AIM weekly movers: Sopheon bid approach

Andrew Hore
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AIM weekly movers: Sopheon bid approach

Product management software supplier Sopheon (LON: SPE) has received a bid approach from IOps Buyer Inc, which is a subsidiary of Wellspring Worldwide Inc. The two companies have agreed in principle to a 1000p/share bid. The share price jumped 84.7% to 905p. Due diligence has been completed and discussions are advanced. Chicago-based Wellspring Worldwide provides software and data systems for managing technology transfer and intellectual property.

Real Good Food (LON: RGD) says first half revenues were 2% ahead at £16.1m, although volumes fell by 10%. October revenues appear set to be 6% higher. The cake decorations supplier has significantly reduced its loss due to higher margins. A shortage of cash has held back growth, but the company could be profitable for the full year. Talks continue concerning the extension of the loan agreement with Hilco Private Capital. Interim results will be published in December. The share price recovered 45.8% to 1.75p.

Explorer Orosur Mining Inc (LON: OMI) reduced its first quarter loss, although there were no revenues. The focus is likely to become the new joint venture lithium asset in Nigeria. The share price advanced 36.6% to 2.8p.

Digital content services provider Zoo Digital (LON: ZOO) has launched a new facility in Chennai, and combined with director buying, that pushed up the share price 34.9% to 49.9p, which takes it back to the level at the end of September. Zoo Digital believes there is significant growth potential in India and that is why it has opened a second facility in the country. Chairman Gillian Wilmot 162,905 shares at 36.99p each.

FALLERS

Velocys (LON: VLS) is the worst performer today because the conditions for the $15m strategic investment from Carbon Direct have not been met. To receive this cash the sustainable fuel developer needs to raise $40m, including $8m already raised, and management is still trying to secure investors. The $15m cash injection is no longer binding. Velocys needs more cash before the end of the year. There is a significant market opportunity in sustainable aircraft fuel, but Velocys is in a weak position when discussing additional funding and the share price slumped 69.8% to 0.31p.

Carbon ceramic disc brakes developer Surface Transforms (LON: SCE) has reduced revenue guidance for 2023 to £8.6m, having generated £6.3m up until October. The previous forecast for 2023 revenues was £13m. There have been problems ramping up production in the second half and it will not be completed until early next year. A new debt facility is being negotiated to enable an increase in annual capacity to £150m. The share price declined 36.6% to 16p.

Powerhouse Energy (LON: PHE) is deferring development of the Longford project in Ireland. It will assess the position with Hydrogen Utopia (LON: HUI). The Powerhouse Energy share price slipped 30.7% to 0.26p.

Mineral sands company Base Resources (LON: BSE) says mining will end at Kwale in December 2024. There is insufficient resource development potential to extend the mine life, which would require significant capital spending. The share price fell 30% to 6.125p. In the quarter to September 2023, ilmenite and rutile prices improved, but zircon was lower. There was $77.2m in cash at the end of September 2023, having paid a dividend of $29.9m on 28 September, which is not much less than the market capitalisation of £71.4m.

FTSE 100 flat after US jobs report, US bond yields sink

UK Investor Magazine
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FTSE 100 flat after US jobs report, US bond yields sink

The FTSE 100 was broadly flat on Friday after markets fielded October’s US jobs report, which missed analyst estimates but supported the Federal Reserve keeping rates on hold again in December.

The FTSE 100 was trading down just 2 points to 7,444 at the time of writing as the jobs report helped erase losses.

The US economy added 150,000 jobs in the month of October, missing economist estimates of 180,000 jobs added. The Federal Reserve will be pleased to see average hourly wage growth slip to 4.1% from 4.3%.

US bond yields sank in the immediate reaction to the release. US 10-year yields fell to 4.56% after touching 5% just last week. This will be supportive of equity markets for the rest of the session if the declines hold.

S&P 500 futures were 0.4% higher.

