Calnex Solutions releases profit shock
Shares in Calnex Solutions (LON: CLX) have slipped to a near-three year low following a profit warning for the six months to September 2023. There will be a minimal profit this year. The share price fell 30.2% to 66p. Calnex Solutions joined AIM on 5 October 2020 via a placing at 48p/share and went to an immediate premium.
The AIM-quoted telecoms and network testing instrumentation supplier is uncertain about the timing of telecoms customer orders. Revenues will be up to 30% lower than previous expectations. Normally there are additional orders at the end of a quarter, but that did not happen in September.
Fixed costs are likely to be maintained for the long-term and gross margin is expected to continue to be more than 74%. Inventories remain higher than in the past. Management is trying to diversify the client base into defence and government.
Cavendish has slashed its 2023-24 pre-tax profit forecast from £4m to £100,000, down from £7.2m last year, on revenues reducing from £27.4m to £17m. There does appear to be demand for the company’s instruments, but predicting when it will turn into revenues is difficult.
The balance sheet remains strong even though net cash is set to fall to £13.9m. The market capitalisation is £57.8m.
There is no forecast for 2024-25, but management is confident that there will be a recovery. New and improved products will help the revenues to grow again.
Tekcapital is primed to pop higher as MicroSalt IPOs
Tekcapital creates exciting technology businesses with the potential to help the lives of a great number of people from scratch with the core aim of Tekcapital shareholder value creation.
As CEO Dr Clifford Gross explains, each one of their portfolio companies was founded by Tekcapital and taken from a concept on a piece of paper to businesses with substantial market opportunities.
Belluscura – a company founded by Tekcapital and later listed on AIM – has recently announced a potential $85m worth of orders and royalties.
Tekcapital is now set to list its next success story in London this month. MicroSalt is targeting a £10m-£15m AIM listing to secure growth capital to fund the expansion of their low sodium salt technology business.
MicroSalt has already secured distribution agreements with US supermarket giant Kroger and has said they are in talks with major players in the snack food industry.
Sodium overconsumption plays a part in millions of premature deaths per year and MicroSalt is tackling this head-on with a technology that reduces sodium in their table salt by 50%.
Tekcapital shareholder value
Tekcapital valued MicroSalt at $17m as a privately held company on its balance sheet as of the end of June 2023.
The transition from a privately held company to a listed entity represents a major milestone for both MicroSalt and Tekcapital and provides the opportunity for Tekcapital to crystallise shareholder value.
In addition, the market should give more weight to Tekcapital’s net asset value going forward as a large proportion will now be valued by the public market as opposed to private market methods. Tekcapital’s holding will be readily realisable and the risk premium associated with privately held companies should diminish.
We are yet to learn of the specific valuation attached to MicroSalt on IPO and investors will eagerly await the value of Tekcapital’s holding post-IPO.
With a market cap of just £20m, Tekcapital could quickly start to look very good value as soon as the particulars of the MicroSalt IPO are made public.
FTSE 100 surges higher on China stimulus and US interest rate hopes
The FTSE 100 surged on Tuesday as the gloom around US interest rates reversed, and China was reportedly considering unleashing a wave of stimulus.
The FTSE 100 rallied 1.6% to trade at 7,611 at the time of writing. The rally was broad, with 98 of the FTSE 100’s constituents trading positively.
“Investors regained their appetite for risk after a troublesome start to the trading week linked to concerns about conflict in the Middle East and how the associated hike in commodity prices could feed through to inflation and interest rates staying higher for longer,” said Russ Mould, investment director at AJ Bell.
“Triggering the U-turn in the market mood were comments on Monday from Fed Vice Chair Philip Jefferson who implied the US central bank needed to ‘proceed carefully’ with any further rate hikes. This raised hopes in the market that the Fed might not need to lift rates any higher, particularly if higher bond yields were already threatening to act as an anchor on economic activity.”
Already improving sentiment on the back of US rates hopes received an additional boost from reports China was mulling actions to help stimulate the economy.
Bloomberg reported China was exploring the issuance of 1 trillion yuan ($137 billion) in government debt to be spent on major infrastructure projects.
The prospect of significant construction projects in China fired up the FTSE 100’s natural resources, with miners Anglo American, Antofagasta and Rio Tinto enjoying solid gains. Prudential jumped 3.9% on hopes of better trading conditions in China.
The risk-on sentiment in equities was reflected in a 6% rally for Ocado, the FTSE 100’s top riser.
Spirax-Sarco was the top faller after JP Morgan analysts cut their price target to 11,100p from 11,500p.
BP & Shell, Tesco and UK Housebuilders with interactive investor’s Victoria Scholar
The UK Investor Magazine was delighted to welcome Victoria Scholar, Head of Investment at interactive investor, for a deep dive into a selection of UK and US equities.
We discuss:
- BP (LON:BP)
- Shell (LON:SHEL)
- Persimmon (LON:PSN)
- Metro Bank (LON:MTRO)
- Tesco (LON:TSCO)
- Nike (NYSE:NKE)
- Netflix (NASDAQ:NFLX)
We frame the conversation in the context of current macro themes and the human tragedy unfolding in the Middle East.
We look at oil prices and how the conflict could spark a super cycle in fossil fuels. Victoria provides insight into the thinking in the underlying commodity markets and compares this to the motivations of equity investors.
