UK INVESTOR
20 000 MONEY // SHARES // INTERVIEWS
ISSUE 18 // JANUARY 2017
The DOW @
Plus Seven cracking tips The deadwood press does not need supporting Investing in supermarkets UK Investor Magazine — 1 — January 2017
Intro
From The Editor INSIDE 3 Three resource stocks to buy Gary Newman 6 Are we backing the wrong side in Syria? Tom Winnifrith
I think we have just set a new record for the lateness of this publication. But we are still in January, albeit only just and
7 Is it worth bagging a super market share Chris Bailey 8 Why bother supporting journalists? Tom Winnifrith
so welcome to the January edition of the UK Investor Show Magazine.
9 Company Profile: Zytronic Steve Moore 10 The DOW at 20,000 Tom Winnifrith 11 Simian Global: The biggest joke Cynical Bear 12 Three stocks to sell Tom Winnifrith 14 The House View
We go to press at a historic moment for the stockmarket as the Dow Jones Average has just gone through 20,000 for the first time. Incidentally the Dow is an Average not as the rather silly Economics Editor of Channel 4 News asserted today, an Index. The two are different and it is quite appalling that, so called specialist, journalists are paid vast sums yet make such a daft error. We look at that 20,000 landmark in this issue and we also have something, we hope, for everyone. I serve up three stocks to sell, Gary Newman has three resource stocks to buy. Chris Bailey looks at retail - is the sector oversold or are structural changes set to cause changes we cannot foresee and which are not discounted?
CONTACT US UK Investor Magazine 91 - 95 Clerkenwell Road London, EC1R 5BX E: info@ukinvestorshow.com W: www.UKInvestorShow.com EDITORIAL Tom Winnifrith Editor
Meanwhile the countdown is on to our big event of the year, UK Investor Show which takes place at the QE2 Centre in Westminster on Saturday April 1. The all star speaker line-up includes all the big names: Nigel Wray, Evil Knievil, Mark Slater, appearing by video, tech queen Vin Murria, Lucian Miers, Paul Scott, Adam Reynolds, Peter Hambro, Ross Norman, Matt earl, Gabriel Grego and the list goes on and on. Oh, and I am there too, involved with two bear sessions” as well as doing no holds barred presentations on the frauds Worthington & Cloudtag. Well over half the 2,500 seats have already been booked and we will start to despatch snail mail tickets on St Valentine’s Day. we hope that you will be there to hear the star speakers and to meet 121 PLCs each with their own stand. There are some cracking companies attending at CEO level and if you are interested in shares you don’t want to miss out. More details can be found at www.UKInvestorShow.com - see you in April. Tom Winnifrith UKEditor Investor Magazine — 2 — January 2017
UK Investor Magazine — 3 — January 2017
The top three resource stocks to buy for February
R
By Gary Newman
esource stocks in general have benefited from improved commodity prices in recent months, and for some that looks set to continue during 2017. Precious metals in particular have enjoyed a good bounce during the first few weeks of the year, with both platinum and silver 10% or so above the lows we saw at the back end of 2016. News of three proposed interest rate increases by the Federal Reserve during 2017 weren’t taken well by the market, as this pointed to further Dollar strength, but that is now less certain with Trump as president and commentators seem to be divided as to whether the currency will continue to get stronger or not. There is also enough potential for turmoil and uncertainty, especially within the Euro zone, that precious metals could once again provide a safe haven for investors.
With many of the gold producers having already risen a lot this year, I quite fancy one where its mine is about to come online, and not only will that create interest, but it will also benefit from any further increases in the gold price in the coming months. That company is Ariana Resources (AAU), where the Kiziltepe mine on its Red Rabbit project, in Turkey, is expected to begin production soon – it was originally scheduled for late 2016 but has been delayed by adverse weather conditions. The previous JORC showed measured resources of 108koz of gold, and 1.48Moz of silver, with all in cash cost of production of around $600/oz and a mine life of up to 11 years, and the company has mentioned that it expects further revisions to these reserve estimates following recent drilling activity – just as long as they are in a positive direction of course. In terms of funding, the company has just raised £900,000 by way of a placing at 1.6p, some of which will be used to carry out work at the recently
acquired Salinbas project, plus at Tavsan, and revenue from Kiziltepe will also help, with the company targeting annual production of 50,000 ounces. Currently you can buy the shares for around 1.8p, so not that much higher than the recent placing, and the market cap of £14 million or so offers plenty of upside potential once revenue starts to come in. Especially when you consider that the company would be making in the region of $800/ oz at current gold prices, less any other cost of sales not included with in the $600/oz cash cost.
