Tekcapital shares were firmly bid on Friday after a busy week for its portfolio companies, including significant updates for low-sodium technology company MicroSalt and Innovative Eyewear, the developer and manufacturer of smart eyewear.

Tekcapital broke above 10p in early trade on Friday, trading at the highest levels since June. Yet, the gains this week in TEK shares still leave the technology investment company heavily undervalued compared to the net asset value of its portfolio.

According to our calculations, the total net asset value of the portfolio companies is a little over £51m. This doesn’t include any cash or convertible loan notes it has on its books.

The portfolio value alone would translate to a share price of 26p compared to a current Tekcapital share price of just 10.5p at the time of writing. Our portfolio valuation total was calculated using live share prices and is subject to change as underlying prices fluctuate.

One of the shares fluctuating on Friday was MicroSalt after the company released a bumper update on its orders from some of the world’s largest snack food companies this week.

MicroSalt shares had added another 26% to trade at 95p at the time of writing on Friday. In terms of underlying value for Tekcapital, MicroSalt is the company’s largest holding, with the value of their holding exceeding the entire market capitalisation of Tekcapital.

There is a clear disconnect between portfolio company valuations and Tekcapital shares.

This disconnect results from the macroeconomic environment being largely unfavourable for early-stage companies as higher interest rates increase discount rates and lower the perceptions of value in certain assets.

However, this discount is largely unwarranted for Tekcapital. Most of its portfolio consists of listed equities, which have clear indications of value attributed to them by public markets. The discount between Tekcapital shares and the NAV is more appropriate for a portfolio of privately held stocks with big question marks about their valuation. The market may remove this discount as sentiment improves.

Tekcapital also has the additional benefits of potential upside in portfolio companies.

MicroSalt could well have further run if the company revealed further commercial deals that cement its place as one of the major players in reducing sodium content in food to help fight against cardiovascular disease.

Recently listed GenIP is arguably undervalued after coming to market during a period of uncertainty around AIM shares. The Generative AI analytics firm has already announced orders that infer an annual revenue run rate that would dictate a valuation two or three times higher than the current share price should one apply peer group average price-to-sales multiples to the company.

Then we have Guident, the only current privately held company that may be Tekcapital’s jewel in the crown. The autonomous vehicle safety company operates in the popular urban mobility sector and is busy building out commercial relationships, one would assume, in preparation for a future listing.

Tekcapital also retains holdings in Innovative Eyewear and Belluscura, which are both scaling their models and increasing revenue.

As an AIM-listed company with a market cap under £50m, Tekcapital should be considered a higher-risk share. However, adventurous investors with a reasonable appetite for risk may benefit from the closing of the discount between the NAV and share price and any further appreciation of portfolio company values.

In a very quick snub for Mike Ashley’s demands, this morning it has been announced that the ailing boohoo Group (LON:BOO) has appointed former JD Sports and currently Debenhams CEO, Dan Finley, 41, as the Group’s Chief Executive Officer. 

Finley has been involved in the boohoo Group’s fast-growing digital department store, since he was appointed Debenham’s CEO in January 2022, under his leadership, the business has been transformed into Britain’s leading online department store with a gross merchandise value annual run rate of some £800m, through a capital-light, cash generative and highly profitable marketplace model.  

Group Deputy Chairman Alistair McGeorge stated that: 

“The Board of boohoo was unanimous in its decision to appoint Dan Finley as CEO. Dan is one of the outstanding leaders in a new generation of digital retailers.  

Dan and his team have successfully transformed Debenhams from a failed department store, creating a new business model that is a capital-light, stock-light, high-growth marketplace.  

Before Debenhams, Dan had a track record of phenomenal success in online retail during his 10 years at JD Sports.  

The Board looks forward to working with him, as we continue the review of options to unlock and maximise shareholder value.” 

Current boohoo CEO John Lyttle, who recently announced that he was standing down from the role, will remain available to Dan and the group to ensure continuity through the change of leadership and a smooth transition.  

It is expected that Dan will be appointed to the boohoo Group Board in due course. 

Boohoo Group shares are currently trading at around the 29.62p level. 

Mike Ashley, who last week demanded that he should be appointed CEO, representing his Frasers Group, boohoo’s biggest shareholder, might consider that he has been snubbed by this appointment. 

Frasers Group (LON:FRAS) shares are 761p, down 23.50p. 

London’s flagship index was firmly in the red on Thursday as the budget implications hit sentiment and a US tech sell-off compounded a risk-off tone to trade.

The FTSE 100 was down 0.7% to 8,099 at the time of writing.

Although yesterday’s budget wasn’t as bad as many had first feared, it was still broadly negative for UK companies.

Increased National Insurance will raise business costs and erode profits, and the hike in capital gains tax will dent investor enthusiasm. Frozen corporation tax is a minor win for UK businesses, but it is very minor in the context of the £40bn tax hikes announced yesterday by Rachel Reeves.

Forecasts of increased government spending and borrowing have raised gilt yields, which doesn’t bode well for interest rate cuts. Everyone knows this isn’t good for stocks.