The US jobs report comes after a busy week for central banks in which both the Federal Reserve and Bank of England kept rates on hold. However, both signalled they would react to economic conditions and did not rule out further rate hikes.

Today’s jobs report does not provide any reason for the Federal Reserve to hike rates again in the short term, but it is not weak enough to bring rate cuts back into the narrative.

FTSE 100 movers

Ocado was the FTSE 100’s top gainer on Friday as it continued the rebound from a catastrophic sell-off. Sainsbury’s earnings this week will help sentiment around Ocado’s shares as hopes of a bid from Amazon fizzle out.

Sainsbury’s itself was also stronger again after reporting rising sales and healthy margins earlier this week.

The leisure sector was heavily hit on Friday as interContinental Hotels shed 3% and Whitbread fell 2.4%.

Currys sells Greek business and boosts its balance sheet

Andrew Hore
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Currys sells Greek business and boosts its balance sheet

Electricals retailer Currys (LON: CURY) is selling is Kotsovolos business and this will move the company into net cash. The share price improved 4.24% to 47.93p, but it is still not much higher than its recent 10-year low. Liberum estimates a sum of the parts valuation of £1.19bn, compared with a market capitalisation of £543m.

Kotsovolos has outlets in Greece and Cyprus, and it is being sold to Public Power Corp for an enterprise value of £175m. Net proceeds are expected to be £156m and pro forma net cash excluding leases for Currys would be around £50m. The business generated 7% of group sales.

Currys will be left with its retail operations in the UK and Nordics. The lower interest charge should offset the loss of profit contribution.

Management plans to discuss pension contributions with the pension trustees in order to reduce the pension deficit and cut ongoing contributions.

Liberum believes that Currys could become a bid target. Currently, the prospective multiple is little more than six.

Sam Bankman-Fried, aka the “Crypto King,” was found guilty of FTX fraud

Eve Katz
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Sam Bankman-Fried, aka the “Crypto King,” was found guilty of FTX fraud

On Friday, Sam Bankman-Fried, formerly in charge of one of the largest cryptocurrency exchanges globally, was convicted of fraud and money laundering following a month-long trial in New York.

He had received seven charges related to fraud and money laundering. Mr. Bankman-Fried pleaded not guilty.

His sentencing is scheduled for March 28 of next year. It is unclear for how many years he will be sentenced, but it is likely to be decades.

The verdict was reached after five hours of deliberation.

The 31-year-old ex-millionaire was arrested a year ago, right after his organisation, FTX, went bankrupt.

FTX, a cryptocurrency exchange, was valued at $32 billion (£26 billion) before it went bankrupt in November last year, leaving $8 billion in customer funds unaccounted for.

He was found guilty of lying to investors and lenders and stealing billions of dollars from FTX.

The court sketches of the moment he was found guilty show his parents hiding their reactions (likely tears) by covering their faces with their hands.

US attorney Damian Williams said to the press after the hearing that “Sam Bankman-Fried perpetrated one of the biggest financial frauds in American history—a multibillion-dollar scheme designed to make him the king of crypto. This case has always been about lying, cheating, and stealing, and we have no patience for it.”

Apple sales drop despite record-breaking iPhone sales

Eve Katz
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Apple sales drop despite record-breaking iPhone sales

On Thursday, the tech giant Apple reported a 1% revenue dip to $89.5 billion (£73.3 billion) for the three months ending September 30, compared to the same period last year.

The company reported $23 billion in profits, driven by record iPhone sales over the past three months. The latest iPhone 15 came out in September and has been aiding Apple’s sales.

Apple’s shares are down 3% at the time of writing in the pre-market.

Apple sales have been dipping for four quarters, raising concerns about demand for its products and services.

Sales for Macbooks, Mac computers, and iPads dropped following a surge in interest after the lockdown.

Mac computers, for instance, fell to $7.6 billion for the quarter, a drop from $11.6 billion the previous year.

