AIM movers: Aquis recommends bid and Woodbois returns from suspension
Aquis Exchange (LON: AQX) is recommending a bid from rival exchange trading business SIX Exchange. The offer is 727p/share in cash, which values the company at £225m. There had been several previous proposals from SIX. The combined business will have greater pan-European scale and be able to expand internationally. SIX is particularly interested in the Aquis technology and there is also potential to develop the Aquis Stock Exchange a pan-European market. The share price jumped 113.6% to 705p. The company joined AIM in June 2018 at 269p/share.
Alaska-focused oil and gas explorer Pantheon Resources (LON: PANR) has commenced drilling of the Megrez-1 well, which is in the eastern area of the Ahpun field. The reservoir sections being targeted are younger and shallower than previous Alaskan wells. Newly elected President Trump says he supports an Alaskan natural gas pipeline to supply the Alaska LNG project. SP Angel suggests that a US listing could be sought in 2025. The share price increased 20.4% to 27.275p.
Angle (LON: AGL) says the DNA analysis of circulating tumour cells using Parsortix can identify EGFR-mutated non-small cell lung cancer patients that are developing resistance to treatment with AstraZeneca drug Osimertinib. This drug has annual revenues of $6.7bn and the findings could provide additional revenues for the pharma services business. The share price recovered 21.2% to 10p.
Nostra Terra Oil & Gas (LON: NTOG) has reached cash positivity and it has completed the phase 1 workover programme. Production has increased following the new management starting in May and it will continue to rise. The share price improved 13,3% to 0.0425p.
FALLERS
Trading in Woodbois (LON: WBI) shares has recommenced after Allenby was appointed as nominated adviser. Two independent non-execs have been appointed. Paul Shackleton has worked as a nominated adviser and Clive Roberts also has a capital markets background. A new boss has been appointed to the Gabon forestry business and a shipment of existing pre-sold stock is underway. The share price declined 15.3% to 0.25p.
Growth is slowing at Team Internet Group (LON: TIG) as online ad pricing declines. There has also been a reduction in demand for Shinez online marketing services. Shinez was acquired in April and changes in ad network partners has reduced traffic. Third quarter revenues declined 5%. Full year revenues are still forecast to grow from $837m to $843m, which is an 11% reduction on the previous forecast. The lower margins are being offset by reduced expenses, so pre-tax profit is forecast to improve from $77.2m to $79.2m. Net debt should be $95m at the end of the year and this could nearly halve next year. The share price dipped 14.7% to 101.7p.
Security services provider Westminster Group (LON: WSG) says that it is not going to leave AIM following its strategic review. The share price is 13.9% to 1.55p.
Gold explorer and producer Ariana Resources (LON: AAU) has secured a $5m financing agreement with RiverFort Global Partners and $2m has been received. No new shares will be issued. This will fund feasibility studies for the Dokwe gold project in Zimbabwe. RiverFort Global Partners will be the cornerstone investor for the ASX listing. The share price slipped 10.9% to 2.45p.
Oil and gas company Tower Resources (LON: TRP) is raising £275,000 at 0.027p/share. This will finance the business while it moves towards the finalisation of the Cameroon farm-out. The share price fell 6.9% to 0.0207p.
FTSE 100 selling subsides as Croda leads tentative rally
The FTSE 100 gained on Monday as London’s leading index tracked a European rally higher, albeit at a slower pace than counterparts in mainland Europe.
“The FTSE 100 broke its losing streak to trade higher on Monday with healthcare and financial stocks doing much of the heavy lifting. There was wider optimism across Europe as stocks recovered from a rocky week but Asian markets remained on the back foot as China disappointed on stimulus,” said AJ Bell investment director Russ Mould.
“Chemicals firm Croda topped the UK’s flagship index. The shares have had a tough year so the third-quarter sales growth and retained profit guidance contained in its latest update were well received by relieved investors.”
The FTSE 100 has been under pressure since the US election on concerns about ramifications for trade. The hawkish Bank of England interest rate cut last week also took the wind out of UK equity’s sails, with borrowing costs now expected to fall at a slower pace than previously thought.
Soft performance in UK equities last week is at odds with US stocks that surged higher as investors cheered the prospect of deregulation and lower taxes after Donald Trump won his second term in the White House. Despite the strong gains in US shares, analysts remain positive about the outlook for US equities.
