The Top 20 For 2022: Of course, at this time of the year, everyone and their mother deliver their list for the winners of the New Year, as I have in recent years. However, I wanted to go from a slightly different angle.
By Zak Mir
In some weeks I interview as many as 10 CEOs and many several times over the course of the year. One of the generally accepted rules of successful stock market investing is that you are investing in management, even more than the business model. It has to be said that the vantage point of being an interviewer can be the box seat as far as judging companies. For instance, it is rare an outperforming company is headed up by someone who does not impress either in an interview, face to face, or via their track record. Most of the 20 stocks included for 2022 are companies where the management are outstanding, and where there is not necessarily the case, the valuation or sentiment towards the group has sunk to “ridiculous” levels.
Finally, the selection is in the small-cap/microcap area – Elephants Don’t Gallop, remains the mantra. My influence has been and continues to be Gervais Williams of Premier Miton, and he continues to be an outstanding example in this space.
14. Cizzle (CIZ): 2.8p Target 7p
It is said that the most dangerous part of flying is, quite logically, take off and landing. This analogy rather works on the stock market, with the take off being the immediate aftermath of the IPO and the first few weeks of listing. M&A is the landing part – whether hostile or agreed. What can be said is that as far as a stock coming to market, the initial weeks and months can be critical. Get off to a good start and that is very often the way it stays. However, bad timing, weak market conditions, lots of pre-IPO investors heading for the exit on day one, and it can take an extended period for the stock to gain its composure. This can be the case even if post listing the company justifies the pre-IPO fundamentals, or even improves on them. We have seen this with a couple of last year’s IPOs, Mode Global (MODE), and in particular Brandshield (BRSD). In the case of Cizzle the headline that its remit is to be an early lung cancer detector is a worthy one, to create a biomarker that disposes of the need for invasive and damaging tests on offer at the moment. What has been interesting since the shares came to market in May at 11p is that the sell off has not so far been interrupted by news of a China MOU and the revelation of a full commercial deal being negotiated, or the MOU with MoU with St. George Street Capital (SGSC), involving two full deals with the potential to generate royalties of up to £5m. This leaves Cizzle trading at a discount to its £8.3m enterprise value. One would imagine that during the course of 2022, probably early on, the value disconnect, and perhaps a pesky seller or two, will be out of the mix.
13. Okyo Pharma (OKYO): 7p Target 20p
We stick with an unloved biotech for the next stock in the Top 20, much of which is based not only on the fundamental value behind a company, but also the acknowledgement that H2 2021 has been brutal as far as the small cap space has been concerned. We have been treated to delayed / overpriced IPOs, and stock margins being raised at the drop of a hat, something which quite understandably might have caused some to chance their arm in the wild west of crypto trading. For Okyo Pharma, 2022 looks to be a comeback year. It has been gestating its dry eye treatment, something which was well flagged in July with the tie up with Ora. It would appear that professional investors started appreciating what is to come from the early autumn, with the shares gapping up from 4p. Indeed, OK-101 is a wonderfully subtle and game changing treatment, able to bind to the surface of the eye, to target the inflammatory cells. One would assume that the reason that shares of Okyo are not much higher than they are is that investors have perhaps not taken the time to appreciate the advance that OKYO has made. Indeed, they have also not appreciated the recent announcements that not only has U.S. Patent issued for use of OK-101 to treat dry eye disease, but that OK-101 is to skip straight to Phase 2 human clinical trials in H2 next year. Given the size of the market, the breakthrough, and the strength of the IP, it can be said that genuine blockbuster drugs do not come much quicker, cheaper, or with greater application than the one that OKYO has under its wing.
12. United Oil and Gas (UOG): 2.8p Target 5p
One of the more British aspects of the London stock market is that there would appear to be something of a block against small cap companies becoming large caps. It is a transformation which for some reason is difficult to make even at the best of times. Breaking the £20m market cap is the first hurdle, with the £100m level the zone to break to get to the promised land out of the retail investor space to where institutional buyers start hunting. As far as United Oil and Gas is concerned, the day of writing sees the stock back above its IPO level of 2.5p in 2017 with a 25% rise. Hopefully, the last of the weak longs are finally out, as news of a successful result at the Al Jahraa-13 well strikes a positive chord. However, with the company delivering revenue of approximately half its market cap every six months in the recent past, CEO Brian Larkin and the team have not exactly been treated like royalty. It is hard to think of another oil and gas play that has not had the benefit of the rise in oil prices over the past year and a half, and at the same time been given none of the benefit of the doubt as far as the execution of strategy, and the potential the company has has. It seems fair to say that if we have seen the last of the sellers near 2p, then this company has the perfect mix of blue sky in terms of Jamaica and production in Egypt, with the rest of the portfolio set to deliver as well with the stock squeezing higher.
11. Afritin (ATM): 6p Target 10p
It has to be said that Afritin has been somewhat under the radar in terms of all but the cognoscenti of the financial Twitter. But in some ways this could be a blessing going forward. The professional investors are in, and of course they already recognise the professionalism of the company, and that of the management led by Anthony Viljoen, the CEO. Those in the know are perfectly aware of his experience and the way he steered Bushveld Minerals, with the implication being that he is fully capable of doing the same and more at ATM. The Namibia asset helps underpin the offering of the company in two ways. As mentioned in a recent interview with the CEO, an investor in the company gets “two for the price of one.” We have Uis offering Tin, at a time when the Tin price is soaring, but last month the company confirmed that tests revealed the potential for additional Lithium and Tantalum sales, with little additional effort. Indeed, the Lithium beneficiation facility is expected to cost just £2.2mln and can be funded from existing cash reserves. And for those who are concerned that we are looking too far forward here, the company has had a shining autumn, with Tin production up 20% to 136 tonnes, and closed a £4.5mln lending facility for its Phase 1 processing plant at Uis.
10. Poolbeg Pharma (POLB): 9p Target 20p
As stated with reference to Cizzle (CIZ), the opening gambit for a company which is new to the stock market is always worth keeping an eye on. The stock market since clinical stage infectious disease pharmaceutical company Poolbeg came to market has not exactly been awash with liquidity, and in the meantime the ebb and flow of the pandemic has provided a distraction for investors. However, one would expect Poolbeg to rise above such local considerations in 2022, with the evidence for this coming in the form of one of the most recent announcements. In this the company said it has agreed terms with AnaBio Technologies to develop an oral vaccine delivery platform. Covid or no Covid, this should have inspired the market in a serious way, given that most of us now feel like pin cushions in the wake of the pandemic, and that a sizeable proportion of “anti-vaxxers” are actually needle phobic. We already know that the oral vaccine for Polio was transformational for the world, and therefore for this aspect alone Poolbeg is likely to be at least as significant a company as the illustrious Open Orphan (ORPH), from which it was spun out in 2021.
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