5 Things Moving Markets 21st November

UK Investor Magazine
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5 Things Moving Markets 21st November

The pound falls

The pound was weaker as traders mulled the implications of the UK seeking a Swiss-style deal with the EU. The UK’s economic situation is far worse than the rest of the G7, largely down to Brexit and associated restrictions. It’s been reported the government is exploring options to ease pressure on the UK economy and the Swiss-style relationship could achieve this.

China exposed equities dip

Rising COVID cases in China have hit China-exposed equities with the FTSE 100’s miners down in London after a poor session overnight for Asian stocks. The FTSE 100 started the week in the red but was ticking higher as the session progressed.

Growth concerns hit oil

After giving up around 10% last week, Brent crude futures fell again on concerns China’s demand for oil would be curtailed by their response to rising COVID cases.

Compass Group share buyback underwhelms

Although Compass Group posted strong revenue growth in their most recent period, investors chose to hone in on their lower than expected share buyback plan and sold the shares.

Bitcoin drops to key support

Bitcoin has dropped to key support just above $16,000 as the crypto universe’s struggle with the fallout of FTX persists. Ether was also weaker.

Good third quarter for MTI Wireless Edge

Andrew Hore
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Good third quarter for MTI Wireless Edge

All three divisions of MTI Wireless Edge (LON: MWE) have positive outlooks for the fourth quarter and into 2023. There is particularly strong potential for antennas in India, where an initial order has been won in the fourth quarter.

A recovery in third quarter profit in antennas helped to offset a lower contribution from Mottech water management services, while MTI Summit managed to offset the loss of Russian business with organic growth and the initial contribution from monitoring and control systems business PSK Wind Technologies.

Revenues were 8% higher at $34.8m, while pre-tax profit improved from $3.11m to $3.24m. Tax was higher because currency movements, but there was a small increase in earnings per share.

Net cash was $5.2m at the end of September 2022. Payment terms for PSK are relatively long, while Russian business was paid upfront. This means that there was an increase in trade receivables that held back cash generation. Net cash could be $6.4m by the end of 2022.

Prospects

MTI has an 80%-owned manufacturing business in India and that puts it in a good position to win 5G antenna business. The initial contract will be supplied in the fourth quarter.

Mottech continues to grow, but profit was lower. Price increases will benefit next year’s figures and help profit to recover. Contract wins mean that MTI Summit Full year pre-tax profit could rise to $4.5m this year, rising to $4.9m in 2023. The share price is unchanged at 51p, which puts the shares on nearly 15 times prospective 2022 earnings, while the forecast yield is 4.9%.

Aquis reversal: EDX Medical seeks to build diagnostics business

Andrew Hore
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Aquis reversal: EDX Medical seeks to build diagnostics business

EDX Medical completed its reversal into TECC Capital on 14 November. The share price returned from suspension and increased by 64.1% to 5.25p, but it is still below the placing price of 6p.
Management believes that the sector will consolidate and EDX Medical should be at the forefront of this. Partnerships will help to broaden the range of diagnostics offered by EDX Medical.
It is still early days for the business, and it is yet to generate revenues. The valuation appears full unless an investor is willing to take a long-term view of the business.
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EDX Medical Group (LON: EDX)
Digita...

New premium listing: Ithaca Energy share price falls after float

Andrew Hore
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New premium listing: Ithaca Energy share price falls after float

Formerly AIM-quoted Ithaca Energy Inc (LON: ITH) has returned to the London market at a tough time, given the extension of the oil and gas windfall tax. The offer price was 250p a share and trading commenced on the Main Market on 14 November, after a few days of conditional deals. The share price ended the week at 196p.

Jersey-registered Ithaca Energy says the Energy Profits Levy should not be hit hard by the changes because of its capital investment in the North Sea. The full details are not available, so the exact potential impact is difficult to assess.

Delek Group bid 120p a share for Ithaca Energy in 2017. That valued the company at £510m. Following the bid, Ithaca Energy went into acquisition mode and became one of the largest independent North Sea oil and gas companies. It has interests in 29 producing oil and gas fields in the North Sea and is the operator of eight.

At the end of June 2022, Ithaca Energy had 2P reserves of 244MM barrels of oil equivalent. In the first six months of the year net average daily production of 66,685 barrels of oil equivalent. In the first half, net cash from operating activities was $989m.

