BATM signs up cyber partner

Andrew Hore
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BATM signs up cyber partner

BATM Advanced Communications (LON: BVC) has signed a strategic partnership with a global technology group to market its cyber encryption technology to the civil commercial markets around the world. The partner will pay at least $2.1m over two years to develop a combined hardware and software product off. The share price jumped 11.8% to 18.5p and it is the best performer on the techMARK All-Share index.

The unnamed partner has exclusivity in some territories. Initial orders are likely to be in the first half of 2024 with larger orders after that.

The global market for BATM’s cyber product is around €4bn annually. There have already been orders in government markets. Total orders between the end of 2022 and March 2025 were worth $35m.

Shore leaves its forecasts unchanged, but this deal takes the company into a new market. Pre-tax profit is expected to improve from $1.5m to $2.8m this year and then rise to $6.5m in 2025. That does not assume any contribution to revenues above the development contributions from the partner. Net cash is forecast to be $27m at the end of 2024.

AIM movers: ECR minerals tax asset and Chaarat Gold restructuring

Andrew Hore
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AIM movers: ECR minerals tax asset and Chaarat Gold restructuring

ECR Minerals (LON: ECR) has appointed Argonaut PCF to help it to take advantage of its $75m of tax losses through the sale of assets in Victoria, Australia. The tax losses could be worth at least A$18m to a buyer, but ECR would be unlikely to be offered more than 50% of that value.  The share price improved 12% to 0.28p.

Video games company Devolver Digital (LON: DEVO) has raised £7.9m via a placing at 33p. This will strengthen the balance sheet. Existing shareholders were keen to invest more cash. In November 2021 when the company joined AIM, there was £190.9m raised at 157p/share, although most went to existing shareholders. That is more than the current market capitalisation. The share price recovered 11.7% to 33.5p.

Bezant Resources (LON: BZT) investee company IDM International, which bought the Mankayan copper gold project in the Philippines from Bezant Resources, says prefeasibility drilling is complete on the project. IDM is consulting with the local population The JORC mineral resource is 793Mt containing 2.8Mt copper, 9.7 million ounces of gold and 21 million ounces of silver. Bezant Resources owns 23% of IDM, which is seeking a reverse takeover and other ways of securing funding. The share price increased 7.5% to 0.0215p.

Mercia Asset Management (LON: MERC) has £47m in cash at the end of March 2024 following the realisation of the investment in nDreams. Assets under management have reached £1.8bn, helped by a new mandate from the British Business Bank. EBITDA was £5.6m in 2023-24 and the strategy is to double that figure in three years. NAV improved to 43p/share despite the write down of the investment in Impression Technologies. The share price rose 4.84% to 32.5p.

FALLERS

Martin Andersson has stepped down as executive chairman Chaarat Gold Holdings (LON: CGH) as the company is in restructuring discussions with Labro Investors, which he is associated with. He remains a non-exec. David Mackenzie is acting chief executive. The company has enough cash for the next few weeks but cannot fund the $1.2m repayment due on the Labro convertible loan in September. The restructuring discussions relate to this. The share price slumped 50.9% to 1.35p.

Fertiliser producer Harvest Minerals (LON: HMI) has raised £425,000 via a placing and settled £575,000 of director fees through the issue of shares at 1p each. The cash will be spent on the Arapua project to test for rare earth elements. The share price slipped 46.3% to 1.1p.

Retailer Shoe Zone (LON: SHOE) has been hit by higher freight costs and weaker spring trading, which has led to a reduction in pre-tax profit estimates for the year to October 2024 from £13.8m to £10m. Last year’s pre-tax profit was £16.5m and revenues are likely to be 1% lower. A total dividend of 6.5p/share is forecast. The share price declined 16.4% to 127.5p.

Semiconductors designer CML Microsystems (LON: CML) had a tough year to March 2024 and this year will also be difficult, but design wins mean that the longer-term outlook is more positive. Revenues grew from £20.6m to £22.9m, although that was due to a near-six month contribution from last year’s acquisition MwT. Underlying pre-tax profit dipped from £3.6m to £3.1m. Destocking by customers and a change in product mix hit profit. A further dip in profit is expected this year, but new contracts and a broader product range, including new digital radio technology DRM, will improve revenues in two to three years. The balance sheet remains strong with net cash of £18.2m. The share price fell 10.4% to 302.5p.

