Small cap movers from the junior market over the past week

A look back at some of this week’s more interesting stories from London’s junior market.

It’s not too often that an AIM company sees hundreds of millions wiped from its market value. After all, most are worth just a fraction of that.

But stock market darling Burford Capital, the biggest company on London’s junior market, has seen its market capitalisation plunge by £350mln this week following another bearish ‘sell’ note from Canaccord Genuity.

Analysts at the Canadian investment bank slashed their price target for the litigation funder to 1,196p as they flagged 20 risks which they think the market is yet to get its head around.

Among the list of concerns was the possibility of a new fundraising or a cutback on lending should realisations not reach the levels bosses have been forecasting.

They also took umbrage with how Burford calculates its return on invested capital: the company claims it has an ROIC of 85%, while the chin scratchers put the number closer to 51%.

Despite their pessimistic view on Burford, Canaccord, which owns 9% of another litigation funder, Manolete Partners, said there was still a “real opportunity” for investors in the sector.

Burford shares dropped 11.3% across the week to 1,557p, although it is still valued at just shy of £3.5bn.

Touchscreen maker Zytronic also felt the wrath of shareholders after it reported a dive in first-half sales and profits.

Revenue fell to £9.5mln from £10.6mln a year earlier, while pre-tax profits plunged to £1.4mln versus £2.2mln in the first half of 2018.

Zytronic blamed the downturn on falling product sales into the gaming sector, with companies in the sector taking longer to confirm orders.

It was a much better few days for Edenville Energy, shares in which almost trebled after investors agreed to pump in a much-needed £510,000.

Share Talk Weekly Stock Market News, 27th October 2019

Earlier this year, the AIM tiddler was forced to place operations at its Rukwa coal project in Tanzania on a limited production profile after an open offer failed to raise the necessary funds.

But bosses said this week’s cash injection would help to boost production and sales, which would lead to it becoming cashflow positive by this time next year.

The improved outlook went down a treat with the market, with the stock steaming 190% higher to 0.07p come Friday afternoon.

On the whole, it has been a quiet week for London’s small caps, with the AIM All Share edging 1.1 points, or 0.1%, lower to 969.4.

Still, that was enough to beat its big brother after the FTSE 100 dropped 19.0 points, or 0.3 points, to 7,410.0 despite finishing with a flourish on Friday.

Pennant International was one of those to flop after it warned a potential contract worth up to £30mln could be delayed again.

The company, which trains up Network Rail’s track engineers among other things, had originally expected to start work on the contract towards the end of 2018 and it has spent hundreds of thousands of pounds to make sure it is ready to deliver the new business.

Bosses still expect record revenues this year, but they warned that the extra £90,000 or so it is spending every month in preparation for the contract award is hurting margins.

A cost reduction programme has been put in place to try to limit the damage, but shareholders weren’t convinced, and the stock closed the week at 102p – a fall of 9.7%.

Small cap movers from the junior market over the past week

Rambler Metals and Mining was shining though after processing a record amount of ore for the second year running through its Nugget Pond facility in Newfoundland.

For 2018 overall, Rambler produced 4,187 tonnes of saleable copper and 4,189oz of gold. Shares surged by a quarter to 1.75p.

Elsewhere, money finally looks to be slushing through the City of London again, with a number of junior companies tapping the market for a few quid.

Chaarat Gold completed a £9.8mln (US$12.7mln) fundraise to support the development of its Tulkubash and Kapan gold projects, while podcast platform Audioboom unveiled a £2.8mln placing.

Others asking for money included Anglesey Mining, oil and gas explorer Angus Energy and restaurant owner Tasty.

Of course, that is on top of a few big deals that went through on the main market this week.

Sirius Minerals netted £325mln from investors to fund the next stage of development at its Woodsmith fertiliser mine in North Yorkshire, while renewables investor Greencoat UK Wind announced plans to raise hundreds of millions to grow its burgeoning portfolio of energy projects.


Author Tom Howard

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