What happened?

In the last week alone, Premier African Minerals’ shares suffered a substantial drop of 26%, and a staggering 85.8% decline over the past year. This dramatic fall has reduced the company’s market capitalization to just £26m, firmly placing it in the micro-cap category. Such a significant decline raises questions about the company’s ability to navigate the challenging landscape of the mining industry.

The company’s financial situation appears precarious, which may be contributing significantly to investor wariness. Premier African Minerals is currently generating less than $1m in revenue, a concerning figure for a publicly traded mining company. Over the past five years, annual earnings have declined by 17.9% per year, indicating persistent challenges in achieving profitability.

Most concerning for me, existing shareholders have experienced dilution in the past year, which often leads to decreased investor confidence. The overall number of shares in the company has exploded by 37% in the last year alone. Combining this with pretty poor performance, it’s not hard to see why many investors are keeping this one at a distance.

Despite the negative performance in recent times, the firm has been striving to provide positive updates on its operations. Today, the company released encouraging preliminary results from a newly installed scrubber unit at its Zulu Lithium and Tantalum Project. The update indicated improvements in mineral recovery and concentrate grades. This development is part of ongoing efforts to enhance operational efficiency and production capabilities, potentially paving the way for an improved balance sheet in the future.

Struggling to grow

Financial metrics paint a picture of a company struggling to achieve sustainable growth and profitability, which likely explains the severe downturn. Investors are understandably cautious about committing funds to a company with such challenging financials, especially in the volatile mining sector.

As Premier African Minerals continues to develop its projects, particularly the Zulu Lithium and Tantalum Project, investors will be watching closely for signs of improved financial performance and operational success. The company’s ability to capitalise on the growing demand for lithium and other strategic minerals could be crucial for its future prospects and potential share price recovery.

The recent installation of the scrubber unit at the Zulu project offers a glimmer of hope. If the company can consistently demonstrate improved mineral recovery and concentrate grades, it may begin to rebuild investor confidence. However, this will likely be a long and challenging process, requiring sustained operational improvements and a clear path to profitability.

Not for me

Overall, the current state of Premier African Minerals’ share price reflects a company facing significant challenges. While there are some positive developments in its operations, the financial metrics and market sentiment paint a picture of a struggling enterprise. The coming months will be crucial in determining whether the company can reverse its fortunes and regain market confidence, but I see far better opportunities elsewhere, so I’ll be avoiding this one for now.

The post What on earth happened to the Premier African Minerals (LSE:PREM) share price? appeared first on The Twelfth Magpie.

Premier African Minerals (LSE: PREM) is a small lithium stock that some investors find exciting. The firm has a diverse portfolio of projects, including lithium and tantalum in Zimbabwe, and gold in Mozambique.

Could this be the next millionaire-maker? Let’s dig in.

What’s been going on?

This has been an incredibly volatile stock. It’s down 81% in just under a year yet is still up 85% over a five-year period.

Why has the stock crashed recently? Repeated operational setbacks and cash-burn issues, in a nutshell.

Premier had hoped to get its wholly-owned Zulu Lithium pilot plant up and running in the first half of 2023. However, that didn’t happen.

As the firm said in its annual report published last June: “In September 2022 we broke ground. In February 2023 we ran elements of the plant. In late March/early April 2023 we saw first concentrates produced. Perhaps this was all just too good to be without some setbacks.”

Yep, it was. One issue was not being able to secure the supply of a chemical substance to make the concentrate. Consequently, the firm said it had “become clear that efficient running of the overall plant is impossible.”

But it was still on track to start operations later in 2023 and had raised $14.8m during 2022.

Always tomorrow

In September, CEO George Roach said: “I believe this will be the last time that I potentially report Interim Results that do not include details of cash generative operations.“

It was targeting November shipments from its Zulu project. Operating losses in the six months to June were $7.1m, it reported.  

In early December, the firm came back and said it was hoping to finally start production in February 2024.

We’re now in April and there is still no lithium or revenue. But it has managed to raise another $3m.

Are we there yet?

On 10 April, George Roach commented: “Premier believes we are now in the home stretch with commissioning the Zulu plant operation… Premier looks forward to finally getting this plant over the line.”

He went on to describe it as a “tortuous journey” so far. A fair comment, I’d say.

