There was a share price recovery in Clontarf Energy (LON: CLON) after it published 2023 figures. The share price rebounded following the disappointment in Bolivia. It failed to move through to the next stage of the bids for the seven priority salt pans in southern Bolivia. There was nearly £183,000 of cash in the bank at the end of 2023 and a further £700,000 has been raised since. The share price jumped 148% to 0.0385p.

Landore Resources (LON: LND) has raised £3.68m at 2.4p/share with strategic investor Luso Global Mining, a subsidiary of Mota-Engil, subscribing £1m. Alexander Shaw, who is the boss of the new investor will become chief executive of Landore Resources. The cash will fund drilling at the BAM gold project at Junior Lake in northwestern Ontario. The share price recovered 62.5% to 4.55p.

Phosphate producer Kropz (LON: KRPZ) said that it knows no reason for the share price rise earlier in the week. There has been additional trading in shares since last week and the price has fallen back from 3.25p at one point, but it is still 53.7% higher at 1.875p.

Baron Oil (LON: BOIL) non-exec Dr John Chessher acquired an initial six million shares at an average price of 0.0864p each. The share price improved 43.7% to 0.102p.

FALLERS

R&Q Insurance Holdings (LON: RQIH) is still trying to complete the sale of its Accredited business. Costs are mounting up as talks continue with regulator and other parties and it is hampering the overall business. This has hit the financial stability of the business. There could be an alternative to the original Accredited deal, but that involves the liquidation of the holding company. Slater Investments has reduced its stake from 11.7% to 10.3%. The share price slumped 91.6% to 0.12p.

Cash shell Cloudified Holdings (LON: CHL) has failed to secure a reverse takeover and trading in the shares was suspended on 13 June. Prior to that the share price dived 43.8% to 2.25p. There is six months to find a deal and potential acquisitions are being assessed. There is £425,000 in the bank and costs are £23,000/month.

Deltic Energy (LON: DELT) has been unable to find a partner for the Pensacola project in the North Sea. This means that Deltic Energy cannot finance its share of the development costs and it is withdrawing from the licence and transferring its 30% share to Shell and ONE-Dyas. Canaccord Genuity has reduced its NPV10 target price to 100p. The share price slid 36.5% to 8.25p.

Helium One Global (LON: HE1) has raised £8m at 0.5p/share. This will finance the deepening of Itumbula West-1well and the extended well test, as well as the development of the helium project in Tanzania. The extended well test should start in the third quarter. The share price fell 34.8% to 0.75p.

In our last note we felt that the minor selling that had materialised could have been the start of another minor leg lower, so this is the first time in the past couple of months that we have got the sentiment wrong.

As the index has actually managed to reverse course quite quickly and moved back to post fresh all time highs in recent days. So that is the good news for the bulls. The bad news is that rather than being entirely wrong we may have just been a little premature.

As now the market again does look vulnerable to some profit taking. Some more bearish macroeconomic notes have come out of Wall Street in recent days highlighting how the recession, long heralded by the inverted yield curve, may finally be showing some signs of emerging. As the US economy does start to show some early signs of slowing. 

Can the Fed cool the economy enough to tame inflation while avoiding a harder landing? So far the market has priced in a very positive yes to this question. As any doubts emerge on this view however there is considerable space for downside moves.

To be clear we are not calling the top of the market here, but what we are suggesting is that some chinks in the armour to the soft landing argument have gathered pace in recent days, and while consumer sentiment is strong there are signs that suggest that this is late stage buying interest and that some early institutional investors in this bull run have already been taking profits. 

We do feel it is warranted therefore to flag up that there is the potential for this profit taking selling to gather pace, which could drop the market back into the previous channel in the coming days. Leaving a more cautious take profit stance for the week ahead.

The FTSE 100 was slightly weaker on Friday as investors took a step back from equities and assessed what has been a busy week for economic data, politics and corporate updates.

London’s flagship index was down 0.4% at the time of writing amid heavy selling of European equities that continued declines on the back of a surprise snap French elections that threatens to provide a platform for far-right nationalists that are opposed to the European project. The French CAC plummeted 2.5% as the German DAX fell 1.3%.

Heavy selling of European stocks followed reasonably robust US trading overnight, which helped the FTSE 100 swerve most of the European downside on Friday.

“Yes, we’ve seen several days of choppy trading on the markets but a robust session on Wall Street last night and resilience on the FTSE 100 at the end of the trading week doesn’t portray a picture of an investor with their head in their hands,” said Russ Mould, investment director at AJ Bell.

