MidGARD service, a recently launched cyber threat detection & response platform, to deliver advanced security monitoring of the client’s entire global estate. In addition to this, the company also announced the expansion of existing Managed Cyber Security Service contract value from £250,000 to over £380,000 (3-year contract). Falanx’s Chairman and CEO, Mike Read, commented “Our pipeline of similar opportunities continues to grow and I look forward to announcing further contracts in the near future”.

Our view: Another contract wins from Falanx! It demonstrates growing momentum for MidGARD from multinational corporate clients, validating that its unique offering is adequately fulfilling client needs and superior than competing services. Today’s new contract and contract expansion further increases Managed Services as a proportion of total revenues, improving the quality and visibility of its future recurring revenue. Falanx remain funded in the near-to-medium-term and we expect organic cash flows likely to grow strongly during FY19 to achieve positive underlying EBITDA. We maintain our Speculative Buy rating on the shares with a target price of 10p.

Beaufort Securities acts as corporate broker to Falanx Group Limited

 

Jubilee Metals Group (LON:JLP2.98p – Speculative Buy

Jubilee announced yesterday that BMR Group, Jubilee’s JV partner in which it owns 29.01% interest in the issued share capital of BMR, had received a letter from the Mining Cadastre Department of Zambia terminating, with immediate effect, BMR’s mining right for the Kabwe project. However, BMR does have the right of appeal against the termination notice for 30 days from 6 February 2018. BMR, with the support of Jubilee, intends to exercise its right as soon as practicable.

Our view: Our understanding is that following this unexpected news, Jubilee’s management has had positive communications with the Zambian mining ministry. The ministry is now aware of Jubilee’s commitment to Kabwe as well as Jubilee’s metallurgical expertise and strong funding position. The funding capability of Jubilee (cash generation from South Africa and $50m facility) is probably the most important. Jubilee has now committed to developing Kabwe and although there is no guarantee, we believe this problem will be resolved. It is difficult for us to make a recommendation. However, following discussions with Jubilee’s CEO this morning, who said the “Zambian ministry is engaging positively and we are confident”, we are encouraged and look forward to the next update. A meeting with the ministry is now scheduled for next week in Zambia.

Beaufort Securities acts as corporate broker to Jubilee Metals Group plc

 

Transense Technologies (LON:TRT) 47.2p – Speculative Buy

Transense Technologies PLC (TRT) has reported Interim results for the period to end December 2017. On a reported basis revenues and operating losses were around flat Y/Y with the net cash position weaker, but underlying these reported numbers, the business has gained significant traction in its key business areas.

Translogik, TRT’s tyre probe and heavy truck sensor division, reported revenue growth of 96% in the period as the operating rental model for the iTrack II sensor system has been adopted by two of TRT’s key customers, Glencore & BHP mines. Sales of the iProbe tyre depth measurement devices were also stronger, with a relatively large order also coming through from Goodyear US, another key customer, which will be reported in the H2 results.

As a reminder, TRT has a very strong customer base, with companies such as Michelin, Bridgestone, Goodyear, Glencore, BHP, General Electric and now Ford all interested in aspects of TRT’s intellectual property portfolio. On the positive side, revenue growth potential is very high if and when some or all of these companies adopt TRT technologies, but on the negative side, these large companies have been historically slow to move. Speculative Buy

Click here to see Beaufort's research note on Transense Technologies published yesterday

Beaufort Securities acts as corporate broker to Transense Technologies plc

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