Aquis weekly movers: Increased trading in KR1 shares

Andrew Hore
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Aquis weekly movers: Increased trading in KR1 shares

A sharp increase in the trading of KR1 (LON: KR1) shares on Friday gave the share price a boost. There were more than 485,000 shares traded, which was similar to the number traded in the rest of the week. The share price of the digital assets investor jumped 23.3% to 63.5p, which is the highest it has been for more than one year.

The Arbuthnot Banking Group (LON: ARBB) shares rose 0.5% to 945p ahead of interim results on Tuesday 18 July.

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Fallers

VVV Resources (LON: VVV) reported 2022 figures after the market closed on the previous Friday. This enabled the suspension of share trading to be lifted and the price fell 14.3% to 15p. VVV Resources continues to seek mineral projects to invest in but has yet to find a suitable one. There was £208,000 in the bank at the end of 2022 following a £170,000 cash outflow during the year.

Ananda Developments (LON: ANA) released its figures for the year to January 2023 showing an increased loss of £1.29m. The medicinal cannabis company had cash of £19,000 at the end of January 2023. Since then, £427,000 was raised at 0.3p/share and £2.92m of loan notes were converted into shares. Cannabis medicines developer MRX Global was acquired after the year end. Costs will reduce when commercial cultivation and manufacturing commence. There was a mixture of buys and sells during the week, but by far the largest deal was a sell worth £5,200 at 0.52p/share. The share price fell 7.76% to 0.535p.

Personalised treatments developer EDX Medical Group (LON: EDX) has appointed Erik Jensen as commercial director, UK and Northern Europe. He has worked with diagnostics firms. The share price slipped 7.41% to 3.125p. There was a sale at the beginning of the week at 2.9p/share.

SuperSeed Capital (LON: WWW) has agreed an admission facility with the Aquis Stock Exchange. VSA Capital (LON: VSA) has 100,000 warrants exercisable at 112p and any of these warrants exercised will be announced at the end of each month rather than on the day of issue. The share price slipped 5.71% to 82.5p.

In the six months to April 2023, Hydro Hotel, Eastbourne (LON: HYDP) reported flat turnover of £1.8m. Gross margins fell, and overheads increased which meant that the hotel operator swung from a £22,000 profit to a loss of £171,000. The share price is 5% lower at 950p.

AIM weekly movers: Helium One Global obtains rig

Andrew Hore
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AIM weekly movers: Helium One Global obtains rig

Helium One Global (LON: HE1) has bought an Epiroc Predator 220 drilling rig so that it can start drilling the Tai-C well at the Rukwa site in Tanzania by September. An experienced crew will be required for this. Costs will be higher as they will no longer be shared with Noble, which has made its own arrangements. The share price rebounded 92.2% to 9.8p, which is the highest it has been for more than one year.

Deltic Energy (LON: DELT) has reported an increased recoverable resource of 99mmboe for Pensacola oil and gas prospect, where it has a 30% working interest. Canaccord Genuity has increased its gross unrisked Pensacola NPV10 value from $450m to $840m. Deltic Energy is likely to farm-down its working interest from 30% to 20% and that would fully finance two wells. Canaccord Genuity has raised its target price from 205p to 240p. The share price increased 80.2% to 41p.

STM Group (LON: STM) has received a potential cash offer of 70p/share from pensions company PSF Capital GP II Ltd. The cross border financial services provider has agreed in principle to this offer. The share price has not been that high for five years. There are a number of regulatory hurdles that will have to be negotiated before the bid can be completed, so even if a bid is announced it may take a while to go unconditional. The share price jumped 74.1% to 47p.

Healthcare investment company Intuitive Investments Group (LON: IIG) is calling a general meeting and publishing a prospectus to enable a move from AIM to the Specialist Funds Segment of the London Stock Exchange. Existing shareholders are being offered the chance to realise some or all of their shareholding through a tender offer for 17.4% of the share capital at 5.25p/share. This could cost up to £675,000. The investment strategy will be adapted. The share price is 50% ahead at 7.5p.

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Fallers

Fiinu (LON: BANK) has not been able to raise the cash it requires to reapply for a banking licence. Fiinu has completed the development of the Plugin Overdraft. Costs will be reduced in the company’s subsidiaries. There was cash of £4.3m at the end of June 2023. This is enough to scale down the operations and meet financial obligations. Fiinu will try to secure the finance it requires but it may end up selling the underlying business. The share price dived 69.4% to 1.95p, which is an all-time low.

