UK car sales see first drop for six years

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Today’s edition features:

  • Kibo Mining (KIBO.L)
  • Obtala (OBT.L)
  • Premier African Minerals (PREM.L)
  • easyJet (EZJ.L)

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The FTSE-100 finished yesterday’s session 0.32% higher at 7,695.88, whilst the FTSE AIM All-Share index was up 0.26% at 1,066.20. In continental Europe, the CAC-40 finished 1.55% higher at 5,413.69 whilst the DAX was up 1.46% at 13,167.89.

Wall Street
Last night in New York, the Dow Jones added 152.45 points (0.61%) to break through the psychological 25,000 barrier for the first time, reaching 25,075.13 at the close.
This latest surge was largely due to strong employment data in the US.
The S&P-500 added 10.93 points (0.40%) to end at 2,723.99 and the NASDAQ gained 12.38 points (0.18%) to 7,077.91.

In Asian markets this morning, the Hang Seng was 5.35 points (0.02%) higher at 30,741.83 and the Nikkei 225 advanced 201.41 points (0.86%) to 23,707.74.

In early trade today, WTI  was trading at $61.96 per barrel and Brent at $68.03 per barrel.


UK car sales see first drop for six years
New car sales fell for the first time in six years last year with demand for diesel cars plunging by almost a fifth. In total, there were around 2.5 million cars registered, according to industry body the Society of Motor Manufacturers and Traders (SMMT). The figure was down 5.6% from 2016, while diesel sales fell 17% as higher taxes and pollution fears hit demand. SMMT chief executive Mike Hawes said he expected car sales to continue to drop this year, predicting a 5 to 7% fall. The figures are preliminary, with final numbers for the year due to be published later.

Source: BBC News

Company news

Kibo Mining (KIBO.L, 5.75p) – Speculative Buy
Kibo Mining announced that it plans to meet with the Tanzania Ministry of Energy and TANESCO on Monday 8 January to finalise the MoU for fast tracking the Mbeya Coal to Power Project (MCPP). The MCPP is viewed as the most advanced Independent Power Producer (IPP) project in the Tanzania energy strategy pipeline and is expected to make a significant contribution towards achieving the government’s energy targets. The MoU will provide a framework within which the fundamental commercial and technical components of the PPA (Power Purchase Agreement) will be established, which is crucial for the development of the project.

Our view: It’s good to see the urgency of all stake holders involved with the goal to fast-track the MCPP towards finalisation of the all-important PPA. We are encouraged with the commitment by the Ministry of Energy to finalise the MoU followed by the all-important PPA in Q1 2018. As such, we look forward to the details of the agreement which will be the precursor to the crucial PPA. In the meantime, we maintain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Kibo Mining plc


Obtala (OBT.L, 12.62p) – Speculative Buy
Obtala announced yesterday (and on 2 January 2017) that its discussions with external trade finance providers have “moved forward” and is now pending completion of due diligence and finalisation. Once the legal documentation is completed, the size and terms of trade finance will be announced. The group noted that structured commodity trade finance is typically priced at 12-18%, with equipment finance over 20% with less than 1 year duration. To complement the proposed external facility and fulfill the required funding gap, the Board said it decided to raise a “separate or internal pool” of loan capital. As a first step, on 2 January 2018, the group announced it had secured an initial US$1m in the form of a 10-year loan bearing interest at 11.5% per annum payable annually in arrears from 5 of the group Directors, including CEO and Deputy Chairman. Proceeds will be used to finance timber trading activities for its recently acquired WoodBois International ApS.

Our view: The management’s participation demonstrates their commitment to the group. The group acquired WoodBois in June 2017 as the group saw an opportunity to grow its trading revenues and market share by injecting capital. Without such funding, WoodBois had been constrained from operational expansion, generating flat revenues in the US$15-19m range, which is less than 0.5% of the management’s estimated market size for African timber exports. We look forward to the further progress on securing external trade finance. We retain our Speculative Buy rating on Obtala with a target price of 37.50p.

Beaufort Securities acts as a corporate broker to Obtala Limited


Premier African Minerals (PREM.L, 0.26p) – Speculative Buy
Premier has updated the market on two of its five Zimbabwe projects – RHA Tungsten (49%)and Zulu Lithium. In summary RHA requires more capital to achieve profitable production which Premier is now seeking from its 51% partner the National Indigenisation and Economic Development Fund (NIEEF). Management believe RHA’s resource grade is high enough for a profitable operation but is a unwilling to continue to be the sole funder. The mine needs capital for proper reserve development. It will send one last shipment this month and suspend operations until a finance solution is found with NIEEF.

Regarding Zulu Lithium, as announced on Tuesday, Premier plans to spin the project out into a new vehicle and distribute a “substantial proportion of Premier’s retained interest in Zulu Newco” to Premier shareholders. Timing of this transaction is “as soon as possible”.

Our view: RHA’s suspension is clearly disappointing but we hope management is successful in its negotiations with NIEEF. Political changes in Zimbabwe are still fluid but most observers believe the legal and fiscal framework will improve e.g. government is now discussing potential 100% foreign ownership of mines. This would increase the value of all Premier’s Zimbabwe projects including Zulu, a potentially very large lithium deposit with an exploration target of 60-80mt. We have a Speculative Buy recommendation.

Beaufort Securities acts as a corporate broker to Premier African Minerals Limited


easyJet (EZJ.L, 1,510.00p) – Hold
easyJet this morning provided its traffic update for December 2017. During the month, passenger traffic increased +5.5% y-o-y to 5.88 million customers, while the load factor improved +1.5% y-o-y to 91.4%. Year to date traffic to December grew +9.6% to 81.63 million customers with load factor up +1.6% to 93.0%. Load factor represents the number of passengers as a proportion of the number of seats available for passengers.

Our view: As was the case for Ryanair, easyJet’s December passenger statistic growth was slower, impacted by adverse weather conditions. It has caused c.400 cancellations in the month with a further cancellation of c.180 due to runway closures and strikes. Load factor, on the other hand, remained strong. Given the share surpassed our target price of 1,460p which was based on FY18E P/E multiple of 15x we consider the shares are now fairly priced. We downgrade our recommendation to Hold.


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Compiled by:
Charles Long, Ben Maitland, Sheldon Modeland & Kazunaga Senga
(t) +44 (0) 207 382 8384

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During the three months to end-December 2017, the number of stocks on which Beaufort Securities published recommendations was 193, and the recommendations were as follows: Buy – 22; Speculative Buy – 163; Hold – 6; Sell – 2.

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