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Copper concentrate to become increasingly important to Anglo Asian Mining

Last updated: 05:29 24 Nov 2015 EST, First published: 07:29 24 Nov 2015 EST

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Anglo Asian Mining (LON:AAZ) has shipped the first batch of copper concentrate from its flotation plant at Gedabek, which is positive news, says SP Angel.

The broker expects concentrate revenues to account for around one-third of Anglo Asian’s total sales proceeds in fiscal 2016/17, up from less than one-tenth in fiscal 2014/15.

“We are looking forward to the progress of flotation plant processing rates ramp up which would be instrumental in improving cash generation of the business and reducing outstanding debt (net borrowings stood at US$51.0m as of Q3/15),” the broker said.

On a separate note, October production numbers released by the State Statistics Committee last week showed operations at Gedabek yielded 6.7k ounces (oz) of gold during the month, taking the total for the first 10 months of the year to 60.8k oz, which equates to 72.9k oz on an annualised basis.

“The news suggests operations remain on track to hit management guidance,” SP Angel said.

Motif Bio (LON:MTFB) has received written concurrence from the US Food & Drug Administration for an optimised fixed dose of iclaprim of 80mg for all patients (except those with moderate hepatic impairment), regardless of body weight, in the company's proposed Phase 3 clinical trials for the treatment of acute bacterial skin and skin structure infections.

Joint house broker Northland Capital Partners said the fixed dose regime is important for the trials, in as much that it optimises pharmacodynamic parameters associated with antibacterial efficacy, while potentially minimising safety events.

“As such, a fixed dose regime considerably improves the likelihood of a successful trial,” the broker opined.

The collapse of Playtech’s (LON:PTEC) merger with Plus500 (LON:PLUS) has sent analysts scurrying to their spreadsheets to revise their estimates.

Citigroup has cut its forecasts significantly, with fiscal 2016 estimates for revenue, underlying earnings and earnings per share (EPS) all down by a shade more than a quarter, while the target price is chopped by 21% to 890p.

On the plus side, as opposed to the Plus500 side, the broker retains its ‘buy’ recommendation, based on the re-rating potential, given Playtech’s low valuation, strong growth, high returns and well-stocked war chest.

Citi’s James Wheatcroft says: “We estimate every €100mln of acquisition spend would enhance earnings by 5% (or 3% if a share buyback).”

Elsewhere, Credit Suisse sticks with its neutral stance on Playtech, but cuts its price target to 760p from 800p, while Investec stays bullish, despite cutting the price target to 850p from 900p.

Centaur Media (LON:CAU) has been upgraded to ‘add’ from ‘hold’ by Peel Hunt after almost two weeks of mulling over the 11 November trading statement.

At the same time, the price target has been cut to 80p from 85p, reflecting two bits of bad news in the trading update: second half (H2) revenue will not meet previous forecasts while working capital requirements mean the year-end debt expectation has risen by a scary 35%.

“The market has clearly reacted poorly to the two elements of poor news. The equity value has dropped by £15mln from the pre-update value; however, the working capital pressure should partially unwind in H1 2016 and there has been no suggestion of a material rebasing of the medium-term growth trajectory. This, alongside the positive comments on margin (asserting 16% achievable next year), suggests solid enough fundamentals that in the near term are overshadowed by adverse sentiment. If the company can demonstrate in Q1 2016 a clear reversal of this working capital trend and resilience in the new revenue forecasts, then the rating fall should reverse,” opines Peel Hunt’s Malcolm Morgan.

BHP Billiton’s (LON:BLT) gravity-defying dividend yield – 9.6% and rising – is a big clue that the market reckons a cut in the pay-out is inevitable.

Invested has looked at BHP’s historical pay-out ratios and its conclusion is that it would be prudent for it to rebase its dividend to one aligned with sustainable operating cash flows.

“A base pay-out of 25% of such cash flows would enable BHP to comfortably withstand a sustained spot environment with upside under any better scenario,” the broker suggests.

Results from DIY retailer Kingfisher (LON:KGF) were marginally behind market expectations, which the company put down to higher store development costs in France and Poland.

“However,” notes Cantor Fitzgerald, “against our forecast it was due to weaker growth in France and a more significant fall in UK gross margins than expected, -120bps [1.2 percentage points] due predominantly to mix.”

The broker acknowledges there is operational gearing in the earnings but after the stock’s 20% outperformance in the last year, it is sticking with its hold recommendation and target price of 360p.

The broker has reduced its fiscal 2016 pre-tax profit forecast to £700mln from £720mln and the EPS estimate to 22p from 22.6p.

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