Zoo Digital (LON: ZOO) has been hit by the screenwriters’ strike in Hollywood in the first quarter. They went on strike during the period and the film actors started a strike at the end of the week. On top of this, major streaming clients have been reducing spending because of the losses being made by the services. This has cut demand for translation and other services. Zoo did better than expected in 2022-23 because of a change in accounting policy, but the pre-tax profit forecast for the year to March 2024, has been slashed from $10m to $3.3m. The Zoo Digital share price dipped 43.8% to 66p. Facilities by ADF (LON: ADF) shares have also fallen 16.8% to 46.2p on the back of the latest strike announcement. It provides facilities for TV and film productions, which were still shooting existing scripts but are likely to stop production now that the actors are on strike. This depends on their contracts.

IP Group has reduced its shareholding in Mirriad Advertising (LON: MIRI) from 14.4% to 10.6%. The share price fell 36.7% to 1.425p.

Totally (LON: TLY) increased full year pre-tax profit from £1.3m to £1.8m but the healthcare services provider warns that this year will be tougher. The total dividend has been cut from 1p/share to 0.625p/share. The main growth is coming from elective care services, where Totally is helping the NHS to reduce waiting lists. The loss of four contracts hit urgent care revenues and a lack of new tenders means that it will be difficult to rebuild them. David and Monique Newlands have reduced their shareholding from 5.14% to 3.2%. Trafalgar Capital Management edged up its stake from 2.9% to 3.1%, while Stonehage Fleming raised its stake from 11.96% to 12.2%. The share price declined 30.1% to 11.875p.

FTSE 100 gains to wrap up a ‘blockbuster’ week

UK Investor Magazine
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FTSE 100 gains to wrap up a ‘blockbuster’ week

The FTSE 100 was heading into the weekend with a further gain on Friday after what AJ Bell analysts have called a ‘blockbuster’ week.

Softer US inflation data and a continued rally in US tech stocks lifted sentiment and helped the FTSE 100 recover from the worst levels since December 2022.

The FTSE 100 traded 0.3% higher to 7,463 at 13.20pm on Friday. The FTSE 100 touched 7,230 last Friday.

“The FTSE 100 squeezed out another drop of happiness at the end of what’s been a positive trading week for equities. The UK blue chip index rose six points to 7,446, putting it on track to end the week 2.6% higher as US inflation pressures ease, raising the hope that the Federal Reserve is near to the end of its interest rate hike cycle,” said Danni Hewson, head of financial analysis at AJ Bell.

FTSE 100 movers

A 17% rise in reported retail revenue failed to spark interest in Burberry shares on Friday as shares slipped 0.1%.

“Burberry has reported a 19% jump in retail revenue for its first quarter, as the luxury giant proves it’s still very much flavour of the month overall, said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.

“Underneath the hood, things aren’t quite as rosy as they might appear though. A large reason for the uplift stems from a rebound in demand from Asia and especially mainland China, after restrictions this time last year dented performance. European tourists also helped tow the top line in a big way. This increase helps to mask an 8% drop in the Americas, where a reduction in domestic spending was only partially offset by people spending abroad.”

Spirax-Sarco Engineering was the FTSE 100 top gainer after being upgraded to buy by analysts at UBS. A buy rating for AstraZeneca helped the pharma giant 2% higher. HSBC started Astra as a buy with a 13,250p target.

Croda International was the top faller after Barclays analysts cut their price target to 6,600p. Croda was down 2.2% to 5,678p at the time of writing.

Equity income: the UK is now once again the most attractive market for the income investor

Aberdeen Investment Trusts
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Equity income: the UK is now once again the most attractive market for the income investor

Charles Luke, Investment Manager, Murray Income Trust PLC

  • The UK is a very international market with around half the revenues of UK-listed companies generated in the United States and Asia Pacific, with Europe also holding a major share.
  • The UK market trades at an approximate 20% discount to global equities.
  • The yield premium for the UK market is now at its highest point for the last 15 years.

It is some years since UK equity income portfolios were the toast of the town for the core of an investment portfolio. Investors have been seduced by the charms of global income portfolios. After all, why not have the whole world at your fingertips rather than just a single market? The reality is more nuanced.

