AIM movers: Pressure Technologies near to disposal and Global Petroleum applies for additional licences

Andrew Hore
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AIM movers: Pressure Technologies near to disposal and Global Petroleum applies for additional licences

Global Petroleum (LON: GBP) has risen on the back of yesterday’s application two additional licences near to an existing licence in Western Australia. Precious and base metals targets have been identified that have similar characteristics to the existing licence. The recent board appointments have experience in this area. The share price jumped 37.8% to 0.1275p.

Paul Scott has taken a 3.18% stake in wellhead safety equipment developer Plexus Holdings (LON: POS). The share price rose 13.3% to 11.5p.

FALLERS

Jade Road Investments (LON: JADE) shares continue to fall following news ithas constituted up to £1m of principal value convertible loan notes lasting 10 months. There is no interest charge, and the conversion price is a 30% discount to the lowest closing bid price in the 30 days prior to conversion. Jade Road Investments has issued £80,000 of convertibles to strategic partner MBM. The two-fifths decline in the share price to 0.3p means that the market capitalisation is not much more than the maximum amount of convertibles that can be issued. That means potential dilution is huge.

Wishbone Gold (LON: WSBN) has raised £360,000 at 0.375p. This will provide working capital. The share price dived 31.8% to 0.375p.

Digital media company Catenai (LON: CTAI) reduced its loss from £196,000 to £13,000 in the six months to June 2024. That is down to the fees earned for the £450,000 convertible loan note investment in oil and gas-focused data analytics company Klarian and reduced costs. Catenai has also moved from net liabilities to net assets. The cash position has improved to £31,500. The share price dipped 30.2% to 0.15p.

Steppe Cement (LON: STCM) reports a 4% decline in cement volumes in the first half of 2024 and revenues fell 7% to $34.4m due to lower prices. That means that the Kazakhstan company has fallen into loss. Steppe Cement expects to maintain its market share at around 14%. Inflation is easing and sales volumes and prices are recovering. The share price is 16.1% lower at 13p.

CleanTech Lithium (LON: CTL) says procedural matters have delayed the approval process for the ASX listing. The share price is down 12% to 15p.

Pressure Technologies (LON: PRES) says current trading is slightly weaker than expected. A defence order has been delayed. On the bright side, the sale of the precision machined components division should be completed soon. This will enable the focus on the cylinders business and move the balance sheet into net cash. The share price fell 5.36% to 26.5p.

Iodine producer Iofina (LON: IOF) generated record interim revenues of $26m due to raised volumes, but higher costs meant that pre-tax profit slid from $4.68m to $1.06m. Iofina is paying more to oil and gas companies for the brines it requires, and maintenance costs were increased. The new IO#10 plant is operating, and prices have improved. Canaccord Genuity has raised its full year forecast revenues from $50.8m to $55.4m, although a higher tax rate means that earnings have been cut from 2.4 cents/share to 2.2 cents/share. The share price fell 4.65% to 20.5p.

EKF Diagnostics – The Shares Of This Profitable Global Business Are Now 28p, Brokers Predict 39p 

Mark Watson-Mitchell
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EKF Diagnostics – The Shares Of This Profitable Global Business Are Now 28p, Brokers Predict 39p 

On Thursday 18th July, I asked whether the shares of EKF Diagnostics (LON:EKF) were a Buy at the then 31p. 

Since then, they have been up to 32.90p and down to 26.30p – after this week’s Half-Year Report, I answer my own question. 

Now at 28p, I consider that the shares of this £125m capitalised global diagnostics business are primed for a recovery rise. 

It may be some time for them to get back up to the 94p that they reached this time three years ago, even so I can see them putting on a neat-25% gain within the next six months or thereabouts. 

The Business 

Based in Penarth (near Cardiff), EKF operates five manufacturing sites across the US and Germany, selling into over 120 countries worldwide. 

