China has extended its Covid lockdown in Chengdu, with the city’s 21 million population set to undergo further mass testing between Monday and Wednesday.
The Sichuan Health Commission reported 90 local Covid cases and 50 asymptomatic residents on Sunday, resulting in a total of 940 and 395 cases, respectively.
The Xinjin district and Qionglai city have been cleared for daily life to resume, after no new positive cases emerged over the past week. Chengdu Covid headquarters said residents will be allowed to return to work if they secure a negative Covid test within 24 hours.
Residents across the remaining districts in Chengdu are set to remain under lockdown while testing continues across the city.
HICL Infrastructure shares fell 0.8% to 173.9p in early morning trading on Monday after the investment trust reported two prospective acquisitions to portfolio.
The group confirmed the potential acquisition of a significant minority shareholding in US electricity transmission asset Texas Nevada Transmission, and the award of preferred bidder status for the assets linked to the Hornsea II offshore Wind Farm offshore transmission link.
HICL Infrastructure agreed to acquire a 45.75% shareholding in Texas Nevada Transmission from Manulife Investment Manager and John Hancock entities.
After the transaction, Texas Nevada Transmission will represent approximately 6% of HICL’s portfolio by value.
The agreement is projected to close before HICL Infrastructure’s FY 2023 end on 31 March 2023, and will be funded via the company’s £730 million credit facility, which is presently undrawn.
The potential acquisition represents HICL’s fifth North American investment, which is set to see the company partner with US electricity system developer and operator LS Power, with the agreement led by InfraRed America’s team, which operates across core and energy infrastructure.
“InfraRed is delighted to embark on this partnership with LS Power, a pre-eminent electricity system operator in the US,” said InfraRed head of core income funds Edward Hunt.
“TNT delivers long-term predictable income under regulated and contracted frameworks, while supplying an essential utility, bolstering network resilience and enabling the transition to renewable energy sources in the states of Texas and Nevada.”
“This acquisition fits firmly within HICL’s vision to support sustainable modern economies and is another example of InfraRed’s international footprint and network enabling HICL to execute its strategic priorities.”
The group’s bid for Hornsea II Windfarm has been submitted via its re-entered partnership with Mitsubishi subsidiary Diamond Transmission Corporation.
The consideration for HICL’s 75% share of the interest in Hornsea II is expected to represent approximately 3% of the company’s portfolio by value.
The firm said it expected the investment to achieve financial close in HY1 2023, and will reportedly be funded from HICL Infrastructure’s £730 million corporate credit facility.
Dechra Pharmaceuticals shares tumbled 7% to 3,250p in early morning trading on Monday, despite a revenue climb to £681.8 million in FY 2022 compared to £608 million in FY 2021.
The pharmaceutical group reported an underlying operating profit of £174.3 million against £162.2 million, alongside an underlying EBITA of £190.6 million from £177.7 million and an underlying EBIT percentage of 25.6% from 26.7%.
Dechra Pharmaceuticals confirmed a reported operating profit of £95.5 million against £84 million.
The company mentioned an underlying diluted EPS of 120.8p from 108.1p and a diluted EPS of 53.4p compared to 51p.
Dechra noted cash generated from operations before interest and tax of £163.3 million from £141.2 million.
The pharmaceutical firm said it expected the veterinary pharmaceutical market to remain resilient despite macroeconomic uncertainty, especially the CAP sector.
Meanwhile, its acquisition of Med-Pharmex provides strength to its US presence, and its Piedmont acquisitions reportedly adds several “exciting” products to its development pipeline.
“We have continued to progress on all aspects of our strategy; the product development pipeline was strengthened, material acquisitions were completed post year-end and a new subsidiary was established in South Korea as we continue our geographical expansion,” said Dechra Pharmaceuticals CEO Ian Page.
Dechra Pharmaceuticals announced a 44.8p dividend per share against 40.5p the last year.
Zamaz believes that its technology platform can help to efficiently build brands via e-commerce. There is already a portfolio of brands in the group, but most are at an early stage of their development.
E-commerce is a large and fast-growing growing global market and Zamaz does not have to gain much of a share to prosper. There was a sharp jump in online trading during lockdowns, but revenues have not necessarily been maintained since then, although they are still showing long-term growth.
