Weekender #4

A weekly recap on European micro-caps

Good morning and welcome to your weekly source of European micro-caps news. Apologies for the late publication but I had a busy week! I’m pleased to announce a new addition to the family, a beautiful and healthy baby girl! I’m also going to delay the publication of the 1st deep dive by a week (my initial expectations that I would be able to work from hospital were wildly optimistic!). I’m very excited about the company selected, it looks very promising.

Stay tuned

Let’s dive in


Highlights

Mr Coffee… he’s so frothy….. Mr Market… he’s so frothy

With many indices making all time highs and the decoupling of the real economy and the markets fuelled by liquidity, you really have to wonder how much froth is in the markets. I’ve tweeted a few red flags since I launched Dark Horse Research including Analyst ‘buy’ ratings reach 18-year high in upbeat US earnings season and Jim Cramer’s tweet about not being able to keep up with the number of IPOs. To this list I would like to add a personal struggle: finding laggards in my universe which are making meaningful moves on meaningful news. I’m having no problems compiling the list of winners, but the losers…. there just aren’t many. All stocks are moving in the same direction and that’s not sustainable. Am I worried? not really. The stocks we are buying are the ones that are likely to outperform in a weak environment, they types of companies that will not go out of business in a downturn and that I’m comfortable buying on weakness. Stay tuned for our 1st deep dive!


Leaders

Top 3 performers:

  • Allarity Therapeutics A/s (#ALLR) +71% (mkt cap: £53m): A Denmark-based clinical-stage precision medicine company actively advancing a pipeline of in-licensed oncology therapeutics for patients with difficult-to-treat cancers. The company announced that its oral PARP inhibitor, Stenoparib, demonstrated additional pre-clinical antiviral activity against new variants of Coronavirus including the alpha/beta/gamma variant. The company is now testing the delta variant.

  • ThinkSmart Ltd (#TSL) +64% (mkt cap: £107m): A UK-based specialist digital payments (buy now pay later) platform business. Square Inc’s $29bn deal to acquire Afterpay will have a positive and material impact on Clearpay UK, a company which is 90% owned by Afterpay and 10% owned by ThinkSmart. A change in ownership gives Afterpay the right to exercise its call option to purchase the remaining shares. ThinkSmart’s 10% holding in Clearpay UK was last valued at £106.6m on 21 Dec 2020.

  • Cora Gold Ltd (#CORA) +33% (mkt cap: £34m): I see this popping up regularly on my twitter feed. It seems to have a strong retail following. A gold mining company active in Mali searching for the next major West African gold mine. The results from the Sanankoro Gold Project in Southern Mali have been extremely encouraging with good widths and high-grade results in generally shallow oxide ore.


Laggards

Top 3 losers:

  • Braveheart Investment Group PLC (#BRH) -24% (mkt cap: £11m): A UK-based investment company that makes strategic investments in companies and provides the businesses with expert advice on operations/strategy/risk. One of Breaveheart’s investments, Paraytec Limited, announced that the results using Alzheimer’s disease patient samples were inconclusive and that the cause and implications of these initial results are not yet known. Paraytec is working with partners in the field of Alzheimer’s disease detection and Covid-19 detection.

  • Bimobject Ab (#BIM) -20% (mkt cap: £70m): A Sweden-based company that is aiming to digitalise construction for a more sustainable future. It provides architects/engineers with information to build faster/smarter/greener. The company reported 2Q21 net sales -13% YoY affected by a low backlog of order from a muted 2020 in services as well as a negative currency impact. EBIT loss widened to SEK -28.2m (-17m) partly impacted by non-recurring costs such as the incentive program.

  • Katoro Gold PLC (#KAT) -11% (mkt cap: £3m): A gold and mineral exploration company and development company with projects in Tanzania and South Africa. The recent political unrest in South Africa brought the funding process to an abrupt standstill with a significant number of parties on the preferred funder list requesting time to re-assess. Some have since returned to the table however this has caused delays.


Directors’ Deals

Notable deals:

  • Trident Royalties PLC (#TRR): A UK-based diversified mining royalty and streaming company (mkt cap: £65m). Buyer: Non-Executive Director (Albert Gourley), 500k shares at 36.95p (£185k). Owns 3.5%.

  • CentralNic Group PLC (#CNIC): A UK-based global domain name service provider (mkt cap: £239m). Seller: Group MD (Don Baladasan), 165k shares at 97p (£160k). Owns 0.02%

  • Fulcrum Utility Services Ltd (#FCRM): An independent energy and multi-utility infrastructure and services provider (mkt cap: £56m). Buyer: Senior Independent Director (Dominic Lavelle), 500k shares at 25.06p (£125k). Owns 0.04%


Notification of Major Holdings

Notable changes:

  • Topps Tiles PLC (#TPT): A UK-based retailer of tiles (mkt cap: £136m). Buyer: MI Chelverton UK Equity Growth Fund (small cap/unquoted focused fund manager) announces a new 5.1% position. I wrote a 27-page short thesis on TPT for the value investing course at LBS. Let me know if you want to see it.

  • First Property Group PLC (#FPO): A property fund manager and investor with operations in the UK and Central Europe (mkt cap: £35m). Buyer: Peter Gyllenhammar Ab (Swedish investor investment vehicle) continues to increase holding upping stake from 3.4% to 4.1%. Position initiated on 28/07/21.

  • Crossword Cybersecurity PLC (#CCSGB): A UK-based company focusing on cyber security technology transfer business (mkt cap: £25m). A lot of activity here post £5m fundraising. Buyers: Canaccord (discretionary clients) increases stake from 9.7% to 10.7%, Gresham House Asset Management (Baronsmead Venture Trust PLC) declares a new position of 11%. Seller: MRB Vermögensverwaltungs AG (Helium Rising Stars Fund - Zurich) decrease position from 7.8% to 5.7%.


Movers & Shakers

Notable moves:

  • Chapel Down Group PLC (#CDGP): UK-based company producing and selling sparkling and still wine (mkt cap: £92m). Frazer Thompson is stepping down as CEO after 20yrs at the company. He will remain a substantial shareholder and adviser to the company. Andrew Carter, currently MD Chase Distillery will be replacing him.

  • Chaarat Gold Holdings Ltd (#CGH): An exploration and development company operating in the Kyrgyz Republic (mkt cap: £152m). Artem Volynets will step down by mutual agreement from role as CEO with immediate effect and will remain as a senior adviser. The company’s Executive Chairman, Martin Andersson, will serve as interim CEO. The company is in advanced discussions with a preferred potential candidate.

  • ReNeuron Group PLC (#RENE): A UK-based cell-based therapeutics company (mkt cap: £62m). Catherine Isted will be joining the Board as CFO effective 11 October, 2021. She joins from Oxford Biomedica PLC (mkt cap £1.11bn) where she led Corporate Development and IR.


Tweets of the week

  • On the subject of red flags

  • Interesting article on AIM

  • For anyone interested in the fascinating history of Europe


Have a great weekend. Put on your wellies and enjoy some of that wet weather!

Dark Horse Research