In 2022, average daily production is expected to be between 72,000 and 80,000 barrels of oil equivalent. Production is expected to continue to increase at least until 2026.

The latest fundraising will contribute to repaying debt to the Delek Group, which remains the controlling shareholder with 89.4%. The offer raised £262.5m. The market capitalisation has fallen to £1.97bn. Ithaca Energy intends to pay $400m in dividends for 2023.

Aquis weekly movers: EDX Medical reverses into TECC Capital

Andrew Hore
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Aquis weekly movers: EDX Medical reverses into TECC Capital

EDX Medical (LON: EDX) completed its reversal into shell TECC Capital in a deal valued at £12m and £1.2m was raised at 6p a share. The share price returned from suspension and increased by 64.1% to 5.25p, but it is still below the placing price. EDX Medical develops digital diagnostic products and service for cancer, heart disease, neurology and infectious diseases.  

Watchstone Group (LON: WTG) has agreed settlement terms with former auditor KPMG. The final payment is £4.95m. Net assets were £11.4m at the end of June 2022, which was mainly cash. The share price increased by 11.5% to 29p, which values Watchstone at £12m.

Tectonic Gold (LON: TTAU) has recommenced drilling at the Specimen Hill project in Queensland. This is drilling below a previous mine and one result was 8.17g/t gold over one metre in distal veins. A shortage of drilling rigs delayed the restart. The drilling should be completed in a fortnight. The share price rose 3.45% to 0.75p.

Wishbone Gold (LON: WSBN) has exercised its option to acquire the Anketell gold-copper project in Western Australia. This cost £320,000 in shares at 14.75p a share and £50,000 in cash. The share price edged up 0.7% to 7.2p.

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Fallers

Web3 gaming and infrastructure company Pioneer Media Holdings Inc (LON: PNER) has closed the first tranche of the previously announced placing and this raised C$580,000 at C$0.10 a unit – one share and 0.5 of a warrant exercisable at C$0.25. This is a huge discount to the market price. The share price slumped 14.3% to 30p. This cash will finance technology development and working capital. Olivia Edwards has been appointed to the board.

Diesel additives supplier SulNOx Group (LON: SNOX) has secured an order in South Africa and a repeat order in Costa Rica. Agriculture has proved to be a large customer base. Even so, the share price fell 8.77% to 13p. NFT Investments (LON: NFT) continues to trade well below its NAV and it fell a further 2.63% to 0.925p. Some of the assets are held in cryptocurrency, so the recent declines may have reduced the stated NAV.

BWP REIT joins IPSX

Andrew Hore
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BWP REIT joins IPSX

BWP REIT (LON: BWP) raised £35m at 100p a share when it joined the Wholesale market International Property Securities Exchange (IPSX) on 16 November. This is a single asset property company.

The asset in question is Bridgewater Place, an office-led mixed-use property of 30 storeys in central Leeds, Yorkshire. There is 252,000 of space that is predominantly let to EY, DWF and Eversheds. The property is valued at £63m by Avison Young and it is nearly 90% let. The ninth floor is unlet.

There is also residential accommodation where the freehold is owned by BWP REIT, but back in 2007 the long leasehold was sold for 250 years.

There are plans for £9m of investment to modernise the building and £11.5m of spending on cladding works. There is likely to be further capital expenditure. Contracted rent is currently £6m a year. After the refurbishment spending then the market rent could increase to up to £7.7m a year.

The expenses of the deal and flotation were £2.8m, leaving £32.2m and the company was valued at £35.1m. WH Ireland is the lead adviser to BWP REIT, and it is also a market maker along with Canaccord Genuity. The asset manager is M7 Real Estate.

The current bid/offer spread is 98p/103p. Pro forma net assets are £29.3m and there is net debt of £33.6m.

Management estimates that on completion of the capital investment then the value of the property could increase to around £130m.

AIM weekly movers: Harland & Wolff gains Roayl Navy contract

Andrew Hore
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AIM weekly movers: Harland & Wolff gains Roayl Navy contract

Harland & Wolff (LON: HARL) is the highest riser one the week after Team Resolute, a consortium it is part of, was made preferred bidder for a £1.6bn contract to build Royal Navy support vessels. This will require significant investment in the Belfast shipyard. The Appledore shipyard in Devon will also be involved. The share price soared 153% to 22.7p.

