(MENAFN- ProactiveInvestors) The Markets
Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 9.00 points down at 7:00 am.
New York: Wall Street extended previous day’s gains amid rising oil prices and encouraging developments in Greece’s debt negotiations. The S&P 500 added 1.4% to close above the 2000 level.
Asia: Markets are trading higher on positive cues from the global markets and several strong earnings reports in Japan especially from banks. The expectations of a Greek debt swap deal also lifted the overall sentiment. The Nikkei was up 2.0% at close whereas the Hang Seng was trading 0.5% higher at 7:00 am.
Continental Europe: Markets ended in the green led by the energy and basic resources sectors. Greece’s new deal to swap outstanding debt for new growth-linked bonds positively impacted investor sentiment. France’s CAC 40 and Germany’s DAX advanced 1.1% and 0.6% respectively.
Crude Oil: Yesterday WTI and prices increased 7.0% and 5.8% respectively. The spread between the two varieties stood at US$4.9 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.32% higher yesterday at 693.27. To read our latest research click here.
Today’s breakfast menu:
- Beaufort Securities on – Speculative Buy ; – Buy; – Buy; – Speculative Buy ; and Industries – Buy
- US factory orders
Today’s news
Fall in UK shop prices slows in January
According to the British Retail Consortium (BRC) UK shop prices declined 1.3% y-o-y in January compared with a 1.7% fall in December. Food prices decreased 0.5% after a 0.1% drop in the previous month. The survey reflects price changes in over 500 products.
ECB resists Greece’s rescue plan
The European Central Bank (ECB) resisted the proposal from Greece’s Finance Minister Yanis Varoufakis to raise €10bn through the issue of short-term Treasury bills for the next three months as the consensus for a new bailout plan is reached. Mr. Varoufakis is due to meet the ECB’s President Mario Draghi in Frankfurt later today.
Company News
() – Speculative Buy
Yesterday released its quarterly newsletter comprising details of the progress across its portfolio of gold assets. The newsletter highlighted the positive developments in the Turkish Mining Sector with revisions in the country’s mining law and opening of a new Greenfield exploration for license auctions. In addition two gold assets with a potential of over 1 million ounces were derisked through joint venture and complete funding from partners. The company mentioned it continues to explore the potential of the Red Rabbit gold project to discover future standalone mines.
Our view: has entered an interesting phase of the growth cycle where it has great chances to witness maiden commercial production from the Red Rabbit prospect. The year 2015 could be a transformational one for the company as years of exploration activities may finally produce some tangible returns for the shareholders. We feel the company has a well-thought-out strategy to balance the near-term potential from the gold prospect and the development of the remaining exploration portfolio. In view of the above and the underlying potential of the asset for a large gold and molybdenum system we retain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to plc
() – Buy
Yesterday declared results for Q4 2014 and FY2014. Total revenues declined 6.7% y-o-y to US$353.5bn and fell 21% to US$73.9bn in Q4 2014. The underlying replacement cost (RC) turned to a loss of US$969m from a profit of US$1507m in Q4 2013 and was down 83.9% y-o-y in 2014 due to the absence of US$12.5bn gain through the interest disposal in TNK- in 2013. The non-operating charge for the Gulf of Mexico oil spill stood at US$477m for the quarter and US$819m for the year (on a net pre-tax basis). Including the contribution of newly acquired total production stood at 3214 thousand barrels of oil equivalent per day (mboe/d) compared to 3231 mboe/d in 2013. In the upstream quarterly production declined 2.6% to 2187 mboe/d while the underlying production increased 2.3% due to growth in production from higher margin areas. The full year reported production was 5.0% lower whereas the underlying production was 2.2% higher. In December 2014 announced the commencement of operations at the Kinnoull field and also signed a production-sharing agreement (PSA) with State Oil Company of the Republic of Azerbaijan (SOCAR) for the Absheron Peninsula in the Azerbaijan sector of the Caspian Sea. Performance of downstream business drew its weakness from the fuels business and costs associated with the restructuring programme. The company anticipates a weaker refinery environment given the low crude prices yet expects higher reported production in 2015. Of the announced buyback of US$8bn in March as on 31st December 2014 had bought back 612 million shares for a total value of US$4.8bn. announced a quarterly dividend of 10c per share payable on 27th March 2014.
