"This morning's announcement that Japan's Sofbank Group, the multinational telecommunications and Internet corporation, has concluded a recommended takeover of ARM Holdings, one of the UK's biggest technology companies, at close to a 50% premium to its closing market value on Friday, is a clear reminder that Sterling's post-Brexit devaluation opens new opportunities for acquisitive internationals. ARM shareholders will be asked to vote on the £24.3bn deal shortly, although Softbank's apparent commitment to double the size of the target's workforce over the next five years, in order to cope with an expected demand explosion for 'Internet of Things' related technologies is, at least, one sign for the UK's new Prime Minister that Brexit has not created an insurmountable barrier to foreign investments. Against this background, London equities are called higher on the open, with the FTSE-100 seen up around 25 points. Sterling and Euro both suffered over the weekend, as safe haven buying pushed investors back into US$ as the Turkish Lira collapsed on response to the country's attempted coup. The Dow Jones Industrial Average hit its fourth consecutive record closing on Friday, albeit in relatively quiet trading across all benchmarks. Asia was more active, this time being led by China which reported slowing monthly house prices; with Japan on public holiday, the Shanghai Composite stood out as the day's main fallers while Hong Kong and Australia put in minor gains. The UK is not due to report any significant macro data today and no major corporates are slated to release trading updates or figures. On this basis, talking points are likely to centre on the recommended ARM takeover, as dealers scan other technology stocks that might similarly become vulnerable to international bargain hunters, and also the Secretary of State, David Davis', warning to the recent, post-Brexit flood of EU migrants that a cut-off point may prospectively limit numbers of those allowed to stay prior to Britain concluding its divorce from the Eurozone."
- Barry Gibb, Research Analyst
The FTSE-100 finished Friday's session 0.22% higher at 6,669.24, whilst the FTSE AIM All-Share index closed 0.17% better-off at 724.22. In continental Europe, markets ended lower due to losses in travel stocks after a terrorist attack in France. Poor corporate earnings releases further dampened investor sentiment. France's CAC 40 fell 0.3%, while Germany's DAX closed broadly flat.
Wall Street ended slightly lower as investors digested a mixed set of corporate earnings releases. The S&P 500 dropped 0.1%, with the consumer discretionary sector losing the most. For the week, the markets closed 1.5% higher.
Equities are trading higher after a failed military coup in Turkey. Investors cheered positive US economic data and speculation of additional stimulus by central banks globally. The Nikkei 225 remained closed on account of Marine Day holiday. The Hang Seng was trading 0.3% up at 7:00 am.
On Friday, WTI prices increased 0.6% to US$45.95 per barrel, and Brent oil prices rose 0.5% to US$47.61 per barrel.
UK house prices slip in July
As per property tracking website Rightmove, the average asking price for a house in the UK fell 0.9% m-o-m to £307,824 in July, after rising 0.8% in June. On y-o-y basis, prices increased 4.5% compared with a 5.5% rise in the previous month.
UK construction output falls in May
As per the Office for National Statistics, construction output, which contributes 6% to the economy, fell 2.1% in May after a 2.8% increase in April. The decline is mainly due to the uncertainties surrounding the UK before the Brexit vote.
Ariana Resources (AAU.L, 1.85p) – Speculative Buy
Ariana Resources, the gold-silver exploration and development company operating in Turkey, announced today its summer drilling programme will commence this week on the Kiziltepe project. Kiziltepe is being advanced towards production through a Joint Venture agreement (50:50) with Proccea Construction with mine completion expected in Q4 2016. A multi-purpose drill rig (reverse circulation and diamond core) is being mobilised to site and will drill extensions of several veins in the vicinity of the Kiziltepe mine totalling up to 4,000m. Drilling will focus on the Arzu Central target following receipt of permits as well as additional targets at Kiziltepe and Karakavak.
Our view: Despite recent political events in Turkey we are encouraged with the pace of construction at Kiziltepe with production expected during Q4 2016. We look forward to the summer drill programme and confirmation of continuity of mineralisation between Arzu North and Arzu South areas. The Arzu Central target area has the potential to significantly increase the current resource base and extend the life of mine beyond the current eight years. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Tiziana Life Sciences (TILS.L, 147.5p) – Speculative Buy
Tiziana, the clinical stage biotechnology company focused on targeted drugs to treat diseases in oncology and immunology, this morning announced it has purchased key assets from Shardna SpA, a biobanking and genomics research company located in Cagliari, Sardinia. The total value of this transaction was €258,000. Tiziana is now also establishing an Italian subsidiary in Sardinia, LonGevia Genomics Srl, with a view to identifying new opportunities to diagnose and treat diseases. Key assets being acquired include 230,000 biological samples from 13,000 fully genealogically-linked residents from region with exceptional human longevity. Shardna was founded in 2000 and was the first Italian research company in the field of genomics, created initially through a public private partnership. Its work was aimed at the identification of genetic and environmental factors which carry a predisposition to common multifactorial diseases through the study of the homogeneous population from the isolated communities in the Ogliastra region of Sardinia. This region has a prevalence of centenarians almost fifty times that of the US or UK, indeed inhabitants have the second highest longevity after Okinawa Island, Japan.
