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Jul 2014
A flawless half

Gem Diamonds’ H1 FY2014 trading update was extremely positive, with production and average US$/ct values exceeding expectations. The strong operational performance has led to guidance being revised upwards from Letseng, while further positive newsflow is also being generated by Ghaghoo. On the back of these results, we have adjusted our price forecast up 10% for FY2014 and 5% for FY2015, which results in an increase in our target price from 220p to 235p. We maintain our Buy recommendation.

Jul 2014
Operations in-line

Petra’s FY2014 trading update confirmed that production was 4% above management’s 3Mcts guidance at 3.11Mcts and 17% above FY2013. With costs also well-controlled, we believe Petra is well placed to continue on its path to 5Mcts by FY2019, which appears to be coinciding nicely with continued firmness in the rough diamond market. However, despite these positives we believe Petra shares continue to look we

Jul 2014
Focus on Retail

A good set of results against a more challenging backdrop, but also reflecting another quiet period for major losses. FX negatively impacted the results and rates are clearly on a downward trend. The downside protection is likely growth in the retail/specialist insurance lines. Margins in the former are lower on average but also less volatile, plus growth here should not require extra capital. We like Hiscox but see the shares as up with events. A third year of capital return is possible and this suppor

Jul 2014
Success in the pipeline

African Barrick (ABG) achieved further improvements with regards to lowering costs while increasing production in H1 2014. In addition, the management team has made significant progress to the company’s growth pipeline. We have updated our model to reflect the improved operational performance and better developed pipeline. As a result, our target price has increased from 250p to 285p and we upgrade our recom

Jul 2014
Decent underwriting profit = good dividends

H1 2014 results were in-line with our forecast and the reported combined ratio of 70.6% remains impressive. We consider the combination of Lancashire/Cathedral to be a far more attractive and resilient model which is much better ‘fit for purpose’ in a softening rating cycle. Profits will likely fall, but less so than under the old structure, in our view, which means investors should continue to see an attractive level of capital return. We maintain our dividend forecast and the 8.7% yield supports

Jul 2014
Time to focus on trading again

In FY2013, the negative impact on trading of customers delaying the adoption of new products and Densitron’s cessation of dividend payments made it difficult for us to build an investment case. However, given management’s upbeat tone on orders at the recent AGM we reinstate forecasts, from which we derive an 8p target price (8.0x FY2015 P/E). Now that there should only be upside potential from the two non-core property assets, investors can focus on Densitron’s core business. We resume coverage with a Buy rati

Jul 2014
The US opportunity

Beazley reported strong H1 results, helped by better yields, no major losses but also good underwriting. It cannot avoid the softening rate cycle, but its Specialty Lines and US focus should partly mitigate. As a result, at H1 c.60% of the book was still seeing flat/rising rates. Beazley predicts some top-line growth in 2014/15 and overall rate reductions, but not a rating collapse. It intends to invest further in its US platform, but we still expect further capital return at the year-end assuming no material changes t

Jul 2014
2014 summary

Farnborough confirmed a slowing (though still high) pace of order intake this cycle (with notably high intake from leasing companies, which tends to be a cyclical peak indicator), driven by new products. The investment debate seems to have become more bearish, with a focus on order bubbles, overcapacity and potential margin erosion. Our view remains positive, and GE Aviation’s Q2 spares datapoint reinforces an aftermarket pick-up underway.

Jul 2014
IMS and acquisition

We are positive on the quality of ERM’s portfolio of B2B assets and encouraged by the acquisition of Indaba. That said, given the cautious outlook comments in yesterday’s IMS and pedestrian medium-term growth prospects, we see little impetus for a reversal of recent share price weakness unless other deals can be completed. We have adjusted our forecasts to reflect these developments, but retain our 1,090p target price and Neutral recommendation.

Jul 2014
Placing of new 2020 ZDP shares

On 2 July, Utilico Investments (UTL.L) released full details of its plans to create a new class of 2020 ZDP, previously announced in February 2014. The aim of this new issue will be to provide UTL with new financing and simultaneously fund the redemption of the existing 2014 ZDP. Under its terms, this would also allow the opportunity for holders of the existing 2014 Zero to rollover some or all of their 2014 ZDP shares into the new 2020 ZDPs (subject to overall limits on the Rollover Offer). With an issue price of 100p, the new shares will be placed at a GRY of 7.25% with a final capital entitlement of 154.9p on 31 October 2020. The company plans to issue up to 25m 2020 ZDPs by way of the rollover, initial placing and placing programme and up to 10m 2016 ZDPs and up to 10m 2018 ZDPs pursuant to the placing programme.

Jul 2014
Balance and timing

Following Faroe’s busy exploration drilling over 2013/14 and recent placing, we provide a comprehensive update on the company. Our Buy rating is predicated on a fundamental valuation of the resource base and the discount at which the stock is trading; however, we note that with a lack of material operational catalysts in H2 2014 (apart from the re-start of Njord production this summer), our rating has an 18-month view. Faroe’s portfolio is now more balanced and still offers exploration optionality.

Jul 2014
H1 FY2014 results

Chemring’s H1 results on 24 June combined margin strength at its core S&E segment, unchanged guidance, a further fall in backlog and the simultaneous unexpected departure of its CEO of 20 months. For us, this continues to reflect a difficult defence spending environment, particularly in the US, which we expect to worsen. We cut our EPS estimates by 11.7% (2014) and 6.9% (2015) (due to FX, and lower revenues and margins) and our PT by 6.7% to 140p. Our fear of further multiple compression leads us to retain our Sell rating on Chemring shares.

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