It is a global diagnostics business, whose two main divisions are focussed upon: Point-of-Care analysers in the key areas of Haematology and Diabetes; and on its Life Sciences services which provide specialist manufacture of enzymes and custom products for use in diagnostic, food and industrial applications. 

Half-Year Report 

The six months to end-June 2024 reported on Tuesday of this week, indicated a period that showed strong improvement in gross margins, earnings growth and cash generation, in-line with management expectations. 

Reflecting winding down of non-core and low margin product lines and services the Interim revenues from continuing operations were £25.2m (£26.9m), while the profit before tax of £3.1m (loss £0.03m). 

Chairman Julian Baines stated that: 

“The Board remains confident in the outlook for the business overall and with orders already in house for the second half we are very confident that the Point of Care performance in Europe, Middle East and Africa will improve significantly.  

The actions we’ve taken are expected to yield further improvements in gross margins, earnings growth and cash generation, and as a result of our efficiency drive we now have a leaner business, with a cost base correctly aligned to a more focussed higher-margin product mix. 

The Company expects the improvement in performance to continue in H2 2024 and remains confident that full year results will be in-line with market expectations.” 

Analyst Views 

The trio of analysts at Singer Capital Markets – Chris Glasper, Karl Keegan and Edward Sham – rate the group’s shares as a Buy, looking for 39p in due course. 

They noted that the Interim results show a strong improvement in margins and cash generation as a result of self-help measures and strong execution from management taking effect.  

They state that the outlook remains positive, with H2 looking well underpinned by orders already received in the Point-of-Care division and further growth from the newly commissioned Life Sciences manufacturing plant in South Bend. 

The analysts reckon that despite the tangible evidence of progress, with the shares remaining at depressed levels, trading on <10x EV/EBITDA, falling to <8x, underpinned by a solid balance sheet and a FCF yield of 6%.  

However, they do continue to believe that undervalues both the core Point-of-Care business and the significant growth potential in the Life Sciences division.  

For the current year to end-December, they estimate revenues of £53.0m (£52.6m), with adjusted pre-tax profits of £6.6m (£6.7m), generating earnings of 1.0p (1.5p) per share. 

The 2025 year could see £56.6m sales, an increased profit of £7.5m, with earnings of 1.2p. 

Going forward, they already estimate that 2026 will show £60.3m in revenues and £8.6m in profits, worth 1.4p per share in earnings. 

In My View 

Based upon the broker estimates it does look as though EKF’s reorganisation process is capable of showing some early benefits to the bottom line. 

Although the shares are trading at a fairly high price-to-earnings ratio, I consider that they will rise from the current 28p to trade around the 35p level within the next few months. 

UK retail sales jump but consumer confidence falls

UK Investor Magazine
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UK retail sales jump but consumer confidence falls

Fresh economic data released on Friday provided a mixed picture of the UK consumer, with retail sales rising more than expected but consumer confidence slipping.

The weather played a part in retail sales rising 1% in August, much better than the 0.4% consensus expectation.

“It’s no secret that people feel happier when the sun shines and that happiness tends to impact their spending habits. Warm summer evenings are the perfect backdrop for a BBQ with friends and family, requiring a quick trip to the supermarket to stock up on burgers, buns and beer” said Danni Hewson, AJ Bell head of financial analysis.

“Food sales provided a substantial boost to retailers in August with fragile consumer confidence enjoying a rate cut hug which offset some of the political messaging that’s since eroded some positivity. 

“Ever since lockdowns blighted people’s lives, they have put experiences ahead of stuff and food often plays a vital role in creating those memorable events that will be cherished as nights draw in and summer excesses fade into memory.”

However, while the good weather ramped up people’s supermarket spending, Gfk’s Consumer Confidence reading slipped to -20 from -13, signalling underlying concerns of the UK consumer.

The -20 read was the lowest since March, showing that all of the optimism built up over the summer has quickly evaporated. Potential Labour tax risers are to blame.

For all the talk of helping the UK grow, Labour has done exactly the opposite in the first months of government.

