12 Companies to follow in 2021
This time last year, Boris Johnson had just won the General Election by a huge majority and it seemed as if a new dawn for the UK was about to begin. How wrong we all were…
A few cases of some strange virus nobody had ever heard of had been reported in China, but few people noticed, many didn’t or just brushed it off as “just another bug”. As far as most economists and stock markets were concerned, the virus was “some Asian problem” and will never come over to Europe and the rest of the World…
That all changed as February drew to a close and Covid-19 began to hit Europe. Lockdowns became the new normal and shares plunged. Calling 2020 a rollercoaster year for the markets doesn’t do justice to a rollercoaster or even being in a theme park! Markets continued to collapse in the spring to levels not seen for over a decade as coronavirus hit global markets and the uncertainty and implications of what all this actually meant were really being hammered home.
Although much of the wider losses have been recovered, when it comes to individual equities as always there have been some notable laggards and a few surprise leaders. Here, we have selected a dozen “alternative” companies that have a varied company business model from a focus on Asia, Bitcoin, and Palm oil to Helium, the Housing Market and Graphene! It will be very interesting how this carefully selected “Basket” will perform in 2021 and all should be worth following over the next 12 months…
Companies covered include : #ADAM #DKL #ESC #GILD #HMI #HE1 #MODE #OTMP #ORPH #PNPL #POW #VRS
Adamas Finance Asia
Adamas Finance Asia (AIM:ADAM) offers growth capital and financing to emerging and established SMEs throughout Asia, a sector relatively underserved by the region’s banking industry.
Adamas says there is a ‘trillion-dollar financing gap’ for the more than 270 million SMEs operating in Asia, which suffer from a bias towards larger companies, experiencing a 56pc rejection rate when applying for financing compared to 10pc for multinational corporations.
Adamas has built a diverse investment portfolio, mostly in China and Japan, structured with downside protection. It includes the Infinity Capital Group, a Hong Kong based property developer; DocDoc, a virtual network of physicians and hospitals supporting patients to find high quality specialised medical care; TELLUS Niseko, a 14-unit luxury hotel; Fook Lam Moon, a high-end Hong Kong-based food and beverage business; Future Metal Holdings Limited, the owner of an open pit dolomite quarry in China; and Meize, a Chinese wind turbines manufacturer.
Adamas is serving an Asian economy that has recovered more robustly from the pandemic than the West. China’s industrial production has powered to its highest rate of growth in 2020, surpassing most of 2019. Consumption has recovered and exports are booming, rising by 21pc in November. Japan is not out of the woods yet, but aggressive economic stimulus measures are helping the economy take advantage of a relatively Covid-free environment. Legendary investor Warren Buffet made headlines in the autumn with a contrarian $6bn bet backing Japan’s solidly-yielding, low price-to-book equities.
The company has a very strong balance sheet having just raised well above what they were looking for in the recent fundraise, which also adds capital to existing funds of course, and the company has a plethora of news and investment activities due in early 2021. The company also plans an aggressive PR campaign early in January which will coincide with the company name change to Jade Road Investments. Interesting times ahead.
With a market capitalisation of 24.5 million, several strategic ideas in the pipeline and a full war-chest, the company’s share price is currently waiting to take off at around 22p.
Dekel Agri-Vision (AIM:DKL), an agriculture processing, logistics and farming operation located in the Ivory Coast, has weathered the storms of 2020 well, recording strong production and sales at its flagship Ayenouan palm oil project, where fruit harvested across a 1,900 hectare estate is processed at a 60 tonne per hour mill.
Palm oil, the most widely used edible oil in the world, is used in hundreds of food products, including margarine, chocolate and oven chips. Food use currently accounts for an estimated 80pc of total demand, although demand for palm oil as a low-cost feedstock for the biodiesel sector is growing fast. The Ivory Coast is the second largest West African palm oil producer and West Africa’s only net exporter, and well positioned to take advantage of the biggest palm oil exporting countries, Malaysia and Indonesia, reach production capacity.
Dekel’s positive year is reflected in its most recent palm oil production update which records double-digit increases compared to the equivalent period last year, including a 38pc increase in CPO production to 1,530 tonnes, a 22pc increase in CPO sold to 1,515 tonnes, and a 26pc increase in CPO sales prices to €664 per tonne. The company attributes the strong results to continued post-Covid restocking by key buying nations, including China, as well as low stock levels in Malaysia and other major producing countries.