Anyway, while the plant has demonstrated it can produce the desired grade of materials, there are now operational challenges affecting consistency and recovery rates.

But this will apparently “be rectified in the coming weeks“. So revenue could finally, possibly, be near.

Where next?

As for becoming a millionaire, I’d need the shares to go up 50 times following a £20k investment. Or 20 times after £50k. While theoretically possible, I think that’s unlikely.

Then again, my horse bet (Mr Incredible) just ended the Grand National without a rider, so I’m not very good at calling these types of things.

Would I invest in this pre-revenue penny stock? No, I wouldn’t, as things stand. I have no idea whether Premier will succeed and how much more cash it will need to raise to do so.

Yet the shares will surely head higher if these latest operational challenges are resolved. Won’t they? And lithium demand should be strong long term due to the green transition.

The post Could Premier African Minerals be a millionaire-maker penny stock? appeared first on The Twelfth Magpie.

The company has its finger in the lithium business, in high demand for batteries these days. And it also has interests in tungsten, tantalum, and other rare earth elements in Africa.

It’s not just a lithium-only punt, so there’s a bit of safety from that.

Share price

Now, the share price is well under a penny, at just 0.23p at the time of writing. And that usually sounds a note of caution.

But I do think we’re seeing some interest again in 2024, even after last year’s climb came to nothing. The shares reached 1.04p a year ago, so we’re looking at a 12-month fall of 17%.

Still, even with last year’s mini boom and bust, the price is still up 135% in the past five years. Growth share investors often need to buckle up for a bumpy ride.

Where’s the cash?

The main problem so far has been a lack of profit. In fact, the most notable thing in the firm’s accounts for the past few years has been a lack of cash flow.

In its interim report in September 2023, Premier recorded a net fall in cash of $9.4m. It was still very much in the cash-burn phase. And that can often go on a lot longer than early investors hope.

But I see a good chance that 2024 could mark a turning point.

With that first-half update, CEO George Roach said: “I believe this will be the last time that I potentially report Interim Results that do not include details of cash generative operations.“

Lithium operations

So, I don’t think we should hope for too much when we see FY23 results. But what’s 2024 looking like so far?

Well, the firm’s March update on its Zulu Lithium Plant operations outlined a number of problems, with further delays. Premier is taking over direct operation of the plant now. And it also kicked out the firm behind the design.

The CEO, while admitting these have been disappointing developments, said: “Premier does believe this is a major turning point and we look forward providing further updates from Zulu.“

What next?

The share price has declined since that downbeat update. But the demand for lithium is there. And the firm assures us that the suppliers behind its plant development are still on board.

But how much longer will the cash burn go on? How much more cash will Premier need before profits arrive, and what dilution could shareholders suffer? I can’t answer those questions.

This is a penny stock that I think could start to see a turnaround this year. Then again, I’ve thought that about similar stocks before and been proved wrong.

So, I’m convinced there’s lithium promise here, and we could see a higher share price by the end of the year. But the risk is too high for me to buy.

The post Is Premier African Minerals the best penny stock to buy for 2024? appeared first on The Twelfth Magpie.

But since April, the shares have plummeted.

Could the company’s interim results published today (29 September) provide investors with any useful clues about the outlook for the business and what that might mean for its share price?

Potential cash generation ahead

The chief executive opened the results by saying he believed “this will be the last time that I potentially report Interim Results that do not include details of cash generative operations.”

That sounds an upbeat note about where the business might be this time next year. If the miner does indeed start to generate sizeable cashflows, today’s share price might yet turn out to be a bargain.

Also on a positive note, the company said that the past month has been “encouraging” and after restarting operations this month, it expects to meet its production targets for November.

The company then plans to install a new mill over Christmas that will allow it to ramp up production from the start of next year.

A loss of $7.5m was reported for the period.

Where next from here?

The company believes it can start to generate revenue later this year.

But if production is delayed, the business may need to raise more money. Indeed, at the end of June, net cash and cash equivalents were less than a quarter of a million dollars. In the period since then, Premier African has raised more funds.

Last month, it announced the issue of new shares, raising cash but diluting existing shareholders. I see a risk of further dilution if more Premier African Minerals shares are issued to raise additional funds.

Meanwhile, the lack of operating cashflows continues to pose a risk to the ability of the company to stay afloat. It included the following warning in its interim results.

