Zakmir.com

One of the perennial issues with the small cap end of the London stock market has been that if a company in question does not produce something which comes out of a hole in the ground, it is likely to get the cold shoulder.

Clearly, there are exceptions that prove the rule, but tech and pharma have been particularly frowned upon – exactly the opposite sentiment which has made the Nasdaq in the US, one of the greatest capitalist venues ever created.

Post Covid-19

However, it may be the case that in a post Covid-19 environment some of these prejudices will change, as investors scramble for sectors and companies that may be immune to one of the most horrific Black Swan’s in history. We have already seen positive re-ratings for all things online, especially games and gaming, with software and technology of all kinds coming back into focus in a positive way.

The timing of this new appreciation could not be better for the likes of Dev Clever, who arguably has been behaving as if a tech / software as a service revival was going to be around the corner anyway. Indeed, since 2013 it has established a significant footprint not only online, but also in mobile and virtual reality. But perhaps as many of us in lockdown will appreciate currently, Home Schooling is all the rage.

EdTech

While the focus of Dev Clever may be away from the nitty gritty that marooned parents are currently grappling with on behalf of their children, EdTech via remote learning certainly is within its sphere. Given that Dev Clever has just signed a Heads of Terms Agreement with Lenovo, a world leader in EdTech,  it could be argued that the UK company’s fundamentals are very much underpinned. Indeed, according to a new Vox Markets note, estimates are for revenues at in the education part of Dev Clever’s business to increase ten fold over the next three years from £2m to over £27m.

Given the way that online / tech is always scalable, this is something which is not hard to believe. A £100m plus market cap versus less than £20m currently – just multiplying by five rather than ten, does not seem excessive, even if the current (enforced) home schooling / education ends over the next few months.

Immersive Technologies

Over the next few years, Dev Clever’s multi pronged strategy in immersive technologies, particularly VR, is likely to underpin the attraction of remote learning as well as the general agency services the group already provides such as career guidance. Set against such a background, it is not difficult to envisage a return for the share price to return towards the best levels of last year at 15p plus – later in 2020.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Shelter From The Storm

It is clear that with economic fundamentals and the stock market in turmoil due to the Covid-19 pandemic, there are few places to shelter from the storm – financially or otherwise. However, there have been some instances of companies and management who appear to have caught the zeitgeist and then run with it. Initially the story of Open Orphan was to take advantage of the so called orphan drugs space, niche treatments for relatively obscure diseases that offered developers greater margins and generic immunity for longer.

Picks And Shovels

As a services provider in the pharma space, Open Orphan set up stall after a RTO last summer as a provider of picks and shovels (laboratory facilities), in what is traditionally regarded as the very speculative space of drug development Since thenthe pharma space has gone into a full blown Gold Rush, not least due to the search for a vaccine for Covid-19. Open Orphan looks like it has gone from looking well placed in the orphan drug space, to being the holder of a lottery ticket. Or is it more than one lottery ticket?

Controlled Human Infection Model

Perhaps the most outstanding development for all of us is Open Orphan’s Controlled Human Infection Model, with volunteers deliberately infected with common coronavirus strains in order to develop a vaccine. Given that the company has Europe’s only commercial 24-bed quarantine clinic and on-site virology laboratory, it can be said the whole process is being carried out “in-house.”

Lest we forget the way that there is money in this space, Open Orphan has in the past month signed a £10m human challenge study deal with a European biotech company for mild cold viruses. This will of course go to underpin Open Orphan’s still relatively modest £38m market cap.

Universal Flu Treatment

However, it could very well be one of the aspects for investors to get most excited about will be its own Flu-v vaccine, acquired with its purchase of Hvivo at the start of this year. This is currently on Open Orphan’s books at zero. However, any value for a phase IIb Universal flu treatment that has just announced positive results that gets over the regulatory approval line is going to be significant. Therefore, on this basis alone fans of the East London based company have plenty to look forward to for the rest of 2020.

 

Zak Mir interviews Michael Eales, CEO of Ironveld, in the wake of the latest RNS regarding IIG.

It is clear that since the arrival of Covid-19 this year, investors have had to totally change they look at the financial markets, and perhaps more importantly, who the new winners and losers will be.

It is not always an intuitive process, as perhaps the panic buying of toilet roll has shown us. This particular asset has certainly been deemed an “essential”, but there are others which when consumers are in lockdown have acquired an increasingly more important status.