Last week, Parsley Box (LON: MEAL) published the circular for a general meeting to gain shareholder approval for the cancellation of the AIM quotation. The meeting will be held on 14 December. The cancellation will save £400,000 a year in overheads related to being on the public markets. Paul Davidson has built up a 3.4% stake. The share price improved 80.6% to 2.8p even though it appears likely that shareholders will be left with a matched bargain facility.

Finland-based biopharmaceutical company Faron Pharma (LON: FARN) has amended the warrants agreement with IPF Partners. The warrant price will be the lower of €1.85, the most recent fundraising, or the price of another fundraising. The original warrant price was €3.126 a share. The share price is 26.9% higher at 247.5p.

Poolbeg Pharma (LON: POLB) and consortium partners have been awarded a €2.3m grant by an Irish government fund to develop an oral vaccine candidate from pre-clinical to phase I readiness. The aim is to induce mucosal immunity. The week before Poolbeg identified multiple novel drug targets for the treatment of respiratory syncytial virus (RSV) through it s collaboration with OneThree Biotech. The share price rose a further 26.4% to 10.3p this week and it reached a new 2022 high.

Downhole oil and gas exploration equipment supplier Enteq Technologies (LON: NTQ) is pinning its hopes on the SABER (Steer At-Bit Enteq Rotary) RSS equipment it is developing and about to test on hard rock in Norway. This will increase its addressable market. Enteq has cash of $2.4m and management believes this will finance the testing and a commercial launch of SABER RSS. Interim revenues more than doubled and there was a $500,000 loss. The share price moved 23.5% higher at 10.5p.

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Fallers

Eco (Atlantic) Oil & Gas Ltd (LON: ECO) shares fell by 60.5% to 17.5p after its Gazania-1 well, offshore South Africa, did not discover commercial hydrocarbons. The well has been abandoned. Two other wells are planned for South Africa next year.

Delays in commencing manufacturing and building up sales of Stereax small battery cells have knocked the Ilika (LON: IKA) share price, which slumped 34.7% to 32p, having fallen to 26.5p on Thursday. The commercial prototypes will not be available until the end of 2023. It is also taking longer than anticipated for the larger Goliath batteries to reach the position where they have equivalence with lithium-ion cells. Forecast group revenues have been cut for this year and next year, while the 2024-25 forecast has been slashed from £18.1m to £2.7m by Berenberg. That indicates the length of the delays. That would put Ilika into a net debt position, so a fundraising is probable before the end of 2024.

N4 Pharma (LON: N4P) is raising £1m at 2p a share. A broker offer could raise up to £1m more. The share price slumped by 30.5% to 2.05p. The cash will be used for the development work relating to loading SiRNA onto delivery vehicle Nuvec, plus for funding the investigation of possible acquisitions.

Third quarter revenues of programmatic advertising services provider Tremor International (LON: TRMR) were below expectations and finnCap has reduced its full year forecast. Forecast 2022 earnings have been cut from 65.3 cents a share to 53.9 cents a share. Expected cost savings have been increased from $50m to $65m a year. Share buy backs and director share buying helped the share price to recover later in the week, but it still slumped 24.1% to 287.6p.

FTSE 100 storms ahead with Legal & General leading the charge

UK Investor Magazine
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FTSE 100 storms ahead with Legal & General leading the charge

The FTSE 100 looked passed dismal UK economic forecasts from the OBR and stormed to the highest intraday levels since since September on Friday.

Just a day after Jeremy Hunt unveiled depressing tax increases and spending cuts, markets looked forward to brighter times and economic conditions that avoid the worst forecasts for growth.

The rally was broad with only a handful of the FTSE 100’s constituents trading in negative territory at the time of writing.

“Following a slight pullback on Wall Street last night and in Asia on Friday, European stocks bucked the trend to trade higher on the last trading day of the week,” says Russ Mould, investment director at AJ Bell.

“After yesterday’s Autumn Statement-driven fall the pound managed to claw back some of its losses versus the US dollar as investors had time to digest the information and the new economic outlook for the UK.”

Legal & General were 3.9% higher and the FTSE 100’s top gainer after the life insurance and financial services company reaffirmed their full year guidance.

Peers Aviva, Admiral Group and Phoenix Group were also rising on L&G’s good news.

A strong session from the FTSE 100’s commodity companies also provided the index with support on hopes demand destruction may not be as bad as previously thought.

