AIM movers: Harvest Minerals discovers rare earths and delayed demand for Chamberlin

Andrew Hore
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AIM movers: Harvest Minerals discovers rare earths and delayed demand for Chamberlin

Harvest Minerals (LON: HMI) has made a rare earth elements discovery at its Arapua fertiliser project in Brazil and the share price jumped 120% to 2.75p. That is the highest it has been since last summer following weak fertiliser sales. There has been a better start to the year. Rock samples analysis shows rare earth elements and further work will be done to firm up the opportunity by assessing previous drilling. There are a range of rare earth elements that have shown up.

Semiconductor chips supplier IQE (LON: IQE) was more upbeat with its latest trading statement and the share price is 35.7% higher at 27.075p, which is the highest it has been for more than one year.  Growth returned in the second half of 2023, but the full year revenues were 31.1% down at £115.3m and the loss was higher. Net debt was reduced to £2.2m. The customer base is being broadened so IQE is less dependent on wireless. The recovery has continued into this year.  

Educational services provider Malvern International (LON: MLVN) increased revenues from £6.3m to £12.2m and moved into profit in 2023. Student numbers are increasing. The balance sheet has improved with net debt of £38,000. The share price rose 9.52% to 23p.

Churchill China (LON: CHH) still managed to increase its profit in 2023 even though the third quarter trading was weak, and revenues fell. Europe was the bright spot, with growth in ceramics sales to hospitality customers in the main markets. The UK was flat, and the rest of the world sales were lower. The dividend has been raised from 31.5p/share to 36p/share. Capital investment will improve efficiency and margins. Investec forecasts flat 2024 pre-tax profit of £10.8m and that assumes an upturn in the UK. The share price improved 8.91% to £11.

FALLERS

Weak third quarter demand at castings company Chamberlin (LON: CMH) hit profitability. Some new programmes were delayed, and other demand was lower than forecast. The renewable offshore energy sector remained strong. There has been some recovery in the fourth quarter and costs are being reduced. Prices increases have been made. The share price slumped 18.2% to 1.35p.

Yesterday’s warning that first quarter revenues at carbon brake technology developer Surface Transforms (LON: SCE) were lower than target is still hitting the share price and it has fallen a further 17.4% to 4.75p. Production yields improved in March and revised delivery schedules have been agreed. Cavendish expects a 2024 loss of £3m.

Futura Medical (LON: FUM) generated its initial revenues from the Eroxon erectile dysfunction treatment in 2023. There will be a US launch in the next 12 months. There was profit taking with the share price slipping 15.2% to 36.3p. Buying activity later in the morning meant that this was a small recovery compared with earlier in the day. The fall does not reflect the prospects for the business. Liberum expects revenues to improve from £3.1m to £10m this year. That would still produce a loss, but it does not include royalty contributions from the US. They are expected in 2025 when revenues of £18m and pre-tax profit of £2.6m is forecast.

Drug developer Sareum (LON: SAR) shares declined 10.9% to 12.25p following yesterday’s issue of subscription shares to RiverFort Global Opportunities (LON: RGO). After the issue of 2.9 million shares there is still an outstanding balance of £800,000 on the lending facility. Sareum will not make any additional draw downs from the facility.

Leveraging AI and enhancing cycling aerodynamics with Body Rocket

UK Investor Magazine
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Leveraging AI and enhancing cycling aerodynamics with Body Rocket

The UK Investor Magazine was delighted to welcome Eric Degolier, Founder & CEO Body Rocket, for a deep dive into the world’s first real-time drag meter, a device capable of offering precise drag measurement directly integrated into a cyclist’s bike.

Body Rocket has taken the power of a cyclist wind tunnel and placed it in the pockets of everyday cyclists. Body Rocket is the first and only company to integrate the aerodynamic technology found in wind tunnels directly into bikes.

By leveraging AI, Body Rocket has developed a consumer-friendly interface that breaks down aerodynamics’ complexity into easy-to-understand and easy-to-action metrics.

The technology is being used by Olympic triathlon champion Kristian Blummenfelt, current world champion Beth Potter, Ironman and 2x Ironman 70.3 champion Gustav Iden, World #6 Indie Lee, and former world hour record holder Alex Dowsett.