There has been a clear divide this week between mainland European stocks trading on political concerns and US and UK that continue to be driven by interest rate expectations.

Interest rate hopes

The Federal Reserve provided little insight into the timing of interest rate cuts at this week’s meeting, which would have disappointed some market participants.

That said, CPI data provided a dash of optimism that inflation was falling and the Federal Reserve would soon have the right economic conditions to warrant a cut.

This optimism kept a lid on any selling of US stocks, and investors are likely to remain positioned for a rate cut by sticking with long equity bets in the coming weeks and months. Strength in US stocks – should it be maintained – will help support UK equity sentiment in the coming week as investors look forward to the Bank of England’s interest rate decision on Thursday.

Tesco

Tesco was the made corporate story of the day with the group proving it has what it takes to fight of discount rivals amid the cost of living crisis by producing 4.6% sales growth in its last quarter.

“The UK’s biggest supermarket, Tesco, has announced trading is in-line to hit full year expectations,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown.

“Crucially, in the first quarter, volumes continued to grow, which is an important milestone during slowing inflation. The emphasis on value for money is evident and has become markedly more pronounced in recent times. This is helping to attract and retain customers, but doesn’t come cheap. Convincing customers to put a higher number of items in their trolley is therefore the aim of the game. There’s recently been a launch of summer menu items, which sounds good in theory, but the very poor weather could put a pin in that BBQ-flavoured balloon.”

Crest Nicholson shares surged higher on Friday after the housebuilder announced it had received a bod from rival Bellway.

Just a day after Crest Nicholson took an axe to its dividend and profit forecast, sending shares sharply lower, its peer Bellway has announced an approach to potentially acquire a struggling competitor amid a broad market downturn.

In a move to strengthen its position in the UK housing market, Bellway made a non-binding all-share offer to acquire Crest Nicholson in early May. As one would expect with such an opportunistic bid, Crest Nicholson’s board rejected the proposed deal, saying it significantly undervalues the group.

The offer valued each Crest Nicholson share at 253p, representing a 30% premium to the company’s share price when the offer was initially made.

Under the terms of the offer, Crest Nicholson shareholders would receive 0.093 Bellway shares for each share they hold in Crest Nicholson. Based on Bellway’s share price of 2,718p at the close of business on June 13, 2024, the offer also represents a 20.5% premium to Crest Nicholson’s 3-month volume-weighted average price.

Bellway’s board believes that a combination of the two companies would bring together the strengths of each business. Crest Nicholson’s board are not buying it and has rebuffed the approach. Bellway have until 11 July to make a formal bid. On the face of it, such a tie-up would make little sense for Crest Nicholson shareholders.

Tesco shares perked up on Friday after the supermarket reaffirmed it profit guidance for the year as the group continued to grow market share.

Shares rose over 1% on Friday as Tesco reiterated guidance of adjusted operating profit of £2.8bn for the year after group sales grew 4.5% in the 13 weeks ended 25 May 2024.

“Tesco has maintained its profit guidance in this morning’s trading statement as underlying UK sales for the supermarket rose by 4.6% in the first quarter,” said Mark Crouch, analyst at investment platform eToro.

“Despite higher inflation vexing the sector, Tesco has stood fast and knuckled down on quality and value. By utilising the Clubcard scheme and offering a wider range of food products, Tesco managed to increase their market share in 2024.”

The key for investors is top-line growth. It’s accepted that there is little that can be done with margins in the current environment, so the main source of earnings growth will be top-line expansion. In this respect, there is a lot to encourage investors in today’s update with the group using its loyalty scheme to fight off the threat of the discounters.

“Tesco has done exceptionally well to grow market share given rising competition. Its full-line offering sets it apart from the likes of Aldi, and its product proposition puts it ahead of other big names,” said Sophie Lund-Yates, lead equity analyst, Hargreaves Lansdown

“Tesco’s enormous scale means it operates more like a utility in some respects – everyone needs to put dinner on the table and an increasing number of customers are buying that at a Tesco. That helps underpin a reasonably generous dividend yield, too. Moving forwards, investors will want to see further growth kicked out from wholesaler Booker – as well as a clearer understanding on what the next chapter looks like for food.”

 Tesco will report interim results on Thursday 3 October 2024.

Are the shares of the £71m capitalised data transfer company Cirata (LON:CRTA) being chased by investors far above their real value?

In the last six weeks alone, they have risen almost 120% from 38p to a High of 85p – a performance that confounded many market observers who have looked at how the Sheffield-based company is progressing.