The UK is an international market. Many companies listed on the UK market draw their sales from around the world, which means they are not dependent on the UK’s – admittedly sluggish – domestic economy. The United States and Asia form around half the revenues of UK companies, with Europe another significant chunk. Investors are already getting global income from their UK portfolios.

But why not just buy a global income portfolio and get the broadest possible opportunity set? The answer lies in the valuations of UK companies, which have been pushed lower by weaker confidence in the UK economy and political system. This has left UK share prices cheap relative to their global peers.

The absolute discount to global markets sits at around 35%. However, the UK market has lighter representation in areas such as technology, which tend to trade on higher valuations. Adjusted for these sector differences, our estimates suggest the UK market is at an approximate 20% discount to global equities.

We see this in the rating of UK companies relative to their international peers. A variety of companies in the Murray Income portfolio helps to highlight this: BP trades at a price to earnings ratio around 40% below US-listed Exxon; Diageo’s valuation is around two-thirds that of US distiller Brown Forman as is Rentokil compared to US peer Rollins; Smith & Nephew trades at around 16x its annual earnings, compared to 25x for US-listed competitor Stryker. It is difficult to determine differences in the operations and prospects for these businesses yet there is a chasm in terms of their valuations.

Apart from the global financial crisis, the UK’s market multiple is nearing its lowest point for 30 years. It is cheap in absolute terms, relative to history and also relative to global equities. Investors are getting global income at a knock-down price by investing through the UK market.

Premium dividend

The UK has a long-established and well-developed dividend culture. While other countries have improved their payouts to shareholders in recent years, few can match the track record of UK companies. The yield for the FTSE All Share is currently 3.7%, which puts it significantly ahead of most major markets. The S&P 500, for example, yields just 1.7%.

This premium has always existed, but is particularly high today as poor sentiment towards the UK has depressed share prices (yields are expressed as a percentage of the share price). The yield premium is now at its highest point for the last 15 years.

Equally, dividend cover looks healthier than it has for some time. The pandemic allowed many companies to re-set their dividends to more realistic levels. Aggregate dividend cover – the amount of profit a firm makes divided by the dividend it pays out – for the FTSE 100 is now more than 2x, having been below 1.5x as recently as 2016.

It is also worth noting that UK investors in global equity income funds will usually see a drag from withholding tax. This lowers distributable income for overseas-listed investments, but has no bearing for investments in UK-listed companies.

Global trends

The UK market is often seen as old-fashioned, stuffed with yesterday’s companies in mature, low-growth industries such as banking and fossil fuels. This may be true of the UK’s largest companies, but looking beyond the mega-caps, there is an increasing range of companies exposed to exciting global themes, such as digitalisation, the energy transition and emerging global wealth.

Equally, where there are gaps, these are readily plugged. At Murray Income Trust, 20% of the portfolio can be held in overseas-listed companies. This allows us to fill any holes in our exposure or diversify risk in concentrated sectors. At the moment, that exposure includes high quality companies such as Microsoft (Artificial Intelligence), Kone (elevators), Novo Nordisk (diabetes and weight loss), Accton Technology (network equipment), LVMH (luxury goods), VAT Group (semiconductors) and L’Oreal (cosmetics).

In short, if Murray Income Trust were a global income fund focused on high quality businesses, it would look extremely similar to its current make-up. In achieving the aim of a high and growing income (Murray Income Trust is approaching 50years of consecutive dividend growth) combined with capital growth, the UK market serves us very well.

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Important information

Risk factors you should consider prior to investing:

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • The Company may charge expenses to capital which may erode the capital value of the investment.
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG. abrdn Investments Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Both companies are authorised and regulated by the Financial Conduct Authority in the UK.

Find out more at www.murray-income.co.uk or by registering for updates. You can also follow us on social media: Twitter and LinkedIn.

Consumer switching boosts McBride

Andrew Hore
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Consumer switching boosts McBride

Cleaning and detergent products manufacturer McBride (LON: MCB) is benefiting from consumers saving money and switching from brands to lower priced own brands. The fourth quarter was particularly strong and full year figures will be ahead of expectations. McBride is the best performing fully listed company today with a 19.8% increase to 31.15p.

Peel Hunt has upgraded its forecast from a loss of £2.8m to breakeven. The forecast had already been upgraded in April. The previous year’s underlying loss was £29.6m. Margins are expected to continue to improve.