The flotation will help to raise the profile of the business and its brands, as well as improving the bal...
S-Ventures (LON: SVEN) was the best performer of the week, rising 11.4% to 24.5p. S-Ventures has acquired Lizza, a wellness and free-from food brand, from Peter Cremer Holding. The Hamburg-based agricultural business is subscribing £2m for shares in S-Ventures at 70p each. The share price has never traded at that level. Lizza produces pasta and breads and provides S-Ventures with a base in the German market. Revenues were €4.5m in 2021. The initial cost of the deal is €1, but there is an earn-out based on a share of profit over ten years up to a maximum total of €2.366m.
KR1 (LON: KR1) has invested $300,000 in RedStone Finance, as part of a $7m fundraising. KR1 participated in the previous financing round. RedStone is developing RedStone Oracles, a provider of data feeds for crypto assets, and smart contract platform provider Warp Contracts. The share price improved by 4.17% to 50p.
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Fallers
Healthcare IT developer DXS International (LON: DXSP) is reviewing its growth plans for the next 24 months. The new strategy will be designed accelerate growth and is likely to require additional funds. They will probably be raised through a share issue and that appears to have worried investors. The share price slumped by 35% to 6.5p on Friday when the announcement was made.
Rent guarantee service provider RentGuarantor Holdings (LON: RGG) published interim results showing a jump in revenues from £91,000 to £170,000. Higher admin expenses meant that the loss increased from £258,000 to £353,000. Revenues continued to improve in July and August. The share price fell 6.14% to 130p. RentGuarantor floated at 200p a share at the end of 2021.
Tectonic Gold (LON: TTAU) says 40%-owned Whale Head Minerals has received a mining permit for its near-production minerals sands operation, which has an estimated NPV of £150m. Tectonic Gold has agreed to transfer a 30% stake to Whale Head Minerals’ BEE partners, which have mining expertise, and it will retain a non-diluting interest of 10%. The share price has declined by 4.88% to 0.975p.
Invinity Energy Systems (LON: IES) says contract manufacturer Baojia has shipped 1.1MWh of Invinity batteries from its factory in China designed for the project with Elemental Energy in Canada. Final assembly and testing will be done by Invinity Energy Systems at its factory before delivery. The share price fell 2.08% to 47p.
Diurnal (LON: DNL) was the biggest riser on the week with a 139% gain to 26.85p following a cash offer for the company. Neurocrine Biosciences Inc is making a recommended bid of 27.5p a share in cash for Diurnal, which values the drug developer at £48.3m. The April 2021 placing and open offer was at 70p a share and the share price has slumped since then. More cash would need to be raised and that could heavily dilute existing shareholders, so the bid is attractive. Diurnal has two approved treatments. The Alkindi hydrocortisone treatment for paediatric adrenal hyperplasia and Efmody which is a similar treatment for adolescents and adults. Revenues have been slow to build for these treatments.
Digital payments technology provider Bango (LON: BGO) is acquiring the global payments division of NTT DOCOMO for €4m, but this reduces to €900,000 after the cash in the business is taken into account. There will be integration costs and additional overheads taken on. This deal adds new telecoms partners and adds Discovery and Shopify to the client base, as well as enhancing the position with existing clients, such as Netflix. Bango will provide payment services to NTT DOCOMO in Japan. The deal should be earnings enhancing in 2023, when revenues of $16m could be contributed. Less, positive are the $30m-$35m of restructuring charges, transaction costs and write-downs revealed for 2022. That is around the level of the expected income this year. Even so, the share price was 27.2% ahead at 198.5p.
Westminster Security (LON: WSG) is a bit of a yoyo share moving up and down on the latest news. This week a new mass entry screening contract for a theatre and exhibition centre in northern England pushed up the share price by 26.5% to 1.55p.
Shield Therapeutics (LON: STX) has fallen sharply this year, but stake building helped the share price recover 18% to 10.8p, which is still down by three-quarters this year. AOP Orphan Pharmaceuticals AG, which targets rare diseases, has more than doubled its stake to 27%. Jupiter Fund Management reduced its shareholding from 5.87% to 4.6%. Shield Therapeutics has an approved iron deficiency treatment, but in common with Diurnal it is finding it difficult to build revenues.