GenIP: the next Tekcapital spin-off IPO

Charles Archer
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GenIP: the next Tekcapital spin-off IPO

Whisper it, but it seems like IPO season may be coming back to AIM.

While the index has suffered a dearth of quality listings over the past couple of years, recent new entrants to the market include Helix Exploration, Pulsar Helium, MicroSalt and Rome Resources. The next one to watch is GenIP (AIM ticker GNIP), a remarkable GenAI service business that’s already revenue-generating, the second spin-off this year from Tekcapital.

This new AIM IPO is set for its first day of dealing 2nd October. Tekcapital, through its subsidiary Tekcapital Europe, will end up owning circa 64% of the share capital of GenIP post-admission, with an anticipated raise of approximately £1.5 million. Yes, this is fairly moderate.

MicroSalt Progress

But as a reminder, the last Tekcapital IPO was MicroSalt; the spin-off shot up to 114p out of the gate and even after correcting is still worth some £27 million. Given that TEK retains a 70% holding of SALT, and TEK itself only has a market cap of £12 million, there is an obvious value disconnect. Add in TEK’s holdings in Belluscura, Innovative Eyewear, and Guident — and the long-term value is obvious.

For context, MicroSalt continues to go from strength to strength, last week announcing new placements in Winn Dixie, Fresh Thyme Markets, Sedano’s Supermarkets, Northwest Grocers, Cub Foods, and Central Market, as well as bulk orders from Ingredients Online, for its SaltMe branded low sodium crisps and saltshakers.

There are now 1,200 shops across the US retailing the company’s products — and the business is using a new United Natural Foods distribution centre in Florida as well as a Kehe Foods distribution centre in Illinois to help it grow — two of the largest distributors in Northern America.

MicroSalt remains in advanced discussions with major food manufacturers, with volume commitments of approximately 350,000 lbs received in Q3. Even more order commitments are anticipated in Q4 from companies in both Mexico and the US.

And ‘positive conversations’ are also ongoing in the UK, Canada, South Africa, and the US — with the bulk business taking hold in Q4.

Indeed, CEO Rick Guiney remains ‘very excited about the placement of our MicroSalt products and the consequential growth in distribution within UNFI, Kehe and Ingredients Online. All of these retailers have strong presence in their respective markets, and this continues our efforts to have MicroSalt in every kitchen pantry across the US and beyond.’

GenIP IPO

But GenIP is the news of the day — and here’s why. The spin-off has proposed an IPO offer on AIM — having already filed a Schedule One Form with the London Stock Exchange.

GenIP provides artificial intelligence analytic services to help various companies, research institutions and venture funds assess and commercialise new discoveries. It does this by combining expert human technical review with GenAI algorithms to provide insightful services that function better than human work alone.

Current clients include Brazil’s National Nuclear Energy Commission, Fundación Copec UC (a strategic alliance between Empresas Copec and the Pontificia Universidad Católica de Chile), and the University of Huddersfield — though the client target list is large and growing.

For perspective, the company will be targeting the AI analytics market which is estimated to be worth $5 billion by 2030 through its two services: Generative AI enhanced research reports assessing market potential of tech breakthroughs, and Generative AI executive recruitment services to find the people to deliver them to commerciality.

CEO Melissa Cruz notes ‘We are entering a transformative phase in the Generative Artificial Intelligence growth story. The next chapter will be driven by the applications of generative AI and the revenue opportunities businesses will realise by integrating this technology into their core services. At GenIP, we see generative AI as an integral revenue generation tool, not just as a means of cost savings or headcount reduction. Generative AI is at the heart of the solutions we deliver to our clients and will be fundamental for the growth of GenIP. We believe that GenIP’s unique business model offers investors a valuable opportunity to engage with the rapidly expanding Generative AI analytics market and the research institutions and technology companies that fuel much of the world’s innovation.’

GenIP has developed its own generative AI software — Invention Evaluator — which alongside executive recruitment platform Vortechs™ may help clients enable better, faster and more affordable technology commercialisation and investment decisions.

