Morning Mumble: If Boohoo (BOO) and ASOS (ASC) can do it...B(H)S and oil+shipping (as promised).

Good Morning, 

It wasn't so long ago in a meeting about 'where to invest' in a low oil price environment, I found myself recommending short oil/associated products including washing powders and the like, whilst longing holiday companies and retail leisure.

Next's validation will come shortly on Thursday (Preliminary full year results) with the "beat" being reported as a head of consensus. Perhaps not all blue sky as the market is becoming more active, expect margins after this quarter to go under-pressure again. Simply put, if BOO and ASC can do it, then NEXT should be staggering. 

The debacle of BHS, has no doubt been amusing for the sector pundits, but if the journo's don't have a clue, then we hope those fronting the company do. So whilst at the races, there was speculation from those in the industry that BHS has been acquired by a subsidiary of Iconix China Group and the daughter of Silas Chou, Veronica.

Whether Iconix or the Chou's are the reality behind BHS or not, its speculation based on Silas Chou/Veronica Chou alleged desire for a UK acquisition. For myself, if they're behind big brands, why own department stores? Those of you like I thinking,...who, what, where is Silas Chou, being swiftly told off on Friday, apparently they’re behind the IPO (2011) of Michael Kors and the purchase of Tommy Hilfiger in the late 80's, Karl Lagerfeld and Pepe Jeans. Clear as mud to I, but if I'm honest, not something I will be keeping an eye out for. 

Staying in retail, it looks like Richard Chase is exuding confidence in AO World (AO) stock slotting 5,583,475 shares  at £1.80.  John Roberts (Chief Executive Officer) assures the market John Roberts, Chief Executive Officer, said: "The share sale by Richard Rose follows the expiry of the post-IPO lock-up and will help to further increase liquidity and the number of shares in public hands. Richard remains committed to the Company, both as a shareholder and as its Chairman." 

If one thinks selling 85% (circa) of your stock (a sizeable holding) is commitment and confidence, then this week I shall spend a few hours applying for Chairman type positions of stocks that are stonking shorts. Richard Chase has unknowingly made the Christmas card list of every shorter in AO. 

Kefi, the amazing performing Gold stock, you'll note the sarcasm, gives an update on Tulu Kapi. KEFI are apparently only having to find $20m to obtain $100M in debt financing. They have a number of possible sources currently being assembled, including financing from contractors and equity at the project or parent company level. Over to the International Finance Corporation (IFC) to stump up sum (poor!)! if the equity is at the parent company level, one hopes the current shareholders (including yours truly) do not need a snorkel for the impending dilution! 

Ian was discussing his long in HOC (Hochschild Mining) over the weekend. Having spent so much time away from technology, its apparent he's incapable of differentiating between a long and a short. Today, with silver finding significant support its wise to close any shorts on HOC, not for fear of a change in trend but to lock in significant profits since the Christmas Silver bounce. They're also announcing their annual results on the Wednesday, and they might not be as bad as the market expects. One hopes there all in sustaining costs of circa $17/oz. is much better! The common-sense coverage of HOC via EMC from November 2014.

It would be rude not to consider oil and shipping rates, WTI at $44.26/bbl, and Brent at $54.20/bbl. these prices are likely to impact on shipping rates as speculators exit their floating storage rates. These rates have continued under pressure with Suezmax Tanker Spot Rates into Q1 2015, dropping near 20% from the start of the quarter having peaked at $80K+/day down to $47K/day, Aframax Tanker rates fairing much better at circa $38K/day. LR2 Tankers rates at $26k/day. All classes all (excluding Suezmax) are near 50% above the rates of 2013/2014 and Suezmax up near 100% on 2013/14). 

The industry men describe the current rates as very strong. Based on the oil price being low, with continued strong demand (Asia from Arabia) and stockpiling (surely there can't be much more), and the rates benefiting from the storage speculation (albeit reducing). The market has missed the reduction in Russian export duties (circa 40% lower), where oil producers/exporters delayed shipments to save a few $$. So more oil out of the Black Sea, Mediterranean and Baltic! The weather is impacting on the Turkish straits, delays near 6-8 days. 

With the maintenance schedules coming up at refineries around the globe, this will push higher inventories and impact further on the prices. Will the trend in rates encourage speculation in fleet growth depressing the industry? Oh yes, tanker/shipping rates are likely to come under significant pressure end 2016 into 2017. 

There's been contracts placed on around 49 long-term Very Large Crude Carrier (VLCC) and Ultra Large Crude Carrier (ULCC) in the past two weeks, giving a floor to the rates and removing excess capacity from the market. All boding well for the tanker market rates but limiting the spot market delivery capabilities. 

Afren (AFR) down another 20% today, perhaps holders have smelt the roses? Don't be silly...over to GKP! 