Body Rocket is raising funds to propel its growth strategy and make its technology available to the wider $12.9bn premium cycling market.

Find out more on Crowdcube here.

MicroSalt enters premium foodservice market, shares rise

UK Investor Magazine
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MicroSalt enters premium foodservice market, shares rise

MicroSalt shares were higher on Wednesday after the low-sodium salt technology company announced entry into the premium foodservice market.

MicroSalt has again demonstrated its burgeoning addressable market by inking a deal with Canadian Carma Hospitality Group. Carma will use MicroSalt in its 12 restaurants across Montreal.

Although MicroSalt’s growth strategy is largely in the B2B market and assists food manufacturers in reformulating their products to reduce sodium content, today’s announcement endorses the company’s product in that it illustrates the broad range of end customers.

Rick Guiney, CEO of MicroSalt said:

“Inclusion of our low sodium solution with the Carma Hospitality Group is a great endorsement of our ability to provide a low sodium yet tasty solution. It demonstrates the wide appeal of Microsalt and offers a real-world example of our potential in the foodservice channel. The restaurants within the Carma Hospitality Group represent some of the best food establishments in Montreal and we are extremely proud to be affiliated with their culinary team. We also expect that this [relationship with/endorsement by] Carma will result in other restauranteurs embracing our critically needed product.”

Carma’s co-founder was equally upbeat about the relationship and was pleased to adopt MicroSalt’s innovations.

“Our use of Microsalt underscores our commitment to excellence, and innovation. We are proud of our ability to use leading technology applications in our kitchens to ensure the absolute best and unforgettable dining experiences,” said Co-founder of Carma, Mike Zaki.

MicroSalt shares were 7% higher at the time of writing.

Buy ‘capital regenerator’ Berkeley Group Holdings, says HSBC

UK Investor Magazine
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Buy ‘capital regenerator’ Berkeley Group Holdings, says HSBC

HSBC Global Research has initiated Berkeley Group Holdings with a ‘buy’ rating, citing BKG’s focus on developing brownfield sites and forecasting £849m in share buybacks and dividends over FY25-27.

HSBC have given Berkeley Group a 5410p price target suggesting around 17% upside from the time their note was published.

Contributing analysts Daniel Cowan and Matthew Lloyd attribute the term ‘Capital Regenerator’ to Berkeley due to the group being the UK’s only large-scale developer regenerating brownfield sites.

Although HSBC notes constraints with the current planning system, Berkeley is aligned with the government’s long-term homebuilding strategy to develop brownfield sites and is well-placed with an unrivalled land bank.

Placing Berkeley above peers, HSBC’s research found BKG’s pre-tax profit growth of 5% over a 20-year period exceeded 3% for the wider housebuilding peer group. Analysts say this has provided the group with greater visibility and allowed for substantial shareholder returns.

In a recent trading update, Berkeley reaffirmed guidance of £1.5bn pre-tax profit in the three years ending 30th April 2026. Profit guidance for the current year is £550m.

Outlining their price target, HSBC analysts wrote in a note:

“We set our TP at 5410p (rounded), which implies c17% upside. We use a target EV/IC multiple of 1.8x, which we derive from estimated ROIC, WACC and long-term growth. Our forecasts assume no pick up in investment and a subdued operating environment in line with management’s outlook. Our valuation also takes into account the full distribution of FY24e-FY27e net income.”

“We rate Berkeley a Buy as we believe it is unusually well positioned for when planning and market conditions improve, given its rare expertise in large-scale urban brownfield regeneration. Ultimately, investors are being paid to wait for better times, in our view.”

Tesco shares gain on higher revenue and market share increase

UK Investor Magazine
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Tesco shares gain on higher revenue and market share increase

Tesco released Preliminary 2023/24 results on Wednesday, revealing a solid year of revenue and profit growth as the company successfully fights off pressure from the discounters.

The group noted improving consumer conditions as market share increased 28bps to 27.6% during the period. All important UK & ROI retail operating margins increased 42bps to 4.2%.

“We have strong momentum in our business, and are encouraged by signs of improving consumer sentiment.  We’re excited about the opportunities ahead, with the right plans to keep winning with customers,” said Ken Murphy, Chief Executive.

