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Quoted Micro 11 October 2021
AQUIS STOCK EXCHANGE
Ecotricity has failed in its takeover bid for Good Energy (GOOD). Ecotricity had a 25.1% stake and acceptances of the bid totalled 11.5% of God Energy. Acceptances did increase significantly in the last few days of the bid, but they are still well below the level required for the bid to succeed. The offer has lapsed.
National Milk Record (NMRP) reported flat full year revenues of £21.9m, while like-for-like growth was 3.5%. This was despite the cyber attack last year. Pre-tax profit improved from £929,000 to £1.65m with help from lower overheads and a higher contribution from a joint venture. Net debt was reduced to £1m by the end of June 2021. The dividend was increased from 1.25p a share to 1.5p a share. Genomics revenues should build up this year.
Quantum Exponential Group plans to join Aquis. The plan is to identify opportunities in the quantum technology sector. More than 175 start-ups have been identified. Notion Capital will be involved with any investments. This is another investment company being floated by David William – the most recent was standard listed Bay Capital (BAY).
NFT Investments (LSE: NFT) has made two new investments. The first is a C$100,000 investment in Big Whale Labs, a decentralised social network platform. The other investment is $1.4m in Sturdy Exchange, which is a subsidiary of Sturdy Agency. Sturdy Exchange is a marketplace to display, collect and trade NFTs created by artists and performers. So far, four investments have been made.
Dispersion Holdings (DEFI) is holding a general meeting on 26 October in order to gain shareholder permission to issue more shares.
Yooma Wellness Inc (YOOM) is acquiring Tokyo-based Vertex for $12m. The initial payment is $2.5m with $6.5m to follow in April 2023 and the last payment of $3m in April 2024. Vertex sells wellness products via home shopping channels in Japan.
BWA Group (BWAP) has won its case against JV Capital and has been awarded £74,169.
Wheelsure Holdings (WHLP) is collaborating with Sedwell Ltd to develop a secure digital fastener for use in the global rail market. Sedwell has bolt load monitoring technology.
TechFinancials (TECH) has sold its CEDEX subsidiary. There is no initial payment. There could be cash received if the company is sold or raises $20m of new money.
Gunsynd (GUN) says that investee company Pacific Nickel has a JORC resource estimate for the Jejevo tenement in the Solomon Islands, where it has a 80% stake. Jejevo has a mineral resource of 14.42 million tonnes at 1l.29% nickel.
Trading in Harrogate Group (HGTE) shares has been suspended because its 2020-21 accounts have not been published.
Robert Hanson has bought a 0.36% stake in Oberon Investments (OBE) through a share purchase at 6.85p each. Burns Singh Tennent-Bhohi has bought one million Oscillate (MUSH) shares at 2p each.
Michael Williams and Robert Porter-Smith have stepped down from the British Honey (BHC) board.
EPE Special Opportunities Ltd (ESO) had net assets of 488.21p a share at the end of September 2021.
AIM
Tortilla Mexican Grill (MEX) operates and franchises fast-casual Mexican restaurants offering California-inspired food. It raised £5m at 181p a share. The cash raised in the flotation, plus a new senior finance facility of up to £10m, will provide working capital and fund the UK roll out and development of franchise opportunities. Tortilla Mexican Grill has 52 restaurants in the UK, two of which are franchised with SSP – they are at Euston station and Gatwick airport. There are also ten franchised sites in the Middle East – the franchisee is Eathos. Six sites have opened this year. A new site costs between £350,000 and £425,000 to kit out.
Continuing operations of plastic products supplier Coral Products (CRU) increased revenues from £8.7m to £10.7m in the year to April 2021. Underlying profit jumped from £230,000 to £756,000. This could rise to £1m this year with the existing businesses. Once the Haydock site has been sold there should be cash of more than £7m.
Compliance and energy saving services provider Sureserve (SUR) says its order book has grown by more than 30%. Net cash was more than £16m. The results will be announced on 25 January.
Elliott Bernerd of international property developer Chelsfield is taking a significant stake in AIM-quoted chartered surveyor and property adviser Fletcher King (FLK). He is investing £547,000 in new shares and buying existing shares so that his stake is 29.99%. He is buying the shares at 52.5p a share, which is a premium to the market price.