The software should allow businesses to better evaluate and commercialise their technology discoveries. The Generative Artificial Intelligence (GenAI) enhanced research reports assess their market potential and the GenAI executive recruitment service matches technology organisations with experienced executives and business leaders specifically capable of delivering them to market.

Or in other words, the company’s tech helps other organisations better monetise their advances and find the right people to make this happen cost-effectively.

Tekcapital comments

Tekcapital Executive Chairman Dr Clifford Gross enthuses that ‘GenIP’s Invention Evaluator and Vortechs have been instrumental in commercialising numerous technological innovations, allowing them to develop from a clean piece of paper to operating companies and listed spinouts. Now, having forged commercial relationships with leading research institutions and successfully launched revenue-generating GenAI analytics services, we believe the Company is well placed for the next chapter of its growth story as a stand-alone Company providing GenAI services to the wider market.

The new services were launched in September 2024 whereupon the Company received orders for 40 analytical assessments and three executive search assignments.’

Perhaps just as important as the orders is the personnel; Non-executive Chair is Lord David Willetts, who also serves as Chair of the UK Space Agency — alongside Oxford Professor and former Chairman of the UK Atomic Energy Authority Dr David Gann as a non-executive director.

The company’s website will go live at AIM admission with more detail, but given the market reaction to the MicroSalt IPO, it is certainly one to watch.

FTSE 100 holds onto gains after Bank of England keeps rates on hold

UK Investor Magazine
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FTSE 100 holds onto gains after Bank of England keeps rates on hold

The FTSE 100 surged higher on Thursday after the Federal Reserve cut rates by 0.5% overnight, sending US equities to record highs.

London’s leading index held onto gains despite the Bank of England deciding to leave rates unchanged, opting for the cautious approach after services inflation ticked slightly higher this week.

“As expected, the Bank of England kept interest rates unchanged, opting for a more cautious approach following a small rise in services inflation the day before,” said Isaac Stell, Investment Manager at Wealth Club

“The decision to leave rates unchanged comes despite falling inflation expectations and the Bank expecting slower economic growth in the second half of the year.”

Although the FTSE 100 dipped slightly after the Bank of England’s decision to keep interest rates at 5%, the index remained buoyant after Federal Reserve took the big step of cutting rates by 0.5%.

The 0.5% cut could have been interpreted in one of two ways. The negative interpretation is that the Fed is worried about the state of the US economy. However, markets chose to look on the bright side and welcome the benefits lower borrowing costs will have on the economy.

“The US Federal Reserve’s decision to cut interest rates by half a percentage point is generally winning praise for the signals it sends on the fight against inflation and the pre-emptive, pro-growth nature of the move but it just may be that the central bank has little option, owing to America’s ballooning budget deficit,” said AJ Bell investment director Russ Mould.

The US interest rate cut sparked a risk-on trade in markets on Thursday which was reflected in the FTSE 100’s many cyclical sector leading the index higher.

The mining sector – to some, the ultimate cyclical sector – was out in front, with Anglo-American, Glencore and Fresnillo all trading more than 4% higher at the time of writing.

JD Sports, who have big expansion plans for the US, gained with other retailers on hopes of a boost to consumer spending. Luxury names Diageo and Burberry also received the interest of investors as both rose around 3%.

UK banks were slightly higher after the Bank of England held rates with investors looking forward to higher rates providing support for interest margins for a little longer.

The risk-on trade was underscored by weakness in utility companies and other defensive names. National Grid was the top faller, with a 2% decline.

AIM movers: Phoenix Copper profit-taking and ex-dividends

Andrew Hore
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AIM movers: Phoenix Copper profit-taking and ex-dividends

Virtual reality technology developer Engage XR (LON: EXR) generated record interim revenues of €2.2m, but the full year loss is still expected to be flat at around €4m and net cash should be €3.7m. Management believes profitability can be achieved in late 2025. The share price recovered 15.4% to 0.75p.

