Today’s edition features:
- MySQUAR Limited (MYSQ.L)
- Prospex Oil & Gas (PXOG.L)
- Thor Mining (THR.L)
- Ibstock (IBST.L)
Visit Company News »
The FTSE-100 finished yesterday’s session 1.44% lower at 7,389.94 whilst the FTSE AIM All-Share index was down 0.38% at 999.63. In continental Europe, the CAC-40 finished 0.59% lower at 5,115.23 whilst the DAX finished down 1.15% at 12,014.30.
In New York last night, the Dow Jones ended 0.93% lower at 21,844.01, the S&P-500 closed 1.45% lower at 2,438.21 and the Nasdaq was down 2.13% at 6,216.87.
In Asian markets this morning, the Nikkei 225 was 0.05% lower at 19,729.74 and the Hang Seng was down 1.89% at 26,926.38.
In early trade today, WTI crude was down 0.88% at $48.16 per barrel and Brent crude was 0.89% lower at $51.44 per barrel.
Wall Street lower on US-North Korea tensions
US stocks saw their largest losses since May on Thursday, as tensions mounted between North Korea and the US. Pyongyang, which has threatened to fire missiles toward the US Pacific island territory of Guam, gave more details of its plans. Meanwhile, President Donald Trump intensified his rhetoric, saying North Korea should be “very, very nervous” if it does anything to the US. Markets had been bracing for a correction after weeks of trading in record territory, as strong corporate earnings fuelled optimism. The sell-off on Thursday in the US was widespread, with the financial and consumer sectors leading the share price declines. Investors bought up safe-haven assets such as gold, helping the precious metal touch a two-month high, and the Japanese Yen rose. But Thursday’s decline fell short of the drops seen on 17 May, when political outcry mounted over Mr Trump’s dismissal of FBI director James Comey, who was investigating ties between the Trump campaign and Russia.
Source: BBC News
MySQUAR Limited (MYSQ.L, 3.92p) – Speculative Buy
The Myanmar-language social media, entertainment and payments platform whose principal activity is to design, develop and commercialise Myanmar-focused internet-based mobile applications, yesterday announced its launch of a new hardcore game called Land of Magic and the addition of Nanbat Wingabar to the Lucky Wingabar casual gaming platform. Land of Magic (landofmagicmm.com) is the first MMORPG (massively multiplayer online role-playing game) targeted at the Myanmar market, the game allows users to choose from among three classes of characters with each class offering 9 unique skill sets. The game features realistic 3D graphic design, the ability to create clans/guilds for a group of players that regularly play together and a PvP (player versus player) fighting arena. This genre is unique to the Myanmar market and Land of Magic is anticipated to benefit from the existing user base of other games and the integration with Telenor Myanmar for seamless payment. Land of Magic will use the ‘freemium’ model, which allows free play up to a certain level, after which players will have to pay for purchasing in-game items and has been developed for both Android and iOS devices. This game will replace WuKong as the Company feels it will create greater revenue opportunities. Nanbat Wingabar is a lottery game with three different game modes and had such a strong reception during an initial test phase that additional modes were added.
Our View: Continuing progress! MySQUAR remains focussed on achieving monetisation targets and building new partnerships. Land of Magic continues its delivery of live action games unique to the Myanmar market. Having raised £1.2m before expenses by way of a placing and subscription for new ordinary MySQUAR shares at the end of July, in addition to an estimated £700k cash position, various receivables and the undrawn Rising Dragon loan facility, its balance sheet has now been sufficiently bolstered to permit ongoing expansion of its online offerings, while also evaluating potential acquisitions and strategic investments with a view to further accelerating the growth of MySQUAR’s product lines. As announced on 28 July 2017, this includes the establishment of a mobile payments platform processing peer-to-peer (P2P) and person-to-merchant (P2M) transactions for the Myanmar market; this will include creating digital wallet services that will also be integrated into the MySQUAR ecosystem for the receipt of funds and payment of games, services and digital goods. Based on expected progress, Beaufort now considers MySQUAR even has the potential to produce its first net earnings for shareholders as early as its financial year-ended June 2019, by which time its branded social media and entertainments platform will indeed have secured deep foundations in Myanmar. This all suggests the shares still have a long way to go from currently depressed levels notwithstanding, of course, the opportunity for a predatory approach from one of the acquisitive online hubs which remain hungry to add new virgin territories to their international portfolios. Beaufort retains its target price of 21p/share on MySQUAR along with its Speculative Buy recommendation.