Our view: This transaction provides Tiziana with access to a unique biobank, taken from a highly genetically homogenous population. It provides a unique resource at minimal cost from which it can leverage and combine the massive power and low cost of next generation gene sequencing with a full complement of biologic technologies, including proteomics and metabolics alongside, of course, genomics. It will permit the Group to generate valuable insights into gene regulatory networks, genotype-phenotype linkage and gene-environment interactions that will feed into and inform its drug discovery and diagnostic programmes. Tiziana's management team, who have collectively been instrumental in the discovery of blockbuster drugs such as Avastin and broadly adopted diagnostics such as the PSA test for prostate cancer, aim to use their experience and insights to discover new drugs and diagnostics to address important unmet medical needs using this biobank. The addition of Milciclib to its portfolio, as well as the acquisition of Foralumab at the end of 2014, gave the Company two phase II candidates. Tiziana also remains ontrack to progress its lead candidate in its Bcl-3 programme into clinic in later this year or early 2017. £12.8m (gross) funding was raised in FY2015, followed by a total of £0.88m in the form of Convertible Loan Notes ('CLN') and £0.3m through warrants so far in the current year, which demonstrates shareholder confidence in these ongoing projects. Beaufort retains its Speculative Buy recommendation on Tiziana Life Sciences.
Beaufort Securiites acts as corporate broker to Tiziana Life Sciences plc
Oncimmune Holdings (ONC.L, 121.0p) - Speculative Buy
Oncimmune Holdings announced it has obtained the CE mark for the reagents used in EarlyCDT®-Lung, an autoantibody blood test that can detect cancer up to four years earlier than other methods. The CE mark certifies the reagents used in EarlyCDT®-Lung meet the strict EU standards of manufacturing and quality control dictated by the In Vitro Diagnostics Medical Devices Directive. Since its launch in 2012 as a CLIA laboratory test in the US, the company has already sold over 145,000 commercial tests of EarlyCDT®-Lung. The technology is already available through physicians in the US, and privately in the UK and other regions. In the meantime, other tests are being carried out for the early detection of lung cancer using biomarkers, the results of which are expected to be released by December 2016.
Our view: Obtaining the CE Mark for EarlyCDT®-Lung is an important milestone for Oncimmune as this is a testimony to the company's test and process quality. Now, Oncimmune satisfies the regulatory requirements in both Europe and the US, where it already has the CLIA certification. The obtainment of the CE Mark would not only enable easier international adoption but also support standardised certification. Oncimmune is an early cancer detection company, and its EarlyCDT® platform technology has the potential to allow earlier diagnosis of cancer and improve patient outcomes. The company has developed certain antibody tests that may detect cancer up to four years earlier than other methods, and can be applied to a wide range of solid tumour types. Oncimmune's technology has a significant advantage over the current biomarkers available in the market. Thus, in light of the developments above, we maintain our Speculative Buy rating on the stock.
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Barry Gibb, Harry Stevenson, Sheldon Modeland & Charles Long
(t) +44 (0) 207 382 8384
Consumer price inflation (CPI) in the Eurozone rose 0.2% m-o-m in June, after a 0.4% increase in May, as per the data released by Eurostat on Friday. On y-o-y basis, CPI increased 0.1% in June, after a 0.1% drop in May. Core prices, excluding energy, food, and tobacco, grew 0.9% y-o-y in June from 0.8% in May.
US retail sales advance
US retail sales advance increased 0.6% m-o-m in June, after a revised rise of 0.2% in May, the US Commerce Department said on Friday. Excluding the sales of motor vehicle and parts, retail sales were 0.7% up in June, following a 0.4% increase in May.
US consumer price index (CPI) increased 0.2% m-o-m in June, after a similar reading in May, the US Bureau of Labour Statistics stated on Friday. The markets expected a 0.3% rise in prices. Core consumer prices, excluding food and energy, rose 0.2% m-o-m in June, after a similar rise in May.
US empire manufacturing
The US Empire State manufacturing index for general business conditions decreased to 0.55 in July from a 6.01 in June, the manufacturing survey by the Federal Reserve Bank of New York revealed on Friday. Economists had expected a reading of 5.0.
US industrial production
Industrial production in the US increased 0.6% m-o-m in June, after a 0.3% fall in May, the Federal Reserve announced on Friday. Markets were expecting output to increase by 0.3%. The capacity utilization stood at 75.4%, compared to 74.9% in the previous month.
US University of Michigan sentiment
The US University of Michigan's consumer sentiment index for July fell to 89.5 from 93.5 in June, preliminary data indicated on Friday. Economists expected a reading of 93.5. The consumer expectations index, which closely forecasts the direction of consumer spending, decreased to 77.1 from 82.4, while the current economic conditions index slipped to 108.7 from 110.8.
During the three months to end-June 2016, the number of stocks on which Beaufort Securities has published recommendations was 319, and the recommendations were as follows: Buy - 123; Speculative Buy - 146; Hold - 50; Sell - 0.
Full definitions of the recommendations used by Beaufort Securities in its publications and their respective meanings can be found on our website here.