OptiBiotix Health shares were firmly higher on Wednesday after announcing the development of a new sweetener product.

OptiBiotix has developed a portfolio of patented, zero or low-calorie sweet dietary fibres, called SweetBiotix® which avoids the health concerns associated with sugars and syrups.

OptiBiotix Health shares were around 29% at 9.30am on Wednesday.

The new products will target a sugar substitutes market estimated to be worth $18.8 billion in 2023 and forecast to grow to $24.3 billion by 2028.

The new product will have a broad range of applications including fizzy drinks, snacks, bakery products, dairy products and cereals.

“The development of a unique product concept within an industry is high risk, particularly in the food industry where you are competing in an industry dominated by a small number of large global players with demanding requirements,” said Stephen O’Hara, CEO of OptiBiotix.

“OptiBiotix has looked to overcome these challenges by working closely with partners during the product development process and believes it has created a product portfolio of sweet prebiotic fibres, called SweetBiotix®, which meet a large and growing unmet industry and consumer need. SweetBiotix® are unique in being classified as dietary fibres creating the opportunity to replace unhealthy calorific and cariogenic sugars with healthy fibres in a wide range of food and beverage products or as an ingredient in its own right.”

“With growing industry and consumer health concerns over traditional sugars and sweeteners, the approaching commercialisation of the SweetBiotix® family of products offers shareholders the potential for a significant enhancement in the value of the Company.”

Watkin Jones shares were in free fall on Wednesday after the build-to-rent and student accommodation company said remedial work and slow market conditions would impact earnings.

Watkin Jones shares were down around 36% at the time of writing.

The company announced it may fail to complete targeted forward sales deals by fiscal year-end due to rising interest rates and low market liquidity. Watkin Jones also plans to take a £10 million impairment charge on certain assets given the increased cost of funding and macro-economic backdrop.

With property sales stalled, Watkin Jones said it likely won’t materially improve on its £2 million underlying pre-tax profit recorded in the first half of the year. For fiscal 2024, it forecasts a profit before tax of £15-20 million.

Adding to its woes, Watkin Jones aims to boost provisions for remedial work on legacy properties by £30-35 million, spread over five years. This follows its decision to sign the UK government’s Responsible Actors Scheme to reimburse funds for rectifying safety issues in residential buildings.

Its net cash position is £36 million and the company says its balance sheet will allow for a degree of agility going forward.

London’s leading index did little to inspire investors on Tuesday, with attention firmly fixed on US bank earnings and tomorrow’s UK inflation data.

The FTSE 100 was up 3 points to 7,409 at 14.00 on Tuesday.

“After a decent showing on Wall Street last night, European markets were less enthusiastic with most of the major indices struggling to find direction,” said Danni Hewson, head of financial analysis at AJ Bell.

UK markets will be looking forward to the release of June’s UK inflation reading set for release tomorrow morning. Economists forecast the UK CPI inflation rate to fall to 8.2% in June from 8.7% in May.

There is a divergence in inflation rates in major global economies, and tomorrow’s reading will have implications for FX markets and the FTSE 100.

Ocado

Ocado was the standout FTSE 100 performed on Tuesday as the food retailer and technology company soared 16% after releasing a reasonably upbeat half-year report.

Group revenue grew 9% to £1.4bn as their technology solutions revenue surged 59%. After reporting an EBITDA loss in 2022, Ocado produced £16.6m EBITDA in the first half of 2023. This evidently pleased investors and worried Ocado’s short sellers.

“There are two ways of looking at Ocado’s results. The business has generated a small EBITDA profit versus market forecasts of a loss. Sales are up across all of its divisions and clients are busy opening new fulfilment centres or reaping the benefits of Ocado’s system through improved operational performance. Ocado even believes it could win contracts outside of the grocery sector for its technology,” said Danni Hewson.

“However, a bear would point to ongoing pre-tax losses for the group, continued slow pace in signing up new partners, and pedestrian gains in the total number of active customers for its UK retail operations.

“That life isn’t getting any worse for the company is enough to satisfy the market. Although what matters to most investors is whether Ocado remains a takeover target. Rumours that Amazon wanted to buy the business breathed new life into the share price in recent weeks but the retail giant has remained quiet on the speculation.”

FTSE 100 movers

Housebuilders were among the top risers ahead of tomorrow’s UK inflation data. If inflation falls more than expected, it lessens the need for further interest rate hikes – something housebuilders desperately need.

Persimmon, Taylor Wimpey and Barratt Developments were 4%-5% higher at the time of writing. Expect sharp moves in the sector as the stock market opens tomorrow if UK inflation comes in hotter than expected.

Telecoms stocks were out of favour, with Vodafone and BT slipping over 1%.

Pelatro is facing delays in collecting $1.1 million in outstanding payments from customers in Nepal, Myanmar and Bangladesh. The issues stem from government regulations in those countries requiring approval for payments to foreign companies. Two customers are also disputing $375,000 of the total owed.

