Crystal Amber plan to revitalise Hurricane Energy

Andrew Hore
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Crystal Amber plan to revitalise Hurricane Energy

Activist investment company Crystal Amber (LON: CRS) is requisitioning a general meeting at North Sea oil and gas producer Hurricane Energy (LON: HUR). It wants to remove three directors and replace three of its own nominees with two new directors.

There would be proposals at a general meeting to remove executive directors Anthony Maris and Richard Chaffe, along with chairman Philip Wolfe. Crystal Amber wants Tony Buckingham and Franco Castelli to be appointed to the board. On top of this, David Craik, John Wright and Juan Morera would also leave if the two new Crystal Amber nominees are voted onto the board. All three were nominated by Crystal Amber and the first two were appointed after a previous general meeting requisition.

This would mean that there would still be a majority of independent directors on the board. Tony Buckingham and Franco Castelli run Albion Energy, so they have sector expertise.

Formal sale process

A potential bid of 7.7p a share was rejected by Hurricane Energy, but this sparked a formal sale process that has led to other potential bid approaches. They have until 7 January to submit bids. Hurricane Energy has also said that it will return $70m to shareholders, which is equivalent to 3.1p a share, if there is no successful bid.

Net cash is expected to be $118m at the end of 2022 and Crystal Amber believes that the Lancaster field can continue production until the second quarter of 2025. Crystal Amber is supportive of the cash distribution. There are also $370m of tax losses.

The proposed directors believe that there is substantial potential in the Hurricane Energy interests and attracting new investment would enable them to be exploited.

Albion Energy would be granted an option equivalent to 5% of Hurricane Energy at 0.1p a share. A further 10% would be under option at 10p a share. In order to take up these options, Hurricane Energy would have to raise $250m for drilling by July 2023.

The Hurricane Energy share price rose 0.17p to 7.78p, which values the company at £152m. Crystal Amber is unchanged at 97.5p.

AIM movers: MS International new weapon sale and Gfinity loss

Andrew Hore
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AIM movers: MS International new weapon sale and Gfinity loss

MS International (LON: MSI) has won a £22.4m contract to supply new land-based mobile gun systems for air defence. They will be supplied to an overseas customer in 2023. This sparked a 46.8% share price increase to 690p.

Webis Holdings (LON: WEB) pool wagering subsidiary WatchandWager has signed an agreement with Monarch Content Management to accept wagers on all Monarch operated racetracks. This includes Gulfstream Park in Florida. The share price jumped 20.8% to 1.45p.

ECR Minerals (LON: ECR) has identified lithium, tantalum and niobium anomalies is the stream sediment sampling campaign at the 100%-owned Lolworth Range project in Queensland. Further results are awaited. Earlier in the week, a new parallel gold system was identified at the 100%-owned Creswick project in Victoria. The share price rose 8.57% to 0.95p.

Egaming company Gfinity (LON: GFIN) reported a slightly lower underlying loss of £4.1m in the year to June 2022, down from £4.5m, if the gain on disposal is excluded. Revenues fell by 8% but costs were also reduced. There was a £2.57m cash outflow from operating activities. There is £2.14m in the bank. Potential deferred consideration is payable based on 30% of revenues generated by recent acquisitions over specific periods. Yet another fundraising appears likely in 2023. The share price slumped 43.2% to 0.565p. There are unexercised warrants that could generate £2.7m, but they are exercisable at 1.25p.

Online Blockchain (LON: OBC) shares slid by 26.7% to 11p, valuing the company at £1.57m, following full year figures, which show a swing from a small profit to a £1m loss. Revenues remain small at £107,000. Directors’ remuneration totalled £260,000. NAV is £1.9m, including cash of £765,000. The value of the 17.6% stake in ADVFN (LON: AFN) declined from £1.42m to £1.1m.

City of London Group (LON: CIN) shares have fallen a further 25% to 30p after yesterday’s announcement that it is seeking shareholder approval for its winding up and distribution of its stake in new bank Recognise Bank to them on a pro rata basis. A cash injection to Recognise Bank provides a valuation of the stake of 30p/ City of London Group share. Shareholders owning three-quarters of the company support the proposals.

