Trader’s Café with Zak Mir: A Week In Small Caps, Saturday 29th October 2022

Now that we have safely secured a new Prime Minister and the higher taxes which he previously delivered, the main focus is back to what to do with the consequences of the cost of living crisis. One would presume we will have to see mass-scale handouts, in the manner of furlough, to the different sectors and individuals concerned.

Author @ZaksTradersCafe

The Small Cap Barometer

The small cap is of course a barometer of such matters. There was a contrast seen this week between companies able to announce sometimes stunningly good news, and those with backs against the wall. Empire Metals (EEE) and African Pioneer (AFP) celebrated copper finds, while Deepmatter (DMTR) signed a multi-year license agreement with the Life Science business sector of Merck. MobilityOne (MBO) celebrated the recently proposed JV with Super Apps Holdings.

On the downside Made.com (MADE) and Pure Gold (PUR) reminded us of the existential threats some small caps are facing currently. Indeed, the liquidity crunch of recent months meant that they are having to ask shareholders for funding at a sub-optimal time. The latter perhaps not helped by what seems to be more frequent, apparently perfectly legitimate, leaking of fundraise news.

Leaks

Apart from making for decent clickbait from those who leak, it is difficult to see the benefit of such actions. True, if you find out that a company you are invested in is in distress and needs to raise money, you could sell up and avoid losing a considerable sum. Or, of course, make money from going short.

However, the problem is that the leak risks sabotaging the fundraise in question, and provides the risk that the company goes under. So, is a leaked story worth such potential damage? If it is ok to leak it, what is the point of the insider concept?

Out In The Open

Ironically, the best of what we have seen for small caps of late, are situations in which the news has been out in the open. Sometimes this has been for weeks, and the market has then started to price this is appropriately.

Alkemy Capital (ALK) is now up by around three quarters since news its subsidiary Tees Valley Lithium Ltd said it was collaborating with BP (BP.) subsidiary bp Alternative Energy Investments Ltd on green hydrogen. The news means the minnow has been given the validation of a blue chip deal. One did not need to be Warren Buffett to anticipate such a significant re-rate for the stock.

Indeed, the same could be said for ECR Minerals (ECR) in the wake of the October 20 RNS which unveiled strong re-assay results in Victoria, Australia. The shares of ECR are up a third since then.

We are seeing a similar ongoing re-rate for Renalytix (RENX), on the revelation earlier this week that US federal Medicare administrative contractor, National Government Services, has started paying for use of KidneyIntelX.

Union Jack Oil (UJO) signalled a fundamental inflection point with its declaration of a Maiden Special Dividend, as well as announcing a Share Buyback Programme.

One would not be surprised if transport technology Aurrigo (AURR) continues to rise in the wake of signing an agreement with Changi Airport Group for the next phase of development of Auto-Dolly, Aurrigo’s baggage transportation system for airports. The company arrived on AIM with a £20m market cap last month, and is already up to £32m.

Hydrogen

That said, we are not exactly in IPO heaven so far this year. Hoping to break this pattern next month is Georgina Energy, which is focused on hydrogen, helium, and natural gas. After an interview with the company last week, it was interesting that some of the brighter sparks on Fintwit pointed out the link here between the company and punters’ favourite Mosman (MSMN). Perhaps some MSMN holders will take a look at Georgina as well.

Speaking of hydrogen, it has been noticeable that plays such as ITM Power (ITM) and Ceres Power (CWR) have not exactly been flourishing. It seems like it is time for those who seek to produce hydrogen to team up with those who have the technology to produce it in a renewable fashion. This logically points to Powerhouse Energy (PHE) and Hydrogen Utopia (HUI). By the same token, the market does not yet seem to have woken up to Oracle Power’s (ORCP) moves in the green Hydrogen area, after it finessed its news last month regarding a massive project in Pakistan.

Another minnow which recently announced moves in the renewable energy space is Sabien Technology (SNT). Indeed, I actually ventured out (highly unusual) to a presentation in central London given by Sabien and South Korea’s City Oil Field. COF’s technology involves catalytic degradation of waste plastics and vinyl materials via a wave energy to produce a heavy oil. One only hopes that this going forward would be a step in addressing the world’s waste plastic crisis. Presumably, this would also do no harm to the Sabien share price down the line either.

Aquis

If IPOs are a work in progress for the rest of 2022, then the state of the Aquis market is also something that we are looking to for improvement, both the perception and the reality. It will be interesting to gauge the mood at the VSA Capital, Aquis Showcase Event next month. In the meantime, it was a better week for some of the more liquid plays on the Aquis market.

Arguably the poster child of the exchange, KR1 (KR1) was up 30% on the week. In its interims last month it said income from digital assets stood at £16,567,889, +203% on HY21. Valereum (VLRM) improved a similar amount after its recent RNS saying that “solid progress” was being made with regard to its acquisition of the Gibraltar Stock Exchange. TR1 news backed Quetzal (QTZ) via serial investor Chris Akers.

Less familiar to some is the video technology company Visum (VIS). The company focused on the global leisure market technology has improved to 19p from its original 14p IPO price, as it continues to beef up its board.

Author @ZaksTradersCafe

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.


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