The Markets
Market opening:
New York: Wall Street closed in the green on Friday. S&P 500 rose 0.3% and was up 2% for the week. Industrials and consumer discretionary sectors witnessed good buying interest from investors. Twitter Inc. officially filed for an initial public offering.
Asia: Hang Seng was trading 1.3% higher at 7:00 am. Nikkei was shut for a public holiday today. Investors are eyeing the Federal Reserve?s two-day policy-setting scheduled for 17th and 18th September.
Continental Europe: Equities closed higher on Friday. Germany?s DAX and France?s CAC 40 climbed 0.2% each.
UK small caps: On Friday the FTSE AIM All-Share index gained 1.08% points yesterday to stand at 780.84.
Today?s news
No house price bubble in the UK: Nick Clegg?
The UK is nowhere near a house-price bubble, as per a statement by the Deputy Prime Minister, Nick Clegg. He mentioned Bank of England (BoE) and the government have tools to prevent one and ensure it does not reoccur. The government runs a scheme ?Help to Buy? to enable cash-strapped buyers to purchase a home with a deposit of as little as 5%.
Summers withdraws name from Fed Chairmanship
Lawrence Summers, 58, voluntarily withdrew his name from the race to be the next Federal Reserve Chairman. His was one of the three names the US President had mentioned as possible replacements for the current Fed Chairman, Ben Bernanke, whose term ends on 31st January 2014.
Share Offer
The Government has announced its intention to conduct an initial public offering (?IPO?) of and Beaufort Securities is offering clients the opportunity to subscribe for shares in the IPO. Click here for more information.
Company News
D Wetherspoon ()
announced preliminary results for FY2013 ended 28th July 2013 on Friday. Revenues increased 7% y-o-y to ?1.3bn on a nominal basis and 5.8% on a like-for-like (LFL) basis. Excluding the extra week, revenues were up 9.3%. LFL food sales were up 10.9%, while bar sales rose 3.8%. Machine sales inched forward 0.4%. Adjusted operating profit rose 3.7% to ?111.3m, while adjusted pre-tax profit grew 6.3% to ?76.9m. Exceptional items totalled ?19.8m, including the impairment of trading pub assets worth ?15.6m, a provision for onerous leases of ?3.3m, and losses of ?1m on disposal of property, plant and equipment. Operating margin dipped to 8.7% from 9%, primarily on account of higher taxes, utilities, bar and food costs. Adjusted EPS rose 13.3% to 46.8p. Underlying sales in the six weeks to 8th September rose 3.6%, with total sales up 7.8%. The company opened 29 pubs during the year. It plans to open around 30 pubs in the current financial year. Chairman Tim Martin informed that the company continued to stand for VAT equality among pubs, restaurants and supermarkets, and planned to support Jacques Borel?s VAT Club on Tax Day. He also reported some favourable outcomes from legal cases and out of court settlements, including the Van de Berg judgment. Mr. Martin forecasted a ?reasonable outcome? for the full year. The Board proposed a dividend of 8p, taking the full year dividend to 12p, in line with last year.
Our view: delivered a strong performance despite mounting tax burden of ?632,000 per pub during the year. All the segments posted an increase in revenue during the period. The company joined in to support the call for equal taxes for pubs and supermarkets to eliminate undue benefits enjoyed by the latter, especially on the liquor products. The company also reported positive outcomes of court cases and settlements involving material stakes. Besides, gave a robust performance in the latest earnings data for six weeks ended 8th September, signalling an upbeat trend in the coming period. Regardless of the outcome of tax opposition, we believe that the expansionary plans of the company and its strong fundamentals are likely to pave the way for a smooth ride to its future growth. We upgrade our view on the stock to a Buy.
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On Friday, announced a production and drilling update for the Smoky Hill and Jolly Ranch projects (100% owned and operated), located in the Denver-Julesburg Basin, Colorado. In August, company?s gross oil production stood at 1,661 barrels per day (bpd), with an average realized price of US$97 per barrel. Production from the Arikaree Creek oilfield rose from the last month, with Silverton 16-10 and Snowbird 9-15 wells adding a combined 257 bpd on average. The company is expected to return to the monthly production growth in fourth quarter, post the completion of the preventative maintenance and pressure testing programme at Arikaree Creek. Nighthawk plans to retain the drilling rig for additional period in the fourth quarter, after the completion of drilling at first two planned wells at Arikaree Creek, to undertake more exploration and production activities. Further development of Arikaree Creek is expected to commence in mid-October 2013, ahead of the company?s initial expectations. Besides, Nighthawk is seeking a permit to drill a salt water disposal well at Arikaree Creek. The company intends to core one of the new wells to provide valuable additional information for the Competent Person Report (CPR).