“If the Company is unable to obtain additional finance for the Group’s working capital and capital expenditure requirements, a material uncertainty may exist which could cast significant doubt on the ability of the Group to continue as a going concern”.

In other words, if production does not happen when hoped – which is not an unusual event in Africa where the firm’s mining operations are located – then the business may not be able to survive if it cannot raise more money.

High risk

That risk alone is enough to put me off buying Premier African Minerals shares, no matter what potential reward I see if production starts on schedule.

And the company has a large concentration of risk in a small number of operations located in a politically volatile region.

It has been shoring up its finances but until commercial production and significant cash generation begins there is an ongoing risk that it could run out of money, or further dilute shareholders.

For now, I will not be touching Premier African Minerals shares with a bargepole.

The post Could Premier African Minerals shares be a bargain buy? appeared first on The Twelfth Magpie.

With the transition to electric vehicles, it’s clear to me that demand for the primary metal used to produce the batteries will grow significantly over the next decade.

The future

According to Global Markets Insights, the lithium-ion battery market was worth $53bn in 2022. This is forecast to grow to $254bn by 2032. If correct, that’s a compound annual growth rate of 17.1%.

To put this in context, if £1,000 invested today grew at this rate, it would be worth £4,848 in 10 years’ time.

Such high growth rates have been achieved by some penny stocks. That’s why investors spend a lot of time looking at these shares hoping to find the ‘next big thing’.

But there’s a high degree of risk associated with these companies. Many are in their infancy and loss-making, just like the two below that I recently came across.

Option 1

Kodal Minerals (LSE:KOD) has identified large lithium deposits in West Africa.

The company is negotiating a $100m funding package from Hainan, a Chinese company looking to develop a lithium processing plant.

If successful, Kodal will have sufficient funds to start production. But I’m concerned because the deal was supposed to complete before the end of April 2023. The new deadline is August 2023.

Another worry is that at the end of 2022, the government of Mali decided to suspend the allocation of new mining licences. Although this is not expected to affect Kodal, it does highlight how unstable operating in some regions can be.

Option 2

Premier African Minerals (LSE:PREM) is much further advanced with its mining activities in Zimbabwe. Although unconfirmed, production was due to start in June 2023.

Problems with an equipment supplier meant the company missed a deadline to start supplying lithium to CANMAX, a Chinese heavy machinery manufacturer. CANMAX paid upfront for the spodumene concentrate (lithium ore) and is now seeking repayment of the full amount plus interest ($34.7m). It may convert the amount owed to equity in Premier African — it already owns 11% of the company — or debt.

Premier African now needs to find alternative funding as well as another customer. I see no reason why it can’t do this. But it will take time and further delay the ramping up of production at the mine.

Verdict

To be honest, I don’t want to invest in either of these two stocks. I think they are a long way from achieving sufficient scale to generate the earnings that will justify a far higher valuation.

Regretfully, I should have invested in lithium long before now. I therefore don’t want to lose any more time waiting for these companies to deliver.

Instead, I’d rather invest in an established producer. Rio Tinto has interests in Canada and Serbia but output is still relatively small. In contrast, during the first quarter of 2023, Sociedad Quimica y Minera de Chile derived 73% of its revenue from the mineral.

Alternatively, I could buy an exchange-traded fund that tracks companies in the lithium sector or the price of the metal itself. This removes the problem of having to identify which individuals stocks to buy. Therefore, when I next have some spare cash, that’s what I’m going to consider doing.

The post 2 lithium penny stocks to consider holding for 10 years appeared first on The Twelfth Magpie.

That’s an impressive return from a mining company that hasn’t booked any revenue yet. But a termination notice received on 25 June 2023 from its only customer could damage the company’s prospects in the short term.

When news broke of the dispute, its shares closed the day 40% lower. They are now worth around half what they were in April 2023.

Does this mean now’s a good time to invest?

Precious metals

The company’s flagship asset is the Zulu Lithium and Tantalum Project in Zimbabwe.

It had hoped to be mining spodumene (a mineral with a high lithium content) in Q1 2023. But its equipment supplier produced parts to the wrong specification, delaying production to June 2023.

This meant the company missed its deadline of 31 May 2023 to supply CANMAX, a Chinese manufacturer of heavy machinery. As a result, CANMAX no longer wants to buy anything coming out of the mine.