The figures build on Dekel’s positive interim results to 30 June 2020, which stated an increase of 5pc in revenues to €15.4m, EBITDA up 36pc to €1.9m, and net profits up from a loss of €0.1m to positive €0.4m. The company expects final year 2020 numbers will show a material improvement compared to 2019 and at least hit market forecasts.
Dekel – which has a 19.4m market cap – is looking forward to a strong start to 2021, with the Ivory Coast’s high season for palm oil farming running from from late January to May. The company is also developing new assets, most notably the commencement of production at a large scale cashew processing project in Tiebissou – with an eventual target of 30,000 tonnes per year – and a 24,000 hectare brownfield development site in Guitry.
Dekel’s share price reflects the company’s performance, climbing from 3.75p at the outset of 2020 to highs of 4.7p.
Lockdowns and social distancing restrictions dealt experiential leisure company Escape Hunt (AIM:ESC) one of 2020’s toughest hands.
The company has pioneered the ‘escape room’ entertainment concept: an immersive environment in which groups of half-a-dozen or so players are locked in for a set time with the challenge of solving a series of puzzles to unlock the room. Themed environments set in the worlds of the Japanese samurai, the Wild West, Blackbeard’s treasure island, and Doctor Who – a concept developed in association with the BBC – have proved popular for birthday parties, family outings and corporate team building exercises. The company now owns a dozen venues in the UK, and has developed a network of international franchise partners operating escape rooms at more than 50 locations across 24 countries.
When Covid-19 forced the temporary closure of its centres Escape Hunt refocused on a new line of business, online escape rooms, which allow customers to explore rooms through Zoom and other platforms by sending instructions to ‘a real-life expert games master’ standing by in the room ready to find clues and solve puzzles. The digital strategy has been a hit: in December the company delivered nearly 200 bookings to more than 1000 corporate teams and 6000 individuals. The largest attendance in a single game had 347 people split between 57 teams playing in the same game all hosted by the company’s in-house delivery team. The company has also released print-and-play versions of its games, including an agreement with Netflix to develop a game based on the Enola Holmes movie. The company now offers a suite of 17 proprietary games.
Escape Hunt’s half-yearly results to 30 June reported a cash balance of £4.3m at the end of August 2020, boosted by a June fundraising. The adjusted EBITDA loss in the half year was down to £816,000 from £1,059,000 in the equivalent period for 2019.
The company’s share price has fought back from a trough of less than 3p at the start of the March lockdown to 16p today. Escape Hunt has shown its resilience over the past year, improvising to meet the mortal challenge the pandemic posed to a business premised on bringing people together, and consolidating its recovery from the negative momentum generated in 2019 by the folding of one of its major institutional investors. The June fundraising brought a raft of new institutional supporters on board.
Prior to the collapse of its investment partner Escape Hunt’s share price had risen to more than 100p as it scaled its business around a popular new entertainment concept. Backed by a new set of investors, a new digital sales line, and the prospect of re-opening its physical locations, that price could start to climb again.
Esports are digital sports in which professional players compete on online platforms such as League of Legends, Dota, Rocket League, Fortnite, and Counter-Strike, before both physical and digital audiences. Their popularity has already surpassed traditional sports like basketball, ice hockey and baseball, drawing in an estimated global audience of 443m in 2019, which is expected to grow to some 650m by 2023. Esports followers currently generate revenues of around £4 per head, behind traditional sports at £28-£68, but through 2016-19 that rate grew at a compound of 15pc a year. The top esports teams are worth up to £300m.
Guild plans to develop a global franchise by building esports teams that will compete in all the major international esports tournaments, and by establishing a player training and scouting infrastructure modelled on the talent academies pioneered by Premier League football teams. The company has recruited David Beckham, who holds a 5pc stake, and graphic designer Fergus Purcell – known for his work on the Palace skatewear label – to promote the Guild brand.