Oil has also had a decent start to the year, although has remained very volatile, and as long as it contains to trade in the $50-60 range, I can see Serica Energy (SQZ) having a very good year. Last year was slightly disappointing for the company as a result of lost production caused by work on a pipeline and offtake facility, but those problems at the Lomond platform, which services Serica’s 18% owned Erskine field in the North Sea, now look to have been resolved and production is stronger than ever. Production net to Serica reached 3,800boepd in December, now that it is able to produce at an unconstrained rate, and at the same time the new operators of Lomond reduced costs, so the company also benefits from improved profitability from that – even prior to these, and other, cost reductions the field had operating costs of just $20 per barrel, and are now significantly below that. The company has managed to achieve all of that without getting itself into any sort of debt – it still owes BP two payments of $2.775 million due in July 2017 and 2018 - and had $16.6 million in the bank as at the end of 2016. That wasn’t including the proceeds of sales for December, which was expected to add a further $3.5 million of cash build to the pot. The share price of the company has risen a lot during the past 12 months, having been around 8p this time last year, and the market cap now stands at £51 million, which you could argue was a fair re-
UK Investor Magazine — 4 — January 2017
flection of the net asset value which stood at $71 million as at the last update up to the end of June 2016. But given the amounts of cash that are now rolling in on a monthly basis I can still see plenty of upside from the current price of 20p to buy, although the risk does still remain that at present the company is solely reliant on Erskine.
Finally, I would consider buying Gem Diamonds (GEMD), as despite a bit of a volatile year during 2016, I can see value going forwards from here, especially if diamond prices have a relatively strong performance during 2017, as many in the industry seem to be expecting. It is always hard to predict what will happen with diamonds, as probably more than any other commodity, prices are largely controlled by the amount of stock that is released onto the market. Prices had been weak but producers have been attempted to balance supply and demand, and as a result prices have been stronger, and alongside that De Beers isn’t expecting any large new discoveries, and sees supply declining from 2020 onwards.
The share price of Gem Diamonds has been volatile recently and it has seen a bit of a bounce off of the lows around the 100p area, now sitting at 117.25p on the ask, but that is still quite some way below the 52 week high of 148p. The last set of financials looked disappointing at face value, with a net loss of $15.9 million for the six months up to the end of June 2016, but that was largely as a result of a $40 million impairment charge on the Ghaghoo asset. That aside, gross profit was in line with the same period during 2015 and the company would have made a post tax profit of some $24 million or so. The net assets of the company at that time also stood at over $330 million, and the more recent trading update showed that at the end of September it had $44.1 million in cash, although $28.2 million of its banking facilities have been drawn down upon, so net cash was still $15.9 million. With the company on track to meet its full year operational guidance, alongside reducing costs, I can see plenty of upside potential from a current market cap of around £160 million. The author holds shares in Serica Energy (SQZ)
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newsletters.advfn.com/tomwinnifrith UK Investor Magazine — 5 — January 2017
Mass on December 25 in Aleppo cathedral after 5 years and yet we are still backing the wrong side in Syria Writes Tom Winnifrith
O
ver Christmas, here in Bristol we prayed for Christians around the world who were suffering for their faith and we prayed for peace in Syria. And on Christmas day I hope we all rejoiced as the cathedral of St Elijah in Aleppo held its first Christmas service in five years. What joy that must have brought to the 100,000 Christians still left in Aleppo. The Western media reported this rather sheepishly. Because it exposes the folly and wickedness of the policies of our Government in Syria, policies that the Western media has lapped up and promoted with lies and bias throughout. Here are the facts. Before the war President Assad supported full religious diversity. Christians in Syria were safe and allowed to pursue their faith without fear. That is not the case in barbarous regimes elsewhere in the Middle East but they are our allies and Assad was and is wicked and evil, or so we were told. In Aleppo the Cathedral was on the front line between the 1.5 million folks living in West Aleppo run by President Assad and the 250,000 living in a rebel enclave, East Aleppo. Those in the East were, according to David Cameron, “moderates” and we in the est supported them with arms and money. Our press reported daily on how they were under attack. It never reported on how rockets, fired at no particular target, landed on a daily basis on West Aleppo. Our media did not report on how the “moderates” threw folks from the top of tall buildings for being postmen under the Assad regime or how they beheaded, in public 12 year old boys they thought were spies or how they made worshiping Jesus a crime punishable by death. And thus while about 60% of the Christians of Aleppo fled the town altogether, 40% stayed and