AMTE Power (AMTE) is on course to launch its first commercial battery cell product before the end of 2021. This is a product for the automotive market. There should also be news in the coming months about the site for the company’s UK Gigafactory.
CEPS (CEPS) has restructured its investment interests and the latest interims are the first with the ongoing businesses. Revenues increased by 65% to £9m and lower group overheads meant that operating profit before exceptionals improved from £357,000 to £855,000. Building services company Hickton increased its profit, as did Aford Awards. That offset a lower contribution from stretch fabric supplier Friedman’s.
Palm oil plantation operator Dekel Agri-Vision (DKL) processed 12% more fresh fruit bunches in September 2021 than the year before, while the crude palm oil price was 76% higher than the same month last year. The new cashew plant should be up and running in October. Dekel is on course to be profitable this year.
MAIN MARKET
NMCN (NMCN) has appointed Grant Thornton as administrator. Galliford Try (GFRD) has acquired the company’s water sector businesses, which have annual revenues of £100m, for £1m in cash.
Reserve power generator Mast Energy Developments (MAST) has completed the acquisition of Rochdale Power. This is the third site in the portfolio of sites under development that will have a total capacity of 18.4 MW.
Andrew Hore
Andrew Hore – Quoted Micro 16 August 2021
AQUIS STOCK EXCHANGE
Yooma Wellness Inc (YOOM) has a dual quotation on the Canadian Securities Exchange and obtaining the Aquis quotation is part of the stated strategy to become the largest CBD business in the world. Acquisitions have been made this year and at least three more are lined up. Prior to joining Aquis, Yooma raised £7.46m at 52.32p a share. As well as the cash raised in the placing, there is an option granted to a strategic investor to subscribe £5m for 9.56 million shares. Administrative delays relating to the investor mean that the share issue has not been completed yet. Yooma Wellness says that annualised 2021 sales could be $32m if it makes the expected acquisitions.
Ecotricity has posted its offer document for Good Energy (GOOD), which continues to reject the approach.
Clean Invest Africa (CIA) is in discussions with a potential investor. A fundraising could be secured within weeks. There are also discussions concerning a joint venture. CIA has been hit by Covid-19 measures in South Africa.
Pioneer Media Holdings Inc (PNER) has made an additional investment in connected gaming platform developer Paidia eSports Inc and a new £200,000 investment in Streaks Gaming. Pioneer will own 40% of Paidia. London-based Streaks operates a conversational gaming platform. Users are matched with a personalised digital conversational partner generated by AI. Pioneer will own 16.1% of Streaks.
Sativa Wellness Group Inc (SWEL) increased revenues by 828% in the second quarter of 2021. Revenues in the six months to June 2021, revenues jumped from £733,000 to £4.86m, while the loss reduced from £2.37m to £1.27m. The business is being restructured into three divisions: Goodbody Botanicals, Phytovista and Goodbody Wellness.
Construction of the DJT Plants medical cannabis growing facility started on 4 July. Ananda Investments (ANA) continues to make progress with the purchase of the 50% of DJT it does not own.
Rutherford Health (RUTH) is partnering with genomic and theranostic company OncoDNA, which will enable its patients to obtain genomic testing that can help to secure the most appropriate cancer treatment.
Administrators have been appointed to NQ Minerals (NQMI).
Chris Akers has increased his stake in Oscillate (MUSH) from 3.1% to 9%. Thomas Grant Nominees owns 9.95%. Robert Johnson has a 3% stake in TECC Capital (TEC).
AIM
Drug developer BiVictriX Therapeutics (BVX) has a low capital cost model which outsources the main operations. It has a lead asset called BVX001, which is targeting adult leukaemia. BVX001 has already indicated an anti-tumour effect in animal models. No adverse effects were observed. The £7.5m raised at 20p a share will accelerate the optimisation of BVX001, so it reaches pre-clinical milestones. The share price ended the week at 23.5p.
Marlowe (MRL) has decided not to bid for Restore (RST), which has acquired PRM Green Technologies, which is an IT recycling business. This acquisition will be immediately earnings enhancing.
Crestchic revenues increased by 44% in the first half of 2021 and Northbridge Industrial Services (NBI) group revenues are 22% ahead at £19.6m. The 2021 pre-tax profit forecast was increased from £2.1m to £2.5m.