Pelatro shares were down around 46% at the time of writing on Tuesday.

The company said the payment delays will impact their working capital but the board remains confident in eventually collecting amounts awaiting government approval.

Investors appear unwilling to hang around and wait for approvals as cash becomes tight for the customer engagement technology firm.

The payment delays, along with routine procedures, prompted Pelatro’s board to review all outstanding payments. The review uncovered unusual payment delays from four customers totaling $1.1 million of Pelatro’s $4.2 million in receivables.

Pelatro remains in discussions with the customers and expects to eventually collect the government-delayed payments. However, Pelatro has no clarity on timing as the payments require individual government approvals.

The company had $700,000 cash on hand at the end of June. Pelatro forecasts collecting $2.6 million from other customers through September. But based on assumptions and forecasts, Pelatro said they likely need external funding in the fourth quarter depending on timing of the outstanding payments.

The mention of external funding has sent investors running for the hills – understandable given the current market conditions.

This morning’s H2 Trading Update from DX (Group) (LON:DX.) reported that the delivery solutions business will show some 10% uplift in revenues to £470m (£428m).

The group’s brokers have both come out positive and have upped their estimates.

Performing up to Management expectations, the parcel freight, secure courier and logistic services business has seen its expansion strategy going according to plan.

In spite of the current economic headwinds, the group remains encouraged about its growth prospects, while the recent additional Tuffnells Parcels Express volumes secured will help to enhance profitability in the new financial year and beyond.

The financial year ended 1^st July 2023 is expected to generate strong cash flows and net cash up by 39% to £37.6m (£27.0m), which is slightly ahead of management’s target.

That boosted cash balance was after capital expenditure of £10.9m (£6.2m) and the payment of an interim dividend of £3.0m (nil). 

There will be a further update on trading with the full year results, due in early October.

Analyst Opinions – Target Prices 50p to 57p a share

Guy Hewett at finnCap has a Target Price of 57p on the group’s shares.

He is estimating that the year to 1^st July will see adjusted pre-tax profits of £26.0m (£20.3m), lifting earnings up to 3.8p (2.8p) and paying a 1.5p per share dividend (nil).

For the new year he sees £519.2m sales, £32.0m profits, 4.3p earnings and a 1.7p dividend.

Over at Liberum Capital analyst Gerald Khoo rates the shares as a Buy looking for 50p.

For the last year he has £26.7m profits, 3.4p earnings and also a 1.5p dividend.

The current year into 2024 could see £494m revenues, £33.1m profits, 4.0p earnings and a 1.7p dividend.

Conclusion – strong cash balance will fund further expansion

This expanding group’s strong cash balances are exemplary. Its will certainly give it a good pillow against any further ‘headwinds’, especially as its beds down on the agreement to take over 15 former Tuffnells Parcels Express depots and to take on volumes from former Tuffnells customers.

The group’s continued success is built upon its consistent high customer service levels, there is no reason to expect that to change going forward.

The shares of this £196m capitalised company, at just 32p and on 8.4 times historic PE and near 5% yield, offer a very attractive upside.

United Oil & Gas expects to report a drop in revenues to $6.4 million for the first half of 2023, down from $9.8 million in the same period last year. The company attributed this to lower realized oil prices, which averaged around $78 per barrel versus $105 last year.

United Oil & Gas shares were down over 23% at the time of writing on Tuesday and have given up 36% of their value over the past year.

In terms of production, output from the Abu Sennan Licence in Egypt averaged 1,051 barrels of oil per day in H1 2023  (net to United’s 22% working interest), with an additional 93 barrels of oil equivalent per day of gas. Two new development wells came online in Q1 and Q2, helping boost output. However, the ASH-8 well has seen declining production after initial high rates.

Additional drilling is planned for H2 2023, including an exploration well in the ASM prospect. In the UK, United continues to progress plans for the Maria discovery and Waddock Cross field, with potential drilling in 2024. The company also seeks farm-in partners for exploration in Jamaica.

While revenues were down, United said cash collections remained strong at $7 million. However, repatriation of funds from Egypt has become more difficult and costly due to macroeconomic challenges and reduced USD liquidity. The company continues to manage its working capital position.

Brian Larkin, United Chief Executive Officer, commented:

“We have had a strong start to the first half of the year from our Egyptian drilling programme with two successful development wells coming onstream and positive results from our low cost workover programme. We are cognisant of the short term challenges in Egypt and with this in mind are delighted to continue drilling in the second half, initially targeting one exploration and one appraisal well In this highly prospective licence. We look forward to announcing further details in due course.

“In parallel, we remain focused on securing a partner in Jamaica for this potentially transformational licence and we are delighted to have multiple quality potential partners advancing their evaluation of the project. We look forward to the remainder of the year and updating our shareholders on our progress.”