“I remain bullish, with solid earnings growth, strong economic growth, and the forceful ‘Fed put’ providing a solid foundation for the market to build upon, while cleaner post-election positioning, and expectations that Trump’s proposed stimulus will provide a renewed economic sugar rush, are also helping to move things along rather nicely,” said Michael Brown Senior Research Strategist at Pepperstone.
Strength in US stocks threatens to leave London’s market further behind, with doubts around Chinese stimulus acting as a counterweight. The FTSE 100’s gains were broad on Monday with a splattering of resources stocks in the red reflecting ongoing frustrations at slow growth in China. Rio Tinto slipped 1%.
UK government capitalise on NatWest share price gain by selling down stake
The UK government has shown a rare sign of financial deftness by selling a £1 billion stake in NatWest following a rally in the bank’s shares appreciated in recent months.
UK Government Investments Limited sold £1 billion of NatWest shares at 380.6p, bringing its stake down to 11.4%.
The new Labour government unleashed a tax raid on businesses and investors to fund spending increases, and although the £1 billion will hardly touch the side of the ‘black hole’ supposedly left by the conservatives, it does demonstrate a semble of financial markets nous.
“The government has taken advantage of NatWest’s share price having just traded at its highest level in nine years to offload a £1 billion stake in the bank,” said AJ Bell investment director Russ Mould.
“Rachel Reeves is vindicated in her decision in July to scrap a ‘Tell Sid’ public offer of the government’s remaining stake in NatWest. Ditching the share sale was one of the first things she did after Labour won the general election, saying it was ‘a bad use of taxpayers’ money’ as the initiative – created by the previous government – was expected to offer the shares at a potentially large discount to the market price to incentivise take-up by the public.
“By sitting tight and waiting for the market to strengthen, and restricting the sale to institutional investors, Reeves has so far managed to get a better price for the shares. Whether that trend continues remains to be seen.”
Investment trusts: a versatile choice for long-term investors
Investment trusts: a versatile choice for long-term investors
- Investment trusts are a flexible, liquid option for investing in a range of asset classes, including shares, bonds and property
- Trusts also have advantages for investors who need an income from their investments
- After a period of volatile markets, investment trust discounts are higher than normal
Investment trusts have stood the test of time. The first investment trust was launched in the 1860s, “to give the investor of moderate means the same advantages as the large capitalists”. They have been fulfilling this role ever since, democratising access to investment markets and bringing choice and diversification to investor portfolios.
The premise of an investment trust (or investment company) is straightforward. They are listed companies that invests in shares, bonds and other assets, such as property. In their simplest form they will invest in a portfolio of shares, but there are also investment trusts that invest in areas as diverse as wind farms, commercial property or student accommodation. The choice is vast, and there is something to suit every investor.
The benefits of the company structure
The company structure brings a number of advantages compared to an open-ended fund such as an OEIC. First, it brings pricing transparency, investors can buy or sell on the stock exchange as they would a normal share. This means it is easy to get access through an investment platform or trading account.
It also means there is a board of directors, who look after the interests of shareholders. This board of directors appoints the investment manager, monitors them to ensure that they are doing their job properly, and can replace them if they’re not. The board will also ensure that the manager is communicating effectively with shareholders, and that the investment goals of the trust are upheld.
Investment advantages
The company structure also allows for more investment flexibility. With an open-ended fund, the investment manager has to buy and sell when capital flows in and out of the fund. If lots of investors want to sell the fund, the fund manager may find that they have to liquidate assets very quickly. This can be difficult, particularly in areas that have lower trading volumes, such as smaller companies, or very illiquid assets such as commercial property. The manager might have to accept a lower price as a result.
Investment trusts are closed-ended, which means managers don’t have to trade the underlying holdings when investors buy in to or sell out of the fund. Fund managers are not as constrained by liquidity considerations when they invest. This makes investment trusts a compelling option for areas such as smaller companies, emerging markets, or property and infrastructure assets.
Investment trusts can be a good option for investors who need an income. Some trusts have a long and illustrious track record of paying high and increasing dividends. It may be written into the investment aims of the trust. The Association of Investment Companies (AIC) compiles an annual list of ‘dividend heroes’ – these are trusts that have raised their dividends every year for 20 consecutive years or more. You should of course always remember that dividends are not guaranteed and past performance does not predict future returns.