Sainsbury’s investors checkout as sales growth slows

UK Investor Magazine
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Sainsbury’s investors checkout as sales growth slows

Sainsbury’s shares were on offer on Tuesday after the supermarket said sales growth had slowed and price inflation slows.

Higher prices last year were always going to make the comparables tough as inflation slowed. Sainsbury’s sales growth has slowed to 2.7% in the first quarter, compared to 4.8% last quarter and 9.8%

Although soaring inflation last year can account for the plateauing of sales growth, such a step down is a bitter pill for some investors to swallow.

Investors may be concerned about a mismatch between lower sales prices and input costs results in squeezed margins in the coming periods. Concerns about margins and a general slowdown in sales growth were enough to send investors to the checkout on Tuesday, and shares slid 2%. 

“At first glance, it’s a bit tough to work out what sort of results have landed in Sainsbury’s bagging area,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Ultimately, the reduction in the rate of growth was partly to be expected, especially in grocery. As inflation cools, the weather worsens and tough comparisons crop up on the course, eking out the amount of growth seen last year was always a difficult ask. But there is a lingering Sainsbury’s specific issue in its ownership of Argos.”

Lund-Yates continued to explain that while Argos can provide excellent exposure to areas outside of groceries, it is a highly cyclical business that suffers when consumer tighten their purse strings.

“Electronics aren’t faring well in this economic climate, as people prioritise the essentials. General merchandise is the most cyclical area of the supermarket economy to be in, so being overweight in this arena really slows you down when times get tough. The additional exposure offsets and hides what has been a remarkable showing for the core grocery business.

“Sainsbury’s was having a bit of an identity crisis, straddling the more vulnerable middle-line between premium and value. An awful lot of work has gone into improving products, value perception and innovation more generally, giving the group enough gusto to start moving market share in the right direction. AI ambitions to improve real-time customer service and experience are grand but a bit thin on detail, so an area to watch.”

Shoe Zone shares sink in perfect storm of rising costs and falling sales

UK Investor Magazine
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Shoe Zone shares sink in perfect storm of rising costs and falling sales

Shoe Zone shares sank on Tuesday after the retailer issued an update on its financial outlook, citing ongoing difficulties in the global shipping industry and unexpected weather patterns affecting sales.

The footwear retailer has been grappling with increased container prices, a consequence of reduced shipping vessel supply and the continued rerouting of cargo away from the Suez Canal.

In addition to increased costs, Shoe Zone sales fell from April to June creating a perfect storm for lower profits. The company now expects profit before tax for the year to be not less than £10m.

Shoe Zone shares were 14.75% down at the time of writing.

“Budget footwear firm Shoe Zone left investors with cold feet after its latest profit warning. Perhaps the most significant takeaway from the downbeat guidance was the flagged increase in shipping costs, with upward pressure on container prices thanks to the reroute away from the Red Sea and the Suez Canal,” said Russ Mould, investment director at AJ Bell.

“Shoe Zone’s warning also dragged down LED lighting specialist Luceco, another big importer of product from overseas.

“It is a reminder that inflationary pressures remain in the global economic system which may have wider implications than tripping up Shoe Zone. It also means investors will be closely monitoring companies with global supply chains to see if they are experiencing a similar impact.

Chariot Limited – Near Term Production, Long Term Scalability – Shares Are Valued Almost Seven Times Current Price 

Mark Watson-Mitchell
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Chariot Limited – Near Term Production, Long Term Scalability – Shares Are Valued Almost Seven Times Current Price 

“Our primary purpose is to connect the abundance of Africa’s energy resource with energy-hungry urban and industrial sectors as well as underserved populations.” 

Chairman George Canjar of Chariot Limited (LON:CHAR)  

The company declares that its mission is to create value and deliver positive change through investment in projects that are driving the energy revolution. 

It claims that energy security and sustainability are at the top of the global agenda, and affordable, accessible energy is critical to enabling the ongoing energy transition. 

The Business 

The Guernsey-based Chariot is an Africa-focused transitional energy group with three business streams, Transitional Gas, Transitional Power and Green Hydrogen. 

Transitional Gas – is focused on high value, low risk gas development projects in Morocco, a fast-growing emerging economy, with a clear route to early monetisation, delivery of free cashflow and material exploration upside. 

