On Friday, Australian-listed Lynas Rare Earths, which operates only in Malaysia and Australia, said in a press release that it was temporarily shutting down all of its Malaysian operations as the country’s government continuously expressed concerns over the radiation levels emitted during Lynas’s extraction process.
All of the operations, except for the mixed rare earth carbonate processing plant, are to be shut down temporarily.
During the interim shutdown, the mixed rare earth carbonate processing plant will continue to process a minimal amount of the raw materials.
Lynas shares were flat in Australian trade.
During the shut-down of Malaysian operations, the working crew based in the country will be deployed to Australia, where they can continue to work on a rare-earths processing facility start-up in Kalgoorlie, Western Australia.
The conflict in the Middle East drove oil prices higher on Friday, with Brent and WTI heading towards the second straight week of gains.
According to Sophie Lund-Yates of Hargreaves Lansdown: “The oil price has topped $92 a barrel as concerns about recent conflict spreading throughout the Middle East rise. If Iran were to be pulled into the situation, there are fears the oil price could top $150 a barrel for Brent crude. While the demand picture remains muddied, the market is very much reacting to anxiety over supply.”
WTI crude was up 0.74% on Friday, while Brent crude is up 0.65%.
As Israel prepares for a potential ground invasion into Gaza, the concerns around oil supply from the Middle East continue to grow.
On Thursday, the Israeli Minister of Defence told the troops gathered at the border that they should be prepared to move into Gaza soon.
Russia and Saudi supply
In addition to concerns around the Middle East conflict, there are ongoing oil supply shortages from Saudi Arabia and Russia.
According to the official S&P Global Commodities at Sea data, total Russian shipped oil and oil products exports consisted of an average of 5.27 mb/d, the lowest supply of oil from the country since September 2022.
Russia has banned exports of oil and oil products to some countries as the price cap continues to be enforced.
AIM-quoted iodine producer Iofina (LON: IOF) has confirmed that development of the new iodine plant IO#10 is progressing, and it has signed a new brine supplier.
US-based Iofina is building the new plant next to the recently opened IO#9 plant. The new plant should increase capacity to 750 tons. The timing of the start of production has not been confirmed.
Iodine prices remain strong due to strong medical demand and the lack of additional supply. Cash generated from operations should fund the new plant construction.
Canaccord Genuity is maintaining its 2023 pre-tax profit forecast at $9.8m, up from $9.3m in 2022, while the 2024 estimate is $10.7m. The 2023 earnings estimate is 3.8 cents/share, rising to 4.2 cents/share next year.
The forecasts are based on an iodine price of $65/kg, falling to $55/kg in the second half of 2024, which is below the current price. Each additional $1/kg adds $300,000 to EBITDA.
The share price fell 1% to 24p, continuing a decline that has been going on since the summer. The 2023 prospective multiple is eight, falling to seven next year. Net cash should reach $1.9m at the end of 2023.
The Chinese post-pandemic recovery continues to be under threat as the country’s leading real estate companies face a potential collapse and investments in property hit a 9-month low.
The latest Chinese government data shows that for the first nine months of the year, local property investments dropped by 9.1%. Chinese property stocks are at their lowest since 2009.
Chinese real estate mega-giants Evergarande and Country Garden are both in debt. On Thursday, Country Garden missed a $15 million coupon repayment, according to Reuters, based on the information obtained from their sources. The company is now closer than ever to default, a fate that has already met many Chinese big real estate companies.
Evergrande also continues to remain in the centre of the country’s real estate sector-based crisis, with their shares falling more than 5% on Friday.
Reuter’s National Bureau of Statistics-based calculations show that Chinese new home prices are down 0.2% in October, but the drop has lessened since the month-on-month decline that saw August’s new home prices drop by 0.3%.
According to the National Bureau of Statistics of China, the property crisis continues to be fueled further by a lack of investment in the construction of new homes.
Property developers say that, following a short-term increase in sales in Beijing and Shenzhen earlier this year, the market is once again stagnant, as many first-time buyers prefer to stay on the sidelines in this uneasy climate.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said that “Chinese economic data is relatively upbeat apart from property sales and investment, and it’s this differentiation that’s causing alarm bells to ring. The uncertainty surrounding the sector is reverberating in markets, and investors are watching for signs of support measures from the government.”
Harland & Wolff Group Holdings has won a major contract from Canadian oil giant Cenovus Energy to undertake the mid-life upgrade of the SeaRose Floating Production Storage and Offloading vessel.