According to Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, “uncertain economic conditions, higher-for-longer narratives, and a slump in China have created a potent force, and not a good one for the likes of Apple. Convincing people to upgrade a loftily-priced iPhone at a time of year that’s already tough on wallets in the current climate just became a much harder task indeed.”

However, Apple Chief Executive Tim Cook said that despite current shortages in sales, the team believes “that later this quarter, we’ll reach a supply-demand balance” .

AIM movers: Bid approach for MC Mining and Surface Transforms guidance slashed

Andrew Hore
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0
AIM movers: Bid approach for MC Mining and Surface Transforms guidance slashed

MC Mining (LON: MCM) shares continue to rise following yesterday’s announcement of a bid approach. Two companies that own a 64.5% stake in the South African coal miner say they intend to acquire the shares they do not own, and the indicative offer is A$0.2 to A$0.23 for each share. Independent directors are assessing the indicative offer. The share price is 15.6% ahead at 9.25p.

Chain manufacturer Renold (LON: RNO) will be reporting interim figures on 15 November. The share price improved 3.77% to 28.9p.

Thor Energy (LON: THR) has completed the stage 2 earn-in spending required to acquire a further 29% of the Alford East copper-gold-real earths project in South Australia. This takes the stake to 80%. Thor Energy has issued 9.26 million shares at A$0.027 each, plus 18.5 million warrants exercisable at A$0.03 each, to Spencer Metals as consideration for the stake. The Thor Energy share price rose 3.23% to 1.6p.  

CAP-XX (LON: CPX) says product sales improved by 35% to $900,000 in the past four months. October tends to be a good month for the supercapacitor manufacturer, and it generated one-third of the revenues. Orders suggest a further improvement in revenues and the new sales and distribution strategy is starting to pay off. The share price edged up 2.86% to 0.9p. This is just above the all-time low.

FALLERS

Carbon ceramic disc brakes developer Surface Transforms (LON: SCE) has reduced revenue guidance for 2023 to £8.6m, having generated £6.3m up until October. The previous forecast for 2023 revenues was £13m. There have been problems ramping up production in the second half and it will not be completed until early next year. A new debt facility is being negotiated to enable an increase in annual capacity to £150m. The share price slumped 29.8% to 16.5p, which is the lowest it has been since the summer of 2020.

Eurasia Mining (LON: EUA) executive chairman Christian Schaffalitzky has exercised six million options at 0.42p each. The share price declined 13% to 2.35p.

Roebuck Food Group (LON: RFG) is acquiring Motherwell-based food ingredients supplier Moorhead & McGavin for £2.225m in cash and shares. A placing will raise up to £2.5m at 13.5p/share. The share price declined 3.33% to 12.78p. Moorhead & McGavin supplies cereals, pasta and rise to the catering sector and generated revenues of £7.26m and EBITDA of £377,000 in 2022. Roebuck Food Group sold its cold storage division, and it has been seeking an acquisition to scale up the business.  

ARC Minerals (LON: ARCM) says the conditions for the agreement with Anglo American, which has acquired 70% of the joint venture that owns the Zambia copper project. Drilling has started at one of the licence areas. The deal will provide cash for ARC Minerals to use to develop other projects. WH Ireland believes fair value is 5.8p/share, but the share price dipped 2.78% to 3.5p.

Ocado shares: what’s happening at the technology and premium grocery delivery company

UK Investor Magazine
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Ocado shares: what’s happening at the technology and premium grocery delivery company

Ocado shares have been on a tear this week, with the food technology company topping the FTSE 100’s top gainers for the past few trading sessions.

The Ocado share price was again the top riser at the time of writing on Friday, with gains of over 4%.

We look at the factors driving recent price action in Ocado shares as the stock rebounds from the 460p mark.

Interest Rates

Although Ocado is predominately associated with its premium grocery delivery service, the company is viewed by many market participants as a technology company. Ocado has developed proprietary technology concerned with the distribution of groceries, which is used by their delivery service and third-party supermarkets.