“Legal & General topped the list of FTSE 100 risers after it gave a reassuring trading update. Commodity producers were in demand, extending a recent rally for the mining and oil sectors as investors hope the global economic slowdown won’t be as bad as previously feared,” said Russ Mould.

UK Banks

Investors may have noticed a stealthy rally in UK banks in recent weeks and today saw the trend continue. Lloyds shares crept up another 2% on Friday morning and are now down only 5% on the year. Barclays added 1%, but are still down 15% in 2022.

Ocado shares were gaining after a bout of profit taking. Th online retailer’s shares had staged a 100% rally from their October lows.

AIM movers: Eco (Atlantic) Oil & Gas halves on drilling failure

Andrew Hore
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AIM movers: Eco (Atlantic) Oil & Gas halves on drilling failure

Eco (Atlantic) Oil & Gas Ltd (LON: ECO) shares more than halved to 19p after its Gazania-1 well, offshore South Africa, did not discover commercial hydrocarbons. Two other wells are planned for South Africa next year.

N4 Pharma (LON: N4P) is raising £1m at 2p a share. A broker offer could raise up to £1m more. The share price slumped by 26.8% to 2.05p. The cash will be used for the development work loading SiRNA onto Nuvec, plus for exploring possible acquisitions.

Hardware supplier Samuel Heath & Sons (LON: HSM) reported interim revenues growing by nearly 10% to £7.56m, but the improvement case from currency movements. Pre-tax profit fell from £776,000 to £521,000 following the restoration of marketing spending to previous level and increased investment in product development. Net assets are £11.1m, including £3.5m of cash. The share price fell 13.5% to 450p.

Live Company Group (LON: LVCG) has appointed John Miller as its new finance director – a non-board position – and Jason Lee has invested £250,000 at 2.5p a share, taking his stake to 8.24%. This cash will provide additional working capital. Jason Lee has agreed to subscribe a further £750,000 at 3p a share in tranches between January and March next year. The share price fell 7.58% to 3.05p.

Griffin Mining (LON: GFM) recommenced operations at the Caijiaying zinc gold mine on 1 November, but there have been subsequent Covid-related restrictions. Full production and blasting restarted on 16 November. Management expects to produce 800,000 tonnes of ore this year, rising to 1.5 million tonnes in 2023. The share price declined by 4.86% to 68.5p.

Parsley Box (LON: MEAL) has published the circular for a general meeting to gain shareholder approval of the cancellation of the AIM quotation. Even so, the share price has jumped 54.6% to 2.55p. The meeting will be held on 14 December. The cancellation will save £400,000 a year.

Home testing healthcare company MyHealthChecked (LON: MHC) is seeking shareholder approval for a capital reduction at a general meeting on 6 December. This will create distributable reserves so that dividends could be paid. The company also intends to use spare cash to buy back shares. The share price is 9.38% higher at 1.75p.

Share buy backs and director buying have helped the Tremor International (LON: TRMR) share price recover 7.06% to 291.2p following the disappointing third quarter trading statement earlier in the week. The shares have still fallen by more than one-fifth this week.

Agronomics (LON: ANIC) has risen a further 2.5% to 14.35p after Upside Foods gained US FDA approval for its cultivated chicken. This is the first cultivated meat to gain approval and Agronomics hopes that its investee companies involved in cultivated meat could also gain approvals.

Parsley Box to leave AIM and become private company

UK Investor Magazine
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Parsley Box to leave AIM and become private company

Parsley Box box has failed to secure the necessary capital to continue life as AIM traded company and today announced its shares will be suspended.

Parsley Box has struggled to gain commercial traction after the pandemic and has faced difficulties that saw its shares lose almost all of their value before the suspension.

The company had been exploring funding options and after a cost versus benefit analysis on remaining a publicly traded company, have decided the best path forward is as a private firm.

“Another day and another recent IPO goes up in smoke. After the disaster that was Made.com, meals delivery firm Parsley Box is set to cancel its AIM listing,” said Russ Mould, investment director at AJ Bell.

“Following an £84 million flotation in March 2021 Parsley Box has served up a litany of disasters for shareholders and has effectively lost any support from the market.

“This was evident in a very sorry attempt at a fundraise by Parsley Box earlier this year as investors snubbed the chance to buy new shares and management had to step in.

“While the cost of living crisis didn’t help, the proposition behind Parsley Box always looked a little shaky. Why would people pay more to have premium ready meals delivered when they could easily get them from supermarkets at a much cheaper price?”

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