Beaufort Securities Breakfast Alert: ANGLE, Rio Tinto, Royal Mail
Date
7/20/2016 7:54:01 AM
(MENAFN- ProactiveInvestors - UK) Beaufort Securities, 08:13
Markets
Europe
The FTSE-100 finished yesterday's session 0.03% higher at 6,697.37, whilst the FTSE AIM All-Share index closed 0.53% better-off at 730.47. In continental Europe, markets ended in the red amid poor corporate earnings releases and weak economic data from Germany. Investors remained concerned over geopolitical tensions across the world. Germany's DAX and France's CAC 40 fell 0.8% and 0.6%, respectively.
Wall Street
Wall Street ended lower amid a mixed set of corporate earnings releases yesterday. Moreover, lower expectations of global growth dampened investor sentiment. The S & P 500 dropped 0.1%, dragged down by losses in the materials and energy sectors.
Asia
Equities are trading mixed, taking negative cues from the global markets. Weak oil and commodity prices exerted pressure on basic resource stocks. The Nikkei 225 fell 0.3%, while the Hang Seng was trading 0.8% higher at 7:00 am.
Oil
Yesterday, WTI prices decreased 1.3% to US$44.65 per barrel, while Brent oil prices dropped 0.6% to US$46.66 per barrel.
Headlines
IMF cuts global growth forecast for 2016
In its World Economic Outlook (WEO) report, the International Monetary Fund (IMF) cut the global growth forecast to 3.1% for 2016 from 3.2%. The agency also revised the global growth forecast for 2017 to 3.4% from 3.5%. Furthermore, the IMF reduced the UK's growth outlook to 1.7% from 1.9% for 2016 and to 1.3% from 2.2% for 2017. The agency cited the UK's decision to leave the European Union as the main reason for the downgrade.
Company news
ANGLE (LON:AGL, 64.50p) - Speculative Buy
ANGLE is focused on commercialising its patented Parsortix liquid biopsy system, which has the potential to transform the diagnosis and treatment of cancer by making it possible to harvest intact cancer cells from patient blood for analysis. The Group yesterday announced that it has formally initiated and recruited first patient for its 200 patient European ovarian cancer study (ANG-001). ANGLE has contracted with four leading cancer centres; Medical University of Vienna, Charite - Universitatsmedizin Berlin, and two clinics from Vivantes Network for Health GmbH's two largest hospitals, based in Berlin for patients recruitment. The target patients will be women diagnosed with a pelvic mass by imaging studies who are scheduled to receive surgery for the removal of their masses. Patients' blood will be analysed using the ANGLE's Parsortix system and RNA (ribonucleic acid) from the cell harvests will be evaluated to detect the presence or absence of ovarian CTCs (circulating tumour cells). The goal is to successfully discriminate between women with benign and malignant masses as confirmed by the histopathological examination of the tissue post-surgery. Successful completion of the ANG-001 study would enable ANGLE to offer the Parsortix system to accredited European hospitals where a laboratory developed test (LDT) based on the RNA markers identified to assess the malignancy status of women prior to surgery for abnormal pelvic mass would be able to be designed. ANGLE aims to complete the study by 2016 calendar year end.
Our view: ANGLE has moved a step closer to obtaining CE-marked Parsortix-based test that distinguishes between benign and malignant pelvic mass. Based on the results of the ANG-001 study, ANGLE expects to design and conduct a further study to validate the clinical utility of Parsortix with the downstream RNA analysis. The successful validation would allow ANGLE to fulfil the In Vitro Diagnostic Directive (CE marking) requirements for the combined product, allowing European hospitals to offer the test to patients without validation. This opens the door for far widen application of the Parsortix cell separation system, which captures circulating tumor cells ('CTC') in a simple, affordable way. The uniqueness of the Parsortix is that it offers the same clinically relevant information from a patient's blood test, irrespective of its location in the body, that otherwise can only be obtained from an invasive metastatic biopsy. Though extensive development and clinical trials will be required across a wide range of indications before such tests to achieve comprehensive acceptance by international medical and insurance providers, much earlier and elementary testing for cancer detection now looks set to become a reality. Significantly in this respect, ANGLE differentiates itself from other medtech companies claiming similar abilities. In recent months, the medical world has become aware of a number of new, innovative, but early stage, non-invasive tests (be they derived from blood, saliva, sweat, antibodies etc.) that are apparently also capable of elementary and accurate detection of cancer. The fact remains, however, that detection in the form of a simple 'most probably yes' or 'most probably no' is, in fact, of only limited use unless the test is also capable of capturing or harvesting the same cancer cells for laboratory analysis. Without this, doctors will remain unable to ascertain key information, including identifying the cancer itself along with the extent to which it is aggressive or benign and therefore how to treat it. As such, ANGLE is the only such detection technology that is capable of offering such analysis and so, in Beaufort's opinion, is much more likely to become the globally recommended standard for hospitals and associated medical institutes. Recently, the Group secured major new funding from professional investors to progress clinical studies, which are expected to be sufficient to cover the next 2 years of planned clinical studies. Assuming all goes to plan, ongoing studies of ovarian cancer should have sufficiently concluded to permit first commercial sales to EU hospitals, particularly to those centres conducting the trial, during 1H'2017. Beyond this, FDA authorisation for metastatic breast cancer is expected to be secured through substantive studies defined by three major US-based centres. Successful conclusion here, potentially offers scope for initial North American commercial sales for MBC later in 2017. Further indications, including ovarian and prostate will seek a similar route with the FDA. Importantly in this respect, ANGLE management is already advanced in its discussions regarding necessary reimbursement codes for medical insurance in the States. Beaufort retains its Speculative Buy recommendation on the shares.