Beaufort Securities acts as corporate broker to MySQUAR Limited
REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION
Prospex Oil & Gas (PXOG.L, 0.45p) – Speculative Buy
Prospex has acquired 50% of an interesting gas project in north east Romania called Suceava. The cost is €750k, €400k up front and €350k once the first well has reached target depth. The chairman summarised the rationale nicely with his comment “Suceava ticks all the boxes we look for in a project: located in a proven hydrocarbon region of Europe; access to historic data including well logs that are fit for purpose; long pipeline of robust leads and prospects; near term value triggers in the form of new drilling; established routes to market; and low cost, both in terms of the acquisition itself and drilling”. The acquisition has two main prospects (1) Bainet which should be drilled in 2017 is a shallow gas target with producing (98% methane) analogues in the same concession and on an adjacent block (2) Grancesti SE-1 is an undeveloped discovery which flowed gas at a rate of 1.2MMcf per day. The well will require recompletion. Note that Grancesti SE-1 gas was discovered while exploring for oil at deeper levels. (3) in addition to Bainet and Grancesti, there are four prospects and one lead. Prospex’s new JV partner is an established operator in Romania called Raffles Energy.
Our View: Investors have been waiting circa six months for Prospex’s next move. And this investment: onshore Europe, in a proven basin, for a modest consideration paid for from existing funds, fits the strategy well. It will also deliver drilling news flow this year which should act as a positive catalyst for the stock.
Beaufort Securities acts as corporate broker to Prospex Oil & Gas plc
REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION
Thor Mining (THR.L, 0.90p) – Speculative Buy
Thor Mining, the exploration and development company with assets in Australia and USA, has announced the commencement of a drilling campaign at its wholly owned Pilot Mountain tungsten project in Nevada. The purpose of this campaign is to expand the current resource base. The drill programme comprises four reverse circulation (RC) drill holes and two diamond drill holes designed to confirm and expand upon existing high-grade drill intersections at the Good Hope deposit and also further test for extensions of high grade mineralisation previously intersected in the Desert Scheelite deposit. Four RC holes, up to a depth of 150m, are planned at Good Hope to confirm and extend high grade WO₃, copper Cu, and Zn mineralisation. In addition, two RC holes with diamond core tails will be drilled at the Desert Scheelite deposit to test for extensions of high grade mineralisation previously intersected.