it will come as no surprise that they all fled to the West to live under evil President Assad not Dave Cameron’s friends “the moderates”. But St Elijah was quiet on Christmas Day for it was either under the control of “the moderates” for whom the worship of Christ was punishable by death or, in more recent years, on the front line and a place that would be bombarded with rockets by the “moderates” should Christians gather to celebrate Christmas. It had already been shelled heavily. But this year, in 2016. President Assad, the Russians and Iranians have pushed the “moderates,” who you and I would recognise as Al-Qaeda backing extremist Islamofacists, out of Aleppo and after five years Christians can return to their heavily damaged cathedral, a site where Christ has been worshiped for 500 years, and celebrate the birth of the Lord. I rejoice in that as I am sure we all do. But can we now perhaps recognise that the “moderates” that our political and media elites insisted we back were evil men? We have , as I have noted many times here, been backing the wrong side. Russia has been backing the right side It is our policies that have prolonged the conflict in Syria, that have created the refugee crisis, that have banned Christmas for so many. Our leaders and the press have blood on their hands and one hopes that Christmas at St Elijah’s will force them to acknowledge this and to show some contrition. Perhaps we can start with Secretary of State Clinton, President Obama and Call Me Dave...over to you guys. Oh I forgot, call me Dave just flew first class to the West Indies for a Godless Christmas in the sun, he really cannot be thinking of the Christians in Syria, who he has so utterly betrayed, as he must have so much else on his mind.
This article first appeared on www.TomWinnifrith.com UK Investor Magazine — 6 — January 2017
Are the supermarkets hot to shop after their Xmas trading updates? By Chris Bailey of Financial Orbit
A
fter being outed by Tom Winnifrith as a non-adherent to the Star Wars doctrine, I turn my thoughts to matters in our galaxy (not far away)…and the bevy of trading updates from supermarkets this month. The roll call started with a boost akin to the hyperdrive on the Millennium Falcon as Morrisons (MRW) had its ‘strongest performance for seven years’ with a Christmas period like-for-like sales growth of 2.9% boosted by its superior product Best range which allowed it to say that profits would be ahead of hopes. Well done turnaround CEO Morrison Dave… your back-to-basics strategy has worked out pretty well…and the shares (150p a year ago) are pushing 240p as I write. Back in the day it used to be that 300p was a real historic barrier for Morrison shares. I would be a holder here awaiting a full set of numbers and next step strategy chat. Then came Sainsbury’s (SBRY) and even though its headline like-for-like sales were barely positive the market got the horn with its observation that the newly acquired Argos had seen like-for-like sales growth of 4%. Trading-wise whilst acknowledging a 50% rise in sales of Taste the Difference party sales and just how cheaply it was selling turkey for…Sainsbury’s did not push up its profit numbers and was generally a little bit more downbeat about future prospects, with observations including: ‘The market remains very competitive and the impact of the devaluation of sterling remains uncertain’ Sainsbury’s shares do not interest me here. Perhaps it is because it is not run by someone called Dave…because Tesco (TSCO), in a Morrisons-esque manner, banged on about an eighth successive positive like-for-like quarter as it continues its own corporate renaissance even if recent like-for-like sales growth was impacted by changes to the Clubcard offering. Tesco shares slipped on the update but are currently a few pence above the 200p level. There are two reasons for this. First the well-received Morrisons and Argos-pumped Sainsbury’s numbers had already boosted its shares earlier
in the week. Second, Tesco also mused about the next phase of supermarkets wars in the UK with the observation: ‘We have worked hard throughout the period - in collaboration with our supplier partners - to minimise the impact on our customers of the inflationary pressures that have started to emerge in the market. As a result, while deflation has eased, the price of a typical basket remains nearly 7% cheaper than in September 2014. We will continue to do all that we can to ensure that we offer our customers the best possible prices’. There is a serious two-way pull going on at the moment. Inflation is up in the world and food inflation is clearly shifting north as highlighted by some numbers today out of the United Nations’ Food and Agricultural Organisation Index which showed a rise of 12% year-on-year. Unsurprisingly the suppliers – including Unilever (ULVR) and perennial dog Premier Foods (PFD) – are agitating for increases but, as noted above by Tesco, the key debate is just how much is passed onto me and you. And this, of course, is the central message of the Christmas trading updates. Best and Taste the Difference sales success will be harder to replicate outside of a holiday period and too much general price compression threatens to play again into the hands of the Aldi and Lidl’s of this world against which the big names struggle to compete on price, but are increasingly doing okay on range, convenience and online / delivery capabilities. And once you talk about prices…you end up talking about profits. It is clearly still not an easy backdrop and memories of good Christmas trading will fade quickly into 2017. I would continue holding onto Morrison and Tesco shares here on the basis they are delivering, but what I really want to hear come the spring is the strategy they will employ in 201718 to keep both the tills ringing and the bean counters happy. Sales are vanity and profits/cash flow are sanity as always. Perhaps we should ask Yoda for a view (although my cursory look at his film appearances suggest to me he would prefer Waitrose – and a free coffee ‘natch).
