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Today’s edition features:
- Diversified Gas & Oil (DGOC.L)
- Oncimmune Holdings (ONC.L)
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Polls driving Sterling driving the FTSE-100
"The revelation of a new-style YouGov poll on Wednesday shattered any complacency about the likely outcome of next week’s election. Having inherited a Conservative majority in the last General Election courtesy of David Cameron, Theresa May appears to have risked it all for nothing with the poll suggesting a possible loss of 20 seats to 310 seats (out of 650), resulting in a hung parliament.
This poll was the first conducted by YouGov on a constituency-by-constituency basis so it remains to be seen whether this provides any greater precision than other polling methodologies. Much was being made by opposition parties that Theresa May would not appear in last night’s multi-party political debate (yet another one!) but, judging by the low viewing figure reported for the Paxman May-Corbyn face-off a few days before, it may be that the electorate’s interest is beginning to flag and that many have decided on their voting position.
Unsurprisingly, Sterling took a hit in the morning which generated a Pavlovian rally in the FTSE-100. A research company Panelbase suggested later in the day that the Conservatives were now in fact 15 points ahead of the Labour Party (compared with just 5 points last week). This prompted Sterling to recover to around $1.29 and the FTSE-100 to reverse an almost-70 point gain by the early afternoon to a 7 point fall on the day.
It is to be expected that the market will become even twitchier and, perhaps, less rational as polling day approaches. As so often with recent elections, the implications of the result look to be binary. In this instance, the choice appears to be a more financially restrained ‘steady as she goes’ set of policies from the Conservatives against a distinctly radical set of ‘buy now – pay later’ policies from the Labour Party which may carry more immediate appeal to voters (particularly the young) but will add to the UK’s debt and weigh even more heavily on Sterling than anything we have seen in recent months. Ultimately, it seems to come down to timing and how quickly voters choose to pay to address inequalities in society. What is clear is that there is much to shred investors’ nerves before the 8th June."
– Mike Franklin, Chief Investment Strategist
Markets
Europe
The FTSE-100 finished last night’s session 0.09% lower at 7,519.95 whilst the FTSE AIM All-Share index was up 0.14% at 992.55. In continental Europe, the CAC-40 finished down 0.42% at 5,283.63 whilst the DAX was 0.13% higher at 12,615.06.
Wall Street
In New York last night, the Dow Jones fell 0.1% to 21,008.65, the S&P-500 shed 0.05% to 2,411.8 and the Nasdaq eased 0.08% to 6,198.52.
Asia
In Asian markets this morning, the Nikkei 225 had improved 1.09% to 19,865.49 and the Hang Seng gained 0.35% to 25,749.34.
Oil
In early trade today, WTI crude was up 0.95% to $48.78/bbl and Brent was down 2.95% to $50.31/bbl.
Headlines
Insurance premiums ‘rise due to tax change’
Insurers have warned customers that premiums will go up thanks to a tax rise that has now come into force. The Insurance Premium Tax (IPT) rate has increased from 10% to 12%, with motor, home, pet and health insurance all affected. Companies warn that the average family will be paying £47 more a year as a result. Successive chancellors have found IPT to be an irresistible way to raise money for their spending plans. This latest rise of two percentage points to 12% means that the rate has doubled in only a few years. Calculations suggest that the tax rise will add £8 to the average motor policy. It may add £20 to the bill for a 19-year-old whose motor insurance premium was already much higher than the average, owing to the greater risk posed by younger drivers. A percentage tax bears heaviest on those who have the most expensive policies, such as young drivers or people living in less well-off areas or flood zones.
Source: BBC News
Company news
Diversified Gas & Oil (DGOC.L, Shares Temporarily Suspended) – Update
Diversified Gas & Oil Plc (‘DGOC’), the US based gas and oil producer, yesterday provided an update of its proposed acquisition. As announced on 5 May 2017, the Group has entered into a conditional sale and purchase agreement to acquire certain gas and oil assets from Titan Energy, LLC. As such transaction constitute a reverse takeover and is subject to DGOC shareholders approval, its shares were suspended on the same day. Within yesterday’s update, the Group confirmed that it has made “good progress” with respect to completing the financing of the acquisition and in preparing the information required to be included in the new AIM admission document. Publication of the new AIM Admission Document has been delayed and now expected during mid-June 2017 (originally expected on 31 May 2017). Upon this, the trading in the Group’s ordinary shares on AIM is expected to resume, while acquisition remain conditional on shareholder approval at a General Meeting to be held on or before 30 June 2017. The Group said it will update shareholders with further information as appropriate.