Our view: Nighthawk managed to deliver a significant increase in production from the Smoky Hill and Jolly Ranch projects to 1,661 bpd in August from 1,512 bpd in July, despite a downtime witnessed at Snowbird 9-15. Gains in oil prices, with an expectation of further increase going forward, brightens the future prospects for the company. Nighthawk has planned to proceed with further development programme at Arikaree Creek, ahead of the timeline set before. The proposed salt water disposal well could contribute significantly towards cost reduction for the company in the future. After the recent acquisition and analysis of 2D seismic grid, the company could probably go forward to tap lucrative conventional targets as well as the extensive unconventional Pennsylvanian prospects. Given the aggressive exploration and development strategy adopted by the company and encouraging production results witnessed during the month, we believe there is a significant opportunity for the company to expand production and resource base, going forward. We retain a Speculative Buy rating for the stock.
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presented its unaudited results for the six months ended 30th June 2013, on Friday. Operating losses shrank to ?776,508 from ?1,317,204 in the same period last year. Losses before tax contracted to ?772,515 from ?1,508,981, with contribution of ?433,367 from Namibia and ?339,148 from the UK. No losses were reported for Mozambique. Loss per share lowered to 0.10p from 0.22p. The company completed first stage of the planned development programme ? ?proof of concept? at North River?s flagship asset, the brownfield Namib Lead Zinc Project. The results indicated a mineralisation intercept at 382m below surface on the Junction ore-body, evidence of multiple down-hole electromagnetic survey (DHEM) contacts interpretation, which is 500m below previously mined levels. The programme also encompassed exploration of the Exclusive Prospecting Licence (EPL) situated adjacent to the mine. Previous exploration at the prospect had highlighted numerous surface gossans, similar in size to the one in the discovery of the Namib Mine and also suggested the presence of lead and zinc ore. Besides, the first near-mine target generated by the Versatile Time-Domain Electromagnetic (VTEM) survey target intercepted mineralisation at 112m below surface. The company plans to proceed to the second stage of the programme, involving the completion of a comprehensive feasibility study on Namib. Currently, the resource base at Namib stands at 668,000 tonnes, grading at 6.6 % zinc, 2.5 % lead and 46 gram/ton (g/t) silver. The mine produced about 104,000 tonnes of concentrate, valuing more than US$100m in terms of revenue at normal recovery returns. North River raised ?1 million through share placement in April 2013, to support operations at Namib. The stock gained 7.7% on the on Friday.
Our view: North River made significant progress towards development of its flagship project focused on the redevelopment of a historic mine in Namibia. Multiple DHEM contact interpretation highlight the presence of significant ores below the historic mine. Electromagnetic survey of the Namibian lead, zinc and silver prospect have uncovered the deepest intercept for the project till date. With the appointment of a top notch industry consultant, Snowden Mining Industry Consultants, to cover all aspects of the project through to the application for a mining licence, North River looks well positioned to make steady progress going forward. Additionally, there seem to be good prospects of further resource upgrades for the company in the initial resource assessment to be carried out by the consultants. Given the above, we believe the company is well prepared to leap forward with its growth and development strategy. We issue a Speculative Buy for the stock.
Economic News
US PPI
US producer price index for finished goods advanced 0.3% m-o-m on a seasonally adjusted basis in August, following an unchanged pricing in July, the Labour Department said on Friday. Economists had expected the index to rise 0.2% for the month. On y-o-y basis, prices moved up 1.4%, following an increase of 2.1% in the previous month, while the economists had expected a reading of 1.3%. Excluding the volatile food and energy segment, the index remained flat after gaining 0.1% in the previous month. On an annual basis, prices were up 1.1%, after edging 1.2% higher in the prior month.
US retail sales advance
US advance retail sales rose 0.2% m-o-m in August after an upwardly revised increase of 0.4% in July, the Commerce Department said on Friday. Economists had expected sales to rise 0.5% during the month. Excluding autos, retail sales edged up 0.1% in August compared to a revised 0.6% increase in the previous month, while the markets forecast was 0.3%. Core sales, excluding automobiles, gasoline and building materials, inched up 0.2% after a 0.5% gain in July.
US University of Michigan confidence
US consumer sentiment declined to 76.8 in September, from 82.1 in August, as per the preliminary reading released by Thomson Reuters/University of Michigan on Friday. Markets had expected an index reading of 82.0. The gauge of current economic conditions hit a five-month low of 91.8 vis-a-vis 95.2 last month. The consumer expectation index plunged to 67.1 from 73.7, reaching its lowest in eight months. The one-year inflation expectation rose to 3.2%, up from 3% in the previous month.
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