Friday’s Stock Market Report featuring Paragon Diamonds, Afren, JD Wetherspoon and advfn

The Markets

At the London close the Dow Jones was down by 197.19 points at 17,698.10 and the Nasdaq 100 was down by 35.52 points at 4,300.71.

In London the FTSE 100 fell by 20.49 points to 6,740.58 but the FTSE 250 gained 48.34 points to 17,109.47. The FTSE All-Share closed down by 7.04 points at 3,648.24 and the FTSE AIM Index inched up by 0.85 points to 717.06.

Broker Notes

Northland Capital has a “buy” stance and 12.9p target price on sparkler searcher Paragon Diamonds (PRG). The broker noted today’s news that the firm is looking to buy a kimberlite diamond mine with an established resource in Africa, along with details of a £130,000 placing to fund due diligence for the deal. The acquisition is expected to reduce costs via economics of sale as, if completed, it would be developed along with the firm’s existing asset at Lemphane, where Stage 1 production remains on track for Q215. Northland called the potential deal a “transformational development” but maintained its price target based on the operation of Lemphane alone. Paragon Diamonds shares slipped by 0.05p to 5.55p.

Panmure Gordon has a “buy” stance and 178p target on NetDimensions (NETD), implying 160% upside from the current price. The broker notes a “rack” of recent contract news from the enterprise software business, along with news that industry analysts Aragon Research have described the firm as a “Leader” in its enterprise learning guide. Panmure believes that the valuation remains compelling, suggesting that the current EV/sales ratio of 1.7 times and 2015 forecast PEG ratio of 0.7 times shows that growth is not reflected in the current share price. NetDimensions rose by 2p to 69p.

Blue Chips

Drugs giant GlaxoSmithKline (GSK) has agreed to sell 28.2 million shares in South African pharma business Aspen Pharmacare for a total of ZAR 10.5 billion (£574 million). GSK will have a 6.2% stake in the business following the sale, with the proceeds being used for general corporate purposes. The net profit on the sale will not be included in GSK’s core profit figures in 2015 and the firm will no longer account for Aspen as an associate. Broker Jefferies has 1,550p target on the shares, which rose by 11.5p to 1,560p.

Mid Caps

Boozer owner JD Wetherspoon (JDW) grew pre-tax profits before exceptionals by 4.1% to £37.5 million in the 26 weeks to 25th January. While sales grew by a more pronounced 9% to £744.4 million the firm took a hit from increased competition from supermarkets and higher pay and bonuses for its pub staff. Once again Chairman Tim Martin complained about the tax disparity between supermarkets and pubs, saying that it remains the “biggest danger” to the pub industry, Spoons maintained the interim dividend at 4p per share. On the outlook, the firm commented that In the six weeks to 8th March like-for-like sales increased by 1.6%, with total sales increasing by 5.6%. Shares in the firm lost 31.5p, closing at 780p.

Specialised technical products business Diploma (DPLM) has bought the Kubo Group of companies for £27.3 million in cash. Based in Switzerland and Austria, Kubo is a supplier of seals, O-Rings, gaskets and moulded rubber parts to industrial customers. The business specialises in high value products that address harsh environments or complex applications. Kubo made pre-tax profits of £3.4 million in 2014, with the deal expected to be immediately earnings enhancing. Investors liked the deal, with the shares rising by 49.5p to 815p.

Afren (AFR) has agreed a $300 million deal to cover its financing requirements, with the funding expected by the end of June. Under the deal the troubled oil firm will refinance its existing loan notes, undergo a debt for equity swap, extend its $300 million Ebok credit facility and also raise up to $75 million in an equity offer. Once the deals are complete existing shareholders will only own 11% of the company. Afren also revealed that 2014 full year net production was slightly below guidance at 31.8 kbopd, with revenues of approximately $0.9 billion, down from $1.644 billion in 2013. Net production guidance for 2015 is between 29 to 36 kbopd. Afren shares plunged by 1.85p to 4.65p. To read the latest comments of Simon Cawkwell (aka Evil Knievil) on Afren, CLICK HERE

Small Caps

Website owner advfn (AFN) noted that it has received a requisition for a General Meeting from shareholders Sweet Sky Limited and Shellhouse Limited. Last week the two parties submitted an invalid GM request (due to paperwork issues) looking to remove all the advfn directors and appoint a new board. Sweet Sky and Shellhouse are owned by a certain Zack Keinan and have a 22% stake in advfn, which is seeking advice in relation to the validity of the requisition. While Keinan has not yet made public his reasons for wanting to remove the board we believe that it could have something to do with the £12.5 million accumulated deficit which the company has racked up over the years. Shares in advfn fell by 1p to 115p.

On to companies which make money, and shares in airline and logistics business Dart Group (DTG) surged by 56p to 362.25p. This came after the Jet2 owner announced that underlying operating profits for the year to March will be ahead of current market expectations and broadly in line with last year’s result of £49.2 million. This comes on the back of lower than anticipated winter losses. Into the next financial year and forward bookings in the Leisure Travel business for summer 2015 are said to encouraging, with over 50% of the season having already been sold. Fowler Welch, the firm’s Distribution & Logistics business, is said to be focussing on growing its revenue pipeline and developing existing and new business opportunities.

UK Oil & Gas (UKOG) continues to increase its stake in the Horse Hill well near Gatwick Airport, but at an increasing cost. The firm now has a 30% interest in the well’s owner, Horse Hill Developments, after buying an additional 2% interest from Danadav Investments for £352,000. Earlier in the week the firm bought an 8% interest from Angus Energy for £580,000, with the latest deal representing a price rise of 143% in four days. UKOG also has a 1.32% indirect interest in Horse Hill via its 6% interest in Angus Energy. The shares slipped by 0.01p to 0.78p.

Specialist currency manager Record (REC) has received approximately $1.75 billion from an existing client for a bespoke mandate. Fees under the deal are said to be consistent with previously published average fee rates for return-seeking strategies. The Windsor based firm said that the increases occurred, and revenues have started to accrue, during the latter half of the current quarter. However, it warned that the bespoke mandate is of a tactical nature and at least part of the increases may only be temporary. Shares in Record rose by 0.25p to 34.5p.

Savannah Resources (SAV) has identified areas of gold mineralisation, with associated copper mineralisation, at its Block 4 development in Oman. Rock chip sampling produced results up to 5.7% copper and 3.7 grammes per tonne of gold. Diamond drilling is underway at both the Sarami (Block 5) and Ghayth (Block 4) prospects, with five of the planned ten hole diamond drill programme completed to date. Shares in Savannah Resources fell by 0.08p to 1.98p.

International staffing business SThree (STHR) grew gross profits by 17% in the three months to February. This was in line with expectations in what is the firm’s seasonally least significant quarter. The performance was driven by a 24% rise in gross profits in the Contract business, alongside a more modest 6% rise in the Permanent business. By region the Americas performed the strongest, with a 38% rise in gross profit, with the UK & Ireland growing by 13%. SThree ended the day down by 0.5p at 339.5p.