Ocado’s Customer Fulfilment Centres (CFC) improve the way grocery companies prepare and organise deliveries ready for distribution using artificial intelligence and robots.

This side of the business has earned Ocado the label of a ‘tech stock’ in some quarters, meaning the company trades in a similar fashion to US tech giants like Meta, Apple and Amazon.

The hiking cycle increased the risk-free rate and made technology-focused equities less attractive over the past 18 months. Those with lofty valuations, including Ocado, were punished.

After the Federal Reserve and the Bank of England both kept interest rates on hold this week, technology shares have received a bid as investors position for the end of the hiking cycle and a period more favourable for tech stocks. This can explain the rally in Ocado shares this week.

Ocado is oversold

Ocado shares entered oversold territory in late October and built a base around 460p. Having found support after shares halved from July highs in the region of 950p, the stock just needed a catalyst to spark a bounce.

Such a catalyst was found in interest rate decisions this week and a general uptick in the technology sector.

Strong Sainsbury’s Earnings

Sainsbury’s earning update released this week will have encouraged Ocado investors. Sainsbury’s, seen as one of the premium supermarkets, has managed to increase sales by offering lower-priced groceries and running offers to attract shoppers.

Ocado shareholders will be hoping Ocado’s efforts to attract customers and increase basket sizes by competing on pricing through special offers will have a similar impact.

The latest data from Kantar showed the joint venture between Marks & Spencer and Ocado enjoyed a 9.6% uplift in sales in the four weeks to 1st October as market share increased to 1.7% from 1.6%.

Lloyds shares: three economic indicators investors must watch closely

UK Investor Magazine
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Lloyds shares: three economic indicators investors must watch closely

The Lloyds share price is in no man's land. The decision by the Bank of England to keep interest rates on hold in November almost confirms Lloyds has squeezed all it can from the current rate hike cycle.
Key income measures will now face increased pressure at a time when economic conditions start to deteriorate.
Lloyds investors must understand and keep a close eye on these three critical economic indicators in the coming months to gauge the impact on the bank's earnings.
Spoiler: CPI or GDP aren't included.
With a cap effectively placed on Lloyd's top line with net interest margins peakin...

Are Australian wildfires making the country “uninsurable”?

Eve Katz
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Are Australian wildfires making the country “uninsurable”?

Australia is currently on fire. On Thursday, around 76 fires were raging in Queensland, with nine in New South Wales to the south.

Western Downs (Queensland area) Mayor Paul McVeigh even said to Australian reporters on Tuesday that “some areas are still too hot to get into. Unfortunately, we are expecting that number to go up”.

One wildfire in eastern Australia has reportedly annihilated over 50 homes and consumed 49,000 acres of farmland and scrubland.

Dozens of bushfire warnings are still in place across southern Queensland and northern New South Wales.

At the time of writing, over 10 million hectares of land were on fire all across Australia.

In comparison, all of England’s land area adds up to 13 million hectares. So, the equivalent of almost the entirety of England is on fire.

Some fires are so big that they cannot be put out; they are just controlled by the firefighters. Two people have been reported dead.

This, according to the Australian government, marks the early start of the country’s wildfire season, which typically peaks in the Southern Hemisphere summer.

In the Northern Hemisphere, we typically associate the three months of December–February with colder weather and (sometimes) snow. In Australia, these three months are associated with big fires.

Australian Prime Minister Anthony Albanese said on Tuesday that “these are heartbreaking scenes when people lose their houses. This is a difficult period, and it’s going to be a difficult summer.”

Experts anticipate this upcoming season is highly likely to be the most destructive since the 2019–20 Black Summer fires, which claimed 33 lives, destroyed over 3,000 homes, and burned 19 million hectares of land.

Insurance crisis

As extreme weather events intensify, the maintenance and repair costs for Australian properties—homes, workplaces, and buildings—go up. In response, insurance companies are raising premiums to cover the higher costs of claims and reinsurance.