Britain’s largest supermarket has successfully navigated the tightrope of balancing budget and premium offerings—no mean feat in the current competitive environment.

For the first time, the Tesco Finest range generated more than £2bn in sales in the full year. At the same time, Tesco has aggressively challenged discounters Lidl and Aldi by price-matching 4,000 products.

The result is a 7.4% jump in group sales driving a 10.9% increase in retail operating profit.

“Tesco has continued to deliver following their strong update at the turn of the year with more of the same and the outlook is good. Profits are up and are expected to rise further in the coming year as inflationary cost pressures, which have haunted the sector in recent years, are easing substantially and will ease further,” said Adam Vettese, analyst at investment platform eToro.

“Britain’s largest retailer has used its size to its advantage by being able to ride out these pressures and also deliver value to cost-conscious shoppers in the meantime, even price-matching heavy discounters, which has been key to their market share ascendancy.”

Commenting on the sale of Tesco Bank, Tesco said the sale is likely to be completed in H2 2024, generating £1bn cash, of which £250m will be returned to shareholders as a special dividend.

“Disposals within the banking arm and share buybacks on the horizon will please investors as they look to see the price kick on through the rest of the year, with the aim of surpassing the troublesome 300p level which once again provided resistance last month,” Vettese said.

New AIM admission: Strong prospects for European Green Transition

Andrew Hore
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New AIM admission: Strong prospects for European Green Transition

European Green Transition was set up by Cathal Friel as an investment company to acquire mining and processing projects that will help with the transition away from fossil fuels. Cathal Friel has brought other companies to AIM, including Amryt Pharma and Hvivo (LON: HVO). He sees minerals used in green technologies as an attractive opportunity.

The plan is to build up a portfolio of investments to spread the risk. There are already investments, with more in the pipeline and there are plans to contact relevant advisers to find additional opportunities. The assets will be developed and then ...

Microlise broadens services and grows recurring revenues

Andrew Hore
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Microlise broadens services and grows recurring revenues

SaaS-based transport management technology developer Microlise Group (LON: SAAS) is growing in the UK and internationally. Broadening the range of services provided to its fleet customers is helping to grow revenues, around two-thirds of which are recurring.

Nottingham-based Microlise has developed a set of modules covering areas such as fleet performance, journey management, safety, compliance and driver connected mobility. There are more than 640,000 subscriptions. Churn rate is less than 1%.

In the past year there have been three acquisitions. The most recent is K-Safe, which has developed road safety products Flare and Flare Aware, which are used by bicycles, e-scooters and motorcycles. It is a hazard warning system, providing awareness and alerts to drivers. Deliveroo and Just Eat are clients and Microlise can off the product to its clients.

In 2023, revenues improved 13% to £71.7m, which incudes recurring revenues of £45m. By the end of the year annual recurring revenues were £47.7m. The other revenues are for hardware and installation services. Pre-tax profit rose from £4.9m to £5.3m. The maiden dividend is 1.725p/share.

Net cash is £16.8m, although this will fall to under £10m after acquisition payments and dividends. That still leaves plenty of cash for further acquisitions.

Since the year end, Microlise has gained a A$20m (£10.3m) five-year contract with WooliesX, part of the Woolworths retail chain in Australia. The roll-out has started and should be completed this year. This provides a solid base for the Australian business.

Microlise joined AIM nearly three years ago and raised money at 135p. The share price went to a significant premium and then trended downwards until early this year. At 162.5p, the performance of the shares has outstripped AIM, which has fallen by more than one-third over the period.

Singer forecasts a jump in 2024 pre-tax profit to £6.7m now that the component and supply chain problems are behind the business, with £8m forecast for the following year. The shares are trading on 33 times prospective earnings, falling to 26 next year.

FTSE 100 supported by miners, BP hits six-month high

UK Investor Magazine
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FTSE 100 supported by miners, BP hits six-month high

The FTSE 100’s weighting towards commodities helped provide support on Tuesday as stronger miners and oil majors offset weakness in BAE Systems and Rolls Royce.