There was 13% growth in volumes in the fourth quarter and the figure for the year to June 2023 was 5.4%. New contracts and higher demand from existing clients has boosted sales.

Net debt was £166.5m at the end of June 2023, which was also better than expected. Working capital was reduced. Debt should come down steadily. No dividends are likely in the short-term.

The full year results will be reported on 19 September. The 2023-24 pre-tax profit forecast has been upgraded from £9.5m to £12m. The shares are currently trading on less than seven times prospective 2023-24 earnings.

AIM movers: Ilika rebounds and Zoo Digital hit by Hollywood strikes

Andrew Hore
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AIM movers: Ilika rebounds and Zoo Digital hit by Hollywood strikes

Batteries developer Ilika (LON: IKA) bounced back after the share price fall following yesterday’s full year figures. Ilika is near to confirming the details of the sub-contracting of manufacturing of its Stereax batters in the US. The share price recovered 12.3% to 36.5p.

Housebuying digital services provider Smoove (LON: SMV) is continuing bid discussions with Pexa Group. The talks were announced nearly three weeks ago. The share price improved 9.31% to 41.1p. Prior to the bid announcement the share price was 31.9p.

Johnson Service Group (LON: JSG) is going to beat full year expectations. The workwear rental business is starting to win new business and the hotel linen business continues to recover. Capital investment has improved efficiency. The share price is 7.61% ahead at 111.7p. Interim figures will be published on 5 September.

Molecular Energies (LON: MEN) has sold 800,000 shares in green hydrogen projects developer Atome Energy (LON: ATOM) at 100p each to CFT Ventures, which is controlled by the former head of Glencore’s oil trading business Mark Crandall. He is also involved in developing other renewable energy projects. Molecular Energies still owns 20.5% of Atome Energy – the share price improved 2.72% to 94.5p. The Molecular Energies share price is 3.52% higher at 117.5p.

Zoo Digital (LON: ZOO) has been hit by strikes in Hollywood in the first quarter. The screenwriters went on strike during the period and the film actors started a strike yesterday. On top of this, major streaming clients have been reducing spending because of the losses being made by the services. This has cut demand for translation and other services. Zoo did better than expected in 2022-23, but the pre-tax profit forecast for the year to March 2024, has been slashed from $10m to $3.3m. The Zoo Digital share price dived 27.8% to 75.5p. Facilities by ADF (LON: ADF) shares have also fallen 10.8% to 45.5p on the back of the latest strike announcement. It provides facilities for TV and film productions, which were still shooting existing scripts but are likely to stop production now that the actors are on strike.

Graphene technology developer Versarien (LON: VRS) has raised £650,000 at 1p/share to help finance the operations until money is raised from disposals. The share price slumped 31.8% to 1.2225p.

Strategic Minerals (LON: SML) investee company Cornwall Resources has been unsuccessfully applied for funds for the Redmoor tin/tungsten project from the Cornwall and Isle of Scilly Council Shared Prosperity Fund. There are plans for the 50% owned company to resubmit the application. The share price fell 13.3% to 0.15p.

Fund manager Premier Miton (LON: PMI) revealed that assets under management declined by 5% to £10.5bn in the quarter to June 2023. That was mainly down to net outflows from funds, plus some negative performance. There was an inflow to fixed income funds. The share price slipped 4.46% to 75p.

Gulf Marine Services – contract extensions could help shares to rise another 50% and still look undervalued

Mark Watson-Mitchell
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Gulf Marine Services – contract extensions could help shares to rise another 50% and still look undervalued

Following news earlier this week of two important contract wins analyst Daniel Slater at Zeus Capital is rating the shares of Gulf Marine Services (LON:GMS) as a Buy, expecting its shares to treble in value.

The Business

The group is a world leading provider of advanced self-propelled self-elevating support vessels.

Its fleet of 13 SESV’s serves the oil, gas and renewable energy industries from its offices in the United Arab Emirates, Saudi Arabia and Qatar.

GMS’s clients in a broad range of offshore oil and gas platform refurbishment and maintenance activities, well intervention work and offshore wind turbine maintenance work, as well as offshore oil and gas platform installation and decommissioning and offshore wind turbine installation.

The group’s assets serve clients’ requirements across the globe, including those in the Middle East, South-East Asia, West Africa, North America, the Gulf of Mexico and Europe.