Oil and gas explorer Petrel Resources (LON: PET) says some countries are talking about improving fiscal terms for explorers, but they remain sub-optimal for explorers. Petrel Resources has been assessing critical minerals projects, which can gain EU subsidies. Helium is the most advanced area of investigation. This perked up the share price 14.3% to 1p.

Jersey Oil and Gas (LON: JOG) recovered a small proportion of its share price loss following its interims. Delays to the Buchan field development mean that first oil will be after 2027. The timing will depend on decisions by the UK government. Jersey Oil and gas is halving annualised costs to £1.5m and it still has cash of £13m. The share price rebounded 4.03% to 64.5p.

Touchstone Exploration Inc (LON: TXP) says that it is no longer going to go ahead with its bid for rival Trinidad-based oil and gas producer Trinity Exploration and Production (LON: TRIN). During the summer, the target’s board recommended the rival 68.05p/share cash bid from Trinidad incorporated Lease Operators and withdrew the recommendation of the Touchstone bid. The Touchstone Exploration share price is unchanged at 32p, while Trinity Exploration and production is 4.17% higher at 62.5p.

FALLERS

Phoenix Copper (LON: PXC) has published the pre-feasibility study for the Empire open pit mine in Idaho. Discounted NPV at 7.5% discount is $87.9m and total cash costs are estimated at $2.44/copper equivalent pound. Over eight years the mine could generate net free cashflow of $153m. Further exploration planning is happening, and equipment is being purchased for the processing site. The share price lost some of its recent gains and is down 12.8% to 17p.

Telematics technology supplier Trakm8 (LON: TRAK) says fleet and optimisation revenues are well ahead of the same period last year. However, insurance revenues are still depressed as clients run down their stocks of equipment. Higher margins should offset increased costs, so that interim profit is maintained. The full year results remain uncertain. The share price slid 10.7% to 6.25p.

Secure payments technology company PCI-Pal (LON: PCIP) expects full year results to be published by 22 October. The audit process is taking longer than expected and more work is required. The company has reiterated guidance, so forecasts are unchanged. Annualised recurring revenues will be 23% ahead at £15.5m and this year has started well. Even so, the delay knocked 2.8% off the share price to 52p.  

Oil and gas company Sound Energy (LON: SOU), which at one point was one of the larger companies on AIM but has fallen back sharply, says the farm-out of Tendara should be completed in the coming weeks. There is a £146m impairment charge related to the farm-out. There was £2.1m in the bank at the end of June 2024, although £1.9m is in the subsidiary being sold as part of the farm-out, although that might be retained as part of working capital adjustments. There is a £1.5m bridge debt facility. Net debt could be £30m at the end of 2024 and rise to $39m next year. The share price declined 4.77% to 0.738p.

Ex-dividends

Brooks Macdonald (LON: BRK) is paying a final dividend of 49p/share and the share price increased 2.5p to 1842.5p.

Cavendish Financial (LON: CAV) is paying an interim dividend of 0.25p/share and the share price dipped 0.15p to 10.1p.

Diales (LON: DIAL) is paying an interim dividend of 0.75p/share and the share price is unchanged at 26p.

Eckoh (LON: ECK) is paying a final dividend of 0.82p/share and the share price is unchanged at 48.5p.

Eleco (LON: ELCO) is paying an interim dividend of 0.3p/share and the share price is unchanged at 133p.

Epwin (LON: EPWN) is paying an interim dividend of 2.1p/share and the share price is down 1p to 101p.

Gamma Communications (LON: GAMA) is paying an interim dividend of 6.5p/share and the share price fell 29p to 1677p.

Jet2 (LON: JET2) is paying a final dividend of 10.7p/share and the share price is 17.5p higher at 1426.5p.

Keystone Law (LON: KEYS) is paying an interim dividend of 6.2p/share and the share price rose 5p to 635p.

Lords Group Trading (LON: LORD) is paying an interim dividend of 0.32p/share and the share price fell 1p to 40.5p.