Superdry: following Update broker looks for 500p a share

Mark Watson-Mitchell
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Superdry: following Update broker looks for 500p a share

Yesterday afternoon’s news from the iconic fashion retail group, stating that it had enjoyed good trading up to the end of October and, more importantly, that it had tied up its financing facility, has today spurred the company’s broker to declare a 500p Target Price for its shares, currently just 112p after hitting 118p yesterday.

Analyst Wayne Brown, at Liberum Capital, stated that the group has provided three key level assurances – strong trading, a new banking facility, and also the appointment of a new auditor.

He was impressed that net debt had fallen £25m since 1 October to just £13m at 13 December.

For the current year to end April 2023 he is looking for £643m (£610m) sales, lower pre-tax profits (as expected) of £10.4m (£20.4m), earnings of 9.7p (35.0p) and a per share dividend of 3.2p (nil).

However, for the coming year he sees quick recovery to £682m sales, £20.4m profits, 18.9p earnings and a 6.3p dividend.

For the 2025 year he goes for £726m revenues, £35.6m profits, 33.1p earnings and a 11.0p dividend.

Based upon the Liberum estimates it is obvious why he has such a high Target Price, which could see the shares double, even treble over the next year or so.

City of London Group liquidation and distribution of Recognise Bank shares

Andrew Hore
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City of London Group liquidation and distribution of Recognise Bank shares

City of London Group (LON: CIN) intends to obtain shareholder approval for its winding up and distribute its stake in new bank Recognise Bank to them. Shareholders owning three-quarters of the company have indicated that they will vote in favour of the proposal.

City of London Group will leave AIM and be placed into a members’ voluntary liquidation. There will then be a pro rata distribution of shares in Recognise Bank to City of London Group shareholders. The general meeting will be held on 25 January.

All the other businesses and investments have been sold. The costs of the liquidation are likely to be £880,000.

Recognise Bank obtained a banking licence and launched personal and business savings products in September 2021. Jean Murphy took over as chief executive of Recognise Bank in August. Deposits reached £127.9m at the end of September 2022, while the loan book was £112.1m.

City of London Group’s largest shareholder PV27 has agreed to invest £25m in Recognise Bank at 106p a share. This should be completed next February. That share price provides a valuation for the City of London Group stake of 30p for each of the company’s shares.

At the end of September 2022, City of London Group had net assets of £39.9m, which includes intangible assets of £993,000. The City of London Group share price slumped by 242% to 40p on the news of its plans. The market capitalisation is £47.8m. In 2021, £13.4m was raised at 60p a share.

Asset Match will provide a matched bargain facility for Recognise Bank shares.

Braveheart Investment cuts Velocity Composites stake

Andrew Hore
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Braveheart Investment cuts Velocity Composites stake

AIM-quoted investment company Braveheart Investment Group (LON: BRH) has taken advantage of the sharp jump in the Velocity Composites (LON: VEL) share price to sell some or all its stake. It appears to have made a gain on its original investment whether or not it has been fully realised.

On Tuesday, composite aerospace parts kits supplier Velocity Composites announced a $100m plus work package agreement with GKN Aerospace in Alabama, which boosts exposure to the US market. The GKN agreement covers five years. The new US production facility opens at the beginning of 2023. GKN is an existing client in the UK.  

The share price started the week at 27p a share and reached 48.5p at one point. It is currently 38.2p. The sale was on the day of the announcement. The 2017 AIM flotation price was 85p.

Braveheart Investment took a 4.13% stake on 24 September 2021 and the market price was around 24p at that time. The stake was trimmed to 3.69% in November, and it may have been at around 30p a share thereby raising more than £40,000. The stake has been reduced to below 3%.

Velocity Composites expects to report 2022 revenues of £11.9m. A loss of £1.5m is forecast and it will not be much less next year. Once the US is fully up and running the company could move into profit in 2024.

At 9.75p, Braveheart Investment is valued at £6.2m. It also has stakes in thermal insulation material manufacturer Autins Group (LON: AUTG) and AIM-quoted architect Aukett Swanke (LON: AUK).

Superdry announces positive financing and Trading Update

Mark Watson-Mitchell
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Superdry announces positive financing and Trading Update

The iconic ‘sustainable style destination’ retail group has declared that its trading in the half-year to 29 October, saw a 3.9% uplift in group revenues, with good showings in its stores and e-commerce sides, up 14.4% and 1.7% better respectively, while its wholesale business was off 5.2% in the period.