Given that lithium is a key component in electric vehicle batteries I don’t think it’s going to be difficult finding another customer.

Falling out

However, CANMAX agreed to pay for product in advance and is now demanding repayment of $34.7m. This prepayment had been used to help fund the development of the mine.

Although PAF’s directors claim the “notice of termination has no force or effect“, they have warned that if the dispute cannot be resolved — and alternative finance isn’t forthcoming to repay the amounts advanced — then the company may not continue as a going concern.

The company does have other interests but it admits “little has been achieved” with these given that all attention has been on the Zulu project.

Verdict

This looks like a big mess.

But given that CANMAX already owns 13.14% of PAF, I don’t believe it’s in the former’s interests to cause damage to the latter company’s long-term prospects.

That’s why the Chinese company has proposed to convert the amount owed into an equity stake or debt. Based on PAF’s current market cap, the issue of additional shares would raise CANMAX’s shareholding to around one-third. If this happens, existing shareholders would be diluted.

I don’t usually invest in shares listed on the Alternative Investment Market. The index is littered with pre-revenue companies — some in the mining sector — looking to strike it big. And very few succeed.

Assuming production of spodumene concentrate did start in June (this has yet to be confirmed), and the situation with CANMAX can be resolved amicably, the company will soon start generating revenue. This will provide some of the cash necessary to develop its other interests. But more will be needed.

I prefer fully funded mining companies that are — on paper at least — less risky.

I think it’s better to invest in the stocks of miners that are already profitable. Companies like Rio Tinto, Anglo American, Antofagasta, Fresnillo, and Glencore have successfully navigated the pre-production stage that PAF has been struggling with.

And because their share prices have fallen recently over concerns of rising interest rates affecting global demand for metals, especially in China, they are presently offering high dividend yields — around 8% is typical.

For these reasons, if I had some spare cash, I’d rather invest in one of these.

The post If I’d invested £10,000 in Premier African Minerals (PAF) shares 5 years ago, here’s how much I’d have now! appeared first on The Twelfth Magpie.

The story of the Premier African Minerals (LSE:PREM) share price is an excellent example. The tungsten, tantalum, lithium, and nickel miner has delivered 281% share price growth over five years. However, in recent weeks the stock has gone into freefall.

Let’s explore what’s going on and whether this could be a buying opportunity for me.

A ‘nearly’ penny stock

I describe this company as a ‘nearly’ penny stock. That’s because, although it trades for well under £1, it has a market cap of £139m. This is above the £100m threshold used as the cut-off point for it to be a true penny stock.

But, with a share price of just 0.61p (that’s right, it’s less than a penny!) and a pre-revenue business model, it has all the hallmarks and risk profile of a penny share.

Premier African Minerals is currently developing a strategic metals and minerals portfolio across the African continent. It has interests in projects in Namibia and Ethiopia. But, the jewel in its crown is a lithium and tantalum operation at the Zulu mine in Zimbabwe.

Lithium is an especially useful commodity due to its wide range of industrial applications. It’s an integral metal for portable electronic device batteries. In addition, it’s a key component for electric vehicles (EVs). As the world transitions to net zero, the EV sector is widely expected to experience rapid growth.

Why is the share price crashing?

On 25 May, Premier African Minerals issued an update regarding the Zulu lithium project. Errors made by the plant supplier have resulted in delays in the project’s journey to full operability. This follows previous delays relating to approval from Zimbabwean authorities and the late delivery of an outstanding reagent. Ominously, the firm warns that cash is now “constrained“.

The plant requires various modifications. These include upgraded screening, relocation of the mill, and the addition of cyclones. The company understands that the plant supplier will cover the remedial work costs.

The upshot of these difficulties is that the company will no longer be able to ship its first spodumene delivery to energy materials producer Canmax Technologies Co. Limited. Accordingly, Canmax could elect to cancel the marketing and pre-payment agreement it has with Premier African Minerals. Canmax might require that pre-payment plus interest is settled within 90 days following due notice.

Ultimately, the company may need to seek alternative funding if there are any significant further delays to shipment. The share price has plummeted amid this vicious storm of events.

Should I buy?