Self-storage sites operator Lok’nStore (LOK) is increasing occupancy rates and adding new sites. Self-storage revenues increased by 21% over the year to July 2021, which is well ahead of forecasts. The first half growth rate was 11%. Over the 12-month period, occupancy rates have increased from 69.6% to 85.8%.
Oil and gas producer Southern Energy Corp (SOUC) concentrates on areas with proven low-cost producing assets, with the current focus in Mississippi. The strategy is to grow production through acquisitions. Alberta-based Southern Energy plans to increase production to 25,000 barrels of oil per day over the next two year. This will require larger acquisitions than in the past. No cash was raised, and the shares will continue to be traded on the TSX Venture Exchange. The share price opened at 6.5p on the first day and stayed at that level until the end of the second day when it fell to 5p (4p/6p) and that price was maintained.
Science Group (SAG) has made a bid approach for TP Group (TPG). Science group has acquired a 10.2% stake in TPG, with the shares being acquired for 5p each.
Best of the Best (BOTB) says that there has been a 15% decline average weekly sales of competition entries. finnCap has cut its earnings forecast from 142.4p a share to 53.3p a share. There should still be £12m in cash at the end of April 2022.
Venture Life Group (VLG) says interim revenues were lower this year because of the lack of hand sanitiser sales and lower sales of Dentyl in China. Sales of other products grew. Forecasts have been updated for recent acquisitions. Share issues mean that earnings are expected to be flat at 2.5p a share. The full benefits of the acquisitions will come through in 2022 when earnings are expected to be 4.6p a share.
Verditek (VDTK) has raised £353,000 from its Crowd for Angels bond offering.
MAIN MARKET
Foams manufacturer Zotefoams (ZTF) improved its interim pre-tax profit by 49% to £4m even though it was reduced by currency movements. Footwear generates one-third of revenues. The new manufacturing site in Poland has opened.
Argo Blockchain (ARB) generated revenues of £31.1m from mining 883 bitcoin in the first half of 2021. Although revenues are improving, there will be higher than expected tax and finance charges this year. finnCap has reduced its 2021 earnings estimate from 7.6p a share to 5.6p a share.
Plaza Centers NV (PLAZ) has received a revised proposal from GC Hevron Capital. The company’s assets would be transferred to a trustee of managed for the benefit of bondholders. Hevron would be issued shares equivalent to 74.99% of the enlarged share capital. There will be a NIS 2 million payment to cover creditors. Hevron will then inject a new business, which is part of its investment portfolio, into the shell. The target is a nutritional food technology company.
Danakali (DNK) is cancelling its standard listing on 24 September and retaining its ASX listing.
Mast Energy Developments (MAST) has acquired Pyebridge Power, which owns a 9MW gas-powered standby generation facility, for £2.5m in cash. The site could generate EBITDA of £488,000 a year.
Hawkwing (HNG) is raising £16.5m through the issue of 8% convertible loan notes. They are convertible at 6p a share. The cash will be loaned to ecommerce aggregator Internet Fusion Group to finance two acquisitions – an outdoor lifestyle brand and an online fashion accessories retailer. Hawkwing plans to acquire Internet Fusion for an enterprise value of £115m through an issue of shares at 6p each. Trading in Hawkwing shares remains suspended.
Path Investments (PATH) has agreed to acquire DG Innovate for £32m in shares at 0.6p each. DG is developing electric motor technologies and energy storage systems. There is enhanced drive technology, which is being used to develop lightweight and cost-effective electric motors, and enhanced battery technology, which is developing fully-recyclable, sodium-ion batteries offering greater energy density than current technologies.
Andrew Hore
Andrew Hore – Quoted Micro 24 May 2021
AQUIS STOCK EXCHANGE
British Virgin Islands-based Boanerges (BNRG) is a SPAC seeking to acquire technology companies involved in big data, machine learning, telematics and internet of things. Boanerges floated on 17 May 2021 when it raised £500,000 at 20p a share. In April, an initial £51,500 was raised at 0.1p a share and a further £75,000 was raised at 10p a share. That means that pro forma cash is equivalent to 1p a share. The shares are trading at 24.5p (23p/26p).