Since listing Guild has signed a £3.6m three-year sponsorship deal with a European fintech company, which will promote its brand and logo on team jerseys and other marketing devices. The company has also released its first digital product range through an in-game customisation feature that will allow Rocket League players to personalise the skin of their in-game vehicles with the Guild brand. Direct-to-consumer sales of in-game items are an increasingly important revenue stream in the esports industry, expected to be the fastest growing esports revenue segment with growth forecast to increase from $7.1m in 2020 to $17.2m by 2023.
Guild is also signing leading esports players to the brand on the model of a Premier League football team. The company has announced its entry into the Fornite battle royal online multiplayer game with the signing of the top-ranked professional Nikolaj Andreas Frøslev (‘Flikk’), and signed a top-tier squad to compete in Valorant, a major new 5v5 multiplayer tactical shooter game launched by Riot Games in June this year.
Guild, whose shares are currently trading at 5.6p, is one to watch for those open to exposure to a growing market with which many investors will be unfamiliar.
Harvest Minerals (AIM:HMI) is a Brazilian-based manufacturer of KPFértil, an organic multi-nutrient direct application fertiliser serving the country’s huge market: Brazil is the world’s largest exporter of agricultural products and second largest importer of fertiliser.
KPFértil, produced at Harvest’s wholly owned Arapua project, consisting of a permitted mine, production and storage facilities, does not require any complex processing or chemically alteration, and can be applied directly to crops. Arapua has the capacity to support more than 100 years’ production at 450 kilo tonnes per annum. Harvest, which has been developing Arapua for some years, had hoped 2020 might be its breakthrough year, but those hopes were quickly stalled by Covid-19, which has hit Brazil particularly hard. But the company moving strongly into 2021.
The year began well, with Harvest announcing that Brazil’s minerals agency had granted a full mining permit for Arapua, the final step in the permitting process. The company also announced it had commenced significant expansion of its mining and product storage areas, which was completed in November. And there was positive news regarding trials: KPfértil has been cleared as a source of potassium and phosphate for coffee plants, confirming it can be used to replace conventional coffee fertilisers; and agronomic test results for sugarcane plantation areas using KP Fértil returned superior yield performance in sugarcane plantation areas compared to more traditional and widely used fertilisers – Brazil is the world’s largest sugar producer.
A September trading update told the story of Harvest’s year in sales figures. Q1 sales of 3,334 tonnes represented an increase on the 3,000 tonnes target, and by Q3 sales were picking up, with 27,577 tonnes sold against the 30,600 tonnes target.
The company’s cash balance as at 30 September 2020 was AUD$3,723,397 with a positive working capital position of approximately AUD$4,861,723.
With solid progress made regarding the expansion of its plant and the conclusion of its permitting process, 2021 may be the year in which the company begins to impact Brazil’s huge markets. At the time of writing Harvest’s share price was around 2.6p, with market capitalisation at £4.9m.
Helium One (AIM:HE1), which listed on 4 December, is seeking to establish itself as a major new player in the international helium market by realising the promise of a set of highly prospective exploration licences in Tanzania.
Helium’s ghostly qualities make it essential for a wide range of technologies. It is light, colourless, odourless, very cold, and inert – one of the ‘noble’ gases that does not react with other substances. Though best known for its use in airships and as a breathing gas for deep sea divers, helium is a critical element in a wide range of cryogenic, scientific and manufacturing processes. Its low boiling point makes it ideal for cooling superconducting magnets used in the magnetic resonance imaging (MRI) machines widely deployed in modern medical diagnosis, a booming market that has grown at an annual compound rate of more than 3pc over the past decade. It facilitates the low temperatures necessary for research in fields like particle physics and space flight, and the inert, sterile, super-clean conditions required for the manufacture of semiconductors and optic fibres.
These and other specialist applications ensure that helium ranks high in the world’s critical minerals lists, generating a global market estimated to be worth more than $6bn a year. But as with so many of the world’s other critical materials – lithium, cobalt, vanadium – the supply of helium depends on a few core suppliers. The gradual rundown of US reserves – originally accumulated for its military airships – leaves the world dependent on a cluster of plants concentrated in Qatar and Algeria.
The £6m Helium One raised at its IPO will allow the company to pursue a 2021 seismic acquisition and drilling programme at its flagship Rukwa Project, the largest known primary helium resource in the world, with the potential to supply the equivalent of 10 years’ global demand. An independent analysis published last October by SRK Consulting Ltd estimated that the 3,590 km2 field contains an un-risked prospective Helium P50 resource of 138 billion cubic feet (bcf), with potential outcomes ranging from 30 bcf to 521 bcf. Exceptionally high helium concentrations of up to 10.2pc have been recorded in the field’s surface seeps (the helium grade associated with hydrocarbon byproduct production is typically around 0.1 to 0.3pc).