The other advantage is that investment trusts can reserve income, saving it up during buoyant years and using that money to support the dividends they pay out out during lean years. This can help ensure a smoother income stream to investors. It was particularly noticeable during the pandemic, when many open-ended funds needed to cut their dividends as their underlying investments cut payouts, while some investment trusts could call on their reserves to keep paying dividends to their shareholders.
Investment trusts can also borrow to invest, known as gearing. This can magnify the returns to shareholders but will also magnify losses on the downside if markets go down. Most conventional trusts run with 5-20% gearing.
Discounts and premiums
Investment trusts are traded on a stock exchange, which means the price is determined by the balance of buyers and sellers. The price may not match the value of the underlying holdings in the trust (the ‘net asset value’ – NAV). This leads to discounts – where the shares trade below NAV – and premiums – when the shares trade above NAV. If a trust’s share price is £80 and its NAV per share is £100, it’s trading at a discount of 20%. Investors are effectively getting £100-worth of assets for £80, which has some appeal for investors that like a bargain.
Selecting investment trusts
There are currently 365 investment trusts including Venture Capital Trusts (or VCTs, which invest in small companies). There is huge choice, split between equities (54%) and alternatives (46%), including significant allocations to private equity, infrastructure and property. There is something to suit every taste.
The right option will depend on whether you are looking for long-term capital growth, income, or for exposure to a specific region or sector. For example, there are Asian, European and North American trusts, others that invest in smaller companies or technology, not to mention those that invest in renewable energy or student accommodation. Each trust has its own specific investment flavour. The AIC has a screening tool that allows investors to find trusts by characteristics such as yield, performance, charges or size.
Why now for investment trusts?
Investment trusts can play a role in portfolios whatever the economic weather. However, there are a number of reasons to look more closely at investment trusts today. The first is income. As interest rates fall, dividend income may become more valuable to investors. Data from the AIC shows that there are 26 investment trusts currently offering a yield of at least 4.5% a year. Many trusts yield more than 5% – and some offer significantly more. However, it is worth noting that the yields from investment trusts are not guaranteed and may vary over time.
After a period of volatile markets, investment trust discounts are higher than normal, particularly in some areas, such as infrastructure and private equity. Currently, more than 90% of investment trusts are trading at a discount, with a fifth trading on a discount of more than 30%. If sentiment improves, discounts could narrow, boosting returns for investors.
Charges may be lower than for their open-ended equivalents. Boards will often exert pressure on the investment adviser to keep costs low. In the first half of 2024 alone, a total of 18 trusts made fee changes to benefit shareholders.
Investment trusts remain a compelling choice for a range of investors, with options for income, growth, or a blend of both. They may have been around for 150 years but remain as relevant as ever for the modern investor.
Important information
Risk factors you should consider prior to investing:
- The value of investments and the income from them can fall and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
Other important information:
Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.
Find out more at www.abrdn.com/Trusts or by registering for updates. You can also follow us on X and LinkedIn.
Aquis shares soar as takeover announced
Aquis shares soared on Monday after the trading venue and stock exchange announced a takeover by a Swiss counterpart.
Swiss exchange operator SIX Exchange Group AG has announced a recommended cash offer to acquire Aquis Exchange PLC in a deal valuing the London-based exchange at approximately £207 million, or £225 million on a fully diluted basis.
Under the terms of the agreement, Aquis shareholders will receive 727p in cash for each share, representing a substantial premium of 120 percent over the closing price of 330 pence on November 8, 2024.
Aquis shares were 114% higher at 707p at the time of writing.
The acquisition represents a strategic move by SIX to strengthen its pan-European presence and address market fragmentation.
SIX, which operates a fully integrated exchange value chain, views the acquisition as an opportunity to enhance its service offerings across Switzerland, Spain, and international markets.
The Swiss exchange operator particularly values Aquis’ next-generation proprietary exchange technology and sees potential in combining it with SIX’s existing financial market infrastructure and industry experience.
Aquis revenue has grown by 495% since its IPO and achieved a profit of £5.2 million in 2023. However, the Aquis board recognises that the European exchange market remains highly competitive, requiring substantial ongoing investment in technology and distribution to compete with well-resourced peers.
The merger is expected to create a more competitive pan-European listing venue, particularly benefiting small and medium-sized enterprises seeking access to capital markets.
The deal is also expected to enhance execution quality for retail liquidity across Europe and create a more attractive offering for retail brokers by expanding SIX’s universe of tradable securities.