Atb Fraser

Morning Mumble: Naibu (NBU), Iron Ore & Anglo Pacific & JKX + Pawnstars

Naibu (NBU) NED's request the suspension of trading in the company's shares. If this is what I think it is, it comes as no surprise. For those more versed in such matters the rocket science of Li Ning's struggles represent the issues. China's Li Ning warns of third straight yearly loss, outlook upbeat. Having closed my shorts out the other day, was I premature. I suspect so...but it would be rude if I started complaining. CamKids isn't suspended is it?

It was hoped today there would be time to share some Housing issues that are coming in the UK. Persimmon based on values and the glut First Time Buyers really needing a review based on a number of factors including First Time Buyers, however it'll have to wait as most are now in action.

Anglo Pacific Group (APF) PLC Trading Update is with no surprise, the lack of enticing assets and the returns that are dire. With jam being implied the dividend may provide some support when DRIP (Dividend Re-Investment Plan) or SCRIP is applied. Unless something materially changes in the asset base or an acquisition of a decent size is made the dividend will start to look expensive in terms of risk. Kestrel appears to be the only saviour here....and that's "anticipated" and far from in the bag. 

APF with the usual excuses about the commodities market, if one had superior assets even in dire markets the returns are assured. The inferred big deal appears to now be never coming, with limited funds, and a question over whom in this market would support the financing for a larger deal, its not for widows or orphans. Expect APF to give up some of it's more recent gains.

Iron Ore is being bounced around in my inbox with most whom disagreed with common-sense however long ago now surprisingly having a sniff of reality. This morning I was sent this through (Cheers AV) CHARTS: Iron ore price won't withstand 2015 supply flood. With their views only 10% lower than mine (currently), albeit disagree with their views on Copper and so would the market with a near 7% drop in the last month. 

With the Chinese returning to speculation (one assumes  this time with Chinese finance instead of STAN's / Citi's :-)) Copper could have some support...but for how long with  Kaisa's missing a payment . Anyone for a Government initiative for social housing? Anyone for a high risk punt on discounted property bonds? The smaller companies appear to be impacted more so...gaining short exposure is difficult though. With little takers for iron ore futures further out, prices are likely to come under further pressure. 

JKX (JKX) Oil & Gas PLC announce Elizavetovskoye Production Update which I suspect will be on deaf ears. The Ukraine has not been forgotten not the limited upside until the issues in the region are resolved. One suspects Putin's weather doll for a severe cold snap to improve his position has taken a vacation. 

H&T Group PLC (HAT) Trading Statement is a positive, with some jitters in the market it should be seen as a positively for the Pawnbroker. With Albemarle & Bond (ABM), being the short and the competition across the sector being seen as a positive, HAT are in a position to acquire and grow from strength to strength. Net Debt down, an acknowledgement of need for a retail focus has started to reward them. There's a number of ways HAT could improve their margins, however that's for them to work out. It's a long not without risks, especially with welfare reform, something to consider for all higher cost lenders, albeit HAT do have the pledge. The downside is, with limited upside on the current SP save for a buyout (or extraordinary event) its not that appealing.

Some shipping watch showing the dire state of the industry for dry goods. Around $70m is at stake for Jinhui Shipping following protracted commercial disputes with Grand China Logistics (GCL) and Parakou Shipping. With losses racking up for Jinhui...

Atb Fraser

Morning Mumble: Oil the support...and a late night Cocoa or Coffee & a telling off for certain holders.

Good Morning, Coffee! Well cheaper coffee!

Nearly 1 month ago, EMC - Morning Mumble: China Data yet again contradicting those overly bullish analysts & shorters heaven! Certainly the Christmas Cheer! See: Brent support...With Brent Crude trading at $51.33/bbl the wiser folks will be reducing shorts or hedging as the odds of greater or severe drops has been reduced but is far from disappeared.  

Yesterday the EU reported the drop in consumer prices that has only gone to assist the negative outlook (Bloomberg: consumer prices). The consequence being that it has improved the likelihood of the oil price staying lower for longer and limit the potential of a recovery above $64/bbl (Brent) (approx. and under review). Over to the EU for the stimulus.

The speculators (long) are aware of risks with a short-term drop in Brent yesterday below $51/bbl to $49.66/bbl indicating there's a good chance of another step-down, especially if speculators absent themselves. Over to OPEC and the rebel components to force an emergency meeting to cut production if anything near $43.20/bbls is seen. One could almost place a Star Wars theme to the story and we would be wise to keep a close eye on ICE Futures Europe (MarketWatch Article) for a new lows in futures.