Proposed acquisition of Titan Energy’s gas and oil assets is based in the Appalachian Basin, principally the states of Ohio, Pennsylvania, southern New York and northeast Tennessee. Cash consideration of US$84.2m will be funded through a new 3 year debt facility provided by Angelo, Gordon & Co with a proposed placing of new ordinary shares raising a minimum of US$20m. Following the Acquisition, the Company will be producing from licences held by production over a total area of approximately 1.6 million acres, an increase of some 42%. It increases Proved Developed Producing reserves by approximately 36.7 mmboe to 60.5 mmboe. The acquisition will increase DGOC’s gross oil and gas production to c.18,291 boepd (11,039 boepd net), comprised of gas production of 17,360 gross boepd (+12,518 boepd) and oil production of 931 boepd (+379 boepd). The Board confirmed that the new wells will be immediately accretive to EBITDA. Diversified Gas & Oil’s CEO, Rusty Hutson, commented on 5 May 2017 “This transformational deal for DGO will materially increase the scale of our portfolio within the Appalachian Basin, taking up further acreage in the states of Ohio and Pennsylvania and entering southern New York and northeast Tennessee. The proposed transaction highlights the strength of our business model in that we are able to acquire complementary assets in a proven, stable and low-risk environment at compelling valuation metrics. We believe that this deal will deliver significant benefits to our shareholders in the form of increased cash flow, proven developed reserves and acreage for future development opportunities whilst also supporting our dividend policy and enabling us to consider additional opportunities that we see within our region of focus”. The Group is scheduled to publish its preliminary results for the year to 31 December 2016 on 7 June 2017.
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Oncimmune Holdings (ONC.L, 141.00p) – Speculative Buy
Oncimmune Holdings, a leading early cancer detection company developing and commercialising its proprietary EarlyCDT platform technology, yesterday announced that it has obtained the CE mark for EarlyCDT-Lung test in an ELISA kit format. EarlyCDT-Lung is a simple autoantibody blood test that can detect lung cancer up to 4 years earlier than other methods. The CE mark certifies that the kit meets the strict EU standards of manufacturing and quality control. The Group said it is now ordering its first batch of commercial kits which will be available within 4 months in time for launch. Oncimmune’s CEO, Geoffrey Hamilton-Fairley, commented “Until it was certain that the EarlyCDT-Lung test would successfully transfer to a kit, Oncimmune’s commercialisation plans for territories outside of the US were conservative as adoption of the test was likely to be slower if we could only offer a central laboratory test. The CE marked kit now allows us to address these markets and support our distributors with a simple test in a well-known, easy to use format. We believe this development will greatly help us in accelerating our appointment of global distributors and support their ongoing performance”.
Our view: Oncimmune continue to make a good operational progress, in line with its guidance. The conversion from a central lab test to a fully CE marked and ISO certified ‘kit’ format is a key to expand its distributor discussions into new geographical territories, such as Asia. The kit has the advantage that it does not require additional training of machine operators as it runs on existing machines (ELISA-96 well-Microplate-Instruments) in “practically all hospital labs” globally as the machines are in use for the testing for infectious disease for more than 30 years. It means test to detect potential lung cancer using EarlyCDT-Lung kit is now available to hospitals in their own laboratories. Beside this, at its interim results on 10 February 2017, the Group noted EarlyCDT-Liver test is expected to be ready for commercialisation before the end of 2017, while EarlyCDT-Ovarian also in advanced development to follow. EarlyCDT-Lung is being used in the world’s largest randomised trial for the early detection of lung cancer conducted in collaboration with NHS in Scotland, where the study has completed recruitment of 12,210 high-risk smokers. Encouraging interim data from the NHS screening trial was presented in December 2016 at the 17th World Conference on Lung Cancer in Vienna, where it showed a shift to early and curative cancer (stage 1 & 2) from 20% in normal practice today to 75%. The Group is also working to improve existing EarlyCDT-Lung test which is now near completion and expected to be tested in CLIA lab in Kansas during 2017. With cancer being an ever-increasing focus for mankind and early detection a key element for reducing mortality and cost, we believe Oncimmune remains well positioned to generate significant value in the relatively near term. Given positive progress, Beaufort retains its Speculative Buy recommendation on the Shares.
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Compiled by:
Barry Gibb, Kazunaga Senga, Sheldon Modeland, Charles Long & Ben Maitland
(t) +44 (0) 207 382 8384
(e) [email protected]
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Recommendations
During the three months to end-May 2017, the number of stocks on which Beaufort Securities published recommendations was 196, and the recommendations were as follows: Buy – 77; Speculative Buy – 100; Hold – 17; Sell – 2.
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