Broker’s Opinion

Slater is estimating that the current year to December will see revenues lift from $133.2m to $146.7m, with adjusted pre-tax profits rising from $19.5m to $26.7m, raising its earnings to 1.9c (1.7c) per share.

For the coming year he sees $153.9m sales, $40.6m profits and 3.1c earnings.

He has a value of 20p on the shares, while the group’s NAV is 22.6p per share.

Conclusion – shares are capable of rising another 50% and still looking cheap

Since we lasted commented on this group in mid-January the company’s shares have risen almost 48% to 6.9p.

On the basis of the group extending various of its existing contracts and the potential to win even more, this company’s shares could so easily rise another 50% to 9p each and even then look cheap going forward.

Powering up production without draining the batteries

Andrew Hore
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Powering up production without draining the batteries

AIM-quoted AMTE Power (LON: AMTE) and unquoted British Volt show how difficult it is to finance the production of advanced batteries. Building a plant to satisfy potential demand takes millions of pounds and independent companies do not have the finances to do this – or else shareholders will be significantly diluted.
There are alternatives, though. Companies can stick to what they do well – developing the technology. One company is securing production for its batteries that will provide the flexibility to satisfy demand as it increases.
Manufacturing deal
Battery technology IP developer Ilika...

FTSE 100 gains with global stocks as inflation fears ease

UK Investor Magazine
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FTSE 100 gains with global stocks as inflation fears ease

Yesterday’s US CPI reading continued to put wind into the sails of global equities on Thursday as investors positioned for a potential end to the US rate hike cycle.

US CPI fell to 3% in June, while Core CPI inflation fell to 4.8%. These are close to the Federal Reserve’s 2% target but are still high enough to warrant further rate hikes – even if they are intermittent.

Nonetheless, the trend to the downside in US inflation is nothing but good news for stocks FTSE 100 gained 0.3% on Thursday and S&P 500 jumped 0.5% to the highest level in over a year.

While US inflation dropped sharply last month, some think we may be near the end of the road for the current disinflationary trend.

“We do not think inflation is going to come back down to central bank comfort zones by themselves,” said Bruce Kasman, Chief Global Economist at J.P. Morgan.

“Yes, there’s a decline going on. But no, we do not think you’re going to get [core] inflation back below 3% in the U.S. or the euro area this year in an environment where supply has been damaged in a more lasting way and inflation psychology has shifted.”

JP Morgan Research sees the US economy entering a mild recession towards the end of 2023 due to central bank tightening.

FTSE 100 movers

A string of disappointing China economic data releases is increasing bets China will again move to stimulate their economy. FTSE 100 miners and other China-focused stocks are a beneficiary of this trade.

Prudential was 2.4% higher at the time of writing on Thursday, while miners jumped. Glencore gained 2.6%, and Rio Tinto added 1.5%.

Selling resumed in housebuilders on Thursday after a brief mean-reversion rally. The release of a trading statement by Barratt Developments gave investors reason to be concerned as reservations and completions fell in recent months.

David Thomas, Barratt Developments, Chief Executive, commented:

“Whilst the trading backdrop has become more challenging in recent months, with many of our customers facing significant cost of living pressures, we have responded decisively – increasing our reservations into the private rental sector, using incentives for customers in a disciplined way, and flexing our build activity, land-buying and operating costs to reflect market conditions.”

Barratt’s slipped 2.5%, while Taylor Wimpey shed 1.91%.

Predator Oil & Gas discovers potential gas reservoir in Morocco

Andrew Hore
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Predator Oil & Gas discovers potential gas reservoir in Morocco

Fox-Davies has upgraded its target price for Predator Oil & Gas (LON: PRD) from 25p/share to 35p/share following news of NuTech petrophysical analysis for the MOU-4 well in Morocco. The share price jumped 42.3% to 13.875p, which is still lower than the Friday closing price of 15.5p.

The analysis has identified a potential gas reservoir at the top of the Jurassic carbonate target. NuTech interprets two metres of likely gas reservoir with average porosity of 19.9% and average gas saturation of 56%. There are also two other areas of likely gas sands above that level.

A rigless testing result will help to derisk the larger Jurassic structural closure in respect of reservoir development and migration of gas.

Fox-Davies estimates that at a recovery factor of 80% the recoverable volume of gas is 484bcf. The structure is less than 5km from the Maghreb gas pipeline.

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