Bid expenses could cost Walls & Futures REIT (WAFR) up to £210,000. The 50p a share bid is rejected by the company’s board, which says that it represents a 51% discount to NAV and a 62% discount to the market value of its properties, after cash is deducted. Management is offering shareholders the opportunity to vote on a winding up of the company if the bid does not become unconditional. This would require 75% of the votes to be carried.
Brewer Adnams (ADB) continued to be hit by lockdowns in the six months to March 2021. Online demand for the beer brands remained strong and management says that bookings for pubs are building up since the lockdown was eased. There is even hope that people holidaying in the UK will boost its hotels.
Early Equity (EEQP) is acquiring Farina Investments, which provides services to the insolvency sector, for £1.9m in shares at 0.5p each. This is effectively a business that is involved in the acquisition and disposal of distressed assets. The deal will increase Early Equity’s stake in Lotto Studios, which is launching a social casino game with ITV Studios, to 20%. The deal also brings a 10% stake in life sciences company Pure Sea Nutrients. A further £90,000 has been raised in a placing at 0.5p a share.
The AGM has been postponed and there were some irregularities in the voting process.
Incanthera (INC) is continuing with discussions with two global cosmetic companies for its Sol skin cancer technology. The idea is to use Sol as a skin cream to protect sun damaged skin. Net cash was £960,000 at the end of March 2021. Incanthera recently raised £1.14m at 12p a share. There is enough cash to get into the second half of 2022. There could be an upfront payment from a deal, but the big money will take longer to be generated. More cash will be required to push ahead with other products.
Apollon Formularies (APOL) says that joint testing with Aion Therapeutic reveals that their combined formulations are effective in killing HER2+ breast cancer cells grown in 3D cell culture. HER2+ accounts for one-fifth of breast cancer. Apollon’s Jamaican medicinal cannabis formulations were particularly good at killing living HER2+ cancer cells directly.
Ananda Developments (ANA) says that its 50%-owned subsidiary DJT Plants has been granted a licence to grow >0.2% THC cannabis for research activities by the UK government. Building of the research facility will commence immediately. There will be 65 strains grown at the facility and plans to extract distil and isolate cannabis products. The business had previously grown cannabis for GW Pharma. The focus will be neuropathic pain, Parkinson’s Disease and epilepsy. Directors Charles Morgan and Melissa Sturgess have each been issued with 100 million shares as contingent consideration following the grant of the licence.
Gledhow Investments (GDH) had net assets of £2.35m at the end of March 2021, up from £907,000 12 months earlier. That includes £374,000 in cash.
Vulcan Industries (VULC) subsidiary M+G Olympic has won more than £500,000 of orders for swimming pools.
All Star Minerals (ASMO) is negotiating the acquisitions of a company with gemstone assets and another company with diamond assets. This is an area where the management team has experience. Further cash will need to be raised to complete due diligence.
NQ Minerals (NQMI) has raised a further £224,000 at 7p a share. Chief executive Walter Doyle has left the company. Wishbone Gold (WSBN) has raised £1.4m at 10p a share and each share has one-half of a warrant exercisable at 20p a share. Wishbone will refine the locations of drill targets at the Red Setter projects and then use the cash to finance the drilling. Sativa Wellness Inc (SWEL) has completed a placing raising $4.61m at 7.875 cents per unit. A unit comprises one share and one-half of a warrant exercisable at 10.5 cents a share. Love Hemp (LIFE) has raised £348,000 via the exercise of warrants at 1p each.
AIM
Compliance and energy saving services provider Sureserve (SUR) reported an underlying interim pre-tax profit was 31% higher at £4.4m. Energy saving’s profit contribution fell by three-fifths, but higher margins for the much larger compliance division meant a much higher profit. A full year pre-tax profit of £12.9m is forecast.
Tracsis (LSE: TRCS) should get additional opportunities from the Williams report on the rail industry. The report was in line with expectations. Great British Railways will take up the overall responsibility for the integrated rail network. The reforms are due in 2023, although there could be delays. Things like digital tickets, simplified fares and season ticket flexibility provide opportunities for Tracsis.
Accrol (ACRL) says that adjusted earnings for 2020-21 will be in line with expectations even though sales will be lower than expected due to a decline in the market. Accrol has 16% of the toilet tissue market and it should return to growth when the comparatives do not include the Covid-19 related panic buying. There are plans to increase capacity at the main Leyland plant.