UK Investor Magazine — 7 — January 2017
Patronising Ex Journalist Neil “Wolfman” Wallis asks us to support journalists - why bother? Writes Tom Winnifrith
I
am in a Twitter spat with ex Fleet Street editor Neil “Wolfman” Wallis who is concerned rightly - that new legislation (Section 40) will restrict the ability of non national newspapers to pursue investigative reporting. But in begging sympathy for journalists, a man who has now turned to the dark side, to PR, fails to accept how low our profession has sunk in the public esteem. I attempted to put that point to him with a cheeky tweet suggesting that the deadwood press holds noone to account any more. Poodles who are part of a corrupt establishment have no bite. Wallis replied with insult (fair enough who am I to criticise?) and then went onto assert that I could not have been a journalist for a quarter of a century because he had done a Google search. Wallis shows the true quality of investigative journalism in 2017. Better stick to PR old man.
Wallis cannot accept that. Okay he is a patronising old fool. So what? The problem is that he is of a generation of journalists who trashed little people with hacking and horrible doorstepping. I really don’t care about the celebs Fleet Street harassed and hacked it is the little folk who were exploited that concern me. The press has been shown in both its political and in financial reporting ( my world) to be corrupt in that it is in bed with those it is meant to expose. If you accept a drip drip of “exclusives” and hope for a job on the dark side in due course, from those you are meant to challenge you become a poodle of the establishment. And that, largely, is how the mainstream press stands today. No wonder, more and more folks turn to the web for news. Old farts of the Wallis era insist that the web is all “fake news” but we see time and time again (the BBC & C4 on the US election being a case in point as I demonstrated repeatedly on this website) that the Old media serves up vast amounts of fake news too. Meanwhile if Wallis could open his eyes he’d see some fantastic truly investigative journalism on the web.
I reckon working for the Evening Standard, AFX, etc counts as journalism even for a luddite PR tosser like Wallis. I think his real problem is with this “interwebby” thing. I earn a living from Wallis is right about Section 40. But he fails to writing in a commercial set up which appears on understand that my profession ( which used to be a website not in the traditional press. We break his before he went for the easy money on the dark stories and expose financial frauds the “traditional side) has disgraced itself so badly in so many ways press” don’t touch. To me that is good solid old that it will find it hard to rally support in this its fashioned journalism but because of the medium day of need. ( a profitable website not a loss making paper) This article first appeared on www.TomWinnifrith.com UK Investor Magazine — 8 — January 2017
company profile
Zytronic plc
Compelling growth within touching distance? By Steve Moore
D
ecember saw Zytronic plc (ZYT) announce results for its year ended 30th September 2016, emphasising “success of the strategy of targeting the larger-format touch sensor markets where our proprietary multi-touch technology has generated significant demand, particularly in the gaming market”. Previously focused on filters for use with electronic displays, the company has evolved to now mainly develop and manufacture a range of patented touch sensor products for, as well as the gaming market, the likes of the financial, vending, industrial and signage industries (the results showing touch revenue +5% at £18.2 million). It operates from near Newcastle-upon-Tyne, but is export focused – the recent results statement also including that “export revenue accounted for 95% of all revenue”. The results showed an adjusted pre-tax profit of £5.14 million, up from a prior year £4.46 million, on revenue of £21.1 million (down slightly due to further decline in original, non-touch glass display products). After particularly £1.90 million of dividends paid, net cash increased by £3.13 million to £11.62 million and current assets over liabilities by £2.93 million to £14.39 million. The performance saw a dividend per share of 10.96p proposed to be paid on 3rd March to shareholders on the register on 17th February, taking the total dividend for the year up by almost 20% to 14.41p – and representing the third successive year of double-digit dividend growth. The statement added that the new “year has started well with orders, revenue and current trading ahead of the same period last year” – and broker to the company, N+1 Singer, is currently forecasting a pre-tax profit of £5.4 million, generating earnings per share of around 29p and seeing a dividend per share of 16.6p.