An Outperforming Sector
Indeed, one of the key sector outperformers of the past week in the US has been cannabis, with the likes of Tilray (TLRY) and Aurora (ACB) the main beneficiaries. The Cannabis ETF (THCX) itself was up more than a quarter. Sales across the sector are reported to be at record levels, something which may be part “stress” and part stockpiling. Of course, cannabis is divided into two areas, the recreational and medicinal.

Part of the reason for the current renaissance in the space may be that both aspects are currently in the ascendant, over and above speculation that further legalization of cannabis could be a key source of revenue to offset Covid-19 bailouts.

Legal Cannabis Investor
Against such a new and improved background Ananda Developments (ANA:AQSE) may be a stock whose time has finally come. Its raison d’etre is to invest in legal cannabis companies, projects and products. In this way, its investments should become a greatest hits of all things cannabis.

Hone Office Application
For instance, in the autumn Ananda and via partner JEPCO, submitted an application to the Home Office for a medical cannabis growing license. Given the way that JEPCO has four years experience in this area, one would assume this will be a successful process.
Once approved, we could see Ananda with the capability of  initially growing 1,100 plants in UK conditions in poly tunnel structures, in exactly the same way JEPCO did under its previous growing licence. The 13 strains of cannabis of greater than 0.2 THC that will be stabilised by Ananda may be useful in the treatment of epilepsy, cancer and Parkinson’s. Of course, Ananda with its new license would have first mover advantage in terms of UK supply.

Liberty Herbal Technologies
The other major prong to the Ananda plan is the 15% holding it has in Liberty Herbal Technologies, the owner of hapac, a medicinal cannabis inhalation system. Sales of this pre Covid-19 were strong in Italy, with ongoing discussions for launch in North America. To address the issue of Covid-19, there is increased potential for a sachet style of dry herb vaping, which requires much less human contact than traditional hand made “doses.”

Asset Class Acceptance
The key to Ananda Developments for the rest of 2020 and in a post Covid-19 environment is how steep the curve of legalisation and acceptance of Cannabis as an asset class becomes. If current moves in the US are anything to go by this UK listed company as a canny investor and protagonist, could play catch up with its Stateside cousins.

The latest news regarding Powerhouse Energy is both validation and the start of a new growth phase for the waste to hydrogen technology group, after an extended timeline on the stock market.

Today we learn that the Managing Director of Peel Environmental – a division of Peel Holdings – the multi billion pound industrial land and buildings empire of John Whittaker – has joined the board of Powerhouse Energy.

This is an enormous vote of confidence by Peel in Powerhouse Energy – currently a relative minnow,  that Peel has invested substantial monies in the deployment and proving of the DMG technology.

This is now a binary program, the technology is not one of R&D but an engineering hurdle – requiring 3 or 4 known technologies to work together. There is very little question or doubt , if any, that the hurdles in this endeavour cannot be overcome – and then this technology is a world beater – with applications anywhere that waste plastic doesn’t have an end of life home to go to. This should be something that the Greta Thunberg and David Attenborough’s of this world should be happy to embrace.

Just as importantly for shareholders,  with an annual recurring royalty of £500k per system just in the U.K. from Peel- after the 2nd system the company will be profitable. After 10 systems it will be a cash cow.

Peel have talked about more than 100 systems in the U.K. within 10 years – that’s an amazing £50 million a year of virtually net income in royalties and several
million in engineering services per annum. All of this illustrates how this company is unlike any other company in the Hydrogen sector, in that is it has a robust and easily obtainable positive revenue generating model in the near term horizon. In other words it has the close hydrogen technology to a commercial model with limited R&D costs compared to all the other players.

Shares in Powerhouse Energy are currently at 0.75p, well above the 2020 support zone near 0.6p. But they were much higher earlier this year towards 1.80p when news of a supplemental agreement with Peel was revealed in February.  The latest onboarding of Myles Kitcher, the Managing Director of Peel Environmental could mark the start of a fresh run of speculative interest in the stock.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

The recent carnage in the stock market has hammered valuations of companies seemingly whether this was justified on fundamentals or not. Clearly, the fall in the price of Crude Oil has only added to the pain of the sector at what is already a difficult time.