Surgical devices developer Creo Medical (CREO) says trading was ahead of expectations in the first quarter of 201. This has led to a 10% increase in forecast revenues to £22.1m. There will still be a loss of £30m. The recovery in elective surgery is increasing demand for surgical devices.
Nexus Infrastructure (NEXS) is building up its electric vehicle infrastructure business and it could move into profit in the next year. The TriConnex utility connections business is also growing revenues, although profit was flat. However, group revenues were one-quarter lower at £64m, because civil engineering business Tamdown continues to report lower revenues and profit. Nexus did make an overall operating profit. The 2020-21 pre-tax profit has been upgraded to £3.6m and it could reach £6m next year.
PerkinElmer has made a 382p a share bid for Immunodiagnostic Systems Holdings (IDH).The bid is at one-third of the share price high around one decade ago. The share price has not been at this level for nearly seven years.
MAIN MARKET
Dukemount Capital (DKE) has secured a joint venture with flexible power company HSKB, which will be renamed DKE Energy. The 50%-owned business will develop two gas peaking facilities which will produce 10MW of power. These will cost £6.25m and the intention is to secure a 15-year, inflation linked contract. Dukemount director Paul Gazzard founded HSKB.
One Heritage Group (OHG) has signed a construction finance facility with Lyell Trading. The facility is for £3.5m and lasts 18 months at a nominal interest rate of 9.6%. The facility will be used to finance Oscar House, a development of 27 apartments in central Manchester. The development should be completed in the first quarter of 2022.
Mast Energy Developments (MAST) says that the Brodesley reserve power project has reached construction ready status.
Lee Marks has been appointed chief executive of NMCN (NMCN) and interim chief executive Robert Moyle is retiring from the board after a transition period.
Kanabo Group (KNB) has signed an agreement with Pure Origin, which will manufacture and package Kanabo’s CBD wellness products from its facility in Wales. There will be a dedicated production line for VapePod products. This deal will lead to a full international product launch.
BATM Advanced Communications (BVC) has started to deliver two Covid-19 diagnostic tests. The saliva-based test will be used by the Italian team at the Olympic Games in Japan.
S&U (SUS) says monthly motor finance collections are above budget and the number of customers on payment holidays has fallen to 1,200. The Aspen bridging loan division is lending more for each deal and profit is reaching record levels.
Andrew Hore
Alan Green joins the UK Investor Magazine podcast to discuss the commodities super cycle – Mast Energy Developments #MAST, Advance Energy #ADV and Caerus Mineral Resources #CMRS
Alan Green discussed the commodities super cycle on the UK Investor Magazine Podcast as it began at the beginning of 2021. Since then, major commodities indices have increased dramatically with copper touching 10 year highs and Oil breaching $70.
Demand for commodities is increasing as economies reopen after the pandemic and under investment in commodity exploration and development has caught supply off guard leading to higher prices. This is particularly evident in Lumber markets which has seen $25,000 added to the cost of constructing the average US home.
With the Federal Reserve hinting QE tapering is some way off, meaning interest rate increases won’t be happening for some time, the path is clear for further commodity price rises. We explore what this means for equity markets and how commodities shares could outperform over the next decade.
We discuss Mast Energy Developments (LON:MAST), Advance Energy (LON:ADV) and Caerus Mineral Resources (LON:CMRS).
Andrew Hore – Quoted Micro 19 April 2021
AQUIS STOCK EXCHANGE
NFT Investments (NFT) is a shell that intends to invest a portfolio of non-fungible tokens (NFTs). An NFT is a digital file with a unique and verified identity held on a digital ledger or blockchain. The tokens can be bought with cryptocurrency and resold. Ownership of NFTs can be tracked and they can be set up so that the original owner gets a cut of any subsequent sale. NFT Investments will apply to be a small registered UK AIFM. NFT Investments raised £35m at 5p a share and it has net assets of 3.7p a share. The shares ended the first day of trading at 4.95p (4.8p/5.1p) after a significant number of trades.
Apollon Formularies (APOL) has completed its reversal into AfriAg Global via an all share offer. The business holds medicinal cannabis licences in Jamaica. Interim regulations allow the export of medicinal cannabis. Medicinal cannabis oils are being sold and medically supervised treatments provided. Management intends to use £1.1m of the funds raised to finance research and development. The rest of the cash raised will go on developing product sales, operating costs and market research.