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Fallers
Fusion Antibodies (LON: FAB) is the worst performer of the week, falling 38.2% to 51p, after the Belfast-based antibody developer released full figures. Annual revenues were ahead of expectations and the loss was flat at £1.3m, but management is cautious about the outlook for its customer base.
The cancellation of a contract by a client in Israel has hit the Ethernity Networks (LON: ENET), which has fallen by 26% to 9.25p. The contract relates to the provision of the company’s Universal Edge Platform. The client claims that its customers have complained about delays in product delivery. Ethernity Networks blames its client for delays due to discussions about pricing and amendments to designs. The contract was worth $930,000 and $107,000 has been invoiced. Last year’s group revenues were $2.64m.
IDE Group Holdings (LON: IDE) has further delayed the publication of its 2021 annual report. The managed services provider believes that the auditors will complete their work by the end of September. The share price fell 25% to 0.9p.
Disappointing drilling results from oil and gas producer and explorer Serinus Energy (LON: SENX) sent the share price 22.2% lower to 10.5p. Arden Partners has reduced is risked NAV from 55p a share to 53p a share. Management says the Canar-1 exploration well in Romania does not justify flow testing. There were signs of residual gas, and it is possible that the gas migrated through this zone. The next well to be drilled is Monfrinu Nord-1. Raising an unsecured convertible loan note facility of up to £750,000 was taken negatively by investors in oil company TomCo Energy (LON: TOM). The cash drawn down has to be paid by the end of November, yet the interest charge is a fixed 5% of the principal drawn down. There will still be a $1.25m loan from Valkor, which is due to be repaid in October. A longer-term solution to financing will need to be found. The share price slipped 20.7% to 0.436p.
International markets suffered a turbulent week, with European markets battered by the ongoing energy crisis, US markets bracing for further aggressive interest rate hikes and the FTSE 100 tumbling as the UK faces the worst living standards in a century.
The blue chip index regained some ground after its surprising nosedive earlier this week, closing 1.8% higher at 7,281.1 on Friday. However, the market fell 2.6% over the week, highlighting the tightening screws as the country looked ahead to a difficult winter.
US markets gained on positive jobs data, with the economy marking 315,000 new nonfarm payrolls against analyst expectations of 300,000.
However, news of a continued tightness in the labour market is set to add fuel to the Fed’s hawkish fire, with chair Jerome Powell eyeing a softening in the labour market before he begins to consider a dovish approach to rate hikes.
“US jobs numbers … offer an insight into the health of the world’s largest economy, it is typically influential on markets. However, US Federal Reserve chair Jerome Powell was so clear in his messaging at last week’s Jackson Hole summit that it would take a big surprise to really move the dial,” said AJ Bell investment director Russ Mould.
The NASDAQ rose 1% to 11,908.8, the Dow Jones increased 1% to 31,996.5 and the S&P 500 climbed 1.1% to 4,011.9.
“There will be some relief on Friday morning that, for now, the recent wave of selling in global stock markets has eased,” said Mould.
“After US stocks broke a four-day losing streak overnight, the FTSE 100 has eked out modest gains, supported by a broad range of companies caught up in the sell-off.”
Housebuilders fall
Housebuilders fell to the bottom of the FTSE 100 after Nationwide reported a slowdown in the housing market over August.
Last month saw a 10% annual rise in house prices against an 11% rise in July, and although the figures remained in the double-digits, analysts pointed out signs that the red-hot market was starting to cool.
Surveyors noted a drop in new buyer enquiries in August, with a slide in the level of mortgage approvals to below pre-pandemic numbers.
Berkley Group Holdings shares fell 2.6% to 3,494.5p, Persimmon decreased 1.7% to 1,443.7p and Barratt Developments declined 1.1% to 410.3p.
“Housebuilders were firmly lower after a week which revealed cracks in the foundations of the property market and raised questions about how much longer their selling prices can run ahead of rising labour and raw material costs,” said Mould.