Insurers are hiking up premiums, some by 10–11% annually, in response to inflation, soaring global reinsurance rates, and Australia’s growing climate risks.

In Sydney, premiums have reached A$20,000–A$30,000 per annum (£10,557–£20,557).

Mat Jones, general manager of public affairs at the Insurance Council of Australia (ICA), said in a comment to Australian SBS News that:

“Reinsurers [the insurers of insurance companies], who are global players, are re-rating Australia. Apart from earthquakes and volcanoes, we get the brunt of all of the extreme weather events. We’ve had flooding, cyclones, and terrible fires, and that risk in Australia is putting upward pressure on premiums.”

With the increased pressure from reinsurers, Australian insurers are forced to re-evaluate insurance costs for people in high-risk areas (and not only).

In flood-prone spots like the Western Sydney Plains, residents are now dealing with not only an increased climate-change-driven risk of floods but also growing insurance costs because they are in a high-risk area.

Insurance bills for storms and floods since January 2020 have cost over $12.3 billion, with 788,000 claims—equal to one in 25 adult Australians, ICA reports.

According to the Climate Council’s 2023 “Uninsurable Nation: Australia’s most climate-vulnerable places” report, the main risk to properties is riverine flooding, which accounts for 80% of the properties expected to be uninsurable by 2030.

Other major threats include bushfires and flash flooding, which will contribute to properties becoming uninsurable by 2030.

Around 520,940 properties in Australia, or one in 25, will be deemed ‘high risk’ and effectively uninsurable due to annual damage costs from extreme weather and climate change by 2030.

Additionally, 9% of properties, or one in 11, will be classified as’medium risk’ by 2030, facing annual damage costs ranging from 0.2% to 1% of the property replacement cost. These properties are at risk of being underinsured.

In a 2022 assessment, the Commonwealth Bank identified approximately 38,000 properties (with mortgages totaling $11 billion) facing significant cyclone exposure risk. Additionally, 56,000 properties (worth $19 billion) were identified as flood-prone, and 5,000 properties (valued at $2 billion) were deemed at risk of fire.

Many currently “at-risk” areas are likely to become “uninhabitable” by 2030, the report asserts.

The Climate Council further notes that, regrettably, in the past eight years, the federal government hasn’t effectively addressed climate change or prepared Australians for increasingly severe weather despite funds being available.

It is then further stressed in the report that the crucial measure for all candidates in the upcoming federal election is their endorsement of policies promoting significant emissions reductions in the 2020s. Investments in national adaptation and disaster risk reduction funding must be increased in order to better equip Australians for increasingly severe weather events.

Exploring Vietnam Holding’s portfolio companies with Craig Martin

UK Investor Magazine
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Exploring Vietnam Holding’s portfolio companies with Craig Martin

The UK Investor Magazine was thrilled to welcome Craig Martin, Chairman of Dynam Capital, the manager of Vietnam Holding, for a deep dive into the trust’s portfolio companies.

Download the Vietnam Holding annual report

Craig has provided a comprehensive analysis of the Vietnamese economy in previous podcasts. In his latest instalment, Craig Martin offers deep insight into three portfolio companies; FPT Corporation, Petrovietnam Technical Services, and Gemadept.

FPT Corporation is the portfolio’s largest holding with 15% weighting. The company provides technology and STEM education services and is positioned to benefit from Vietnam’s aims to do more in the semiconductor value chain.

Petrovietnam Technical Services (PVS) is a renewable energy transition play. Vietnam Holding feels PVS could be a key winner in Vietnam’s plans for NetZero by 2050 – through its ambitions to be a leading producer and exporter of renewable energy. In addition, PVS is working with Singapore to build the world’s longest subsea electricity cable (1000 km to export 1.2 GW, 10% of Singapore’s energy need).

We finish with a look at Gemadept, an operator of seaports and air cargo in Vietnam.

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