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Beaufort Securities Breakfast Alert: Altus Strategies, Concepta, Lionsgold and easyJet

Published: 19:31 07 Nov 2017 AEDT

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Markets


Europe
The FTSE-100 finished yesterday's session 0.03% higher at 7,562.28, whilst the FTSE AIM All-Share index was up 0.17% at 1,045.50. In continental Europe, the CAC-40 finished 0.19% lower at 5,507.25, whilst the DAX was down 0.07% at 13,468.79.
Wall Street
In New York on last night, the Dow Jones closed 0.04% higher at 23,548.42, the S&P-500 added 0.13% to end at 2,591.13 and the Nasdaq finished 0.33% firmer at 6,786.44.
Asia
In Asian markets this morning, the Nikkei 225 was up 1.63% at 22,916.78 and the Hang Seng was 1.28% higher at 28,962.84.
Oil
In early trade today, WTI crude was 0.12% lower at $57.28 per barrel and Brent was also slightly weaker at $64.20 per barrel.
 

Headlines
Paradise Papers: Apple's secret tax bolthole revealed
The world's most profitable firm has a secretive new structure that would enable it to continue avoiding billions in taxes, the Paradise Papers show. They reveal how Apple sidestepped a 2013 crackdown on its controversial Irish tax practices by actively shopping around for a tax haven. It then moved the firm holding most of its untaxed offshore cash, now $252bn, to the Channel Island of Jersey. Apple said the new structure had not lowered its taxes. It said it remained the world's largest taxpayer, paying about $35bn (£26bn) in corporation tax over the past three years, that it had followed the law and its changes "did not reduce our tax payments in any country". In a further statement the company stressed that no operations or investments had been moved from Ireland. The Paradise Papers is the name for a huge leak of financial documents that is throwing light on the world of offshore finance.
Source: BBC News

Company news


Altus Strategies (LON:ALS, 8.62p) – Speculative Buy
Altus announced that it has been granted an exploration licence for its Zolowo project located in the Lofa County of northern Liberia. The licence area comprises 732km2 and is host to an Archean greenstone belt with extensive artisanal alluvial workings. The Zolowo project is located along the same geological trend as the New Liberty gold mine located 190km to the SW and is operated by Avesoro. An initial phase of reconnaissance exploration programme is now being planned which entails mapping and sampling. This is expected to be followed by a licence wide stream-sediment survey to define primary sources of the alluvial gold fields.

Our view: The licence covers the south-western portion of the West Africa Craton and contains a 33km long Archean greenstone belt that is considered to be highly prospective for mesothermal gold deposits analogous to gold mines in Canada, United States and Australia. We note that the numerous and extensive artisanal workings coincide with areas where gold was historically documented through mapping by the United States Geological Survey (USGS). We look forward to results from the initial exploration programme from this highly prospective area. In the meantime, we maintain our speculative buy on the stock.

Beaufort Securities acts as corporate broker to Altus Strategies plc

Concepta (LON:CPT, 8.38p) – Speculative Buy
The pioneering UK healthcare company and developer of a proprietary platform and suite of products targeted at the personalised mobile health market with a primary focus on women's fertility and specifically unexplained infertility, yesterday announced that it has received notice from a distributor that it will formally place an order for £600,000 this month. However, due to third party supplier constraints, revenues from this expected order will be realised in Q1 2018, meaning that 2017 revenues will be lower than market expectations. Orders have been increasing during the second half of October, and with further new distributors being appointed in November and indications of a number of additional new orders, the Board expects the delayed revenue to be additive to the 2018 budget. Concepta sources components for its myLotus products from both UK and Chinese manufacturers. The supplier of the myLotus monitor has reported a longer lead time for procuring one of the chemicals required in the manufacturing of the plastic at one of their third-party suppliers. The delay in the delivery date affects approximately half of the components required to fulfil the orders and revenues as previously forecast for the current year. The Board now anticipates that the delivery of the shortfall will fall into Q1 2018. To prevent any future delays with the supply chain, David Darrock, recently appointed Chief Operating Officer, will head the supply chain management process to ensure future volume requirements are met. David has significant experience managing Chinese supply chains and he will be tasked with sourcing additional suppliers to ensure that the supply chain is robust so as to cover all future requirements.

Our view: Any operational slippage has to be met with disappointment, although coordination of third party supply-chain suppliers for a new product often has teething problems. The fact that just one of Concepta's distributors is willing to place such a large initial order, however, highlights the scale of the original opportunity identified by its management, along with the perceived need for such fertility products. Given that the Group is now remedying this bottleneck and management is rapidly building out its hospital distribution network across China, potentially taking the total to over 20 in the coming months, suggests significant traction is being found. Evidence of this is likely to be found with myLotus' forthcoming product launch conference on 22nd November in Shanghai, which will be attended by all of the country's hospitals with sector specialisation. Given also that myLotus is expected to receive its CE Marking for European distribution during the first half of next year, while also making its initial testing for online distribution, 2018E and 2019E both look set to build momentum significantly. Beaufort has cut its 2017E forecasts in accordance with Monday's news and for prudence trimmed its 2018E sales projection to factor in possible extensions to training and marketing exercises in the territory. Despite this, Beaufort still anticipates a net positive profit contribution being achieved next year, with substantial growth the year after (see below). Reflecting this news and concerns regarding a rapidly weakening balance sheet (cash balance stood at £1.23m at interim stage), Beaufort cut its price target for Concepta down to 17.5p/share, from 22p/share previously, while reiterating its Speculative Buy recommendation given the clear opportunity and the recent decline in its share price.

Beaufort Securities acts as corporate broker to Concepta plc

Lionsgold (LON:LION, 0.90p) – Speculative Buy
Lionsgold (the gold exploration company with a fintech subsidiary) has announced that its fintech subsidiary TRAC has received an electronic money license from the FCA. This makes TRAC an e-money institution, allowing it to issue e-money.

Our view: This license is an essential regulatory part of Lionsgold's new physical gold product "Goldbloc", a global digital currency that allows direct ownership of physical gold. Gold bloc is the product name, the "Real Asset Co" is TRAC's trading name. Good news.

Beaufort Securities acts as corporate broker to Lionsgold Limited

easyJet (LON:EZJ, 1,320.00p) – Buy
easyJet yesterday provided its traffic update for October 2017. During the month, passenger traffic increased 9.9% year-on-year to 7.5 million customers, while the load factor improved 2.3% year-on-year to 92.5%. Year to date traffic to October grew 10% to 80.9 million customers with load factor up 1.5% to 92.8%. Load factor represents the number of passengers as a proportion of the number of seats available for passengers.

Our view: These are strong passenger traffic and load factor numbers and are despite 434 flights cancellations during the month compared to 164 in October last year. Cancellations were mostly due to French ATC (Air Traffic Controller) strike and adverse weather conditions. These results follow September's 11% and 2.5% year-on-year growth in passenger traffic and load factor, respectively, demonstrating continuing strong momentum. easyJet is benefitting from the collapse of its rival airlines such as Monarch, Air Berlin, and Alitalia, together with material flights cancellation by Ryanair, likely to results in market share expansion. The Group is scheduled to release its FY17 results on 21 November 2017, for which, pre-tax profit guidance is in the range of £405m-£410m. The shares are currently traded at FY17 and FY18 P/E multiple of 15.6x and 13.5x along with dividend yield of 3.2% and 3.6%, respectively. Beaufort maintains its Buy recommendation and set a target price of 1,460p.

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