Interest in Helium One’s prospects – the only AIM-listed company focused on helium – is reflected in strong rise in its share price since listing, which has risen in the past few weeks from an IPO price of 4.25p to more than 7p.
Mode Global Holdings (LON:MODE) launched on the LSE’s Main Market in October with no shortage of ambition, proclaiming a mission ‘to build the next-generation financial ecosystem’.
The fintech startup’s flagship product, the Mode Super App, allows users to manage their traditional and digital assets in one place, and earn interest on the bitcoin cryptocurrency through one of the highest-yielding interest-generating accounts on the market. Founded by Jonathan Rowland, Director of UK challenger bank Redwood Bank, Mode also offers payment processing and marketing services for UK and European businesses to Chinese consumers through partnerships with Tencent (WeChat) and Alibaba (Alipay). The company’s suite of bitcoin services include the ‘Bitcoin Jar’ savings account offering a 5pc interest rate, an account through which Euros can be used to buy bitcoin, and a peer-to-peer bitcoin transfer feature allowing users to ‘easily introduce their friends and family to the world of Bitcoin’.
Mode listed with a £7.5m fundraise and a £40.3m market capitalisation. The company’s half yearly results for the period ended 30 June 2020 stated a loss of £1.9m (2019: £1.2m). Since IPO Mode has been riding the current surge in bitcoin prices, which are up by more than 300pc since March. The company’s trading volumes surged 950pc in November compared to August and assets under custody increased by 210pc as more customers used the Mode app to buy and hold Bitcoin.
The picture for Bitcoin in 2021 is – as ever – unclear. In December the cryptocurrency rose above $20,000, its highest level since the 2017 bubble. The next few months will be crucial for establishing whether the latest rise marks a long-term ascent or another short-term spike. Billionaire hedge fund manager Paul Tudor Jones and Stanley Druckenmiller have both endorsed bitcoin this year, and global payments giant PayPal is to start accepting cryptocurrencies. Some observers have suggested bitcoin offers a credible diversification device, and an alternative to gold as a hedge against inflation.
Mode, whose share price has hovered between 50p and 40p since IPO, is one to consider for the adventurous investor open to accessing the volatile but potentially profitable bitcoin space. The possibilities offered by the company’s payment processing service, giving exposure to the growing Chinese consumer market, should also be noted.
OnTheMarket (LON:OTMP), the UK residential property portal provider, is moving into 2021 in good spirits, reflecting the strong upswing in the housing market during the second half of 2020.
The majority agent-owned company, which has almost 3,800 estate and letting agent shareholders operating 6,800 offices, saw year-on-year visits in July 2020 increase 173pc to 27.5m, and average leads per advertiser increase 56pc. The combination of demand built up during lockdown, a surge of interest in rural properties, and the stamp duty relief introduced by the Chancellor, led to house prices rising 0.8pc between November and December, with the annual growth rate up from 6.5pc to 7.3pc. A temporary stamp duty holiday in July – which saves buyers up to £15,000 in property taxes – led buyers to bring forward moving plans.
OnTheMarket’s ‘New & Exclusive’ initiative, allowing agents to list properties on the site 24 hours in advance of listing them on other portals, also seems to have worked well for the company. As at 31 July 2020 1,512 new home developments were listed, up 69pc from 894 at 31 January 2020. With Taylor Wimpey coming on board this year, seven of the 10 largest housebuilders now list on OnTheMarket.
The increased activity has been reflected in the company’s results. In a 14 December trade update OnTheMarket said it expected its figures for the current financial year to 31 January 2021 to exceed expectations, forecasting revenues of £22.5m and an adjusted operating profit of £1.5m. Going into December the company had net cash of £10.9m, and, excluding deferred creditor payments of £0.4m, no borrowings. This represents an effective increase of £2.2m from 30 September 2020, when the company had net cash of £10.3m and deferred creditor payments of £2m.