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Rio Tinto (LON:RIO, 2,337.0p) - Hold
Rio Tinto has released its 2Q16 production results. During the period, Pilbara iron ore shipments increased 6% YoY to 82Mt. Bauxite production increased 13% to 12Mt while aluminium production rose 11% to 911kt. Mined copper production rose 5% to 141kt. On 6th May 2016, Rio Tinto and its partners, the government of Mongolia and Turquoise Hill Resources announced the next development stage of the Oyu Tolgoi project. In terms of structure, Rio Tinto continues to be organised into four groups: Aluminium, Copper & Diamonds, Energy and Iron Ore, complemented by the newly formed Growth & Innovation Group, which will focus on future assets and technical support.
Our view: This was a solid performance by Rio Tinto, as would be expected, with no mishaps and full year guidance maintained. The shares have performed very strongly this year alongside the other UK-listed diversified miners, driven by easy monetary policy in China which has given Chinese industries and notably the construction sector a new lease of life. However, rising Chinese steel prices have started to waver and we think BUYing Rio shares is increasingly risky at these levels, we move to a HOLD recommendation.
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Royal Mail (LON:RMG, 508.50p) - Buy
Royal Mail has released a trading update for the three months ended 26th June 2016. During the period, group revenue increased 1%, while UKPIL (UK Parcels, International & Letters) revenue dropped 1%. Parcel revenue increased 2%, with volumes rising 2% during the period. Revenue from letters dropped 3%, with addressed letter volumes declining 2%. GLS (General Logistics Systems) revenue increased 13%, supported by a 13% rise in volumes. On 25th May 2016, Ofcom published its proposals outlined in its review of the regulation of Royal Mail. The group is currently in the consultation process and would be providing a submission to Ofcom. On 20th June 2016, through its Spanish subsidiary GLS, Royal Mail acquired Spain-based express parcel delivery company ASM Transporte Urgente (ASM) for a total consideration of about 71m. The company also completed the acquisition of eCourier, a leading same-day delivery company in the UK.
Our view: Royal Mail delivered a good performance in the three months to 26th June 2016 despite challenging market conditions, sluggish economic growth, low inflation and intense competition. Improvements across the Parcel and GLS divisions offset the decline in revenue from letters. Parcel revenue increased as a result of the company's initiatives across channels to improve its product line and price mix. Parcel volumes were high, primarily owing to growth in import parcels and Royal Mail account parcels. The GLS segment continued to perform well, buoyed by Easter and other public holidays across Europe. Moreover, the acquisitions mentioned above would sustain Royal Mail's growth plans. The group remains focused on improving its operational and financial efficiency and offering high-quality services to customers. We maintain a Buy rating on the stock.
Economic news
UK CPI
As per data released by the Office for National Statistics, the UK consumer price index increased 0.5% y-o-y in June, after a 0.3% rise in May. The markets expected a 0.4% increase in prices. On an m-o-m basis, consumer prices rose 0.2% in June after a similar increase in May. This was in line with the market expectations.
UK PPI
The UK producer price index (PPI) output rose 0.2% m-o-m in June, after a similar increase in May, the Office for National Statistics said yesterday. This was in line with the market expectations. On y-o-y basis, output prices were down 0.4% in June, following a decline of 0.6% in May.
Germany ZEW survey
The Centre for European Economic Research/ZEW reported that the German economic sentiment tumbled to -6.8 in July from 19.2 in June. The reading was the lowest since November 2012 and below the market forecast of a reading of 9.0. The gauge of current situation dropped to 49.8 in July from 54.5 in June.
US housing starts
US housing starts rose 4.8% to a seasonally adjusted annual rate of 1.189 million units in June, after a 1.7% decline in the previous month, the Commerce department said yesterday. Housing starts were reported at a revised 1.135 million units in May. The reading was better the market expectation of 1.165 million units
Beaufort Securities