Daily Stock Market Report (Fri 11th September 2026) - PAF, STEM, TRN

Good Morning!

Oil prices above $100/bbl and rising bond yields continue to weigh on market sentiment today. The US 5-year started the week at around 4.5% and is now close to 25bps higher:

Perhaps the only good news is that the UK economy grew faster than expected in July, the Office for National Statistics said. Economists had predicted no growth, but the figure came in at 0.4%, following 0.3% in June and zero growth in May. Expansion in the services, production and construction sectors were behind July's figure.

Overnight market movements:

• The FTSE is up 0.2% at 10,629

• S&P 500 is up 0.4% at 7,621

• Brent crude (November) is down 2.0% at $103.34/bbl

• Gold is up 0.8% at $4,352/oz

• Bitcoin is flat at $77,266

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Today's report is now complete.

Spreadsheet accompanying this report: link.

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Companies Reporting

(Market Caps - last night's close)

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Mark’s Section

Pan African Resources (LON:PAF)

Down 1% at 125p (£3.04bn) – Trading Statement & DFS on Soweto Tailings Retreatment Project- Mark – AMBER =

Today's news is the release of a DFS on a tailings retreatment project, but we didn't comment on yesterday's trading statement, so I'll look at that too. One initial concern is that the RNS title appears to have a spelling mistake for the word "Tailings." This may indicate a lack of attention to detail, which is key in mining project delivery! That aside…

Tailings Retreatment:

In places such as South Africa, where gold has been mined commercially for decades, large tailings dumps are common. These are where the waste rock is deposited after gold has been extracted. Because these have already been processed, most of the gold has been extracted. However, not all of it. Typically, this waste may contain 0.5g/t. (It is worth thinking about what that means. Gold is heavy, so 0.5g is a tiny speck, and this is distributed amongst 1 tonne of ground rock.)

In contrast, a reasonable grade for an open-cast mine would be 3g/t. For underground mining focussing on specific quartz veins, the number may be 10g/t on average - still small amounts but many times more concentrated than tailings.

Despite the very low grade, tailings can be economic to reprocess. There are two advantages. First, the hard, energy-intensive work of digging up the rock and grinding it into a fine dust has already been done. Tailings can usually be mined by monitor, spraying them with a giant water jet to slurry them and pumping them to the plant. Secondly, sitting in the sun for years can oxidise some of the contained gold, making it easier to extract. Processing technology has also moved on, making extraction easier in some cases.

DFS:

Just because reprocessing is possible doesn't mean that it is economic. Nor is it always easy. One of my holdings, Goldplat, has a very high-grade (2g/t+) tailings dump but has struggled to get reprocessing off the ground for various reasons (type of material, permitting, plant availability), despite it clearly being economic at current gold prices. (Perhaps the only benefit of this is that I now know a lot about Tailings Reprocessing and the associated challenges!)

Hence, before committing capital to reprocessing tailings, mining companies treat these like any other project and create a Definitive Feasibility Study (DFS). This is the final, most rigorous study, with detailed engineering, accurate cost estimates and enough certainty for a company to make a final investment decision and for banks/lenders to use it to decide on project financing. A DFS typically covers detailed resource/reserve estimates, mine design and production schedule, processing/metallurgical flowsheet, capital and operating cost estimates, environmental and permitting status, and financial modelling.

Pan African is releasing this study today, and investors care most about the last part: financial modelling. These are the headline numbers:

Using a gold price of US$3,550/oz the project returns

- Post-tax NPV₁₃ of approximately ZAR1.85 billion (US$109 million)
- Real ungeared internal rate of return (IRR) of approximately 29.55%
- Payback period of approximately three years, post-commissioning

The Company gives us an NPV13, meaning the net present value of cash flows at a 13% discount rate. This seems realistic to me. Investors need to be very wary of companies that publish NPV figures at a discount rate of 10% or, in some cases, even 5%. These would be far too low for most projects, let alone a new mine in some far-flung place. 13% for an established miner, but in a high-risk jurisdiction, is probably about right.