Our View: The above announcement is positive news as Thor continues to development Pilot Mountain project. The project consists of four deposits: Desert Scheelite, Gunmetal, Garnet and Good Hope all within three kms to each other. We note that there is considerable exploration upside on both Desert Scheelite and Good Hope deposits with potential for Zn, Cu and Ag in the system. The Desert Scheelite deposit has an existing resource of 9.9Mt grading 0.26% WO3 plus 19.39g/t Ag and 0.14% Cu. On aggregate, Pilot Mountain has a compliant resource of 11.73Mt grading 0.28% WO3. We look forward to further updates from the drill programme and assay results in the coming weeks. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Thor Mining plc
REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION
Ibstock (IBST.L, 232.50p) – Buy
Ibstock, a leading manufacturer of clay bricks and concrete products operating in the UK and the US, yesterday announced its interim results for the 6 months ended 30 June 2017 (‘H1 FY2017’). During the period, revenue advanced by +8.7% to £228.3m (+6.4% on a constant exchange rate basis), pre-tax profit rose +2.7% to £38.9m, leading to basic earnings per share of 7.6p, up +2.8%, against the comparative period (H1 FY2016). On adjusted basis, pre-tax profit before exceptional jumped by +14.4% to £43.3m, EBITDA rose +7.4% to £59.7m, leading to basic earnings per share of 9.5p, up +16%. Net debt at the period-end was £159.9m (end-FY2016: £132.8m), implying net debt to EBITDA of 1.4x (end-FY2016: 1.2x). Return on capital employed (ROCE) remained flat at 19% since 31 December 2016, while cash and cash equivalents at the period-end was £18.5m compared to £27.0m a year ago. On the operational front, the Group made new investment of 100 million per annum capacity soft mud brick plant in Leicestershire, UK, which will start commissioning in Q4 FY2017 with production to build progressively across 2018 (c.50% capacity utilisation anticipated during FY2018). Ibstock’s CEO, Wayne Sheppard, commented “The Group has delivered a robust first half performance. The Group remains strongly cash generative, we are investing for further growth, and our expectations for another year of progress are maintained”. The Group declared an interim dividend of 2.6p, up +8.3%, to be paid on 22 September 2017 (ex-Dividend: 19 August 2017).
Our View: Ibstock delivered a satisfactory first half FY2017 performance, with revenue increasing by +8.7% aided also by a weaker Sterling against the Dollar. Underlying performances, which exclude the impact of exceptional items such as finance costs of £6.4m incurred in March due to accelerated write-off of debt fees during its successful refinancing, were strong as the Group maintained margins across its two divisions, leading to +14.4% jump in pre-tax profit. In the UK (81% of revenue), revenue increased by +8% with overall performance from 3 businesses; Ibstock Brick (clay brick), Supreme (concrete fencing, lintels, and general concrete building products), and Forticrete (concrete natural stone walling and dressings and niche concrete roof tiles) being robust, supported by good activity levels from the UK’s new build housing sector. In the US (19% of revenue), the division saw a market slowdown in both residential and non-residential projects, resulting in a mid single-digit brick volume decline. Revenue in this region grew by +11% on reported basis but fell marginally on a constant exchange-rate basis. Looking ahead, the Board said good activity level in the UK has continued into H2 whilst in the US, weaker market conditions is also expected to remain. Overall, the Group maintained its expectations for “another year of progress”. The Group continue to make investment in additional UK brick capacity to meet demand. The new Leicestershire plant, for example is set to commence commissioning in Q4, which is expected to add approximately c.13% to its current brick production capacity per year, equivalent to 5% of total UK domestic brick production. Its capacity expansion project at Lodge Lane blue brick plant in Cannock is also on track for commissioning in Q4. Considering the continuing strong visibility currently provided by UK housebuilders (the Group completed all brick price negotiations for 2017 with its major UK customers), any sign of recovery in the US market will be taken as an upside. Based on estimated EBITDA of £116m in FY2017E, the Shares are valued at P/E multiple of 12.7x, set to fall to 11.5x in FY2018E, along with dividend yield of 3.5% and 3.9%, respectively. We believe Ibstock remains comfortably placed to achieve further growth. Beaufort accordingly, reiterates its Buy rating on the Share.
REQUEST A CALL FROM A BROKER REGARDING THIS RECOMMENDATION
To read Beaufort’s full research archive click here
Barry Gibb, Kazunaga Senga, Sheldon Modeland, Charles Long & Ben Maitland
(t) +44 (0) 207 382 8384
Click here to see all next week’s planned corporate and economic announcements.
During the three months to end-July 2017, the number of stocks on which Beaufort Securities published recommendations was 205, and the recommendations were as follows: Buy – 75; Speculative Buy – 107; Hold – 19; Sell – 1.
Full definitions of the recommendations used by Beaufort Securities in its publications and their respective meanings can be found on our website here.
