(MENAFN- ProactiveInvestors) The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 12.90 points down at 7:00 am.
New York: Wall Street rallied amid upbeat manufacturing PMI in the Eurozone and strengthening oil prices despite moderate data from the domestic economy. The S&P 500 added 1.3% led by the energy sector.
Asia: Markets are trading mixed. Investors largely ignored the positive global cues to focus on weak manufacturing and personal spending data in the US. The Nikkei was down 1.3% at close whereas the Hang Seng was trading 0.4% up at 7:00 am.
Continental Europe: Markets ended in the green on encouraging PMI data and a rebound in oil prices. Investors were optimistic as Greece sought renegotiation of its €240bn debt. Germany’s DAX and France’s CAC 40 advanced 1.3% and 0.5% respectively.
Crude Oil: Yesterday Brent and WTI crude oil prices increased 3.3% and 2.8% respectively. The spread between the two varieties stood at US$5.2 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.56% higher yesterday at 690.34. To read our latest research click here.
Today’s news
Osborne confirms greater powers to Bank of England
Chancellor George Osborne confirmed that the Bank of England would be given additional powers to limit mortgage lending and excess leverage to safeguard the stability of the UK’s financial system. In addition he warned against the disagreement between Greece and the Eurozone over the former’s debt.
Greece reveals new debt proposal to end deadlock
Greece’s Finance Minister Yanis Varoufakis outlined plans to swap the outstanding debt with new growth-linked bonds to end the confrontation between Greece and its lending partners. The new plan has been formulated to implement economic reforms in the country.
Company News
() – Buy
Yesterday announced the results for nine months and the third quarter that ended on 31st December 2014. Revenues grew 17% to €1.1bn (2013: €964m) owing to a 14% rise in the number of customers to 20.8 million (2013: 18.3 million). The operating profit turned positive to €71.6m (2013: €23.0m) while the net profit stood at €49m vis-à-vis a loss of €35m at the end of Q3 2013. Consequently the basic earnings per share also saw a positive change of 6.03% to 3.53c (2013: -2.50c). For the nine months revenues expanded to €4.7bn from €4.2bn while the profit before tax increased to €961.8m from €643.6m. On the operational front the company enhanced the winter schedule by including more primary airports city pairs and business friendly frequencies. Plans are underway to open three new bases during March–April in Bratislava Copenhagen and Ponta Delgada. On the other hand the “Always Getting Better” programme continued to improve the customer experience and the mobile and digital platforms. The company is hedged 90% for FY15 at US$95 per barrel (pbl) at US$92 pbl for FY16 and 35% hedged in FY17 at US$68 pbl. The company intends to offer several promotional fares to mark its 30th anniversary in May 2015. Full year traffic is expected to rise over 90 million while the net profit may lie in the range of €840m-€850m. Despite maintaining a cautionary outlook for FY2016 the company declared a special dividend of €0.375 per share worth €520m to be paid on 27th February 2015. Separately the company also unveiled a €400m share buyback programme during the period commencing 12th February 2015 and ending 14th August 2015.
Our view: reported remarkable results as the company returned to profit booking and raised the full-year profit guidance for the fifth time. The robust results may be attributed to the company’s efforts to win more customers through better seat allocation lower punitive charges and more carry-on baggage. Additionally the company improved its customer service and website in order to entice more business class customers. We feel that the company is being overtly cautious in expecting lower profit margins due to expected price wars in view of the lower oil prices. The ex-fuel cost advantage per passenger enjoyed by the company still puts it in an enviable position as the peers may lack the fundamental business management advantages. Thus in view of the overall optimism we retain a Buy on the stock.
(LON:STI.) – Speculative Buy
Yesterday signed an agreement with Anadolu Export Maden Sanayi ve Ticaret Limited Şirketi for its Karaağac gold project in Turkey. As per the agreement Anadolu would spend up to US$1.5m within the next two years on exploration and drilling of the project. Stratex would receive a payment of US$500000 provided the minimum JORC-compliant indicated resource of 50000 ounces of gold at the project is confirmed in two years. Additionally the company would also collect 1.5% net smelter returns royalty on any future mineral production. The company would continue to manage the exploration programmes. Separately subject to the approval from the Turkish authorities Karaağac exploration licence would be transferred to Anadolu
Our view: The above deal marks the commencement of drilling operations at a potential gold project that was lying on hold for several years. The agreement is a win-win for the company as it not only provides an opportunity to tie-up with a prominent Turkish partner but also allows the company to participate in the upside potential of the project. Furthermore the company is also benefitted by the royalty flow that would add to the expected cash flow from Altintepe along with a 1% NSR royalty from the Öksüt project when it enters production stage. The company is engaged in exploration of assets gold and other high-value base metals across Turkey East Africa and West Africa that offer scope for significant upside potential. Thus in view of the above we maintain a Speculative Buy on the stock.