But most important was the news that Bantry Bay Capital has enabled the group to secure an £80m finance facility, on more expensive but a lot more flexible basis.

Superdry (LON:SDRY), which has 219 stores, also has some 450 franchises and licensees. The globally operating company, selling in some 50 countries across the world, employs over 4000 people within its business.

The group announced that it has made a positive start to its Autumn/Winter selling season.

The retail group’s shares responded with an immediate 8% price rise to 109.5p and should be heading higher again after the financing facility pressure has eased.

Journeo acquisition increases exposure to rail sector

Andrew Hore
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Journeo acquisition increases exposure to rail sector

Transport security and information systems provider Journeo (LON: JNEO) is acquiring IGL Ltd, which supplies displays for rail passenger information, for £8.7m.

The initial cost of IGL, also known as Infotec, is £6.2m in cash and £500,000 in shares with £2m deferred. IGL is estimated to have net cash of £4.5m. Cenkos forecasts a revenues contribution of at least £11.4m an EBITDA of £1.7m next year.

AIM-quoted Journeo is raising £7m at 105p a share to help finance the acquisition and provide working capital. It will also pay off £550,000 of loan note with a 10% interest charge. A retail offer will raise up to £350,000 in additional funds and it closes on 4 January.

Journeo has a significant market share in the bus and coach market. Combining the two businesses should also reduce purchasing costs.

IGL provides additional scale for Journeo in the rail market. It trebles the number of trains using group displays to 2,400 and service revenues could be increased. New products set for launch will improve margins.

IGL has won an $18m contract to supply displays for New York subway trains. The UK is its main market, but it also has customers in Canada ad South America.

Journeo is expected to make a pre-tax profit of £900,000 in 2022, while adding IGL is forecast to improve pre-tax profit to £3.3m. Earnings are forecast to increase from 10.4p a share to 17.8p a share.

Net cash of £5.8m is forecast for the end of 2023, with net assets of £10.3m. The share price jumped 11.5p to 130p, but the 2023 prospective multiple is less than eight.

Strong trading at NWF plus infill fuels acquisition

Andrew Hore
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Strong trading at NWF plus infill fuels acquisition

Trading remains strong at AIM-quoted NWF (LON: NWF) with first half profit ahead of last year and it has made an infill acquisition for its fuels division.

All three divisions are trading ahead of expectations. There is good storage capacity utilisation at the food division. Feeds volumes are slightly lower, due to good grazing conditions, but cost increases are being passed on. The strong milk price is boosting farmer incomes and offsetting higher costs.

The fuels division margins have offset lower volumes due to the warm autumn weather. December volumes were at normal levels.

Oxfordshire-based Sweetfuels is being acquired for £10m, net of cash, and this business made a pre-tax profit of £1.2m in the year to August 2022. Sweetfuels sells 20 million litres of fuel each year. There is a bigger proportion of heating oil than for NWF, so profit per litre is higher.

Peel Hunt is maintaining its current year forecast for the existing operations for now and increasing the earnings forecast by 2% to account for Sweetfuels in the rest of the year. A full contribution next year adds 8% to earnings.

The second half is the important period for the group, because it includes winter months and that is why Peel Hunt is cautious. The Sweetfuels deal indicates the potential for further consolidation in the fuels sector. At 266p, up 5p, the shares are trading on 14 times prospective earnings, while the yield is 2.9%.

AIM movers: Tekmar contract and ex-dividends

Andrew Hore
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5
AIM movers: Tekmar contract and ex-dividends

Subsea cable protection services provider Tekmar Group (LON: TGP) has won a contract to supply cable protection systems for the third phase of the Dogger Bank C wind farm in the North Sea. Delivery will start in the third quarter of 2024. Tekmar is already supplying the other phases. There is no news about the strategic review or the potential strategic investor, which has exclusivity until mid-January. The share price jumped 51.9% to 10.25p.