The £61 million deal follows a letter of intent signed in July 2023 and will see the vessel arrive at Harland & Wolff’s Belfast shipyard in the first quarter of 2024 for a three-month refurbishment.
Harland & Wolff shares jumped over 10% on the news on Friday.
Preparatory work including steel procurement and block fabrication has already begun, expected to generate £10 million in revenues for Harland & Wolff in the 2023 fiscal year.
When work gets fully underway next year, the project will require around 1,000 personnel and subcontractors at its peak.
The SeaRose upgrade will form a significant component of Harland & Wolff’s projected revenues of £100 million and £200 million in 2023 and 2024 respectively.
John Wood, CEO of Harland & Wolff Group Holdings plc, commented on the deal:
“I am delighted that Cenovus has chosen Harland & Wolff as its preferred yard to undertake the mid-life upgrade of the SeaRose. The vessel first came into Belfast in 2012 so we will use our existing knowledge of this FSPO, in addition to applying the latest technologies and innovations for these kinds of highly specialised projects.”
Kitchenware retailer ProCook Group (LON: PROC) is still having a tough time. The share price slumped 15% to 18.225p because of caution about current trading.
Revenues fell 4% to £26.3m in the first half. The second quarter decline slowed to 2%. This was helped by a good summer sale performance in July and August. However, trading has been poorer in September and October and customers are seeking promotional offers.
The ecommerce revenues slumped by one-fifth to £9.1m in the first half and this was partly offset by increased high street sales. Net debt was £3.2m, while there are available facilities of £12.8m.
A new electricals range has been launched. Normally, three-fifths of revenues are generated in the second half. Lee Tappenden has been chief executive of ProCook for a few weeks, so he has not had much time to adapt strategy.
Main Market listed ProCook sells kitchenware, including cookware, tableware and cutlery online and through 58 retail sites. There is a flagship store in Tottenham Court Road. The November 2021 placing price was 145p.
William Currie continues to acquire shares in Brandshield Systems (LON: BRSD) ahead of the cancelation of its AIM quotation on 23 October. His shareholding has increased from 10.3% to 14.75%. The share price improved by 15% to 3.75p – it was 4.5p ahead of the proposal to leave AIM.
Harland & Wolff (LON: HARL) has been awarded a £61m mid-life upgrade contract for the SeaRose floating production storage vessel. The work will be carried out in Belfast and will last three months. It should start in the first quarter of 2024. The share price moved ahead by 13% to 12.75p.
Good Energy (LON: GOOD) has appointed chief operating officer Fran Woodward to the board. She has been with the renewable energy supplier for more than one decade. The recent rise in the share price continues and it is up 11.5% to 243p.
Blue Coast Equity has raised its stake in Everyman Media (LON: EMAN) by buying 2.5 million shares at 55p each. This takes the stake in the cinemas operator to 22.9%, which has increased from 19%. The share price rose 5.45% to 58p.
FALLERS
Networking technology supplier Ethernity Networks (LON: ENET) has lost two-thirds of its value since returning from suspension on Monday and it has declined a further 35.1% to 0.25p on the back of allotting 37.1 million shares at 0.2p each. This relates to a settlement notice for $90,000 from 5G Innovation Leaders Fund. The remaining outstanding balance is £1m.
Eco Buildings Group (LON: ECOB) is another company where the shares have returned from suspension after publishing the 2022 results and the 2023 interims. The share price was unchanged yesterday after trading in the shares restarted, but it has subsequently slumped 31.4% to 17.5p. The Eco Buildings business reversed into the Fox Marble shell on 2 June and the placing at the time was at 55p. The modular housing supplier has transferred equipment from Dubai to its new factory in Durres.
eDrive systems developer Saietta (LON: SED) shares returned from suspension on Thursday afternoon after it published results to the year to March 2023. There were problems with the accounting for the new agreements with Consolidated Metco Inc, which included an upfront payment of €3.3m and an inventory write-down of £2.1m. The share price initially fell from 37.5p to 27p and it has fallen a further 14.8% to 23p. Revenues from continuing operations more than doubled to £4.8m, but the group loss was higher. Orders are in place to build up revenues. There was cash of £7.2m left at the end of March 2023, but by September this was down to £400,000. More cash will be required to finance the delivery of orders.
Marketing services provider Jaywing (LON: JWNG) has appointed Spark Advisory as nominated adviser and Turner Pope as nominated broker. The share price slipped 10.6% to 3.8p. This is the lowest share price for three years, following an increased loss in the first half of 2023.
