Savannah Resources, DDD Group, Debenhams
Date
6/26/2016 8:01:52 AM
(MENAFN- ProactiveInvestors - UK) Beaufort Securities, Thu
Markets
Europe
The FTSE-100 finished yesterday''s session 0.56% higher at 6,261.19, whilst the FTSE AIM All-Share index closed 0.17% higher at 722.33. In continental Europe, markets ended in the positive territory, buoyed by growing investor confidence that the UK would vote in favour of staying in the EU. Germany''s DAX and France''s CAC 40 rose 0.5% and 0.3%, respectively.
Wall Street
Wall Street ended in the red due to investor concerns over the Brexit vote. Furthermore, oil prices came under pressure after data showed a lower-than-expected decline in US crude inventories. The S & P 500 fell 0.2%, with the energy sector losing the most.
Asia
Equities are trading higher as investors await the outcome of the Brexit referendum, which is to be held today. The Nikkei 225 gained 1.1%, supported by a weak yen. The Hang Seng was trading 0.3% up at 7:00 am.
Oil
Yesterday, Brent prices shed 1.5% to US$49.88 per barrel, whereas WTI prices rose 0.6% to US$49.13 per barrel.
Headlines
Britain votes on EU membership today
Britain will vote on a referendum today on whether the country should leave or exit the EU. About 46,499,537 people will cast their votes, a record number for a UK poll. The results are expected to be announced tomorrow morning.
Company news
Savannah Resources (LON:SAV, 2.83p) - Speculative Buy
Savannah Resources, the diversified mining group focused on exploration and development, announced today that it has been granted the Reservation Permits over its two new lithium projects in Finland (see RNS 2 Jun 2016). The Somero and Erajarvi projects cover an area of 60.5km2 and 98.5km2, respectively within a highly prospective lithium terrain. The Somero Reservation permit is less than 2km from Nortec Minerals'' lithium deposits. Through its newly established Finnish subsidiary Finkallio Oy, Savannah holds a 100% interest in both projects. Geological mapping by the Finnish Government has highlighted the presence of lithium bearing minerals including spodumene, lepidolite and petalite. Savannah is currently finalising an exploration programme comprising data compilation, geological mapping and surface sampling with the goal to generating drill targets during 2016.
Our view: Savannah now has permits covering two highly perspective lithium projects within a mining friendly jurisdiction. While still an early exploration play we are encouraged with the potential for lithium mineralisation in the area based on the geological mapping complied by the Finnish Geological Survey (GTK). Given that the global lithium demand is expected to double by 2025 on the back of the burgeoning battery market, Savannah is looking to capitalise on the lithium market and diversify its portfolio. We look forward to further updates regarding the exploration programme in Finland as well as continued developments on the copper-gold deposits in Oman and the heavy mineral sands in Mozambique. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as a corporate broker to Savannah Resources Plc
DDD Group (LON:DDD, 0.38p) - Proposed AIM Cancellation
DDD Group plc, the advanced imaging and 3D solutions company, is due to hold its Annual General Meeting on 29 June 2016 at 10.30am in central London. The meeting will include a special resolution to approve the cancellation of trading on AIM of all of the Ordinary Shares of the Company pursuant to Rule 41 of the AIM Rules for Companies. This notice was posted to shareholders on 24 May 2016 although, under AIM rules, cancellation can only be effected through the passing by a majority of not less than 75% of the votes cast. Assuming the resolution is approved the cancellation would then become effective on 7 July 2016. Subsequent to cancellation, the Company intends to put in place a matched bargain settlement facility to serve as a limited platform for shareholders and other persons who seek to buy or sell shares. On 23rd May CEO, Chris Yewdell, noted in his year-end 2015 results statement, "The AIM listing expense has become excessive for the size of the business and more importantly does not help to generate any additional revenue or profit. The Board''s view is that the Company is not receiving the benefits for which the AIM listing was originally sought, nor is there any possible chance of the situation changing in the foreseeable future. Accordingly the Board has concluded that in their opinion, it is in the best interests of the Company and its shareholders to seek a cancellation of trading from the AIM market. This will cut significant expense and enhance the possibility of potential dividends in the future." As at end-December 2015, 45% of the Company''s ordinary share capital was said to be ''not in public hands''.
Our view: The Board has proposed DDD''s AIM cancellation with a view to eliminating costs. While its SmartCam 2D digital technology product is highly innovative and has the potential to attract an active following, to date its subscription-based revenue model has failed to gain reasonable traction. Meanwhile, the Company''s TriDef 2D to 3D conversion solution is rapidly losing momentum. Having secured additional patents to protect its proposed new 2D offerings, however, DDD is likely to remain cash hungry for some time to come. Given also the Board''s recent decision to resort to the issuance of Secured Loan Notes to raise required working capital, its decision may be considered expedient in view of likely continuing funding needs and difficulty experienced in securing new equity funding. Given that the AIM-cancellation was proposed by DDD''s Board, it is realistic to expect the Resolution to be successfully passed. Bearing this in mind, and the fact that it may in the future become difficult to trade DDD shares on the proposed basis of ''match bargain'', shareholders might consider taking advantage of higher market trading liquidity between now and 6th July, should they wish to reduce of their holdings.
Beaufort Securities acts as a corporate broker to DDD Group plc
Debenhams (LON:DEB, 74.25p) - Hold
Yesterday, Debenhams released a trading update for the 15 weeks and the 41 weeks to 11th June 2016. For the 15-week period, gross transaction value increased 0.5%, while for the 41-week period, the value increased 1.3%. Like-for-like (LFL) sales for the 15 weeks fell 0.2%, but increased 0.7% for the 41-week period. Debenhams lowered the gross margin guidance for FY 2016 to flat against the previous guidance range of 0 basis point (bp) to +50bp. The cost growth for the year is expected at the lower end of the previous guidance range of +2% to +4%. Net debt for the year is expected to be in the range of 270290m. On the operational front, the company progressed with space optimisation, with 75% of the 1m sq ft to be filled by Christmas. Debenhams'' Irish business has successfully applied for Examinership (a rescue process designed to assist struggling business recover from insolvency), which should be completed by the end of the year.
Our view: Debenhams performed poorly in the 41 weeks to 11th June 2016. The company witnessed weak growth in the transaction value amid difficult trading conditions in the UK. Debenhams remained focussed on cost management and expects costs to be in the lower range of its guidance. The company recorded solid online sales growth of 9.1% for the year to date. International online sales continued to grow well, supported by its new web platform. The company continued with the roll-out of new food concessions, with an additional 30 offers in place by October. Nonetheless, the trading environment for clothing remains challenging. Moreover, Debenhams lowering the gross margin for the year is disappointing news. In view of the mixed outlook, we maintain a Hold rating on the stock.
Beaufort Securities