London’s leading index was 0.15% higher as investors awaited major economic developments later in the week including US CPI due to be released tomorrow and the ECB’s interest rate decision on Thursday.

Both will contribute to shaping the narrative around interest rates and influencing the expectation of when major central banks will cut rates. With equity markets enjoying support and trading near record highs, investors will be on tenterhooks as the numbers are released.

“Forecasts imply the ECB will hold rates at 4.5% yet last week’s stronger than expected US jobs data and the ongoing strength in the oil price have raised expectations that the Federal Reserve will push back rate cuts until later in the year, and this has subsequently spooked investors into thinking other central banks including the ECB will also sit on their hands for now,” said Russ Mould, investment director at AJ Bell.

“Tomorrow’s CPI inflation figure in the US also threatens to intensify the argument that rate cuts will not be imminent. The consensus forecast is for a 3.4% year-on-year inflation rate in March, up from 3.2% in February and 3.1% in January. Inflation slowly creeping higher goes against what the Fed wants to see to justify rate cuts.”

Miners rally

On another day of minor gains for the FTSE 100, mining companies were again among the top risers as the inflation trade supported commodities and sent extraction stocks higher. Fresnillo, up 4.4%, was again the top riser as the precious metals miners enjoyed elevated gold and silver prices.

Ocado was another standout performer, with a 3% gain as bargain hunters stepped into the beaten-down premium grocery and food retailing company.

BP and Shell helped support the wider index with 1.3% and 0.8% respective gains amid higher oil prices. BP also garnered the interest of investors after saying Q1 24 upstream activities – those concerned with extraction – would be ahead of Q4 23.

“Shares in BP hit their highest level in six months after it said first quarter upstream production would be higher than the previous three months,” Russ Mould said.

“Sentiment has also been helped by Brent Crude holding firm above $90 a barrel which creates a positive earnings backdrop for the oil industry.

“It’s impossible to judge a company purely based on three months’ performance but full year guidance implies BP is hoping to quietly get on and do the job, achieving small incremental gains which should be enough to keep the market happy.”

abrdn Asian Income Fund provides a respectable yield with plentiful capital appreciation potential

UK Investor Magazine
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abrdn Asian Income Fund provides a respectable yield with plentiful capital appreciation potential

abrdn Asian Income Fund takes an unconstrained view of Asian equities by investing in high-quality equities without being tied to any specific benchmark.

Of course, the trust benchmarks its performance to a broad index, the Morningstar IT Asia Pacific Equity Income Index. However, performance comparison is where the managers limit references to broader indices. It does not play a significant part in asset allocation.

The investment approach seeks out high-quality companies with reliable yields while ensuring each investment is made at a sensible valuation. Inherently, this strategy provides investors with a higher yield and less volatility than other Asian or emerging markets funds.

Although the trust is focused on Asia, the strategy must not be confused with an emerging market mandate. The trust invests in developed Asia Pacific markets, including Australia, New Zealand, and Singapore, while providing exposure to Taiwan and South Korea.

The abrdn Asian Income Fund is largely equally weighted towards cyclical and sensitive sectors, with 43.67% in cyclical and 51.74% in sensitive sectors, including energy, communications and technology.

This approach to sector allocation exposes the trust to underlying growth in Asian markets, which tend to move more quickly than developed markets in reaction to changes in underlying growth, but limits volatility by focusing on established names with a lower risk profile.

For example, the portfolio is underweight the risky and low-yielding Chinese equities prominent in the MSCI AC Asia Pacific ex Japan Index.

In an underwhelming year for Asian equities dogged by Chinese concerns in 2023, the trust’s NAV grew 2.5% compared to a 1.6% return for the index. The dividend grew by 11.75% to 11.75p from 10p over this period.

The top ten holdings include high-quality Asia-Pacific names such as Taiwan Semiconductor Manufacturing, Samsung Electronics, Power Grid Corp Of India, and, interestingly, miner BHP Group.

Focusing on high-quality companies has allowed the trust to increase dividend payouts consistently over the past year to yield 5.5%. Given the strong track record of dividend hikes, one would expect the trust to live up to its income mandate and continue to increase shareholder return in the years to come.