Important Risk Warnings and Disclaimers
This report is published by Beaufort Securities Ltd (“Beaufort Securities”). Beaufort Securities Ltd is Authorised and Regulated by the Financial Conduct Authority and is a Member of the London Stock Exchange.
RELIANCE ON THIS NOTE FOR THE PURPOSE OF ENGAGING IN ANY INVESTMENT ACTIVITY MAY EXPOSE YOU TO A SIGNIFICANT RISK OF LOSING ALL OF THE FUNDS, PROPERTY OR OTHER ASSETS INVESTED OR OF INCURRING ADDITIONAL LIABILITY.
This document is not an offer to buy or sell any security or currency. This document does not provide you with individually tailored investment advice. It has been prepared without regard to the your financial circumstances and objectives The appropriateness of a particular investment or currency will depend on your individual circumstances and objectives. The investments and shares referred to in this document may not be suitable for you.
This research is non-independent and is classified as a Marketing Communication under FCA rules. As such it has not been prepared in accordance with legal requirements designed to promote independence of investment research and it is not subject to the prohibition on dealing ahead of the dissemination of investment research in COBS 12.2.5. However Beaufort Securities has adopted internal procedures which prohibit analysts from dealing ahead of non-independent research, except for legitimate market making and fulfilling clients’ unsolicited orders.
By receiving this document, you will not be deemed a client or provided with the protections afforded to clients of Beaufort Securities. When distributing this document, Beaufort Securities is not acting for you and will not be responsible for providing advice to you in relation to this document. Accordingly, Beaufort Securities will not be responsible to you for providing the protections afforded to its clients.
Beaufort Securities may effect transactions in shares mentioned herein and may take proprietary trading positions in those shares, and may receive remuneration for the publication of its research and for other services. Beaufort Securities may be a shareholder in any of the companies mentioned in this report. Accordingly, this document may not be considered as objective or impartial. Additionally, information may be available to Beaufort Securities or the Group, which is not reflected in this material. The remuneration of the author of this report is not tied to the recommendations on any shares mentioned nor to the any transactions undertaken by Beaufort Securities or any affiliate company. Further information on Beaufort Securities’ policy regarding potential conflicts of interest in the context of investment research and Beaufort Securities’ policy on disclosure and conflicts in general are available on request. Please refer to http://www.beaufortsecurities.com/important-info.
Past performance is not a guarantee of future performance. Investments may go down in value as well as up and you may not get back the full amount invested. The listing requirements for securities listed on AIM or NEX are less demanding and trading in them may be less liquid than main markets. This may make it more difficult to buy and sell these securities.
This document includes certain statements, estimates, and projections with respect to the anticipated future performance of securities listed on stock exchanges and as to the market for these shares. Such statements, estimates, and projections are based on information that we consider reliable and may reflect various assumptions made concerning anticipated economic developments, which have not been independently verified and may or may not prove correct. No representation or warranty is made as to the accuracy of such statements, estimates, and projections or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed are our current opinions as of the date appearing on this material only and may change without notice. Other third parties may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views, and analytical methods of the analysts who prepared them. This report has not been disclosed to any of the companies mentioned herein prior to its publication.
This document is based on information Beaufort Securities has received from publicly available reports and industry sources. Beaufort Securities may not have verified all of this information with third parties. Neither Beaufort Securities nor its advisors, directors or employees can guarantee the accuracy, reasonableness or completeness of the information received from any sources consulted for this publication, and neither Beaufort Securities nor its advisors, directors or employees accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document (except in respect of wilful default and to the extent that any such liability cannot be excluded by the applicable law). You should not rely on this document and should not use it substitution for the exercise of the independent judgment of yourself or your adviser.
The information contained in this document is confidential and is solely for use of those persons to whom it is addressed and may not be reproduced, further distributed to any other person or published, in whole or in part, for any purpose. Other persons who receive this document should not rely on it. Beaufort Securities, its directors, officers and employees may have positions in the securities mentioned herein.