Good Energy (GOOD) increased revenues by 5% to £130.6m in 2020. Gross margins declined and higher bad debts and increased depreciation meant that underlying pre-tax profit was £400,000, down from £2.1m. Net debt was £34.6m at the end of 2020. Dividend payments will resume this year.
Gunsynd (GUN) had net assets of £4.94m at the end of January 2021. That was before the flotation of spirits company Rogue Baron (SHNJ), which has increased the value of the shareholding. There was £1m in the bank prior to the recent sale of part of the Rogue Baron stake.
KR1 (KR1) has invested $250,000 into Equilibrium in return for 595,238 EQ tokens.
Eastinco Mining (EM.P) is conducting test work on orebody samples. Discussions continue with Noble Group about an offtake agreement for tantalum and tine from the Musasa project. There is $325,000 in the bank.
Clean Invest Africa (CIA) subsidiary CoalTech has signed development agreements to identify opportunities in China and Indonesia. It will own 20% CoalTech Far East and Daniel Lee the rest.
Love Hemp (LIFE) has increased the amount raised in the recent placing from £5m to £7m.
Chris Akers has increased his stake in Quetzal Capital (QTZ) from 12.3% to 14.1%. Sebastian Marr has taken a 3% stake in Rogue Baron (SHNJ).
AIM
AdEPT Technology (LON: ADT) has acquired Datrix for an initial £9m, with potential deferred consideration of up to £7m based on the growth of the business. The business provides cloud-based networking and cyber security services, and the two firms already work together. In the year to March 2021, Datrix is estimated to have generated revenues of £10.7m and pre-tax profit of £600,000. There should be £400,000 of annualised cost savings.
A £10m placing at 10p a share by Helium One Global (HE1) was oversubscribed. There was enough cash in the bank to drill three exploration wells at the 100%-owned Rukwa helium project in Tanzania in the next few months. The additional funds will enable the drilling rig to be retained for additional appraisal and more 3D seismic can be acquired.
Open Orphan (ORPH) is planning to demerge HVO-001, which is a small molecule, immunomodulator drug that could become a treatment for severe flu, and other non-core assets inherited from the merger with hVIVO. Shareholders will receive shares in the new vehicle which could be quoted on AIM.
Franchised lettings agency Belvoir (LSE: BLV) improved 2020 revenues from £19.3m to £21.7m, while pre-tax profit rose from £6.2m to £7.5m. Net debt was £3.7m at the end of 2020, although £4m has since been spent on the Nicholas Humphreys business. The property market remains buoyant.
Steel structures supplier Billington (LSE: BILN) still has a strong balance sheet with net cash of £13.9m. Last year, revenues slumped from £104.9m to £66m, while pre-tax profit dipped from £5.9m to £1.7m. The final dividend is 4.25p a share. There is a significant order book, but costs are increasing.
Gaming machine monitors and consoles supplier Quixant (QXT) returned to profit in the second half of 2020. Full year revenues fell from $92.3m to $63.8m, while pre-tax profit dipped from $10.7m to $1.3m. The Densitron displays business did well due to demand from medical and broadcast customers.
Iodine producer Iofina (IOF) says that quarterly production fell 17% to 108.2MT and the first half production is likely to be around 250MT. This is due to the cold weather and the lower than expected production is offset by higher iodine prices.
GYG (GYG) says that a German shipyard has gone into administration with more than £2m of invoices outstanding. This was announced after Harwood Capital said it is considering a bid for the superyacht painting and maintenance services provider of 92.5p a share.
For the first time since April 2017, Immunodiagnostic Systems Holdings (IDH) has published a trading statement at 7pm on a Friday rather than after 4.30pm.
MAIN MARKET
Mast Energy Developments (MAST) intends to develop a portfolio of reserve power assets. The first projects should be up and running this year. AIM-quoted, Africa-focused power projects developer Kibo Energy (KIBO) set up Mast Energy to buy and develop flexible power plants that will supply the reserve power market in the UK. A placing raised £5.54m at 12.5p a share when Mast joined the standard list on 14 April. Kibo still owns 55.4% of Mast.
NMCN (NMCN) has agreed a new £8.9m facility with Reflex Bridging Ltd. This is secured on property developments. The overdraft has been extended by Lloyds Bank.
