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News & Tips: Atalaya Mining, Tristel, Clarkson & more

Equities in London are taking a breather
April 23, 2018

After a decent week last week, London shares opened up flat this morning. Click here for The Trader Nicole Elliott's latest thoughts on the markets.

IC TIP UPDATES:

A five per cent share price bump greeted news today that Atalaya Mining (ATYM) has completed its pre-feasibility study for the Proyecto Touro in Northern Spain. Assuming a long-term copper price of $3 a pound, and applying an 8 per cent discount, the project has a net present value of $180m, an unlevered rate of return of 20.5 per cent, and average annual free cash flow of $60m. We remain buyers.

Today, the news many Tristel (TSTL) shareholders have been waiting for years: approval from the United States Environmental Protection Agency for its foam-based chlorine dioxide product, Duo. With this regulatory clearance, the route has been paved for the infection prevention group to sell into the largest healthcare market in the world, and contribute first revenues during the 2018-19 financial year, once state-by-state approvals have been granted. Shares are up 11 per cent this morning, but remain a buy.

Shipping group Clarkson (CKN) has warned that half year, and possibly full-year, profits will fall short of expectations after first quarter trading proved drier than initially thought. Not only has the challenging shipping market results in several delayed transactions, but freight rates have also fallen in line with the fall in the value of the US dollar. Our recommendation is under review.

Is Petra Diamonds’ (PDL) value-over-volume turnaround strategy starting to work? This morning, the group announced a 20 per cent jump in production in the three months to March, leading to a 44 per cent bump in revenues. And while full-year revenues continue to be hampered by the inability to sell a blocked diamond parcel from the Williamson mine in Tanzania, the receipt of $70.2m sales proceeds after the period ended has allowed the company to reduce net debt from $686m to $622m. Buy.

KEY STORIES:

Hours before the Takeover Panel’s deadline of 5pm last Friday, Ion Investment Group announced its cash offer for Fidessa (FDSA). Fidessa’s board has withdrawn its recommendation of Swiss company’s Temenos’s (SW: TEMN) proposed deal, transferring this to Ion. It’s not hard to see why: Ion’s offer represents an 8.5 per cent premium to that of Temenos. Fidessa’s shareholders will receive £38.703 in cash and, subject to approval, 79.7p in dividends. Temenos offered £35.67, plus the dividend. After market-close on Friday, Temenos said it would not make a revised offer. SS&C, the third potential bidder, has not yet made a formal offer. Shares in Fidessa were down 1.6 per cent this morning.

Capita’s (CPI) results for 2017 showed a 4.3 per cent decline in underlying revenues, a 43 per cent increase in pre-tax profits to £383m, while the underlying figure before significant new contracts and restructuring costs increased by 23 per cent to £401m, which was "in line with expectations". There was a £445m gain on the disposal of the Capita Asset Services businesses, but free cash flow from continuing operations before non-underlying expenses came in at £38.0m (2016: £397m). The outsourcing group also announced a £700m rights issue - it is issuing 1m new shares at an issue price of 70p - a 34 per cent discount to the theoretical ex-rights price.

Despite posting a 400 per cent increase on its maiden resource estimate for the Dundas mineral sands project, BlueJay Mining (JAY) shares are mooted this morning. There seems to be little doubt about the scale and grade of the ilmenite resource, though the market may have wanted more concrete details about the project’s “significant commercial and strategic value”.

Shares in 4D Pharma (DDDD) continued their long slide this morning after the group announced its full year results. As expected, research and development costs grew 65 per cent as the group began a slew of trials and studies. Unfortunately, it has little new to show for its efforts just yet. Sell.

OTHER COMPANY NEWS:

Hurricane Energy (HUR) has found a non-executive chairman in Steven McTiernan, a former non-executive of Tullow Oil and the current chairman of main-market listed Kenmare Resources. In 40 years in the oil and gas industry, Mr Tiernan has held roles for Iraq Petroleum, Amoco, BP and Mesa, as well as senior banking roles at Chase Manhattan Bank, NatWest Markets and CIBC. WH Ireland said the choice and general tone of the message accompanying the appointment “suggests to us that a premium listing is forthcoming”.

Savannah Petroleum (SAVP) has found oil at its Bushiya-1 exploration well in the Agadem Rift basin in south east Niger. Well costs are expected to come in under budget, drilling conditions were benign, and the well will now be suspended ahead of future re-entry.

FairFX (FFX) enjoyed group turnover – the gross value of currency transactions sold, plus gross value of deposits into bank accounts – of over £1bn for the year to December 2017, up from £0.8m. The e-banking and payments group also reported a 52 per cent rise in revenues to £15.5m, and saw its maiden full-year profit as a publicly-listed company. Two acquisitions helped to drive growth and develop the company’s digital banking services – CardOne Banking, and Q-Money. Trading for the first quarter of 2018 has been strong, with revenue up 85 per cent and the acquisition of City Forex for £6m.A