Avast/NortonLifeLock merger greenlit
Avast shares gained 0.2% to 715.3p after the company received the final green light from the Competitions and Markets Authority (CMA) for its merger with NortonLifeLock.
The CMA opened a prior investigation into the merger over concerns the transaction would be harmful to sector competition. However, the deal was cleared by the Authority after a provisional clearance earlier in August.
The agreement was confirmed after the CMA noted sufficient competition in the industry from Microsoft and McAfee, among others.
“Competition authorities cleared the takeover of Avast by rival NortonLifeLock and while this was not a surprise, it adds to a potential exodus of firms from an already threadbare UK tech sector, with Aveva and Micro Focus among those names either already in discussions or rumoured to be attracting interest,” said Mould.
Shell CEO to resign
Shell shares rose 2.2% to 2,324p, despite reports from Reuters that CEO Ben van Beurden was set to resign from the oil giant after almost a decade at the company.
Two sources close to the matter identified four candidates shortlisted to replace the departing boss, with the new CEO to be chosen under a succession committee led by chair Andrew Mackenzie.
Shell head of integrated gas and renewables Wael Sawan is allegedly on the list, along with downstream refining operations head Huibert Vigeveno.
Chief financial officer Sinead Gorman and head of upstream Zoe Yujnovich are also under consideration for the role.
“After yesterday’s surprise departure of Reckitt Benckiser chief executive Laxman Narasimhan, it looks as if another FTSE 100 company is poised for a change at the top as Shell’s Ben van Beurden is reportedly preparing to step down,” said Mould.
“His successor faces a tough task … with regulatory pressure likely to be a key theme. Internal appointments are rumoured to be in the running, befitting an organisation which has often looked inwards when planning a succession process.”
“Whoever prevails will have to balance the demands of the environmental lobby, governments and investors. At least van Beurden spared them the decision of cutting the dividend, a step taken for the first time since the Second World War in 2020. However, there will be more hard decisions to come if the company is going to live up to its net zero rhetoric.”
Analysts marked an accelerating decline in bond markets, bringing bad news for fixed income investors in an already difficult market environment.
Global bonds have lost a fifth of their value so far in 2022, with the fresh surge on US government bond yields on the back of US Fed chair Jerome Powell’s hawkish stance at the Jackson Hole convention adding to investor concerns.
Across the Atlantic, bonds in several European nations saw their worst monthly performance in decades last month, sparking a move in the Bloomberg Aggregate Bond index down approximately 20% from its peak for the first time in history.
Bonds are recognised as an asset class for typically reliable returns, making the 20% decline a sharp surprise for analysts and signalling a entry into a bear market.
Investors are speculating the weakness in bonds will persist as central banks tighten monetary policy in the fight against surging inflation in the US and internationally.
Experts expect the US Federal Reserve to hike interest rates by an additional 0.5% to 0.75%, following Powell’s hawkish remarks at the Jackson Hole conference in late August.
The US added 315,000 nonfarm payrolls in August 2022, representing the smallest job gain since April 2021.
The figure comes after a downwardly revised 526,000 result in July. The report exceeded market forecasts of 300,000 jobs and indicated a remaining tightness in the labour market.
The positive jobs results will boost speculation in the markets about a hawkish US Fed interest rates hike, with chair Jerome Powell citing the tight labour market as a contributing factor to continued aggressive rate hikes from the Reserve.
Sectors with high jobs increases included professional and business services, health care and retail trade.
Although August marked a historically less impressive period for new jobs growth, nonfarm employment is currently 240,000 over the pre-Covid level in February 2020.
CleanTech Lithium are developing three assets within the ‘Lithium Triangle’ in Chile and are targeting first production by 2024/25. The Lithium Triangle of Chile, Bolivia and Argentina is thought to hold some 50 million tonnes of lithium and CleanTech are setting about increasing this with additional resources from their lithium brine projects.
CleanTech will employ Direct Lithium Extraction (DLE) techniques across their portfolio. Dr Boitano provides a fascinating overview of DLE efficiencies and the ESG characteristics of DLE lithium production methods.
Aldo breaks down CleanTech Lithium’s portfolio and what investors can expect on the journey to first production.