The Rights and Issues Investment Trust is a high conviction low turnover portfolio of UK small caps and AIM shares. The trust has a long track record of producing market-beating returns for investors willing to accept a higher degree of risk over medium to longer-term horizons.
Marshalls was recently added to the portfolio and provided a level of diversification away from technology shares that dominate the trust’s top ten holdings.
The addition of Marshalls is a demonstration of the management’s willingness to amend their approach to suit market conditions. As well as Marshalls’ selection providing differentiation in terms of sector, Marshalls is a value play amid a portfolio comprised predominantly of growth stocks.
The company is a market leader in the supply of building materials, in particular tiles and blocks used in groundworks.
It is difficult to imagine Marshall’s finding its way into the Rights and Issues portfolio just a year ago.
However, the decline in UK small caps has presented an opportunity in Marshalls for the eventual recovery in the UK small cap space, as well as the wider economy.
Marshalls serves domestic residential building customers, the homebuilding sector and larger infrastructure projects. It is an industry adversely impacted by the macroeconomic environment and while the company’s earnings have suffered, this has been outpaced by the contraction of their earnings multiple.
Marshalls half-year 2023 group sales fell 17% compared to 2022 as volumes suffered in the current environment. Shares have declined from above 800p in 2021 to trade just above 200p at the time of writing.
At the recent UK Investor Magazine Investment Trust Conference, Manager Dan Nickols explained Marshalls’ current Price-to-Earnings ratio provides the chance for the company’s share price to move back to historical averages.
Indeed, Nickols said it wasn’t ‘fanciful’ to expect the Marshalls shares price to double from current levels if profit recovered to prior levels and it was to return to valuation averages over the coming years.
The human tragedy unfolding in the Middle East continued to impact financial markets on Thursday as the FTSE 100 fell with global equities.
The FTSE 100 was down 1% at the time of writing on Thursday.
“Worries about an escalation of violence in the Middle East weighed on stocks around the world. US markets experienced a troubled session last night and negativity spread across Europe and Asia on Thursday,” said Russ Mould, investment director at AJ Bell.
“Unsurprisingly, investors are flocking to supposed safe-haven or defensive assets including insurers and gold which neared a two-month high. Energy stocks were also in vogue as oil prices held firm above $90 per barrel amid fears that Middle Eastern oil supplies could be disrupted by the Israel-Hamas war. A big drawdown on US crude oil inventories has also given support to the oil price this week.”
Risk assets had held up well during the first days of the latest conflict in the Middle East, but the threat of violence increasing across the region has rightly hit sentiment over the past few trading sessions.
FTSE 100 movers
Rentokil Initial shares were exterminated by some investors on Thursday after lower operating profit margins in their key North American business. Shares in the company were down around 20% at the time of writing.
Rightmove shares were having a tough time after a US group agreed on a takeover of rival OnTheMarket. One would expect the new owners to pump cash into OnTheMarket in an attempt to steal market share from Rightmove.
OneTheMarket generated revenues of around £16.8m in their first half, while Rightmove generated in the region of £170m over a similar period.
The London Stock Exchange Group rose 2% after announcing gross profit increased 4.5% in last quarter’s trading.
Despite releasing a reasonably upbeat scoping study for their Monte Muambe project yesterday, Altona Rare Earths shares sank on Thursday in very thin trade.
Altona Rare Earths shares last traded down 9.5% on the day.
The company released the scoping study for their Monte Muambe rare earth located in northwestern Mozambique project yesterday, providing an insight into the economics of the asset.
The evaluation gave the project an upside scenario NPV of $409.9m and capex requirements of $276.3m. Net revenues over the life of the mine are expected to be $3,193.1m.
Cedric Simonet, CEO of Altona, commented on the scoping study results:
“For Altona, the Monte Muambe Scoping Study is a significant milestone. This key deliverable serves as an affirmative initial validation of the Project’s economic viability, enabling the Company to establish its presence amongst other prospective REE producers in Africa. It provides, together with the Mineral Resource Estimate (“MRE”), a solid foundation for the Project’s subsequent progression.
“As the Project moves into its PFS stage, the Company will continue to work towards de-risking Monte Muambe and, with its local partners, to optimise its technical, commercial and financial parameters. We believe the timing for this achievement is impeccable, at a time where the global rare earths supply chain is diversifying away from China’s decades-long domination, and Western processing facilities are starting to come online.”
Altona Rare Earths shares have suffered from illiquidity and are down around 41% since relisting in London.
