AIM weekly movers: Tekmar recovers but no news on strategic investor

Andrew Hore
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9
AIM weekly movers: Tekmar recovers but no news on strategic investor

Subsea cable protection services provider Tekmar Group (LON: TGP) is recovering some of its recent losses with a 121% improvement in the share price to 16p, although it has still fallen by more than two-thirds this year. Tekmar 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.

X-ray screening systems developer Image Scan (LON: IGE) is the second-best performer this week following the purchase of at 2.37% stake by investment company Braveheart Investment Group (LON: BRH). The share price has jumped by 94.7% to 1.85p. Braveheart Investment bought 3.25 million shares at 1p a share and it believes that Image Scan has medium-term growth potential despite being loss making. Three Image Scan directors purchased shares following the stake announcement. The chief executive Vincent Deery bought 153,846 shares at 1.3p each and finance director Sarah Atwell King 152,985 shares at 1.2995p each. Chairman Timothy Jackson bought an initial 378,300 shares one day later at 1.85p each.

Shares in MS International (LON: MSI) jumped by 64.83% to 745p after it announced 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. The share price has risen by 247% this year.

LBG Media (LON: LBG) has revised guidance for 2022 and a strong second half recovery is expected. Full year revenues will be £63m. However, Zeus has cut its pre-tax profit forecast by 18% to £13.5m. Net cash has been revised downwards from £46.1m to £31m. The 2023 pre-tax profit forecast has been cut from £20.1m to £17.2m. Even so, the share price is 61.8% higher at 110p, which is 21 times prospective 2022 earnings. Chief executive Solly Solomou bought 50.000 shares at 100p each. In November, he acquired 900,000 shares at 51p each. He owns 42% of the media company.

Composite aerospace parts kits supplier Velocity Composites (LON: VEL) announced a $100m plus work package agreement with GKN Aerospace in Alabama, which provides a significant boost to its entry to the US market. This sparked a 42.6% increase in the share price to 38.5p. The 2017 placing price was 85p. The agreement with GKN, which is an existing client in the UK, covers five years. The new US production facility opens at the beginning of 2023. Once the US is fully up and running the company could move into profit in 2024.  Braveheart Investment took advantage of the sharp jump in the Velocity Compositesshare price to reduce its stake to below 3%. Braveheart Investment took a 4.13% stake on 24 September 2021, and it was trimmed to 3.69% in November.

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Fallers

Shares in molecular diagnostics company Yourgene Health (LON: YGEN) slumped by 81.1% to 0.35p, following a large fundraising. In addition to the £6.4m already raised, a retail offer of up to £1m has been launched at 0.3p a share – it closes on 6 January. 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. Finance director Barry Hextall bought 3.4 million shares at 0.344p each, taking his stake to four million shares.

Shareholders of Star Phoenix (LON: STA) voted against the removal of the auditor and the appointment of the proposed replacement auditor, which has already started work on auditing the accounts. However, the new auditor has to be appointed by shareholders, so accounts cannot be published. Another general meeting will be held next year. This means that trading in the shares will be suspended on 3 January. The share price slumped by 55.6% to 0.6p.

City of London Group (LON: CIN) shares have fallen a 43.1% to 30p after it revealed that it is seeking shareholder approval for leaving AIM and winding up the company. As part of the liquidation, it will distribute its stake in Recognise Bank to City of London shareholders on a pro rata basis. A cash injection to Recognise Bank provides a valuation of 30p/ City of London Group share for the stake. Shareholders owning three-quarters of the company support the proposals.

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 early next year to fund its iron ore project in Namibia. The share price is 41.7% 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.

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. Gfinity has £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. There are unexercised warrants that could generate £2.7m, but they are exercisable at 1.25p. The share price slumped 39.3% to 0.575p.

New Year prospects: Likewise Group

Andrew Hore
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3
New Year prospects: Likewise Group

Floorcoverings distributor Likewise Group (LON: LIKE) is a consolidator in the floorcoverings sector. An experienced management team provides the expertise to assess acquisitions and integrate them into the group. It is one of around 250 AIM companies whose share prices have at least halved over the past year.
The core market for AIM-quoted Likewise is residential, although there are also commercial customers. Likewise supplies independent retailers and fitters with products sourced from a range of countries.
Likewise chief executive Tony Brewer joined fully listed floorcoverings distributor ...

Crystal Amber plan to revitalise Hurricane Energy

Andrew Hore
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5
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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6
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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6
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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4
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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8
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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6
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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3
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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6
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%.

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