Heart monitoring technology developer Deltex Medical (LON: DEMG) says that revenues have increased in 2022, while operating costs have been lower than expected. Interest in the company’s new monitor is growing and the first tender has been won at a higher price than the current monitor. Regulatory clearance is still required before any new monitors are sold. This has been delayed until next year. Chairman Nigel Keen has loaned the company an additional £250,000 for working capital. The share price is 19.4% higher at 0.925p.

Destiny Pharma (LON: DEST) believes it is close to signing a US development and commercialisation agreement for phase III lead asset NTCD-M3 for the prevention of C.dif infection recurrence. This deal should provide the funding for the study and possibly an upfront payment. There is also a good chance that a partner will be found for the XF-73 nasal gel to prevent post-surgical infections. There was £8.4m in the bank at the end of June 2022, so additional cash will be required next year. The share price improved by 14.9% to 38.5p.

North Sea oil and gas producer i3 Energy (LON: I3E) reached peak production of more than 24,000 barrels of oil equivalent/day and this could rise to 26,000 barrels of oil equivalent/day. Maintenance will hold back production during 2023, but average production could reach 23,000 barrels of oil equivalent/day. The monthly dividend is being increased by one-fifth to 0.171p a share. There was a 13.5% rise in the share price to 24p.

Katoro Gold (LON: KAT) says its nominated adviser RFC Ambrian is resigning and a replacement needs to be found by 11 January or trading in the shares will be suspended. The minerals explorer will need to raise cash in early 2023 to fund its iron ore project in Namibia.  The share price is two-fifths lower at 0.105p. The par value of the shares is 1p, so it appears that a capital reorganisation will be required in order to issue more shares.

Industrial lasers supplier 600 Group (LON: SIXH) announced a 12% increase in interim revenues to $17m, but the business moved from profit to loss. Supply issues and increasing costs have hit the performance. The sale of the machine tools division has helped to reduce net debt to $2.5m.  The share price slumped by 24.5% t5o 8.875p.

Mosman Oil and Gas (LON: MSMN) says the Cinnabar-1 well is not yet in production. The share price fell 10.3% to 0.065p.

Shares in molecular diagnostics company Yourgene Health (LON: YGEN) continue to fall after its fundraising announcement. The price fell 6.67% to 0.35p, having fallen from 1.85p yesterday afternoon. A retail offer of up to £1m has been launched at 0.3p a share – it closes on 6 January. This in addition to the £6.4m already raised. The subsidiary in Taiwan is likely to be sold and a strategic investor is being sought. The cash raised should last until the third quarter of 2023.

Ex-dividends

Aeorema Communications (LON: AEO) is paying a final dividend of 2p a share and the share price is unchanged at 80p.

Alliance Pharma (LON: APH) is paying an interim dividend of 0.59p a share and the share price rose by 0.3p to 53.3p.

Duke Royalty (LON: DUKE) is paying a dividend of 0.7p a share and the share price is down 0.25p to 35.5p.

Orchard Funding Group (LON: ORCH) is paying a final dividend of 2p a share and the share price fell 3.5p to 49.5p.

PHSC (LON: PHSC) is paying an interim dividend of 0.5p a share and the share price unchanged at 16.5p.

Polar Capital (LON: POLR) is paying an interim dividend of 14p a share and the share price is 15p lower at 471.5p.

FTSE 100 gains as markets gear up for Christmas

UK Investor Magazine
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FTSE 100 gains as markets gear up for Christmas

The FTSE 100 was rising in thin volumes on Thursday morning as investors started to wind down for the festive period. The FTSE 100 was 0.3% higher at 7,526 at the time of writing.

London’s leading index gained despite news the UK economy contracted more than expected in the third quarter. It is now widely assumed the UK is currently in a recession but there is also an argument the volatility we experienced earlier in the year had already priced any downturn.

“The hoped-for Santa rally is running merrily through markets, but it may end up being a short-lived ride given the cost-of-living winds swirling, the confirmation that the UK is rolling into recession and worries about global economic growth,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

“The ONS update showing the economy contracted by 0.3% in the third quarter is bleaker than first forecast but the FTSE 100 and the FTSE 250 have shrugged it off, largely because a UK recession has already been priced in.”

For the FTSE 100 to achieve a Santa rally and produce a positive performance in December, the index would have to close the month out above 7,573.

There were steady gains across most industry sectors on Wednesday with cyclical shares moving higher. Shell was the top gainer.

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