PHSC (LON: PHSC) is paying a final dividend of 1.25p/share and the share price slipped 1p to 31.5p.

Robinson (LON: RBN) is paying an interim dividend of 2.5p/share and the share price slid 2.5p to 107.5p.

Restore (LON: RST) is paying an interim dividend of 2p/share and the share price dipped 0.5p to 266.5p.

Somero Enterprises (LON: SOM) is paying an interim dividend of 8 cents/share and the share price declined 1p to 295p.

Property Franchise Group (LON: TPFG) is paying an interim dividend of 6p/share and the share price fell 1p to 445p.

Selecting neglected UK shares, takeovers, and a UK rerating with Temple Bar Investment Trust

UK Investor Magazine
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Selecting neglected UK shares, takeovers, and a UK rerating with Temple Bar Investment Trust

The UK Investor Magazine was delighted to welcome Nick Purves, Fund Manager of the Temple Bar Investment Trust, for an insightful discussion about UK shares and the trust’s approach to value investing.

Explore the Temple Bar Investment Trust in the UK Investor Magazine Investment Trust Centre.

Temple Bar are value investors seeking out UK shares that trade at a discount to their intrinsic value, with an acceptable margin of error.

We discuss the trust’s strategy and several holdings, including Shell, Marks & Spencer, and NatWest.

We also look at the wider UK stock market, exploring the general environment for UK stocks and current valuations that are attracting takeover bids from overseas companies. Nick notes just how many of the Temple Bar’s portfolio’s holdings have been subject to takeover interest.

Nick outlines the positive impact of share buybacks, which are ‘driving enormous value creation for shareholders’. This is one potential catalyst Nick sees for a rating of UK stocks.

Next revenue growth defies gravity

UK Investor Magazine
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Next revenue growth defies gravity

Next’s sales are defying gravity. Not only are the group fending off any concerns about the health of the consumer and the demise of the high street, they are set to produce record high sales in the 2024/2025 full year.

Strength in the group’s Next brand is being supplemented by growth in labels such as Reiss and Fatface, resulting in 8% group sales growth in Next’s first half to July 2024.

Next published what they called their most important report in years in March, outlining a detailed strategy for growth and identifying the strengths and opportunities for Next.

Steps included breaking down operating divisions to focus on areas of the business more granularly and focusing on the core of their business—fashion. The early results of this review were evident in today’s report with greater insight into how the different areas of the business are performing. And they’re all doing well.

Investors will be pleased to see Next is also expecting massive growth in its online business – an area it has struggled with in recent years.

“Next seems to be an unstoppable force this year, with shares up again this morning off the back of their latest update,” said Adam Vettese, market analyst at investment platform eToro.

“They have raised their guidance for the second time in as many months and projected profit for the year is just shy of £1billion. Given all of the inflation concerns the retail market has had to contend with, on top of the fact that out of the ordinary weather has affected clothing, the performance of Next is highly commendable.

“Investors will be hoping Next can keep up the momentum. Having already enjoyed a 25% gain this year alone, the question will be whether some profit taking kicks in. It seems as though this could have happened this morning with shares off their highs.”

Coral Products – From Their Current 9p These Shares Could Rapidly Rise As The Reorganisation Reaps Rewards 

Mark Watson-Mitchell
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Coral Products – From Their Current 9p These Shares Could Rapidly Rise As The Reorganisation Reaps Rewards 

On Tuesday of this week, 17th September, this £8m capitalised group announced an awful set of results for the year to end-April. 

Its shares, which were 13p at the beginning of this month, are now on their backside and looking friendless. 

However, I ask the question – are they too low not to be purchased? 

On the face of what I can see, at just 9p they look to be a cracking punt on the reorganisation, now underway, actually paying off in the next year or so. 

Coral Products (LON:CRU) is a Bulletin Board favourite and a ‘penny-stock’ to be followed. 

The Business 

The Wythenshawe, Manchester-based group has endured some real hassles over the last year or two, with not only its balance sheet being hit, but also its share price too. 