“Yesterday’s relief rally after the Budget didn’t last long,” said Russ Mould, investment director at AJ Bell.

“Gilt yields jumped after the market cottoned on to a big increase in government borrowing over the next five fiscal years and that extra tax income from changes announced in the Budget won’t appear overnight.

“That means interest rates could stay higher for longer which is not good for housebuilders and retailers hoping for reduced pressures on household finances, hence why those sectors were in the red today. It also explains why banks were among the select few risers on the FTSE 100 as they stand to benefit from a stronger interest rate environment as they can charge more for lending.”

As alluded to by Russ Mould, yesterday’s rally in the housebuilders was turned on its head with Persimmon, Barratt Redrow, and Taylor Wimpey all down 3% or more.

The government pledge for £5bn to build houses isn’t going to do much good if buyers can’t afford to climb the property ladder and landlords dump properties because buy to let doesn’t make financial sense anymore.

Smith & Nephew was the FTSE 100’s loser after it reduced its revenue growth guidance amid weakness in China. Shares were down 12% at the time of writing.

“The largest UK medical devices maker, Smith & Nephew, has cut its full year revenue growth forecast based on weaker than expected performance in China. Lower demand in the surgical business has seen the trimming of the forecast from 5-6% down to 4.5%, a significant shortfall and shares are hurting for it this morning,” said Adam Vettese, market analyst at investment platform eToro.

The prospect of higher interest rates helped Lloyds and Natwest carve out minor gains while Shell rose 1% on a fresh $3.5bn share buyback.

Over 90% of the FTSE 100’s constituents were in the red at the time of writing on Thursday.

Microsoft shares were down in the US premarket after the tech company released its Q1 results, which beat expectations but made investors reconsider the company’s outlook.

Q1 results were robuts. EPS came in at $3.30 against $3.10 expectations and revenue was $65.59 billion versus $64.51 billion analyst expectations. This should have been enough to drive a pop in the stock.

However, weak guidance drove investors to hit the sell button and shares slipped over 3% in the US premarket.

“Microsoft hasn’t been the hottest stock of late, and heading into earnings, it was cloud growth that was under the microscope,” said Matt Britzman, senior equity analyst, Hargreaves Lansdown.

“Growth of 33% for Azure, its cloud computing platform, looked like a strong number, and when you add in the 12% contribution from AI, it continues to support the argument that the major cloud providers are well-placed to benefit from the new AI demand cycle.

“The downbeat stock reaction is likely due to guidance given on the call. Margins are expected to come under pressure next quarter as the ramp-up in AI spending hits the cost line, and with Azure growth expected at 31-32%, that would mark a slowdown quarter-on-quarter.”

Investors may also be concerned about huge ongoing investments in AI. Microsoft is a major player in the AI revolution through their investment in OpenAI, but the amount of cash being poured into pursuing building out the technology will be seen as a negative by some.

Shell shares rose on Thursday after the oil majors released Q3 earnings and announced a fresh $3.5 billion share buyback.

Shell was one of the few FTSE 100 gainers after its Q3 results revealed better-than-expected profits across its fossil-fuel-focused business units.

Perhaps the biggest influence on shares was the expansion of their share buyback programme.

Nick Purves, Fund Manager of the Temple Bar Investment Trust, recently discussed the attractions of Shell’s buybacks on the UK Investor Magazine Podcast. Nick Purves explained that the long-term trend of buying back shares underpinned their investment case and was an integral element in Shell’s place as the trust’s top holding.

The broader market evidently shares this sentiment, and Shell’s shares rose 1% in early trade on Thursday despite the broad losses of the FTSE 100.

“Shell’s delivered a significant third-quarter beat driven by better-than-expected results in all division bar renewables,” said Derren Nathan, head of equity research, Hargreaves Lansdown.

“That’s given management the confidence to push the button on a $3.5bn buyback, marking the twelfth consecutive quarter where plans to repurchase $3bn or more have been announced. That’s impressive stuff in the context of weak commodity prices and industry-wide pressures on refining margins.”

Despite weakness in fossil fuel prices, Shell remains a cash-generating machine, producing $10.8bn free cash flow in Q3 2024 compared to $7.5bn in the same period a year ago.

“At the same time, Shell’s still managing to shrink its net debt pile, paving the way for further shareholder distributions. With capital expenditure now set to come in below guidance for 2024, investors will be paying close attention to Shell’s capital allocation plans for 2025 when full-year results are announced,” Nathan said.

“Integrated Gas and Upstream remain the key profit drivers and whilst the range of outcomes for production in the fourth quarter is a little wide, the short-term outlook looks broadly stable. Looking further ahead, plans to develop new fields as well as upgrade existing assets in the Gulf of Mexico should help keep production moving in the right direction. Shell’s financial discipline is highly impressive, and for now, it seems to be finding the right balance between rewarding shareholders and investing in growth. But any further pullback in investment spend could raise some questions on the group’s ability to future-proof the business.”