BATM Advanced Communications (BVC) has secured a strategic partnership with albis-elcon, which will jointly offer the company’s network function virtualisation technology NFVTime.
Andrew Hore
MAST IPO valuation disconnect reveals hidden value in Corcel (LON: CRCL)
MAST IPO valuation disconnect reveals hidden value in Corcel
The way the UK generates its power is changing rapidly at present. The shift from fossil fuel plants to a lower carbon generation model is creating huge opportunities for the supply of continuous uninterrupted supply of base load electricity as well as trading electricity and capturing attractive spreads, all of which is being addressed by a number of UK companies.
One such company is MAST Energy Developments, a subsidiary of Kibo Energy, which is set to IPO on Wednesday 14th April with a £23m market cap. MAST has a portfolio of small-scale ‘Reserve Power’ generation assets that use low carbon sustainable gas, with their initial focus on the Bordesley site, near Birmingham. Once listed, MAST plans to develop at scale and pace, rather than on a project-by-project basis, and implies a larger portfolio is being prepared.
Currently MAST has a c.5 MW immediate production capacity, with plans to move to c.20 MW in production capacity within the first six months of listing followed by another c.20 MW in production capacity over the subsequent six months.
Surprisingly the considerable interest in the MAST IPO hasn’t, as of yet, definitively spread across to other companies in the sector. London-listed Corcel Plc (LON: CRCL) is already a key player in providing flexible grid solutions (FGS) to the UK grid as it transitions from coal/nuclear generated power to renewables backed by energy storage and gas peaking assets. The company’s initial 100MW energy storage at Burwell near Cambridge is already fairly advanced, and is strongly backed by a pipeline of additional projects in the space as well as strategic partnerships.
MAST is raising in excess of £5 million at IPO, more than the recent market cap of Corcel, to fund its expansion in the flexible energy sector. Yet the company is coming to market with what appears to be between just 5MW and 20MW of project capacity, compared to Corcel’s existing 100MW project at Burwell and their publicly stated efforts to assemble a pipeline of additional MWs and subsequent projects.
In addition to Burwell and its associated strategic partnerships, the Company’s foundation is its Mambare nickel laterite project in Papua New Guinea, which it has been developing for a number of years. This asset underpinned a historic valuation of over £40m at once stage, but with nickel having been out of favour, there was little activity. Nonetheless, with global interest in nickel reaching new highs, there is renewed interest in assets such as Mambare, with the project JV now moving aggressively forward towards a mining lease and looking to fill increasing demand for nickel use in batteries. For an asset that has been recently ignored by the markets, the upside here is significant and the timing appears very good.
Corcel also has exposure to a second nickel/cobalt interest at Wowo Gap, located 250km from Mambare and owned by Resource Mining Corporation (RMI). Corcel owns a A$4.76m senior debt position in RMI which is repayable within the next 12 months. The strategy here has been to take the initial debt position and then negotiate a transaction for the WoWo asset itself, doubling Corcel’s nickel/cobalt exposure at a very attractive entry price. Signfiicantly, RMI has also announced the acquisition of a second nickel project in Africa, which appears to provide a compelling backdrop for RMI to settle its Corcel debt via a project for debt swap. At a stroke, this move will make Corcel a major regional nickel player in Australasia.
Valuations per MW for MAST range from £3.6 million (5MW) to £0.9 million (20MW). Even taking the lowest figure and discounting it by 50%, to remain conservative, the Burwell project alone looks to be worth well over £40m to Corcel’s valuation.
Corcel raised £300k in February and at the same time put in place a debt facility, so appears to have no imminent cash requirement. With 321,381,614 shares in issue, if Corcel were valued in the same way as MAST, based on the most conservative estimate for MAST having control of 20MW of flexible assets, Corcel would immediately be valued at 18p. The math for a comparative valuation assuming MAST has only really secured its initial 5MW, Bordesley project, (and with the rest considered ‘pipeline projects’) isn’t hard to do, and would push Corcel’s valuation into the triple digits and the share price north of 60p.
And to remind again, this valuation analysis for Corcel does not take into account any allocation for the Mambare or Wowo Gap nickel / cobalt assets. Valuation disconnect perhaps? Likely not for long!