Capital growth

The trust’s capital appreciation attraction has two core pillars. First, the trust trades at an 11% discount to NAV, which presents opportunities for this discount to narrow over time. Additionally, and arguably most importantly, Asian equities are substantially undervalued compared to developed market equities, particularly the US.

A higher interest rate environment naturally pulled capital into the relative safety of US and European assets at the detriment to emerging markets. Should history be a reliable indicator, one would expect capital to flow back into emerging markets as developed market interest rates fall.

When these flows are coupled with arbdn Asian Income Fund’s unconstrained approach to high-quality, reliable income plays, the result will likley be both capital appreciation and measured income.

AIM movers: Potential cash return by Orchard Funding and Active Energy to sell CoalSwitch

Andrew Hore
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AIM movers: Potential cash return by Orchard Funding and Active Energy to sell CoalSwitch

Insurance premium finance provider Orchard Funding Group (LON: ORCH) increased lending and revenues in the six months to January 2024. However, pre-tax profit fell 14% to £1.08m because of higher impairment provisions related to fraudulent credit agreements. The NAV is 83p/share. The board is reviewing whether the company should remain on AIM and a possible cash distribution to shareholders. The share price recovered 31.3% to 21p.

Pantheon Resources (LON: PANR) says consultancy Netherland Sewell & Associates has increased its best estimate resource for the 100% owned Kodiak field by one-quarter to 1,208 million barrels of recoverable liquids. The best estimate contingent gas potential is 5.4tcf of recoverable gas. The share price jumped 22.2% to 41.85p – the highest level since March 2023.

The sharp increase in trading in the shares in Cornish minerals company Tungsten West (LON: TUN) is continuing this week. In the past few days there have been the largest numbers of shares traded on individual days since flotation in 2021. The share price rose a further 11.8% to 6.15p.

Cosmetics supplier Warpaint London (LON: W7L) says trading continues to outperform expectations. First quarter sales are 28% higher at £23.5m. This has been achieved by adding stores and broadening the range and there has been no price rise since early 2022. Margins have also improved. Shore believes that its current pre-tax profit forecast of £19.1m for 2024 is likely to be 10% too low. The broker will not upgrade its forecast until the 2023 results are published on 24 April. The share price increased 11.7% to 419p.

Helium explorer Helix Exploration (LON: HEX) debuted on AIM this morning. It has leases in Montana, where there are known helium resources. Appraisal drilling is expected to commence in the second quarter of this year, assuming the permit is obtained, and management believes that there is a strong chance of commercially producing helium by the end of 2025. The fundraising was oversubscribed, so there is enough cash to get to production plus additional cash to invest in other potential helium reservoirs on the leases acquired. The placing price was 10p and the shares opened at 12p before falling to 10.125p.

FALLERS

Active Energy Group (LON: AEG) has been reviewing its operations and how to secure funding. It believes it cannot raise the cash it requires to construct a CoalSwitch biomass fuel plant and commence production. A buyer is being sought for the CoalSwitch assets. If that happens, then the company would become a shell. The share price slumped 35% to 0.325p.

First quarter revenues at carbon brake technology developer Surface Transforms (LON: SCE) were £3m, which was lower than target. However, production yields improved in March when revenues were £1.5m. Revised delivery schedules have been agreed. Cavendish has raised its 2024 forecast loss to £3m because of higher scrappage costs and there are likely to be higher working capital requirements. There should still be net cash at the end of 2024. The share price continued its slide and is down 27% to 6.75p – the lowest level for around a decade.

CleanTech Lithium (LON: CTL) chief executive Aldo Boitano entered into a loan agreement with his shareholding in the company as security in August 2023. He has transferred his 9.4 million shares to a custodian account nominated by the lender. This was not revealed at the time. The chief executive has been suspended because of this and an investigation has started. It is unclear if any of the shares have been sold. The share price declined 18.6% to 12p.

Consumer healthcare products supplier Venture Life (LON: VLG) increased 2023 revenues by 17% to £51.4m and pre-tax profit improved from £5.6m to £7.3m. Earnings rose from 4.1p/share to 5.3p/share. Plans to increase marketing spending have led to a reduction in forecast 2024 earnings from 6.4p/share to 5.5p/share. The share price fell 6.37% to 36.75p.

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