Its Lixus Offshore license covers an area of approximately 1,794 sq.km. The area has data coverage with 3D seismic data covering approximately 1,425 sq.km and five exploration wells, including the Anchois-1 and Anchois-2 discovery wells. 

Transitional Power – is focused on providing competitive, sustainable and reliable energy and water solutions across the continent through building, generating and trading renewable power. 

Green Hydrogen – is partnering with TEH2 (80% owned by TotalEnergies, 20% by the EREN Group) and the Government of Mauritania on the potential development of a 10GW green hydrogen project, the Project Nour covering two onshore areas over 5,000 sq.km across Northern Mauritania, and it is progressing pilot projects in Morocco. 

Deal With Vivo Energy 

Last week the group announced that it had signed a Heads of Terms agreement with Vivo Energy regarding future natural gas offtake from the Loukos Onshore licence in Morocco.  

Vivo Energy, is a market-leading, pan-African retailer and distributor of high-quality fuels and lubricants with a long-standing presence in Morocco’s petroleum products’ sector.  

Through Vivo Energy Maroc, it operates a network of over 400 service stations, supplying commercial and industrial customers across a number of sectors in the Kingdom. 

The aim of the agreement is to set out the next steps for implementing a gas-to-industry strategy business, through commercialisation of domestic gas and the creation of a midstream compressed natural gas partnership to supply Morocco’s growing industrial energy needs.  

Chariot intends to sell initial volumes of up to 3MMscf/d to the midstream CNG business; additionally, Vivo Energy intends to design, fund, construct and operate a CNG plant and virtual distribution network to transport natural gas.  

This midstream CNG business would be operated though a special purpose vehicle in which Chariot can participate up to a 49% interest. 

The group will be able to leverage Vivo’s existing Moroccan customer base, allowing it to quickly gain traction into a rapidly growing market. 

News Due With Joint Venture Partner Energean  

Chariot and its JV partner Energean are expected to spud the offshore Anchois East appraisal/development well in August.  

The drilling and testing campaign will further appraise the existing gas sands and target undrilled prospective resources to potentially increase the Anchois gas development to >1Tcf.  

Success has the potential to upscale the development and lead to FID shortly thereafter, unlocking further material cash flows from the Energean partnering transaction. 

Analyst’s Views 

Stephane Foucaud at Auctus considers that the Chariot Core NAV is 30p and the Sum of the Parts valuation is 50p per share. 

The high impact Anchois East well continues to be expected to spud in August. A drilling success could increase the size of Anchois to over 1 tcf (300 bcf net to Chariot).  

Its overall unrisked NAV for Anchois, including Anchois East Footwall and Anchois East North Flank, is £0.42 per share, which represents nearly six times the current share price. 

Foucaud notes that testing of the company’s Dartois discovery onshore Morocco is expected to take place in 3Q24. 

At Cavendish Capital Markets analyst James McCormick has a 57.7p Price Objective out on the company’s shares, which are now trading at around at 7.0p, valuing the whole group at a mere £75m. 

FTSE 100 boosted by UK and French elections

UK Investor Magazine
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FTSE 100 boosted by UK and French elections

The FTSE 100 traded higher on Monday as the combination of French election results and optimism around the UK elections later this week helped propel stocks higher

“The FTSE 100 started July on the front foot, lifted by property, energy and financial stocks,” said AJ Bell investment director Russ Mould.

“Elections dominate the agenda this week. Overnight results saw the far-right Rassemblement National (RN) take a significant lead in the first round of French parliamentary elections. However, the lead was somewhat lower than expected and there was something of a relief rally in the euro and French stocks.”

London’s leading index was 0.35% higher at the time of writing.

Uk-centric stocks were among the top risers on Monday as traders geared up for the UK elections by buying stocks well placed to enjoy a Labour government’s focus on growth.

Gains in retailers Kingfisher and JD Sports reflected optimism around the health of the UK consumer should Labour win later this week.

Keir Starmer has promised to build 1.5m homes over the parliament. Of course, no one believes Labour will achieve this target, but they are likely to oversee the construction of more homes than the Tories.

Hopes of a spurt in construction activity helped send house builders higher on Monday with Persimmon gaining 2% and newly promoted Vistry jumping 1.8%.

