Argo Blockchain shares halved on Tuesday morning after the bitcoin miner’s shares recommenced trading on the London Stock Exchange after being suspended.

Investors took the opportunity to dump Argo shares as the crypto company said they expected to run out of money in the coming month.

The company had been selling assets in recent months to help raise cash, but are now at a crunch point that could see them enter Chapter 11 bankruptcy.

Argo’s demise

The febrile state of the company was demonstrated by the premature publishing of a notice on the Argo Blockchain website that they had entered bankruptcy proceedings. This led to the stock being suspended by the London Stock Exchange.

Today, the company confirmed this notice was a mistake and shares were restored for trading.

Going to the extent of instructing their IT department to prepare a notice to inform website visitors they are in bankruptcy would suggest bankruptcy is a real possibility.

The company says it is hopeful it avoids bankruptcy by securing an asset sale. This may prove difficult to do.

Investors have chosen not to hang around and find out whether Argo enters bankruptcy and fled the stock. Argo Blockchain shares were down 48% at the time of writing.

Argo Blockchain share are down 96% in 2022 and trade at just fractions of their all time high.

Lloyds shares have had mediocre 2022. The first weeks of the year saw the bank’s shares break above 50p as investors geared up for Bank of England rate hikes and the benefits of higher interest rates for Lloyds’ profitability.

However, Lloyds’ foray above the 50p mark was short lived. The tragedy in Ukraine began to unfold and the western world was gripped by a cost of living crisis as energy bills soared.

The Lloyds share price has been in a steady downtrend in 2023, making a series of lower highs, the most recent of which was a failure to break 47.5p.

In November, we questioned whether the Lloyds share price would reach 50p by Christmas. Although there is a possibility this is achieved, the recent pull back from 47.5p will add an additional resistance level to any move to the upside.

Indeed, Lloyds has staged a significant rally over the past 6 weeks, but the 50p level may be a bridge too far before the end of 2022.

Lloyds dividend

Lloyds shares may not be a selection that provides a huge amount of capital appreciation in early 2023. If experts at the Bank of England and UK chancellor are right, the UK is headed for a recession that will impact Lloyds customers and curtail the banks profit growth.

The recession isn’t expected to be deep, but it is expected to be prolonged.

One wouldn’t expect a huge impact on profits as Lloyds will broadly benefit from higher interest rates, but it’s difficult to see a situation where Lloyds profits grow significantly.

A steady level of profit for Lloyds in 2023 means the company will be in a strong position to continue to pay dividends. There is also scope for dividend increases.

Lloyds dividend cover is 3.9x, leaving more than enough room to pay additional dividends to shareholders. Investors should expect a measured approach to increasing dividends by Lloyds and it would be a surprise if payouts aren’t increased incrementally going forward.

A damaging recession could delay a dividend hike but the current 4.4% yield makes Lloyds a solid dividend choice for 2023 with the potential for capital appreciation from a fairly valued Lloyds share price.

Traders were positioning for busy week of central bank meetings on Monday as the FTSE 100 slipped 0.3% to 7,448 shortly after lunch.

Markets were bracing for interest rate decisions from the Federal Reserve on Wednesday, and the ECB and Bank of England on Thursday.

The announcements will mark the end of a year punctuated by soaring inflation and a central bank response that has threatened the health of the global economy.

“Caution is in the air in financial markets ahead of a series of crunch central bank meetings around the world this week, with yet more interest rate hikes set to be unwrapped as inflation remains stubborn,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

The Federal Reserve is expected to hike rates 50 bps to 4.5% which would represent a step back from the 75 bps hike last time round.

Economists predict the Bank of England will raise rates by 50 bps to 3.5% and the consensus also points to a 50 bps hike by the ECB.

2023 Interest Rates

Higher rates are largely priced into markets and investors will focus on the accompanying statements and press conferences for further insight into how central banks plan to adjust rates in the early months of 2023.

