Brexit transition deal is urgent, say select committee MPs

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Today’s edition features:

  • Hummingbird Resources (HUM.L)
  • Katoro Gold (KAT.L)
  • Premier African Minerals (PREM.L)
  • Dixons Carphone (DC..L)

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Markets

Europe
The FTSE-100 finished yesterday’s session 0.05% lower at 7,496.51, whilst the FTSE AIM All-Share index was down 0.33% at 1,016.57. In continental Europe, the CAC-40 finished 0.51% lower at 5,399.45 whilst the DAX was down 0.44% at 13,125.64.

Wall Street
Last night in New York, the Dow Jones closed 0.33% higher at 24,585.43, the S&P-500 fell 0.05% to 2,662.85 and the Nasdaq climbed 0.2% to reach 6,875.8.

Asia
In Asian markets this morning, the Nikkei 225 was down 0.26% at 22,699.11 and the Hang Seng was 0.5% lower at 29,077.4.

Oil
In early trade today, WTI crude was 0.16% higher at $56.69 per barrel and Brent was up 0.56% at $62.97 per barrel.


Headlines

Brexit transition deal is urgent, say select committee MPs
An influential group of MPs has urged Britain and the European Union to agree a “status quo” transition period following Britain’s departure from the EU. The Treasury Select Committee said that the temporary arrangement should be agreed as quickly as possible to ease business concerns over a “no deal” Brexit. The committee’s report said it “strongly supported” the prime minister’s push for a comprehensive free trade deal which would keep borders as “frictionless” as possible. But it said in order to reach that point, an implementation period would be necessary where the European Court of Justice (ECJ) was likely to retain supremacy over UK laws. “An agreement between the UK and EU27 on ‘standstill’ transitional arrangements is now urgent,” said Nicky Morgan, the Conservative chairwoman of the committee who campaigned for Remain before the referendum. “The consequences of failing to reach an agreement are dramatic and damaging.”

Source: BBC News


Company news

Hummingbird Resources (HUM.L, 36.00p) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced that it has terminated a conditional agreement to acquire 50% interest in African Gold Group’s Kobada gold deposit in Mali. The letter of intent has automatically terminated as conditions were not satisfied within the 45-day period.

Our view: The above announcement is not unsurprising given that the Company is focused on gold production at its Yanfolila gold project. We look forward to commissioning and the first gold pour at Yanfolila before the end of the year. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as a corporate broker to Hummingbird Resources plc

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Katoro Gold (KAT.L, 2.38p) – Speculative Buy
Katoro Gold, the Tanzania focused gold exploration and development company, announced that it has completed its LiDAR (Light Detection and Ranging) survey at its Imweru gold project. The LiDAR survey will provide a highly accurate digital elevation map which will aid in the resource estimation and optimising the planned pit design for the project. The Imweru project has a current JORC-compliant mineral resource estimate of 515,110oz of gold comprising 82% in the Inferred and 18% in the Indicated categories.

Our view: Completion of a LiDAR survey will provide accurate data necessary to generate a detailed digital elevation map which is crucial for the development of the pit design as well as forming a solid base for the mineral resource estimate. We continued to be encouraged with the pace of development at Imweru and look forward to further developments including completion of the ESIA, the PFS and the application for a mining licence in 2018. In the meantime, we maintain a Speculative Buy recommendation on the stock.

Beaufort Securities acts as a corporate broker to Katoro Gold plc

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Premier African Minerals (PREM.L, 0.38p) – Speculative Buy
Premier African Minerals, the South and Western Africa focused mineral explorer and developer, announced today further assay results from its Zulu lithium project in Zimbabwe. Drill hole ZDD-45 intersected 1.74m grading 1.69% Li2O with assay results pending from another 20m of drilling. Hole ZDD-45 now has 40.58m grading 1.56% Li2O in multiple intersections. Drill hole ZDD-27/2, located to the east of the Main Zone, intersected 5.2m grading 1.86% Li2O and 4.4m grading 1.27% Li2O. The purpose of the current drill programme is to update and expand the resources from Main Zone of 20.1Mt grading 1.06%Li2O.

Our view: The above assay results are encouraging and we note the multiple intersections of lithium mineralisation from the Main Zone. We look forward to further assay results which should help expand the current resource estimate from the Main Zone. In the meantime, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Premier African Minerals plc

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Dixons Carphone (DC..L, 181.60p) – Hold
Dixons Carphone yesterday announced its interim results for the 26 weeks ended 28 October 2017 (‘H1 FY18’). During the period, headline revenue in a reported basis advanced by +3% to £4,868m (+3% in constant currency), against the comparative period (‘H1 FY17’). Group LFL revenue rose by +4%; comprised of UK & Ireland +2%, Nordics +8% and Greece +7%. Headline PBT fell to £61m (H1 FY17: £154m) including a negative impact of £58m from a change in receivables revaluations and insurance contract terms. Headline EPS accordingly fell to 4.0p (H1 FY17: 11.7p). Free cash flow increased to £169m (H1 FY17: £64m) due to capex reduction, improved stock management and timing of working capital. Net debt at the period end stood at £206m (H1 FY17: £285m). The Group declared an interim dividend of 3.5p (H1 FY17: 3.5p) to be paid on 26 January 2018.

Our view: The investors showed some relieve yesterday as Dixons’ Board said they intends to maintain the full year dividend and reiterated its headline PBT guidance in a range of £360m to £400m (FY17: £501m), which was in line with consensus estimate of £362m to £420m (mid: £383m), although the company trimmed the upper end of the range (previously £440m). Electrical business continued to perform well across all regions with LFL sale growth of +7% and market shares expansion. Mobile business remains challenging particularly in the Q2 were LFL sale fell by -6% as the launch of new iPhone X was delayed into H2. The UK mobile phone market is impacted by weaker Sterling pushing up the price of premium handsets at a time when significant technical innovation has been lacking in newer models, leading to people holding on to their mobiles for, around 5 months longer than before. Considering such environment, the company said it will commence repositioning of the mobile business to deliver a simpler, less capital-intensive business. The shares are valued at FY18E and FY19E P/E multiple of 7.0x and 6.8x along with dividend yield of 5.9% and 6.0%, respectively. Whilst there are uncertainties over new mobile business model and long-term uptake of Honeybee’s new software-as-a-service model, given peak trading period started well with record Black Friday sales in all geographies, Beaufort retains its Hold rating on the share.

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To read Beaufort’s full research archive click here

Compiled by:
Charles Long, Ben Maitland, Sheldon Modeland & Kazunaga Senga
(t) +44 (0) 207 382 8384
(e) info@beaufortsecurities.com


Weekly diary


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Recommendations
During the three months to end-November 2017, the number of stocks on which Beaufort Securities published recommendations was 237, and the recommendations were as follows: Buy – 37; Speculative Buy – 187; Hold – 11; Sell – 2.

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