OnTheMarket’s progress is reflected in the sharp rise in its share price this year, from 70p in January to 124p. Prospective investors should bear in mind that this year’s mini property boom may be tempered by the scheduled removal of the stamp-duty holiday at the end of March. The Office for Budget Responsibility, which independently produces the government’s forecasts, anticipates house prices will level off or even fall. But with swirling uncertainties regarding the course of the pandemic and the speed of the vaccine rollout, that assistance could be extended, in which case OnTheMarket looks particularly well placed to continue to benefit.
Open Orphan (AIM:ORPH), a contract research organization (CRO), for the testing of vaccines and antivirals, made waves this October with the award of a contract with the UK Government to conduct the world’s first Covid-19 ‘challenge study’.
The study, to be conducted by the company’s hVIVO subsidiary, will see, to discover the minimum amount of the virus it takes to develop Covid-19, and thereby help calibrate the future development of the vaccine. The first stage of this project will explore the feasibility of exposing healthy volunteers to the virus: if the research is approved by regulators it will begin early next year with results expected by May. The contract, which has already commenced, could be worth some £10m to hVIVO depending upon the final number of volunteers included in the characterisation study. hVIVO also offers a full range of COVID-19 tests through its COVID Clear programme.
The contract offers the prospect of a healthy return on Open Orphan’s investment in hVIVO, which it acquired for £13m in equity in January. The company’s interim results for the six months ended 30 June 2020 stated a cash balance of £14.7m following two successful placings in January and May. An EBITDA loss of £4.1m for H1 2020 was recorded, but the company is targeting near-term profitability in light of its strong pipeline of contracted work. It should be noted Open Orphan has another major subsidiary, Venn Life Sciences, offering drug development consultancy, clinical trial design and execution. Venn’s capabilities include CMC, Non-Clinical, Clinical Development and Regulatory Affairs.
Unsurprisingly Open Orphan’s share price has gathered spectacular momentum this year, rising from less than 5p in January to nearly 25p today. Continued uncertainty regarding the UK’s emergence from the pandemic means Open Orphan’s strong run may continue for some time yet.
Pineapple Power Corporation
The strong tailwinds behind the emerging green economy, together with the prospect of a robust economic upturn through 2021, made for favourable conditions for the IPO on 24 December of Pineapple Power Corporation (LSE:PNPL), which regular TMS readers will know is seeking to position itself as a key player within the flow batteries sector.
Flow batteries are among the most exciting green innovations, offering the revolutionary promise of electricity grids powered wholly through renewable energy sources, allowing surplus power generated by solar and wind to be stored when the sun is shining and the wind blowing, and released when the clouds roll over and the air is still. As the technology improves and the price of flow batteries fall their potential is becoming clearer, one report predicting that the value of the flow battery market, less than $200m in 2017, could touch $1bn by 2023, a compound annual growth rate of more than 30pc.
Pineapple listed as a Special Purpose Acquisition Company (SPAC), a ‘cash shell’ equipped with funds to acquire one or more private companies. SPACs have become increasingly popular sources of funds for companies looking for capital without having to go through the lengthy and costly IPO process.
Subsequent to its IPO, Pineapple intends to present itself as a takeover target for a larger company, thereby opening the prospect of a dramatic increase in share price. Pineapple’s directors have extensive experience of raising capital on the European, North America and international capital markets, expertise the company intends to employ to acquire at least one suitable venture in renewable energy. After listing Pineapple will make a strategic decision to negotiate and acquire the most promising of the acquisition opportunities presented to it.
Pinapple’s listing on the LSE’s Main Market raised gross proceeds of £1,316,010, at 3p with shares subsequently trading at around 5p
Power Metal Resources
Power Metal Resources (AIM:POW) offers investors exposure to a carefully compiled international portfolio of mining interests, reaching from North America, through western and southern Africa, and down into Australia.
CEO and mining sector veteran Paul Johnson summarised the Power Metal credo in a July operations update: ‘Many companies put their business case forward focused around a single major project and concentrate their energies around that [But] we have numerous major projects, each of which is capable of delivering a transformational discovery and by virtue of this shareholder wealth.’ Projects will only remain in the company’s portfolio should they demonstrate their potential to deliver a discovery, and if their work programmes can be financed without recourse to external funding.