It now classes itself as a specialist plastic products design house, UK manufacturer and supplier of injection moulded plastic products.  

It provides customised, cost-efficient and sustainable solutions for the food packaging, personal care, household, transport and communications sectors. 

The 2024 Final Results reported group sales down to £31.0m (£35.2m), while adjusted pre-tax profits were slashed 65% to £0.8m (£2.3m), with basic earnings collapsing to 0.96p (2.60p) per share, and an interim dividend of 0.25p (1.1p) per share. 

Reorganisation 

The group appointed a new CEO, Lance Burn, at the start of this year, since when he has reorganised the group’s operations into two new divisions – Flexibles, and Rigids. 

It is hoped that these moves will progressively deliver performance and margin improvement through innovation, simplification and efficiency. 

It has also invested further in new machinery, re-tooling for future projects and re-configuring warehouse space to expand manufacturing capacity. 

Additionally, for £1.21m it has sold off some of its land and buildings in Runcorn, valued at £1.0m, and some properties in Haydock for £0.7m – with the overall purpose of reducing group borrowings. 

Latest Comments 

The group stated that its markets had continued to be challenging in the first four months of the year.  

Commenting that where there are pockets of recovery, they are in the lower margin channels leading to an overall negative margin mix. 

However, it declared that benefits from the investments made in new machinery in 2023 are expected to begin to flow into the business in the second half of this financial year. 

Chairman Jo Grimmond stated that: 

“These results reflect the more challenging trading environment which emerged in the second half of the financial year, which created caution amongst our customers and resulted in orders being deferred.  

In addition, we chose to divest of some £2.5m lower margin business lines as part of the overall reset of the Group.  

A key part of which has been to reorganise the business under two new Divisions, each business retaining a high degree of autonomy and entrepreneurialism and establishing our four strategic pillars of growth for the long-term. 

The current financial year continues with pockets of recovery in key markets, albeit leading to a less favourable product mix.  

The re-organisation has enabled more efficient use of the Group’s physical footprint, leading to recent asset sales which is adding to an already solid financial base, and this is reflected also in our decision to re-instate dividend payments.  

Being based in the UK and being adept at managing complexity well are key strengths for which Coral is known, and we are adding to this through technology.  

Last year, over £3m was invested in machinery and new manufacturing capabilities, the results of which are coming through and will help drive performance over the next 18 months.” 

Analyst View 

Edward Stacey at Cavendish Capital Markets has a Price Objective out on the group’s shares at 25.1p. 

He is estimating that the current year to end-April 2025 will show revenues of £33.0m (£31.0m), while adjusted pre-tax profits could rise by over 125% to £1.8m (£0.8m), more than doubling earnings to 1.7p (0.8p) per share, while maintain its 0.5p dividend. 

The analyst believes that the company has potential pathways to drive higher revenue growth and profitability in the medium-term.  

“We believe that the current share price does not reflect the medium-term upside potential for the business.” 

In My View 

With the shares on their backside, right now could be just the opportune moment to nip in and tuck some away and then wait patiently as the ‘magic’ of Lance Burns begins to show its magnificence. 

Getting in at 9p could quickly produce a uplift. 

Emerging markets: exploding the “risk” myth 

abrdn Investment Trusts
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Emerging markets: exploding the “risk” myth 

Gabriel Sacks, Co-Manager, abrdn Asia Focus plc 

Emerging markets (EMs) played a big part in my formative years. My mother is Brazilian. My father is South African. I was born in Brazil and raised in Rio de Janeiro and São Paulo. 

Later, when I began my investment career, South Africa was the first market for which I had responsibility for research coverage. Nowadays, further extending the theme, I invest in a region replete with EMs – Asia. 

Ask me to define an EM, though, and you might be disappointed by the vagueness of my response. To be honest, I doubt anyone could supply a truly comprehensive answer – less still a genuinely satisfactory one. 