Victoria explains the cyclicality and defensive nature of a number of stocks and finishes with a look at Netflix’s upcoming results.
Gold prices shoot higher as the Middle East conflict unfolds
Gold prices are up by 1.85 percent on Tuesday as market uncertainty, driven by an escalating Israeli-Palestinian conflict, grows.
Gold has gained this week as investors rush to the safe haven as geopolitical risk rises. The yellow metal last traded at $1,859 on Tuesday.
Other precious metals also rose with platinum gaining 0.4 percent and silver by 0.2 percent on Tuesday.
Gold prices snapped a losing streak after the Palestinian military group Hamas launched a surprise attack on Israel on Saturday, resulting in a state of war being declared by both parties. Gold had been steadily declining after a raft of data suggested inflation was falling.
Tensions also saw oil prices rise on Monday but this rally began to fade on Tuesday with Brent crude slipping to $87.
Chinese property giant Country Garden defaults on debt payment
On Tuesday, Chinese property giant Country Garden Holdings disclosed in its filings to the Hong Kong Stock Exchange that the company has failed to make a due-to-Monday offshore debt payment of 470 million Hong Kong dollars (48,98 million GBP), further highlighting that they might not be able to pay off all of Country Garden’s current debt.
Country Garden’s shares fell by 10% in Hong Kong overnight.
Country Garden avoided default in September by getting an extension on offshore private bond debt payments. Nonetheless, a sector-wide crisis in China has been hurting Country Garden’s liquidity position and heightening the risk of default.
In its filings with the Hong Kong Stock Exchange, the company further stated that, amid the crisis, they are uncertain they would be able to meet other payments due in the coming periods.
Many Chinese property giants have been defaulting as the result of an inability to pay off debt.
Evergrande, another major Chinese property company, currently has an outstanding debt of $31.7 billion in bonds, repurchases, and collateral obligations. Their shares also fell overnight.
AIM movers: YouGov outperforms sector and Light Science Technologies stake increase
Capital Metals (LON: CMET) shares have recovered by two-thirds to 2.5p after the minister of the environment in Sri Lanka lost his job after being expelled from his political party. The company believes he has been the main reason it has had trouble with its mineral licences. The share price is the highest it has been since May.
Market research firm YouGov (LON: YOU) reported a 61% underlying improvement in pre-tax profit to £56.4m. Net cash was £107.2m at the end of July 2023, although this is before the proposed acquisition of the GfK consumer panels business. Custom research is growing fastest. The US has been a tougher region. The share price increased 20.3% to 830p.
X-ray imaging company Image Scan (LON: IGE) returned to profit last year. Revenues were 50% ahead at £3m and the pre-tax profit is around £100,000. Net cash is better than expected at £960,000. Pre-tax profit could double this year. There was a 14.7% share price rise to 1.95p.
A strong interim trading statement from Intercede Group (LON: IGP) with revenues growing by 15% has led to a 10.2% improvement in the share price to 48.5p. This means that identity management software supplier is on course to improve full year revenues by 10% to £13.3m, although pre-tax profit is expected to fall from £1.1m to £800,000. Contract wins improve the visibility of revenues.
Pension SuperFund Capital has made an agreed bid of 60p/share for STM Group (LON:STM), which values the financial services company at £35.6m. Shareholders also receive a deferred consideration unit worth up to 7p/share based on the net attrition rate of customers between now and when the bid gains full regulatory approvals and becomes effective. The share price moved up 9.52% to 57.5p.
FALLERS
Dr Graham Cooley has raised his stake in Light Science Technologies (LON: LST) from 5.25% to 6.16%. Even so, the share price declined 6.9% to 2.7p.
Atlantic Lithium (LON: ALL) has been granted permission by the authorities in Ghana to divert two transmission lines that run across the mining areas of the Mankessim prospecting licence. This is where the Ewoyaa lithium project is sited. The share price is 2.94% lower at 24.8p.
Two companies have fallen ahead of results tomorrow. Shares in software company Netcall (LON: NET) fell 2.98% to 81.5p. Energy and water efficiency company Eneraqua Technologies (LON: ETP) is down 2.63% to 92.5p.
Karelian Diamond Resources (LON: KDR) has completed a pitting programme over more than 20 kimberlite target locations in the Kuhmo region of Finland. They are up-ice from the green diamond discovery. Once the highly anomalous samples are identified a drilling programme will commence. The share slipped 2.33% to 4.2p.
Greencore shares surge as buyback announced and profit set to exceed expectations
Convenience food producer Greencore said profit was set to exceed prior expectations for the 2023 full year as revenue jumped 13%.
Greencore shares were 15% higher on Tuesday after the group said they saw adjusted operating profit in a range of approximately £74m-£76m.
The strong performance has provided Greencore with the opportunity to expand recent share buybacks with an additional £15m. Net debt is estimated to fall £25m to £155m by the end of the year.
“The Greencore team has delivered a strong second half performance in what was a difficult seasonal comparative period and against the backdrop of inflation and a challenging consumer environment,” said Dalton Philips, Chief Executive Officer, Greencore.
“We continue to drive operational improvements across the business underpinned by our commitment to quality and customer service. While macro-economic uncertainty remains, we are pleased with the expected FY23 outcome and are committed to driving an improved financial performance in the period ahead.”