Any positive movement circa $3.50-$6/bbl (pending who you read) in futures will create speculation within shipping, the higher figure being required due to charter rates being significantly higher. One would be very surprised if ultra-slow steaming is introduced a la 2009, save for some Chinese influence. The Chinese seem willing to bail out higher cost South American countries rather than see supply reduced Chinese, Venezuelan presidents vow enhanced financing cooperation (Xinhua Net)

Will ignore the fact that ICE Futures Europe are to start cocoa contracts in Euros from April and save it for another day. One hopes United Cacao (CHOC) will be aided by this seeing as prices have fallen to the lows of 2010. With chocolatiers (term used loosely for some companies mentioning no names) committed to higher prices, could Cocoa have the glut that Oil is seeing today in 12 months? Buyers are totally absent from immediate physical markets (cash). Price increases will obviously have to adjust to demand, thus the consumer being the price dictator will dictate the supply chain. Amazingly similar to coffee, with a drop in prices 24-27% pending supply. Who'd have thought it...see my commentary on FTML in October 2014 for more detail on coffee.

With food pricing becoming more transparent globally, one envisages consistent pricing with greater speculation during periods of uncertainty. This has not been the case, as evidenced by the spike in coffee last year, which was unfounded (the short). We have Tesco's informing us of their trading update and plan of action. plus flogging Blinkbox and their Broadband Customers to TalkTalk. Goodbye Divi...but its a lot better than the market thought! Later perhaps get some response from Duncan as he's been on the ball so far!

As a side thought to TalkTalk, do parties join up to Tesco on price or because they don't want to be part of another network. One suspects customer loyalty was the primary focus...good luck with the margins there, albeit it would be interesting to see the acquisition costs

Caledonia Mining (CMCL) 2014 Production Update and 2015 Production Outlook does not bode well for the recovering SP with grade declines a poignant reminder of the issues facing miners on a day to day basis. Its disappointing the lack of commentary on how the recent oil price drops have impacted on CMCL energy costs and all in costs. The un-interruptible power supply agreement must be under review in light of diesel costs coming down in Zimbabwe. Is it time to review their needs and consider the stand-by generation costs once again seeing as they're paying a hefty premium for assured supply which still has interruptions (albeit the company perceive these as acceptable.) Hope/Jam placed on the revised investment plan. It will be very surprising if CMCL hit the same production as the year just gone...

Kenmare Resources (KMR) decide today's update should be related to the share price which is exactly where it should be in light of the risks associated with refinancing and Iluka Resources determined and demand approach to their Due Diligence. One can only assume Iluka Resources will know beyond doubt if KMR is for them. With a significant amount of leverage again Creditors (ransom), Iluka may just be able to structure the deal so all KMR holders debt or equity take a hair cut in the process. Not one for those whom like premium bond style investing.

The words "potential default" should not be ignored in this RNS nor should the returns to shareholders when compared to associated board costs and remuneration. Clearly I should consider another career...perhaps at the Pru? If certain parties are reading, they'll be wise to think about my thoughts once again about KMR. Forget told you so, parties would be wise to consider what justification there was in holding the stock with the outlook, the debt and management. You have been told.

Some cheer for Victoria Oil & Gas (VOG) whom are now in receipt of the $6.4m balance of $10.1m Cash Call Received from RSM. However there's gossip that as a result of Oil declining significantly certain parties wish to revisit their pricing contracts. Perhaps VOG will update the market on this if it's correct or clarify where possible the contract terms. Obviously there's more to the price than just oil, security of supply, economic and environmental benefits, however at the end of the dead, one is always wise to consider there bottom line (the client). The risk is common-sense and should not just be ignored as unlikely...

Now as a frequent traveller on trains the intention of thetrainline.com (I'm refusing to link) the RNS cannot be ignored. The deal with ATOC is viable, however one cannot help but wonder the replication of the APP and business now the value has been placed on the IPO. Those die hard IPO's of IT will be obviously queuing up, the shorts would be wise to wait post the steam and puff.

With rumours bouncing around regarding Circle Oil (COP), the director changes cannot go without a mention over the past two days, with the appointment of Susan Prior as Group Finance Director and the appointment of Mssrs Antony Maris and David MacFarlane as Non-Executive Directors of the Company. Next door to Gulfsands (GPX) whom are not without issues above and beyond the current global pricing crisis for the minnows, could we be seeing some more consolidation? With casualties starting to come thick and fast, Europa Oil & Gas (EOG) states the obvious today with an update. In the absence of any improvement in oil futures above circa 20% one has to question why you would hold any tiddler stocks save for higher risk take-out speculation nevermind the debt issues of certain companies!

With an unsurprising setback in Sirius Minerals (SXX) application process things bobble along without too many issues. Phosphate prices will be further under pressure due to declines in food prices this will only benefit SXX's marketing approach and offtake agreement process.

Atb Fraser  

Proof-reading no doubt required.