Investors can also sense-check the key production numbers:

- Annual gold production of 35,000oz to 40,000oz from STR, with Life of Mine (LOM) production of approximately 561,000oz over a project life of approximately 15 years
- LOM all-in sustaining cost (AISC) of approximately US$1,750-1,800/oz, excluding cost savings from renewable energy supply
- Value-engineered project capital estimate of approximately ZAR3.68 billion (US$216 million at ZAR:US$=17.00), which now takes into account the dedicated new TSF and associated remaining infrastructure

However, unless an investor is a mining expert, there is usually nothing of note in these numbers, and you have to trust the company knows what it is doing.

Gold Price:

The biggest issue I see with this NPV is that the gold price assumption looks a little high. At $3,550/oz, this is well below the current $4,400/oz spot price, but not that low in a historical context.

The NP13 of $109m is reasonable. But against a $4.14bn market cap, it is only 2.6% of the business's value today. It may well be worth more if gold prices stay strong. However, the reality is that this project doesn't really move the needle.

Trading statement:

We tend to get rather strange announcements from companies dual-listed on the Johannesburg Stock Exchange. UK market rules say companies should update investors if the likely financial outcome differs significantly from market expectations, as defined by broker forecasts. However, JSE rules require companies to update investors if expectations differ significantly from the previous period's results. Hence we get this wording:

Shareholders and noteholders are advised that the Company has a reasonable degree of certainty that:
- headline earnings per share (HEPS) for the current reporting period is expected to be between US 17.35 cents per share and US 17.94 cents per share, compared to HEPS of US 5.89 cents per share for the corresponding reporting period, an increase of between 195% and 205%, respectively.

A quick look at the Stock Report shows an analysts' consensus of 22.7c for EPS, so this may indeed be a miss, despite the big percentage increases.

There's not much research on Research Tree to guide us, but an Edison note from March this year does show 24.77c for FY26 EPS. While it is hard to say this is definitely a miss, it does look like a disappointing figure to me.

Production growth:

The good news is that production is forecast to increase further from the 275koz delivered in FY26:

Group production is further expected to increase for the year ending 30 June 2027 to between 280,000oz and 302,000oz, largely attributable to increased production from Tennant Mines.

However, FY26 came in at the very bottom of production guidance, and the bottom end of FY27 guidance would be only a very minor improvement.

Valuation:

Taking the midpoint of the company's FY26 guidance range, this is 17.65c EPS, or around 13p at current exchange rates. This puts the company on a historical P/E of 10. While it is hard to describe this as expensive, it is higher than the rating many smaller gold miners are on at the moment.

The Company's scale and consistency have value, and higher gold prices could drive higher EPS. If they can start to increase gold production from here, that will also help. However, these dynamics are hardly unique to this Company – every gold producer is trying to increase production and is exposed to the gold price.

Mark's view

I can see the attraction of this Company as a larger, and perhaps more stable, gold producer. With a £3bn market cap, it will attract investors who want sector exposure but wouldn't consider something with a £100m market cap. However, the operational and financial results look a bit disappointing to me, at least compared to expectations.

This leaves smaller investors with a dilemma: how much they value scale and stability versus smaller peers trading at earnings multiples half or a third of this company. Personally, I think we should be more cautious in our view, given that smaller peers look like a much better value right now. Roland's previous AMBER view looks about right.

SThree (LON:STEM)

Flat at 294p (£359m) - Statement re Possible Offer - Mark - TAKEOVER/AMBER =

It is strange that a "Statement re Possible Offer" hasn't caused a jump in the share price. Partly because the "Response to Media Speculation" RNS came out on Wednesday and caused a 15% jump in the share price.

Today we don't really get much more detail. The RNS goes into great detail on the strategic rationale for the move, but doesn't indicate a price.