The term “emerging market” was originally coined by the World Bank in the 1980s. It was offered as an alternative to its predecessor, “Third-World Equity Fund”, which was met with an understandably lukewarm reception. 

Today the World Bank no longer maintains an official list of EMs. Classification is instead the remit of the International Monetary Fund, a tiny number of academic institutions and, above all, several major index providers. 

The World Trade Organisation even lets its members self-identify as “developing” or “developed”. This merely adds to the confusion, as a result of which the question often becomes less a case of what an EM is and more a case of what it is not.  

For example, India is tipped to soon become the world’s third-largest economy, while China’s economic might is already second only to the US’s. So why do these countries remain categorised as EMs? 

One reason is that sizeable swaths of their populations still earn low incomes and have a poor standard of living. This means fully fledged status as a modern, industrial economy has yet to be achieved.  

There are many other considerations that might also be taken into account. They include quality of regulation and/or financial systems, market accessibility, rates of growth and even average life expectancy. 

Yet I wonder how many investors think the most significant characteristic of an EM is risk. Historically, investing in these economies has been seen as entailing more uncertainty than investing in developed markets (DMs). That being relatively less developed or industrialised, and sometimes with less stable governments, more volatile currencies and less established markets, always brings heightened investment risk. 

Does this view invariably hold true today? I would say not. The data from Asia strongly suggests investors should look beyond such clichés and recognise the potential benefits of diversification in all its forms. 

More performance, less volatility 

In identifying attractive businesses in Asia, we always search for quality. A company should have an effective operating model, a meaningful competitive edge, good management, a solid balance sheet and a firm grasp of sustainability and governance issues. 

It is wrong to suppose such businesses simply do not exist in EMs – or even that they are relatively scarce. They are there. The trick lies in finding them, which is why we believe it is extremely valuable to have a dedicated research team with an on-the-ground presence in the regions in which in invest. 

Many of the most promising companies lie towards the smaller end of the market-capitalisation spectrum. Again, though, this does not imply they are inherently riskier. 

It instead further underscores the value of having a team capable of unearthing hidden gems. It also highlights the importance of active management in supporting a positive trajectory over time. 

So how might a portfolio of such holdings perform? This is where the blurring of the lines between EMs and DMs – at least in investment terms – becomes strikingly apparent. 

Since 2000, according to Bloomberg data, Asian small-caps have comfortably outperformed DM large-caps. Specifically, the level of returns from the MSCI Asia ex Japan Small Cap Index during that period has been almost twice as high as that from the MSCI World Index. 

Of course, cynics might fall back on the time-honoured trope and say this difference can be ascribed to greater risk. Investors in Asian small-caps have just taken their chances and reaped the rewards, right? 

Not necessarily. Take, for instance, data that shows Asian small-caps have experienced notably less volatility than their DM counterparts over the past six years, with the MSCI Asia ex Japan Small Cap Index more settled than its UK, Europe and World peers. 

The fact is that every market involves risk – particularly in an era punctuated by geo-economic and geopolitical shocks. Look at the UK’s woes during the past few years. Remember the turmoil that surrounded Europe in the run-up to France’s recent snap election. Imagine what might have happened in the US if Donald Trump had not turned his head a split second before his would-be assassin opened fire.  

Ultimately, the key lesson for investors is that diversification across regions, market capitalisations, asset classes and individual stocks might be more prudent today than it has ever been. Diversification is how we spread and therefore aim to reduce risk. 

Debates over the deeply nuanced distinctions between EMs and DMs may continue to rage in perpetuity. But there should be precious little dispute – if any – about the likely advantages of locating opportunities right across the investment universe. 

Important information 

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested. 
  • Past performance is not a guide to future results. 
  • Emerging markets tend to be more volatile than mature markets and the value of your investment could move sharply up or down. 

Other important information: 

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. The company is authorised and regulated by the Financial Conduct Authority in the UK. 

Find out more at http://www.asia-focus.co.uk/en-gb or by registering for updates. You can also follow us on X and LinkedIn. 

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