() – Speculative Buy
Yesterday announced the commencement of a ten-hole diamond drilling programme at the high priority ground electro-magnetic (EM) targets at Sarami West and Ghayth prospects in Oman. The drilling would be conducted by Oman-based Gulf Geotech. The programme is expected to last for a month and the results would be announced as they become available. Among the several ground EM anomalies detected the strongest anomaly was found at the Sarami West spanning over 200m with very high conductance.
Our view: has shown quick progress in identification of the EM targets and subsequent commencement of the drilling programme at the prospect. The Semail Ophiolite belt is known to possess higher grade of copper deposits with gold credits and metallurgical ores. Interestingly the results from the recent EM survey look extremely encouraging. The company’s future plans include developing a better understanding of the prospect through geological mapping geochemical sampling and airborne VTEM survey. Moreover the project in Oman benefits from superb infrastructure low fuel costs and encouraging government that supports any potential mine development. Given the above and the encouraging results till date we reiterate a Speculative Buy on the stock.
() – Speculative
announced the retirement of Mr Julian Metherell the company’s Chief Financial Officer with effect from conclusion of the Annual General Meeting on 21st April 2015. Mr Metherell would be succeeded by Mr Ben Monaghan the present Head of Europe Middle East and Africa oil and gas investment banking at J.P. Morgan. Mr Monaghan has been working at J.P. Morgan since the past 20 years where he was involved in important mergers and acquisitions deals along with several debt and equity capital raises in the sector.
Our view: The outgoing CFO has left Genel in a sound financial position and Mr Monaghan is the right replacement as he brings his relevant sectoral experience to the company to take it forward from where Mr Metherell left. Genel possesses solid balance sheet and enjoys considerable financial flexibility in the portfolio. The company has one of the lowest production costs in the world leaving it well-positioned to grow even in a low oil price environment. Recently the company also received the delayed payments from the Kurdistan Regional Government that were due to the international oil exporters. In light of the above and the company’s capability to withstand a challenging commodity pricing environment we retain a Speculative Buy rating on the stock.
Falklands Oil & Gas () – Speculative Buy
Falklands Oil & Gas provided an operational update with respect to its 2015 drilling programme. The Eirik Raude rig has been moved from West Africa to the Falkland Islands to drill the Premier-operated Zebedee well in the Sea Lion field. The second well to be drilled would be Isobel Deep well followed by Jayne East. The company is also considering a slightly modified drilling order to save on the costs of multiple rig moves. Moreover several large prospects have been identified especially the Humpback prospect within the Diomedea Fan Complex in South Falkland Basin. The mid case gross resource estimate for the Scharnhorst prospect has been increased from 188 to 355 million barrels of oil. Furthermore a number of attractive prospects and leads have been mapped in the Hersilia Fan complex using the new 3D seismic data.
Our view: The movement of the rig to the Falkland Islands is a precursor to the exciting drilling programme that targets over 1.4 billion barrels of gross unrisked prospective resources. The company has the largest acreage position and exposure in the upcoming drilling campaign in the Falklands Islands. Moreover the company reportedly had US$100m of cash with no debt at year-end 2014 thereby providing sufficient funds for drilling the first four agreed wells. We believe that if the company succeeds in the drilling campaign it could result in a windfall for its shareholders as the company has a significantly lower market cap for its potential. Thus in light of the unearthed potential we retain our Speculative Buy rating.
Economic News
UK manufacturing PMI
UK manufacturing PMI climbed to 53.0 in January from a revised 52.7 in December data from the Markit Economics and Chartered Institute of Purchasing & Supply showed yesterday. The reading came ahead of the market forecast of 52.7.
Eurozone manufacturing PMI
Maufacturing PMI for the Eurozone stood at 51.0 in January matching the flash estimate yet above the December reading of 50.6 data from Markit Economics showed yesterday. Market expected the reading to remain unchanged from the flash estimates.
Germany manufacturing PMI
As per the data released by Markit yesterday the final manufacturing PMI of Germany for January fell to 50.9 edging down from the flash reading of 51.0 and falling behind the December reading of 51.2.
US personal income and spending
US personal income increased 0.3% m-o-m in December beating the market forecasts of a 0.2% rise while matching the downwardly revised increase in November according to the Bureau of Economic Analysis. Personal spending declined 0.3% m-o-m in December following a revised 0.5% gain in November. The economists’ had expected a decline of 0.2%.
US manufacturing PMI
The US Markit manufacturing PMI stood at 53.9 in January unchanged from December. Economists were expecting a reading of 53.7.
US ISM manufacturing
Manufacturing PMI in the US fell to 53.5 in January from 55.1 in December the Institute of Supply Management (ISM) reported yesterday. Economists had forecast a reading of 54.5. The ISM prices paid index declined to 35.0 from 38.5 in the previous month below the expected reading of 39.8.
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