I don’t doubt the enormous potential of the lithium mining sector. Premier African Minerals is arguably still in a good position. After all, the Zulu mine is the largest lithium deposit in Zimbabwe, which boasts Africa’s largest reserves of the metal.

However, cash is now a huge concern. Plus, any additional disappointing project updates could send the shares tumbling further. At this stage, the stock looks too risky to me. I won’t be buying today.

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Penny stock

But it’s still a penny stock, and by a long way. Never mind priced at less than a pound, this one is less than a penny. Well, only just. The price stands at 0.99p, as I write.

At check on the long term though shows the shares are well down on their peak of 2015. So it does look like we’ve had an early boom and bust here. So what’s the fuss?

Well, it’s all about lithium. The rare metal is in great demand for batteries, now the electric vehicle market looks set to soar.

It’s about lithium

Premier digs for other metals too, namely tungsten and tantalum. But it’s the lithium from its Zulu project in Zimbabwe that’s most caught the eye of the market.

The firm posts frequent updates, but it’s mostly techie mining talk told us that “we are encountering less weathered ore than was originally anticipated and seeing an ore body that is conforming to the predicted internal geological mining model“. That, it seems, is a good thing.

But when I look at a stock like this, I want to hear about cash. And, right now, that’s where I see the main risk.

What about cash?

The firm also told us that “cash flow is constrained at Zulu, this is expected to be short term and Premier will implement applicable financing measures to deal with this in the lead up to first revenues from sale of concentrates in the coming weeks“.

So it seems that’s what’s behind the share price gains of the past few weeks. Investors are waiting for two key events — first revenue from these lithium sales, and some sort of new finance.

As we often see with mineral exploration firms like this, there’s no profit here yet.

Positive assay

It does look like the lithium deposits at Zulu could be substantial. Assay (product quality testing) results posted in February were upbeat. And they led the company to start with its large-scale pilot plant.

But how much new cash will Premier need? That’s the big unknown, and it makes it very hard to value the shares right now. We just can’t know how much dilution of the stock there might be by the time we see some cash flow.

So I’m torn. I think the lack of cash makes for a lot of risk. But the outlook for that Zulu lithium does seem to be good.

Biggest in Zimbabwe?

The firm says Zulu is “potentially the largest undeveloped lithium bearing pegmatite in Zimbabwe“. So is that lot? How much of the stuff does Zimbabwe have? I just don’t know what it means.

I can’t quantify any of this. And as I don’t buy stocks that I don’t understand, I’ll pass on this one. But for those who know the business, maybe it could be a no-brainer buy now.

I’ll watch the news in the months ahead though, for sure.

The post Does the Premier African Minerals (PREM) share price make it a no-brainer buy? appeared first on The Twelfth Magpie.

Core business operations

The business is “currently developing a portfolio of strategic metals and mineral projects located across Africa”.

The majority of the focus is on two projects. One is the RHA Tungsten Mine and the other is the Zulu Lithium and Tantalum Project in Zimbabwe.

I’m sure ears prick up whenever the lithium project is mentioned, given the huge interest in this area over the past year or so. The commercial uses for lithium are large, notably in the batteries of electric vehicles. As such, demand for sourcing lithium is increasing, as is the price of it.

In a recent update on the Zulu site, the CEO commented that “we continue to see good intersections within the main spodumene rich pegmatite that are both encouraging for the long term and supportive of our decision to commence operations.”

Even though I’m not an expert on pegmatite (who is?), the tone of the report was very upbeat.

Stock price flying high

Naturally, the positive reports coming from Africa are helping to boost the share price. More than this, I feel the stock is being elevated by forward-looking investors anticipating revenue potential. After all, the website cites that the Zulu project is “potentially the largest undeveloped lithium bearing pegmatite in Zimbabwe”.

Since the first drilling programme began in 2016, it has been a long road to getting a commissioning date for Q1 2023. Yet a lot of the hard work has been done. If the company can extract the potential from the location, it could be hugely profitable.

Granted, the business had zero revenue as of the H1 2022 report. A risk I always note with these companies is that funding isn’t infinite, and the company will have to generate cash at some point in order to remain in business.

However, the Zulu project is coming in under budget and is fully funded. This impresses me and is another reason why I feel investors are happy to buy the stock.

My thoughts from here

After doubling in the past year, I feel much of the direction in 2023 will depend on progress at Zulu. This will put a huge amount of pressure on project updates when they’re released.