The company, which used to be known as WANdisco, is classed as a very high risk/reward play on the growth of data migration to the cloud and the ability of new management to scale its technology and pivot from firefighting to growth.

The shares have since eased back to 62p.

The Business

Cirata, accelerates data-driven revenue growth by automating data transfer and integration to modern cloud analytics and AI platforms without downtime or disruption.

With Cirata, data leaders can leverage the power of AI and analytics across their entire enterprise data estate to freely choose analytics technologies, avoid vendor, platform, or cloud lock-in while making AI and analytics faster, cheaper, and more flexible.

Cirata’s portfolio of products and technology solutions make strategic adoption of modern data analytics efficient and automated.

Core use cases include cloud analytics and AI activation, data modernisation, disaster recovery, and Hybrid cloud data architectures.

Impressive Client List

The company claims that its solutions are trusted by hundreds of global brands and industry leaders such as Allianz, AMD, Apple, Daimler, Envest | Yodlee, GoDaddy, HM Health Solutions, Juniper Networks, KOBIC, Manulife, NatWest and Sanlam, The University of Sheffield,

Analyst’s View

At Liberum Capital, its analysts Andrew Ripper and Caspar Erskine initiated the broker’s research coverage on the company in mid-April this year, rating the shares as a Buy at 43.5p, looking for 80p as their Price Objective, so that has already been left behind.

They noted that the company has a credible new management team that is pivoting from firefighting to a growth-orientated agenda.

Data is increasing fast and Cirata’s proprietary technology helps clients to migrate it to the cloud at scale.

The group has a growing pipeline and should deliver sequential acceleration of bookings and revenue over FY24-26E, post the Q1 low.

Their estimates for the current year to end December look for a 43% increase in sales to £10.0m (£7.0m) while pre-tax losses could more than halve to a £13.8m (£29.0m loss).

For 2025 they see £20.0m of sales helping to cut losses to £5.1m.

However, the brokers are going for £30.0m of sales in 2026 and breaking into £2.9m of profits, worth 0.02p per share in earnings.

Update Soon

The group should be announcing its Q2 Trading Update next month, with its Interims due in September.

Caution Advised

Very prudently the analysts comment that Cirata, is only suitable for investors with a very high-risk tolerance and there is uncertainty regarding whether it can scale quickly enough to become self-financing before running out of road.

The shares, which are now back to 62p, could so easily swing lower on profit-taking or rise phoenix-like back up to the 85p level again.

The FTSE 100 retreated on Thursday after the Federal Reserve kept interest rates on hold overnight and gave little away in terms of when interest rates may be cut.

London’s leading index burst higher yesterday after US CPI came in slightly lower than expected. However, a fairly benign instalment from the Federal Reserve yesterday evening did little to keep the FTSE 100’s run going and focus shifted back to domestic issues on Thursday.

“Fed chair Jerome Powell didn’t give a huge amount away, although it felt telling that he was fairly cautious about the cooler than expected inflation figures from earlier in the day. The central bank is clear that it wants further signs inflation is on the path to the magic 2% level before it is prepared to start cutting rates. One major sticking point being the continued tight labour market conditions,” said AJ Bell’s Russ Mould.

“The FTSE 100 was held back by weakness in the housebuilding sector although specialist engineering firm Halma was in demand as it delivered yet another record set of results. The company’s focus on niche areas and providing technology-enabled health, safety and environmental solutions proved to be a winning formula yet again.”

Housebuilders are approaching a fascinating juncture. Both the Tories and Labour have promised to boost housebuilding in the new parliament, yet higher interest rates are curtailing underlying activity, with affordability biting as more people end fixed-term mortgage terms and move on to higher rates.

However, the decline in housebuilders on Thursday was a result of a Crest Nicholson profit warning, which sent shares down over 10%. The builder said it was experiencing slowing demand and slashed its dividend and profit outlook.

Persimmon dropped 2% while Taylor Wimpey dipped 1.84% in sympathy.

Halma was the standout performer after releasing record-breaking profits and revenue for the full-year period.

“Halma’s attraction is simple. It’s a mash-up of businesses working to provide technology solutions in the safety, health, and environmental markets,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“These may not be the most exciting businesses, but Halma’s clear purpose and quality of execution mean performance is impressive. Revenue passed the £2bn mark for the first time in Halma’s history, and improving margins meant profits had an even bigger uplift, coming in ahead of expectations too.”

Halma shares were 11% higher at the time of writing.