However, having commenced 2016 at 429p, the shares fell towards 300p during the year – and have only recently again reached 400p. Looking to offer growth and income value, we added the stock to the Growth portfolio on our Nifty Fifty subscription site at a 380p offer price in October and are initially targeting 450p+.
Management With a BSc (Hons) in Materials Science, CEO Mark Cambridge joined the Romag Group of companies in 1991, holding positions of Technical Manager, Quality Manager and Technical & Quality Director up to the demerger and flotation of Zytronic plc in 2000. Having since also been Sales & Marketing Director, he was promoted to the Chief Executive position in January 2008. Having graduated in 2000 in Business & Finance and attained CIMA accreditation in 2006, Finance Director Claire Smith joined the company in 2007 as a financial controller. With also previous experience including with Procter & Gamble, she was appointed Finance Director in January 2014.
UK Investor Magazine — 9 — January 2017
The Dow passes 20,000 - so what? Writes Tom Winnifrith
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osh a lot of folks got excited when the Dow Jones Industrial Average managed to make it past 20,000. Immediately the bears signalled this as a moment of defining madness while bulls shouted “next stop 25,000, toot toot”. The latter camp reminded me of Mr Toad as he prepared to speed off in his latest fast car. So what does it all mean? It is perhaps worth starting with a couple of caveats. The Dow Jones is an Average ( not an Index) of the stock prices of a relatively small number of companies - 30. Okay they may be America’s largest companies but they are far from representative of America Inc. We make the same point about the FTSE 100 but at least it is 100 companies and an Index not an Average so is less volatile and it is marginally more representative of UK PLC. So having established that the DJIA itself is a meaningless indicator of nothing, the next caveat is that 20,000 is as important at 19,999 or 20,001 or indeed any other number. It is just that we, as humans, always get fixated about big round numbers. Think of the end of the world scares around the year 2000 ( and indeed the year 1,000) the newspaper headlines when the FTSE 100 broke 7,000 or the Dow hitting 20,000. It is all the same. It is all hype. So so far we have established that this is a meaningless indicator passing a meaningless milestone. What else to say? The USA may have a new President but it still has the same enormous problems as it had under the old one. I flag up just
two which you may wish to consider. The first is the fact that eight years of QE and low interest rates plus Government profligacy have created massive asset bubbles in housing, auto finance, tech and elsewhere. Bubbles never deflate slowly they burst and that will cause real pain. The fact that Mr Trump appears keen on even more Government profligacy in a sort of FDR New Deal to bring jobs back to America, may extend some bubbles but it will not solve the problem. Secondly there is another looming 20 to consider - the National Debt: $20 trillion. That is c105% of GDP which is higher than most Eurozone zombies ( even the French) and the Trump spendfest on bringing jobs home, building walls and building up military strength plus selected tax cuts may well make that problem worse too. Unless that debt is tackled it is hard to see the long term attraction of US denominated assets, including equities. There is no sign that the pretty sluggish growth in US corporate earnings we saw in the latter half of 2016 will get any better in 2017. In fact the surging dollar may reduce the rate of earnings growth. Yet US equities trade in earnings multiples that are historically extremely high. Forget all this hogwash talk of a “Trump rally” - that is Wall Street talking not Main Street. Either growth has to pick up big time and quickly to drive corporate earnings massively higher or shares look grossly overvalued. My money, and I write as a Trump supporter, is on the latter.
