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DekelOil Public Limited, Orogen Gold, Sky

Published: 03:29 14 Oct 2016 EDT

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Markets
Europe

The FTSE-100 finished yesterday's session 0.66% lower at 6,977.74, whilst the FTSE AIM All-Share index closed 0.16% lower at 825.43. In continental Europe, the CAC 40 index ended the day 1.06% lower at 4,405 and the DAX was 1.04% down at 10,414.
Wall Street
In New Yoir yesterday evening, the Dow Jones lost 0.25% to stand at 18,098.94, the S&P-500 declined 0.31% to 2132.55 and the Nasdaq closed 0.49% lower at 5213.33.
Asia
In Asian markets this morning, the Nikkei 225 was up 0.42% at 16,844.47 and the Hang Seng gained 0.64% to 23,178.73.
Oil
In early trade, WTI crude was up 0.79% at $50.84/bbl and Brent was up 0.37% to $52.22/bbl.

Company news

DekelOil Public Limited (LON:DKL, 10.62p) – Buy
DekelOil Public Limited, operator and 85.75% owner of the profitable Ayenouan palm oil project in Côte d'Ivoire, provided update for the 3 months ended 30 September 2016 (Q3 FY2016). During the period, revenue advanced by +9.8% to €6.7m helped by improvement in average Crude Palm Oil ('CPO') price by +0.3% to €612 per tonne (or +13% increase compared to H1 FY2016). CPO production amounted to 5,823 tonnes (Q3 FY2015: 7,301 tonnes) due to shorter peak harvesting season and unseasonally drier weather. Production for Palm Kernel Oil ('PKO') and Palm Kernel Cake ('PKC') stood at 522 tonnes and 666 tonnes, sold at €832 and €49, respectively, compared to nil same period last year. DekelOil's executive director, Lincoln Moore commented "With 34,323 tonnes of CPO produced so far this year, we remain on course to report another record full year performance in terms of CPO production."

Our view: Shorter peak harvesting season and unseasonally drier weather across the West Africa and also in Asia turned out slightly disappointing for DekelOil as its CPO production fell by -20%. The Group, however, offset some of these impact by witnessing surge in price of the CPO by +13% since the interim result, which all together pushed up the revenue by c.+10%. Post the period, the Group said it saw a pick-up in volumes of fresh fruit bunches collected for processing, and therefore reaffirmed its full year production targets. Moreover, CPO prices have further improved in October, now at €680 per tonne, up +26% from H1 FY2016. With capacity to produce 70,000 tonnes of palm oil per annum, there remains room to more than double CPO production should the weather patterns and fresh fruit bunches harvest volumes normalises. Combined with the Group's encouraging sales at kernel crushing plant, ahead of expectation, with extraction rate up to 42.2% and the average sales prices up to €832 (H1 FY2016: €781), DekelOil's profitability is expected to grow going forward. This means the Group will be able to comfortably fund its scheduled debt repayments from operational cashflow, while we expect management to continue to improved debt terms. Importantly, and as previously noted, DekelOil was a Brexit winner with the appreciation of the Euro against the Pound of c.16% post Brexit translating into higher Sterling earnings. Having positioned itself so, Beaufort believes the Group will be able to support its long-term operational ambitions while also producing a sustainable surplus. As these are realised, shareholders can expect to be rewarded by management implementing a formal dividend policy. Beaufort has maintained its full year 2016E revenue and EPS forecasts of €27.5m and 1.42p respectively and retains its Buy recommendation on the shares with a price target of 21p.

Beaufort Securities acts as corporate broker to DekelOil Public Limited

Orogen Gold (LON:ORE, 0.02p) – Speculative Buy
Orogen Gold announced yesterday that it has signed a contract for an initial 1,200m RC drill programme on its Silverton gold project in Nevada. Orogen has the right to earn-in to an initial 51% interest in Galileo Resources' Silverton property by way of exploration expenditure of US$0.4m and earn an additional 24% interest with a further US$1.5m. The Silverton property covers a 6km2 area comprising 72 lode claims in Nevada where historical exploration has discovered widespread gold and silver mineralisation within highly a prospective geological and structural setting. The 1,200m drill programme will test the 100m wide Silverton fault system for vein, stockwork and disseminated-style gold and silver mineralisation. Historical drilling has returned mineralised intervals of 1.5m grading between 1 and 5g/t Ag and 100 to 600g/t Ag. Drilling is also planned along a major geological structure to test the potential of the structure to host gold and silver mineralisation.

Our view: Whilst still an early exploration play, the Silverton property is located within a mining friendly jurisdiction that has a history of prolific gold production. The Silverton property complements Orogen's existing Mutsk gold project in Armenia by proving investors with a diversified country exploration portfolio. We look forward to updates from the drill programme which is expected to be completed within 3-4 weeks followed by assay results. In the meantime, we maintain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Orogen Gold plc

Sky (LON:SKY, 848.00p) – Buy
Sky, one of the leading European broadcasting and entertainment company, provided update for the first quarter ended 30 September 2016 (Q1 FY2016). During the period, revenue advanced by +13% at actual exchange rate and grew +7% at constant exchange rate basis to £3.1bn, while like-for-like ('LFL') growth climbed by +5%. In UK & Ireland, revenue at constant exchange rate increased by +5%, while in Germany & Austria was up +9% as it saw its customer base increased. Italy saw revenue growth of +13% helped by the sale of the Olympic rights. On the operational front, the Group added +106,000 new customers, which includes highest Q1 customer growth in 4 years in Italy. Of this, Germany & Australia added most customers, reached +49,000, followed by the UK & Ireland at +35,000. The Group also reduced the operating costs by -2% year-on-year. Sky's CEO, Jeremy Darroch commented "I'm pleased with the start we have made to the year… We are on track as we enter our busy Q2 trading period and we remain focussed on delivering our clear strategy for growth."

Our view: Sky started well in the first quarter of the FY2017 registered encouraging growth across all its market, despite the "quieter" summer due to UEFA Euro 2016 and the Olympics. The Group said the momentum in September was strong, and started Q2 with continued good momentum. In Germany & Australia, the growth in customer numbers and increase in channels reach has subsequently resulted in higher advertising revenue, up +25% and the momentum appears to continue as Sky launches its Sky 1 entertainment offering, expected at the beginning of November. The growth in Italy was a result of the benefit of the sub-licence of the Rio Olympic rights and therefore this rate of growth is expected to be one-off. In the UK & Ireland, the Group is set to add another major product offering in the region by launching its Sky Mobile where customers can make calls, SMS and use data, using Sky's own SIM card. There is a greater opportunity to cross-selling as the Group has known brand and reputations. Given its Q1 performance meeting consensus analyst's expectations, positive Q2 momentum and remain on track to meet its full year expectation, Beaufort reiterate its Buy rating on the Shares.

 

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