Although this is described as a "possible cash offer", this is the sort of behaviour that typically comes with an all-share offer. SThree shareholders don't care what the strategic rationale is, just what they will get paid for their shares!

My second thought is that the market may have already got wind of this. After all, the share price has doubled since the start of July:

On no real improvement in trading outlook:

Making the shares look very expensive:

However, this move doesn't really stand out amongst the sector:

Investors seem to have decided now is the time to buy larger recruiters for a sector recovery, despite no signs of recovery in the actual financials or outlook.

The acquirer:

The only Circle8 I can see is this:

Assuming this is the right company, it appears to have been permanently loss-making since listing.

So straight away, this doesn't look like a credible cash bidder for a £350m market cap UK company.

Mark's view

I can see why the market is sceptical about this possible offer. The bidder doesn't look particularly credible to me to be making a cash offer of the scale required to win over shareholders. The RNS reads more like the precursor to an all-share merger.

Then there's the timing. Why make the offer now, after the shares have already doubled off lows? In general, I am sceptical about this recovery in the share prices of major listed recruiters. The market appears to have suddenly decided that a huge recovery in prospects is underway, despite little sign of it in company trading updates or broker forecasts.

This makes me wonder if this is like the housebuilders more recently, where every market assumption that things are suddenly getting much better gets repeatedly dashed on the rocks of higher bond yields.

That said, the momentum generated by this share price recovery means that the algorithms like the stock:

However, unless brokers significantly upgrade their forecasts in the next few months, none of these Ranks are likely to stay high once the algorithms digest the FY26 results, leaving the quant investor with a real dilemma.

With all this going on, I think we should remain neutral. AMBER.

Trainline (LON:TRN)

Up 2% at 195p (£661m) - TRADING STATEMENT - Mark - AMBER/GREEN =

Trainline describes this update as a "Robust first half performance", but I'd hate to see a half that wasn't robust!

Ticket sales were flat, and revenue down slightly:

To be fair, this is a period when regulated train fares have been frozen.

And the company confirms it is trading in line with guidance:

Market guidance: Trainline reconfirms its FY2027 guidance for Group net ticket sales of between £6.2 billion to £6.45 billion, Group Underlying Revenue of between £440 million to £455 million and Adjusted EBITDA as a % of net ticket sales at c.2.9%, with International Consumer expected to breakeven this year.

While revenue looks like it is declining in real terms:

They are doing better at converting flat revenue into growing EPS:

This makes them look very cheap:

However, it is tempting to think of the company as completely pointless. Why would users pay Trainline for something they can get from the train operators for free?

This risk is that the CMA feel the same way. We don't get much of an update on their investigation today:

Trainline is proactively engaged with the CMA in relation to its ongoing investigation on fees presentation. We are seeking to meet both the DMCCA requirements and the sector-specific requirements of rail retailing.

The good news is that Trainline also provides the back end for some UK train operators. So while banning ticketing fees would undoubtedly have a huge impact on their business, it would not destroy it completely. The reality is an outright ban looks unlikely; instead, the issue is how soon in the booking process fees are made visible to users. This could reduce booking demand but is unlikely to be catastrophic for the company.

Buybacks:

Perhaps the biggest news is the announcement of a new share buyback:

Trainline has today announced a new share buyback programme of up to £100 million. The new programme will commence upon completion of the existing programme and is expected to run over the subsequent 12-month period.

Given the sub-£700m market cap, this is a sizable programme and, if completed, should materially impact the share count and hence EPS.

Mark's view

These figures aren't great, at least on the sales side. However, they don't need to be, given the low forward rating. The company is doing well at converting flat sales to increasing EPS. The CMA investigation remains a risk, but is unlikely to cause a very serious reduction in profits, whatever the outcome.

With a low forward P/E and sizeable share buyback announced today, it makes sense to keep our mostly positive view.