UK Investor Magazine — 10 — January 2017
Simian Global - the joke that is a standard listing exposed by this IPO Writes Cynical Bear
I
ncreasingly it seems that good companies are floating on AIM (albeit not many) while the real dross is heading to the Standard List of the Main Market. You want a case in point, welcome to Simian Global (SMG), a reincarnation of a previously failed effort. Please allow me to explain. Simian Global joined the Standard List earlier this month coming to the market having raised the pitiful amount of £770,000 at 15p. Its first announcement stated that: “Simian Global is seeking to acquire companies within the TMT sector to capitalise on growing consolidation opportunities and create shareholder value by driving positive change. The company is looking at targets across the entire TMT value chain. The management team, consisting initially of Edward Ng and Ajay Rajpal, have international experience in sourcing M&A opportunities.” So what, I hear you cry, just yet another underfunded cash shell looking to do deals in the TMT space on the Standard Segment of the Main Market. Well, those with a detailed memory of AIM or, more likely, those of you that lost money in what became known as MNC Strategic Investments, may be feeling a sense of déjà vu right now and also feeling a bit pissed. MNC Strategic Investments plc came into existence out of the ashes of a failed education business called Lyze Group, which IPO’d on AIM in 2012. Like many AIM businesses, the failed parts were jettisoned and it became an investing company called MNC Strategic Investments. It raised £556,000 in July 2014. looking to make investments in the TMT space. With new cash and a new investing policy came a new Board, namely a certain Edward Ng and Ajay Rajpal. Yep, the very same guys as have just launched Simian Global. Despite Edward and Ajay having “international
experience in sourcing M&A opportunities”, somehow they didn’t manage to do a deal at MNC and so it was suspended after six months in January 2015 and was then kicked off AIM in July 2015. Not to worry though MNC shareholders needn’t despair as in its last ever announcement on AIM, the Board of MNC stated: “Your Board intends to identify a suitable reverse takeover, agree appropriate terms for its acquisition, and thereafter to seek Admission of the enlarged Group to trading on AIM. In the meantime there will no trading facility upon which shareholders are able to deal in the Company’s shares. The Board feels that the delisting from AIM will not affect long term shareholder value, and will enable the Company to complete an acquisition with a lower overhead base, until a proposed successful re-admission to AIM. MNC intends to seek shareholders’ approval of such acquisition, even though by that stage MNC’s shares will have been de-listed.” Shame about the lack of a trading facility but it was going to be back before shareholders even had a chance to see the big hole in their portfolio. Unsurprisingly perhaps, MNC hasn’t been heard of since although its accounts show that it is now almost bust. Now that Edward and Ajay have set up a copycat investment vehicle on the Standard List, I doubt they’re going to bother either. Will they be any more successful this time round? Who knows but at least there is no time limit this time round and they can just sit around on the Main Market, most probably in a suspended state for the majority of the time, wasting investors’ money! Does the FCA even care that the management team has tried and failed at this previously costing shareholders money or can any old Tom, Dick or Harry join the Standard List? That’s a rhetorical question by the way.
UK Investor Magazine — 11 — January 2017
Three to sell right now By Tom Winnifrith
B
eing a bear is not exactly easy right now with the Dow heading past 20,000 and UK shares nudging all time highs. Which begs the questions of the three shares below - why on earth are their shares massively down on their all time highs? If a company’s shares are falling badly in a raging bull market surely something is terribly wrong. Yes it is. Starting with the obvious, let’s kick off with Cloudtag (CTAG) which just a few months ago was the darling of the bulletin boards with its shares flying high on the AIM casino at 25p. They are now 5p which values the company at £21 million or, on a fully diluted basis c£25 million. You may not think that this is too high but this company - which claims to have a health wrist band, the Onitor - seems unable to demonstrate a working model,
statements that are just 100% untrue, either via RNS or in interviews with hapless paid for aidede-rampers such as Proactive Investors. Time and time again it has either issued shares to raise cash on the basis of the share price spike or those who founded the company and got shares at just 0.1p have used that spike to cash in their chips without bothering to announce the share sales as the rules required. If you cannot see what is going on here you should not be investing. In the end all frauds run out of other people’s money and Cloudtag will meet that fate in due course.