Land Securities joined the property-themed action with a 2.5% drive to the upside.

Anglo American shares fell 2.2% after the miner said a fire at one of its Australian coal mines is likely to curtail annual production targets.

“Anglo American shares were under pressure as the company had to suspend production at its Grosvenor steelmaking coal mine in Queensland after an underground fire,” Russ Mould said.

“Mercifully, no-one was hurt in the incident but, while operational issues in a hazardous activity like mining are not unusual, the early indications are the mine will not be back online for months so this is a serious issue for the group.”

Helium One Global gears up for extended well test at Tanzanian project

UK Investor Magazine
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Helium One Global gears up for extended well test at Tanzanian project

Helium One Global is preparing to commence an extended well test (EWT) at its Itumbula West-1 well in the Rukwa project area, the company said in an operational update on Monday.

The company plans to deepen the existing well and begin the EWT in July, marking a crucial phase in evaluating the commercial potential of its fault-fracture helium play.

Helium One Global shares were 5.90% higher at the time of writing.

The company-owned drilling rig is already on-site, awaiting third-party services to begin setup. Helium One have had problem with drill contractors in the past – using their own drill rig should help operations run a little smoother than previous campaign.

Helium One has bolstered its capabilities by acquiring well control equipment to complement the rig. An experienced drill crew has been appointed, with many returning from the previous drilling campaign, ensuring operational continuity and efficiency.

Helium One has a history of delayed drill programme that led to declines in the group’s shares so investors will be happy to hear, in preparation for the July spud date, long-lead items are arriving at the site, and camp personnel and medical support are being remobilised.

“As we fast approach the next operational phase, we are on track to commence the crucial EWT operations at Itumbula West-1 in July. This is a very exciting time for the Company as the test will enable us to determine commercial flow rates, reservoir performance and helium concentrations over a longer period of time. The results of this EWT will enable us to better determine resource estimates and fully evaluate the potential of this new fault-fracture helium play we have at Itumbula,” said Lorna Blaisse, Chief Executive Officer.

“The team has remained focused over the past few months to meet the timelines, including the ordering and delivery of long lead items, integrated subsurface modelling and engineering in order to form the basis of a feasibility study which will be required to apply for a Mining Licence to enable us to move into project development once the EWT is complete.”

The company has contracted global technology firm SLB (formerly Schlumberger) to provide cementing, drilling and completion fluids services, as well as surface well test equipment. GeoLog International BV will return to the project to provide mudlogging services.

The EWT is expected to last 4-6 weeks and will target two zones where helium was successfully sampled during the initial exploration well: the fractured Basement and faulted Karoo intervals. This test aims to determine commercial flow rates, reservoir performance, and helium concentrations over an extended period. A Production Logging Tool will be employed to gather more specific production data at predefined depths.

Laboratory results from helium samples taken from Itumbula West-1 have corroborated the measurements made by the onsite field PVT laboratory, adding confidence to the project’s potential. Additionally, the second phase of fieldwork for the Environmental and Social Impact Assessment study, required for the feasibility study, is ready to commence.

Mosman Oil & Gas – This Group’s Australian & US Helium Interests Are Getting Gassed Up, Shares Could Double 

Mark Watson-Mitchell
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Mosman Oil & Gas – This Group’s Australian & US Helium Interests Are Getting Gassed Up, Shares Could Double 

Late last week the shares of Mosman Oil & Gas (LON:MSMN) put on a 15% spurt in its ‘penny share’ price. 

Capitalised at just under £6m, the Australian-based company is looking very much more interesting of late. 

The Business 

It is a helium, hydrogen and hydrocarbon exploration, development and production company with projects in the US and Australia.  

Mosman has several projects in the US, in addition to exploration projects in the Amadeus Basin in Central Australia. 

Pivot Swing To Helium 

The company’s strategic objectives are to identify opportunities to provide operating cash flow and have development upside, while also progressing with exploration of existing exploration permits. 

It is now focusing on helium, hydrogen and hydrocarbon exploration development and production.  

The Amadeus Basin has some of the highest recorded % of helium and hydrogen anywhere in the world.  

It is one of the most prospective onshore areas in Australia for helium, hydrogen and hydrocarbons and has established infrastructure with production from Mereenie, Palm Valley and Dingo oil and gas fields. 