Rising Production / Low Costs

However, United Oil and Gas is currently particularly interesting as their new Egyptian assets have been repeatedly increasing production and are soon set to be producing as much as 2,000 barrels oil equivalent per day (presently 1700 boepd).

With a new gas pipeline to one of their outlying fields nearing completion imminently, low cash operating costs of $6.5/ barrel and flexibility with their capital commitments United are in an enviable position as compared to other players in the sector who may not be fortunate to have assets with as robust economics.

Egypt / Jamaica

The current market capitalisation is only £7.7m and their portfolio compromises a lot more than their flagship Egyptian assets including their high-risk, high-reward Jamaican licence – prospective for multi-hundreds of millions of barrels.

Smart Hedge

A reasonable portion of their oil production is hedged at $60 per barrel with their BP offtake facility thus limiting downside as such is the recent huge decline in their share price now overdone? The remaining production seems very low cost.

Their BP Facility is based on a floor price of $60/bbl for c.6,600 bbls of crude oil production per month for the next thirty months, effectively hedging this portion of production while allowing United to benefit from market prices above $60 per barrel. Also to be noted is that once their gas pipeline has been completed that approximately 20-25% of production should be comprised of gas sales at fixed prices, again detaching production sales from the oil price and limited revenue downside.

Looking at the daily chart it can be seen that United shares have been left extremely oversold with a RSI reading of just 11 out of 100. Normally 30/100 is regarded as cheap, so we are looking at a rare overshoot on the downside. Even a rebound back to initial March support at 1.65p would be pleasing to bargain hunters from present levels.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

The recent stock market crash has many of us rubbing our eyes at the share prices of familiar stocks. A case in point is Asiamet Resources, the Indonesia focused Copper / Gold explorer / developer, we are looking at a company whose market cap has sunk from over £100m to around £9m currently.

Rather intriguingly the company has recently intimated that it is close to finally completing on a deal to bring a strategic financial partner over the line. Perhaps this could be the catalyst for a revival in the share price, which is currently extremely oversold on the RSI scale – sub 20 out of 100. While many stocks in the market are at such extremes currently, given the way that Asiamet is in a position to take advantage of a projected Copper deficit in the market, it could very well be that if the market as a whole bounces, Asiamet could be one of those small caps fastest out of the gate.

 

Alas, it is normally the case that once financial journalists get on the back of a story, the story is about to end. This very often means inadvertently calling the top – or the bottom of a market run, depending on where it is in its journey. However, while there have been some painful false dawns for the likes of Gold and Silver over the past 10 years. The flaws here have been that the bull argument has very often depended on the elusive “store of value” concept. However, what the “experts” did not count on was no soaring inflation despite QE and a general asset bubble inspired by near zero interest rates. Instead, it would appear that the rally we have seen kicking in properly in H2 2019 has been inspired by the rather more pedestrian sounding concept of supply and demand. This point has been underlined by the way that the geopolitical drivers we have been treated to in recent days have only offered a temporary acceleration to Gold.

What can be seen on the daily chart of the yellow metal has been a brief spike through $1,600 before slipping back to the more sustainable mid $1,500s – maintaining the recovery trend – but not quite as frothy as some might wish to see.

Clearly, the PGM’s, especially in the form of Platinum, Palladium and Rhodium, the supply and demand concept has worked far more notably than store of value, as these metals are now core players in the “Greenification” of the motor industry, especially with reference to catalytic converters. But, perhaps much to the joy of bulls of PGMs we have seen this particular asset class maintain the benefits of being geopolitically sensitive, as well as having a practical purpose helping them maintain their rally.

The stars of the show remain Palladium and Rhodium, with the daily chart of the former still offering a possible $2,400 3 months technical target. At the same time, the short term target of Rhodium allows us to seek out $10,000 on a three months timeframe, given the sharp momentum behind this market.

All of this suggests that even the relatively pedestrian progress of Platinum – a market which appears to be mirroring the conservative price action of Gold, could still retest or even exceed the previous 2019 peak of $1,000 before Q1 2020 is over.

Disclaimer
Zakmir.com is a purely journalistic website – Zak Mir is a member of the National Union of Journalists. There is no intention here of providing financial advice. It is recommended you seek an independent professional opinion before deciding whether or not to take any action with regard to anything written here.

Richard Jennings, director at Align Research,  discusses the state of the small caps market in 2019, and the outlook for 2020 including Align’s top Five conviction stock picks.