With a market cap of £150m and net assets (as of June 2022) of £20m, I do worry about the potential for a sharp correction on any bad news.

For high-risk investors who believe something big could happen here, I do understand why a small investment could be justified. But I won’t be investing.

The post After doubling, what’s next for the Premier African Minerals (PREM) share price? appeared first on The Twelfth Magpie.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Mind Gym 

What it does: Mind Gym provides courses designed to boost workers’ happiness, productivity and leadership skills. 

By Royston Wild. Trading news coming out of Mind Gym (LSE:MIND) has been quite impressive in recent weeks. Yet the AIM-listed business continues to trade in and around penny stock territory. 

However, I think the small cap could be a great stock for investors to buy in early December. I believe the release of half-year results on Friday 2nd could remind the market of its excellent sales momentum and lift its share price higher. 

Mind Gym provides services that help employees improve their wellness and their productivity.  With mental health coming increasingly under the spotlight, demand in this niche market could be about to boom. 

City analysts think so, too. They reckon Mind Gym — boosted by its acceleration in the digital arena — will record earnings growth of 31% and 129% in the financial years to March 2023 and 2024 respectively. 

Turnover leapt 11% in the six months to September, the company announced a month ago. Despite the worsening economic backdrop, I’m expecting December’s update to paint another sunny picture.  

Royston Wild does not own shares in Mind Gym. 

Calnex Solutions

What it does: Calnex is a technology company that specialises in testing and measurement services for telecommunication networks.

By Edward Sheldon, CFA. Calnex Solutions (LSE:CLX) continues to generate strong growth on the back of the global 5G rollout. For the six months to 30 September, revenue was up 38% to £12.7m. Meanwhile, diluted earnings per share were up 34% to 2.67p.

Looking ahead, I see the potential for further growth. In its recent H1 results, the company said that investment in telecoms infrastructure to deliver next generation connectivity “continues at pace”. It also advised that it had a strong order book moving into H2.

One thing I like about Calnex, aside from the growth potential, is the fact that the company is founder led. Research shows that founder-led businesses often turn out to be good long-term investments. Founder and CEO Tommy Cook also owns a huge amount of company stock, meaning management’s interests are aligned with those of shareholders.  

There are some risks to consider here. Component shortages/supply chain issues are one. Overall, however, I see a lot of appeal in the stock right now.

Edward Sheldon owns shares in Calnex Solutions.

Fisher James & Sons

What it does: Fisher James & Sons is a company focused on providing support and engineering services to the marine industry.

By Gabriel McKeown. It used to be tricky to find high-quality companies with low market capitalisation; however, the recent market turmoil has meant that there are now far more small-cap opportunities for UK investors. A prime example of this is Fisher James & Sons (LSE: FSJ), as the share price has fallen almost 85% from pre-pandemic levels.

Despite this share-price decline, the company’s earnings are forecast to grow considerably, signalling a rebound may be on the horizon. Earnings per share is expected to grow by over 40%, compared to 3% turnover growth, indicating that profit margins should improve. Additionally, free cash generation remains strong and is now above its three-year average level.

The company’s significant debt level has likely caused investors to avoid this opportunity. However, the interest cover ratio of 2.1 indicates that this can be covered comfortably by earnings. This financial stability is certainly encouraging, especially if market conditions begin to weaken.

Gabriel McKeown does not own shares in Fisher James & Sons.

Judges Scientific

What it does: Judges Scientific acquires and improves specialist scientific equipment manufacturing businesses serving a diverse range of industries.

By Zaven Boyrazian. Judges Scientific (LSE:JDG) owns and operates a diverse portfolio of scientific equipment manufacturing businesses acquired over the last two decades. It’s certainly catering to a niche market. Yet, its products are critical to the research process for many industries and scientific institutions.

Over the last five years, annual revenue growth has been a modest 5%. However, with management improving operational efficiency as well as exercising pricing power, operating margins have rapidly expanded from 1.7% in 2017 to 17.5% at the end of 2021. That’s more than double the industry average.

Being a highly acquisitive business does introduce some notable risks. The balance sheet could become compromised if the group executes an expensive buyout that fails to live up to performance expectations. However, given Judges Scientific’s track record of successful acquisitions, I feel this is a risk worth taking.