Analyst’s View 

Analyst David Mirzai at SP Angel considers that the company is currently pivoting its strategy to focus capital and management resources on its existing helium interests in Australia and recently acquired interests in the USA.  

He notes that Helium exploration activity on Mosman’s Australian assets is fully carried by its farm-in partners, while the recent US entry has modest near-term drilling costs funded by the proposed sale of the majority of the company’s US oil and gas production assets. 

Following a corporate review and refreshed executive, Mosman has acted to reposition the portfolio with a strategic focus on helium opportunities, where it has been able to leverage helium exploration expertise gained over several years in Australia to identify quality helium projects.  

The analyst states that: 

“In our view, Mosman is pursuing a differentiated strategy in building a portfolio of exploration opportunities in areas with proven high helium concentrations located in OECD countries with the necessary infrastructure.  

The company believes it is relatively undervalued compared to internationally listed helium peers, and with a more diverse prospect portfolio.” 

The Equity 

There are some 12.821m shares in issue. 

The larger holders include Hargreaves Lansdown (23.25%), Interactive Investor Services (20.83%), Barclays Direct (9.69%), Vidacos Nominees (8.80%), and HSDL Nominees (8.26%). 

My View 

At this stage, despite the shares having quadrupled in price this year, I am taking the view that its Management is right in concentrating on building up its helium projects, and that its shares are headed higher. 

The demand is growing and so too are the market prices for the gas. 

Following the disposal of its working interest in various Texas leases, the company will have released cash as working capital as well as giving its teams more ability to concentrate on the helium side. 

For risk-tolerant speculators, the shares could well prove to be a good one-year gamble from the current 0.046p, perhaps a doubling in price? 

Anglo American shares dip after fire halts operations at coal mine

UK Investor Magazine
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Anglo American shares dip after fire halts operations at coal mine

Anglo American shares dipped on Monday after the mining giant announced a fire at its Grosvenor steelmaking coal mine in Queensland, Australia.

The company was forced to suspend operations following an underground coal gas ignition incident on 29 June 2024. The mine is likely to be offline for an extended period which will raise concerns about production targets.

Anglo American shares started the session down about 4% before rallying steadily through the session to trade 1.9% down at the time of writing.

In the first half of 2024, the company anticipated producing approximately 8 million tonnes of product, with Grosvenor contributing a substantial 2.3 million tonnes to this total. The full-year production guidance for 2024 was set at 15 to 17 million tonnes, with Grosvenor expected to yield about 3.5 million tonnes.

These projections are now in jeopardy. The Grosvenor mine’s contribution was already expected to decrease in the second half of 2024 due to a planned longwall move. The current suspension, however, introduces a new level of uncertainty to the production outlook.

Porvair hit by short-term destocking

Andrew Hore
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Porvair hit by short-term destocking

Filtration technology supplier Porvair (LON: PRV) had a tough first half with destocking holding back progress. The outlook for the second half appears more positive although destocking is still ongoing.

In the six months to May 2024, revenues grew from £90.6m to £94.6m, but higher interest charges meant that underlying pre-tax profit fell from £11.8m to £11.5m. This includes an initial contribution from mist elimination filters producer European Filter Corporation (EFC) of £1m to operating profit and it accounted for the growth in revenues of the aerospace and industrial division.

There was a like-for-like decline in revenues in each of the three divisions. The largest decline was in the metal melt quality division where demand in the US was weak. There was higher demand for turbine blade filters.

The laboratory division had a contribution from last year’s acquisition, Ratiolab. The integration costs of this business held back margins and they should improve.

All three divisions should grow revenues in the second half. Peel Hunt expects an improvement in full year pre-tax profit from £21.4m to £22.5m.

The interim dividend was raised by 5% to 2.1p/share and the full year forecast is 6.3p/share. Net cash was £4.1m after the payment for EFC and it should recover to £10.4m by November 2024, down from £14m one year earlier.

Ben Stocks will be stepping down as chief executive next year and the process of appointing a replacement has commenced.

The underlying demand for the many of the company’s products remains strong, even though there are short-term weaknesses, with clean water and other clean technology areas propelling growth.

At 658p, the prospective multiple is just over 17. There is scope for further recovery in demand this year and next year.

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