Recent comments from the Fed suggest a pivot could be around the corner. Indeed, if they are to hike by 50 bps, it would mark a slowing in pace of rate hikes.

The economic backdrop in the US is still not at a point that would warrant keeping rates as they are, given the persistently high level of inflation.

The Bank of England will have to take into consideration a 0.3% GDP contraction between July and October, despite a better than expected 0.5% increase in October.

“October’s bounce back was expected, and the fact the growth was a little more enthusiastic than economists had anticipated is welcome. But this is just an aside – the story is unchanged, the economy is still shrinking and recession feels inevitable,” said Danni Hewson, AJ Bell financial analyst.

The threat of a downturn was evident in the FTSE 100’s consumer-facing stocks with JD Sports, Sainsbury’s, Ocado and Kingfisher among the top fallers.

Hiousebuilders were also weaker, as were global cyclical sectors such as the miners and oil majors.

RBC Wealth Management have warned of possible downside in European equities in 2023 but highlighted favourable valuations as a mitigating factor for the region.

RBC Wealth Management’s outlook for 2023 struck a cautious tone and said they see an opportunity in positioning towards defensive sectors and companies with a global presence.

Overall, RBC said they were underweight European equities but suggested a discount to US stocks and low valuations have already accounted for a European recession.

“We continue to recommend an Underweight position in European equities given the prevailing uncertainties. However, we acknowledge that the long list of downside risks is partly reflected in sharply discounted valuations and extreme investor caution,” said Thomas McGarrity, Head of Equities at RBC Wealth Management.

“Based on a forward 12-month price-to-earnings (P/E) ratio of 12.9x, the MSCI Europe ex UK Index is trading at a discount to its 10-year median of around 14.5x. On a relative basis, the discount to U.S. equities is much steeper than typical, even taking into account sector differences.

“We continue to prefer defensive sectors over cyclicals, and maintain our bias for quality, globally diversified companies that possess strong pricing power. In particular, we see opportunities in companies which are global leaders within the pharmaceuticals, technology, luxury, and capital goods industries. We are also beginning to see select opportunities in deeply discounted cyclicals where valuations already appear to price in the prospect of a European recession, particularly in sectors such as Industrials and Materials.”

Europe is being particularly heavily hit by energy prices and domestic economies are facing a tough start to the year. This would justify the defensive positioning going into 2023.

However, despite the challenging outlook, RBC argue much of the bad news is largely priced in, and the current valuations are attractive enough to take a measured approach to cyclical names.

The last couple of years have seen quite a fundamental change in this Wythenshawe, Manchester-based group’s profile. 

Strategically it has acquired four new subsidiaries this year, at a cost of some £11.3m plus earn-outs.

But then change has been a way of life for £16m capitalised Coral Products (LON:CRU).

The interim results for the six months to end October clearly identify that the group has been investing in growth, both organically and through acquisition.

The big change is now on its way.

The business today

From its base in 1989, when it was serving the VHS market with a wide range of video cassette cases, the company listed in 1995 and switched to AIM in 2011.

Today Coral Products is a manufacturer and distributor of plastic products supplied into a diverse range of sectors. As a group of seven companies, it has extensive capabilities within profile, tube and sheet extrusion, injection moulding, vacuum forming, butt fusion, mirror welding, fabrication, and assembly. 

The seven subsidiaries

Tatra Rotalac is a leading plastic extrusions manufacturer providing custom extrusions, PVC profiles and injection mouldings for the building, telecoms, aerospace and rail sectors.

Global One Pak is a leading provider of own designed lotion pumps, closures and trigger sprayers, supplier to many well-known brands like Tesco, Asda-Walmart, M&S, and WD40.

Customised Packaging specialises in the manufacturing of plastic products using thermoforming and sheet extrusion technology.

Film & Foil Solutions is one of the UK’s largest converters and stockists of flexible film packaging films, print lamination films and speciality plastics, paper and aluminium foils.

Alma Products specialises in extrusion, thermoforming and container printing.