Power Metal has spread its net wide in pursuit of a company-making opportunity, pursuing a variety of projects ranging from early stage greenfield exploration to later stage drill ready prospects, collectively prospective for minerals and metals that include cobalt, copper, gold, lithium, nickel and PGM. Prospective investors should study the company’s fast moving news flow for the latest news regarding the Power Metal’s myriad interests, but at the time of writing they include:
- A joint venture with Red Rock Australasia exploring the Victoria Goldfields in southeast Australia, a region that has attracted a particularly high volume of new license applications this year.
- An option to earn in up to a 75pc interest in the Alamo Gold Project, a package of mining claims in west central Arizona, prospective for silver, lead, gold, copper and zinc.
- An interest in the Molopo Farms Complex Project in Botswana, where progress is being made towards a drilling programme that will target high profile nickel sulphide targets.
- The Ditau Camp Project in Botswana, prospective for rare earths.
- A 100pc interest in the Cobalt Blue Project in Cameroon, where exploration work undertaken last year identified elevated vanadium and titanium, and possible cobalt mineralisation at higher elevations than previously, within thicker lateritic cover.
- A 70pc interest in the Kisinka Project in the DRC, where a 6.8km copper anomaly identified by a sampling programme has been confirmed by a recently completed pitting and mapping programme.
- A 35pc interest in the Haneti Project, Tanzania, prospective for nickel, PGMs, gold and lithium, a joint venture with Katoro Gold.
- An option to take a 30pc stake in the Silver Peak Project, a portfolio of mineral claims over a system of high grade, intrusion related, polymetallic Ag-Pb-Zn-Cu veins, part of the historical Eureka Victoria Silver Mine, in southern British Columbia.
Power Metals Resources has been highly active this year despite the pandemic, expanding an already broad portfolio and securing the funding necessary to explore its potential: as of 10 July Power Metal had £1,707,050 available for its operations. With its blend of adventure and financial prudence Power Metals looks like a decent bet for those seeking exposure to the global metals exploration space, reflected in a sharp rise in the company’s share price from 0.4p at the start of the year to 2.75p today.
Versarien (AIM:VRS) is one of a select group of companies working to realise the commercial opportunities opened by graphene, the superconductive, one atom-thick carbon material 200 times the strength of steel.
The material is a staple in futurist literature, imagining space elevators reaching miles into the sky, and super high skyscrapers reinforced by diamond-hard graphene cladding. But it has many rather more immediate applications, include flexible digital screens, ultra-efficient batteries, artificial bodily organs, radical new extrusion, moulding, 3D printing processes, stronger, lighter aircraft, ultra durable clothing, new printing inks, and new architectural structures.
Versarien has developed an intriguing range of subsidiaries focused on graphene’s possible applications. Total Carbide makes ‘sintered tungsten carbide’ – hard metallic coatings – suitable for arduous environments, like the oil and gas platforms and the flow control mechanisms used in the defence and aerospace sectors. 2-DTech has designed a range of graphene enhanced polymers with commercial possibilities, including Polygrene, Nanene and Hexotene. Cambridge Graphene Limited produces a range of high performance, electrically conductive graphene inks suitable for a variety of printing applications. AAC Cyroma designs vacuum-formed and injection-moulded graphene enhanced plastic products for the automotive, construction, utilities and retail industry sectors.
Eye-catching plays announced over the past few months include the development and manufacture of graphene enhanced protective face masks, a collaboration with Rolls Royce to improve the electrical performance of 2D materials and increase resistance to corrosion of components in future engine systems, a £1.95m agreement with the Ministry of Defence to develop graphene-loaded polymer composites, and the acquisition of more than 100 patents from South Korea-based Hanwha Aerospace Co Ltd for graphene thin film laminates used in the electronics sector, a deal secured by granting Hanwha £4.34m worth of shares.
Versarien’s last set of results, for the year ended 31 March 2020, stated revenues of £8.3m (2019: £9.1m), and a loss of £4.7m (2019: £2.8m). The company has subsequently secured some £10m through backing from Lanstead Capital Investors, and a £5m Innovate UK loan. Just three years ago the company’s share price, currently around 40p, touched nearly 200p, reflecting investor excitement in the sheer range of possibilities opened by graphene. As it continues to work hard to bring them to market, Versarien is one worth keeping an eye on 2021.