Next up is Advanced Oncotherapy (AVO) which also appears to have a few issues when it comes to telling investors what is actually going on. Just four months ago it was raising £10 million at 100p
So, in short Cloudtag is a company with no sales, no product and which burns cash at a rate that is most alarming. It has just raised £4.1 million through the strangest of death spiral facilities but the fag end of the death spiral is still in place. It will not raise that much more for Cloudtag given the crashing share price but it will do enough to
assuring investors that it had firm orders for its cancer busting machines worth $150 million. Unfortunately the customers have walked claiming that Advanced has failed to meet any agreed delivery deadlines and indeed, they assert, that it does not even have a working prototype. see the shares head rapidly as the death spiral provider (L1 Capital) flogs its stock while it can, before the company goes bust or the shares are suspended. For the real problem is that this company is a fraud that has been exposed. If Cloudtag was listed in the US or in a jurisdiction where the regulators were not the most ineffective limp dicked poltroons on this planet, the directors and those who have made millions from this fraud would already be wearing orange jump suits and doing a perp walk. But this is the AIM Casino. Time and time again this company has made
Advanced has been less than transparent in the way that it has admitted to this terrible news, twice clashing with its (now ex) distributor Sinophi on the terms of the breakdown. It has had to have information dragged from it and leaked internal emails which fell into my possession and which I published cast very real doubt over whether the company has in fact committed Securities fraud. All that and a product not even at prototype stage yet what could get worse? Oh. Bankruptcy. Advanced said it would secure £15 million of non dilutive funding by December 31. It has not. If it does not it will run out of cash within weeks and go bust. When it first said it
UK Investor Magazine — 12 — January 2017
would raise that finding it had an order book of $150 million. It now has an order book of zilch. That is surely a problem for any potential lender is it not? At 63.5p the market cap is £46 million. For a company with no sales, almost no cash, no working prototype and no credibility that valuation is mighty full.
And finally an old favourite Eden Research (EDEN) which at 13.125p is valued at £24 million. It sent me lawyers letters back in 2005 for exposing its lies. After 21 years in business this company has racked up losses of £34 million and is still loss making. Actually the losses would be greater still had it not engaged in a blatant panama pump securities fraud in August 2015. That little fraud boosted revenues by £600,000 but they were fake revenues from a related party company Terpenetech. Terpenetech paid for these bogus sales by flogging shares in Eden which Eden had issued to it. In any proper market folks from Eden would have been joining the chaps from Cloudtag in wearing orange jumpsuits for that one. But on AIM fraud is okay.
Eden’s problem is that with its lead product which treats grape rot racking up trivial sales in markets where it has launched, including Europe’s biggest market Italy, it is once again running out of cash. The shares ticked higher last week after a ramptastic article in the Sunday Times claimed that Eden was going to “save” the French wine industry with its product that has flopped everywhere else. That is the pump, the dump is yet another share placement and it looms. Ahead of that discounted offering the shares are a slam dunk sell.
Hot Stock
ROCKETS Stocks Ready to take off hotstockrockets.com UK Investor Magazine — 13 — January 2017
the house view
Forget Politics If one reads the mainstream press the fate of the stockmarket is dominated by events political, that is to say largely Donald Trump’s presidency and how exactly Brexit pans out. It is all too easy to buy into this simplistic analysis. The correct share price for an individual share is determined not by the Donald’s latest policy pronouncement or by the date of the triggering of Article 50 but simply by the discounted value of future cashflows. And a stockmarket is driven by the sum of its parts. So it is not politics but corporate earnings that will drive the ups and downs of the Footsie and, indeed, even the AIM Index in 2017. That is not to say that Trumpenomics or Brexit will not have their sway. They will. But the mainstream press overeggs both puddings. In our view the big theme for 2017 will be how both corporates and individuals respond to increasing interest rates. In the US rares are already rising. In the UK they just have to start rising this year. Only in the economic basket case that is the Eurozone is there no case for monetary tightening. Indeed in the EZ we would expect further loosening amid weak growth in states such as Germany and ,more train wrecks in places like Greece and Italy. For those companies that are over-borrowed that will be an issue but it does not end there. As base rates head higher we would expect a move away from higher risk asset classes and that is likely to impact on the ability of PLCs that need re-financing to achieve that. Higher interest rates could well be the prick that bursts some of the clear asset bubbles that have developed over the past half decade, not least residential real estate and the technology bubble from the unicorns downwards. Above all, with real incomes for most workers likely to advance only very slowly but with consumers sitting on historically very low savings rates and levels of debt that are, historically, very high, any increase in rates is likely to have a dramatic effect on consumer spending. For B2C facing corporates that will have a marked impact on earnings. The effect on corporate earnings of monetary tightening will be dramatic and it is a key reason why we remain bearish on the markets as a whole. No doubt Brexit or Trump - or maybe Russian hackers - will be blamed but it is base rates that will be they key driver. That is what needs to be watched. UK Investor Magazine — 14 — January 2017