Manplas provides a custom manufacturing service for the production of vacuum-formed components and sheet plastic parts. 

Ecodeck recycles 10,000 tonnes of waste plastic per annum into sustainable and environmentally eco-friendlygarden and landscape construction products.

Ready to attract institutional investors

With some 97.6m shares in issue, Executive Chairman Jo Grimmond holds 7.66% of the equity, while other directors hold 6.78%.

Professional investors include Lombard International Assurance (5.71%), Diverse Income Trust (2.90%), Peter Gyllenhammar AB (2.80%), and Rights & Issues Investment Trust (2.38%).

Two private investors have notable holdings – John Wright (5.84%) and Ian Hillman (5.76%).

As this group builds up, I would expect it to become more attractive to smaller company fund managers.

The interims

The half-time results reported that the group’s sales had risen 147.9% to £17.6m, while its reported pre-tax profits put on 75.3% to £894,000. Its underlying EBITDA was 85.5% better at £1.88m, with underlying earnings put on 44.4% to 1.17p per share. The interim dividend was unaltered at 0.50p per share.

As part of its capital expenditure programme the group has committed £2.5m for new injection moulding machines, specific tooling and it has reconfigured some 5,000 sq.ft of warehouse space into extra manufacturing capacity.

Group property has been revalued to £3.2m, while net cash at the interim stage was £3.8m, showing an overall strong net asset position.

The group has fixed energy costs until 2025, while margin improvements should be seen in the second half.

Executive Chairman Joe Grimmond stated that: “These excellent results reflect our ongoing investment in future growth. Our objective is to build a specialist UK plastics business of scale, targeting profitable, high-demand sectors. We aim to drive growth both organically and via acquisitions, whilst maintaining our commitment to sustainable objectives……Like all businesses, we are mindful of the challenging economic environment, nevertheless, we believe Coral is in a good position going forward and we have yet to show the full benefit of our investments to date.”

Analyst Opinion – ‘fair value’ 21.6p a share

Edward Stacey at Cenkos Securities rates the group’s shares as a Buy.

His estimates for the current year to end April are for revenues of £34.6m (£14.4m), with adjusted pre-tax profits of £1.7m (£1.3m), lifting earnings up to 2.1p (1.5p) and a dividend of 1.2p (1.1p) per share.

For the coming year he sees £41.9m sales, £2.3m profits, 2.5p earnings and 1.3p of dividend per share.

Conclusion – I see them touching 25p in 2023

After speaking to boss Jo Grimmond at length on these figures I am convinced that he has ‘shaped’ up his group very well to grow over the next few years.

As investor interest builds up gradually ‘smallco funds’ will get aboard, taking the equity up to considerably more flexible ratings.

The shares, now at just 17.5p, are clearly heading higher, with 25p being an easy level at which to aim in 2023.

Caracal Gold have secured an additional funding to expand the Kilimapesa Gold Mine in Kenya through a non-dilutive pre-paid gold purchase agreement.

A $3m financing facility has been made available to be drawn on before 31st December 2022 and add to a similar agreement for $10.5m announced in late November.

Caracal are now fully-funded to complete the expansion Kilimapesa Gold Mine with the aim of increasing both production and the resource.

“This second non-dilutive financing further strengthens Caracal’s cash position bringing the total raised in the last two weeks to US$13.5m,” said Robbie McCrae, CEO of Caracal Gold.

“Attracting these two new high-calibre partners, OCIM and Philoro, is testament to the vast potential Caracal offers as it focuses on becoming a +50,000oz per annum producer with +3moz in resources.

“We can now concentrate on the final push to deliver on our initial production target of 24,000oz per annum, whilst continuing to advance our regional exploration efforts in Kenya to ultimately build the life of mine and value potential. Alongside this, we are excited by the development opportunity Nyakafuru in Tanzania offers and look forward to progressing our targeted exploration programme to support a Preliminary Economic Assessment.”