Our view: The write-offs and impairment charges due to the plunge in the oil prices impacted the annual performance of . The company reacted with deep capital investment cuts through reduced spending on new projects. The company also trimmed the exploration expenditure and postponed the advancement of certain projects. However the surprise profits from that contributes nearly a third of the ’s production helped the company beat the profit expectations from the market. Refining and trading division also posted a profit of US$1.21bn compared to US$70m an year ago. The company also announced higher dividends despite rising costs and shrinking cash flows. Thus given the above and the company’s focused investment strategy we retain a Buy on the stock.
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() – Buy
provided a trading update for the three months ended 31st December 2014. Assets under management stood at £323.3bn while gross inflows amounted to £11.3bn for the period. The encouraging inflows in the months of October and November were impacted by the December outflows due to weaker investor sentiment. Fixed income net outflows totalled £1.5bn. The integration of the recently acquired Scottish Widows Investment Partnership (SWIP) rebranded as Aberdeen Property Trust remains on track with the migration expected to be completed by the end of 2015. The company is expected to meet the changing needs of the investors through disciplined cost management.
Our view: Aberdeen witnessed net outflows in the first quarter of the financial year reflecting investor diffidence in the emerging world economies. In such a scenario the money managers are finding it difficult to retain investors who are reshuffling portfolios in anticipation of higher interest rates in the US while limiting exposure to the riskier assets that promise higher yields. However despite the expected top-line fund flow volatility the company remained vigilant to win new business at competitive fee margins and incorporate cost discipline in the business management. Separately the integration with SWIP is expected to provide more cost synergies than initially estimated. Aberdeen’s overall business remains well balanced with sufficient capital and cash to generate long term returns for the investors. In view of the above we retain a Buy on the stock.
() – Speculative Buy
Yesterday provided an operational update on its oil & gas and mining divisions. The company successfully dried the Mancos well in the Uinta Basin to 3200 feet (ft) and ran a production casing to the total depth. The mud logs indicated the presence of oil & gas with a potential of 84ft net oil pay in the conventional reservoirs below the Mancos Shale. plans to complete the conventional reservoirs while the two whole cores and 50 rotary sidewall cores are being analysed. At the Paradox well the 3D seismic survey is being conducted on a priority basis. On the mining front the Mina Charay mine saw recoveries averaging 79.3% gold and 61.7% silver during the pilot run. The mine is likely to generate cash flow through production from March 2015. At the TC copper project the company has decided to terminate the drilling programme as no mineralization of porphyry-style alteration was found. The entire cost of the operations was borne by JV Partner Lowell Copper. Separately the company could not complete the disposal of Wate Mining Company as planned on 16th January. Discussions are underway to resolve the matter at the earliest.
Our view: The recent update on ’s projects and the progression of assets towards revenue generation bodes well for the company. Rose operates in a low cost environment and plans to complete the conventional reservoirs in March to ensure initial oil production during H1 2015. The termination of the drilling at the TC copper project allows the company to focus on other prospects in Mexico. The company has strategically increased the exposure in the oil and gas projects as they continue to gain momentum while continuing the exploration of copper and molybdenum. In view of the above we believe that the company is on the right growth track. We retain our Speculative Buy rating on the stock.
Industries () – Buy
Yesterday industries proposed a capital return of 18.7p per share amounting to £200m to its shareholders. The return would be funded using the £365m proceeds from the disposal of the Bridon business with the remainder being going towards repayment of the company’s debt. Shareholders would be given the choice for the mode of payment receipt between Income and Capital option. The income option provides one C share against every existing ordinary share with a dividend of 18.7p per C Share that would be treated as dividend income for UK tax purposes. The capital option gives one B Share for every corresponding existing ordinary share; to be redeemed by on 2nd March 2015 for 18.7p per B Share and would be treated as capital for UK tax purposes. The payments for both the options are likely to be made on 16th March 2015. The company has also planned a 13-for-14 reverse share split.
Our view: announced a reverse stock split and capital return to its shareholders following the sale of a division that made ropes for use in the mines. The company enjoys an enviable track record of creating value for the shareholders as it created approximately £2490m from a net shareholder investment of £170m since 2005 while managing an average annual return of 23% on equity investment. The company continues to move ahead with its ’buy improve sell‘ strategy similar to private equity firms. Thus in light of the above positives and the company’s impeccable track record we maintain a Buy on the stock.
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