Zaven Boyrazian does not own shares in Judges Scientific.

Shoe Zone

What it does: Shoe Zone is a low-cost footwear retailer that sells shoes in over 380 stores across the UK and through its website.

By Harshil Patel. Shoe Zone (LSE:SHOE) reported higher sales over the past year. Its low-cost offering is proving to be popular as customers tighten their belts and face rising costs elsewhere.

It’s a founder-led, well-run business that keeps a tight lid on costs. Much of its future growth could come by expanding its larger store format and from online sales. So far, this strategy seems to be working.

Its double-digit profit margin is stable versus last year, but a drop in shipping costs could push it even higher next year.

I also like its growing dividends and share buybacks. Shoe Zone currently offers a dividend yield of 3%. With £14m of cash on its balance sheet, I’m pleased to note that it’s well funded.

As a shoe retailer, there is competition. And growing stores in an uncertain economic climate could be a challenge over the coming years.

That said, overall, I’d say it’s a resilient, and cash-generative business. It’s making excellent progress and I’d buy the stock for my ISA this December.

Harshil Patel does not own shares in Shoe Zone.

Aquis Exchange 

What it does: a financial services firm operating through three divisions: Aquis Exchange, Aquis Stock Exchange, and Aquis Technologies. 

By G A Chester. Founded and led by a veteran stock exchange technology pioneer, Aquis Exchange (LSE: AQX), is an industry innovator and disruptor. 

Its core Aquis Exchange is a pan-European equities trading platform for institutional investors. It offers a ground-breaking subscription-based pricing model, rather than pay-per-trade. The company also owns Aquis Stock Exchange, a challenger to the London Stock Exchange‘s AIM market. Further revenues come from selling market data and licensing exchange software to third parties. 

Aquis has a current market value of £118m. Revenue for 2022 is expected to be close to £20m (+15%), with pre-tax profit at just over £4m (+25%). Thereafter, annual top-line growth is forecast to accelerate to nearer 20%, with pre-tax profit growth up into the mid-to-high 30s. 

I think the market’s being generous offering me the chance to buy Aquis stock at 21 times forecast 2023 pre-tax profit of £5.65m. Nevertheless, there’s a risk the shares could derate if growth were to undershoot the high level anticipated. 

G A Chester does not own shares in Aquis Exchange. 

Premier Miton Group

What it does: Premier Miton Group is a Surrey-based fund management company

By Paul Summers: Many listed fund managers have seen their share prices collapse as clients have become skittish over the global economy. AIM-listed Premier Miton (LSE: PREM) is no exception. Its value has fallen by more than half in 2022. 

Based on analyst projections, the stock can now be mine for 14 times earnings. That’s not exactly cheap. However, it could turn out to be a bargain when market sentiment inevitably shifts and forecasts are revised. Importantly, Premier has the track record to lure investors back, with 88% of its funds in the first or second quartile of their sectors since inception.

Then there’s the income stream. Although dividends can’t be guaranteed, Premier is down to yield 9.5% in this financial year.

I think this might be a great contrarian play. That said, I would consider waiting until after full-year results are announced early in December before potentially buying the stock.

Paul Summers has no position in Premier Miton Group

Frontier IP 

What it does: Frontier IP provides commercialisation and support services to very early-stage companies in exchange for founding equity stakes. 

By James J. McCombie: Frontier IP (LSE: FIPP) was able to claim its first IPO listing of a portfolio company in its 2022 annual report, which generated £6.5m of cash in share sales. A further £3.4m flowed in after it sold more of the same shares. The hope is that cash flows like this could become a regular occurrence as the 24 companies in Frontier’s portfolio continue developing. And there are some exciting companies in there. One is developing a new family of antibiotics, and another turns landfill fodder into high-quality tiles and tabletops.  

Frontier IP expends time and resources for equity stakes in companies that might have little more than an idea. Although the rewards can be great, many might return nothing, and now the lion’s share of operating income is non-cash. The portfolio approach reduces the risk of any one failure wiping out the company, but this is still a high-risk investment.   

James J. McCombie does not own shares in Frontier IP.

Hotel Chocolat

What it does. Hotel Chocolat is a premium British chocolate retailer. It produces and distributes chocolate and other cocoa-related products.

By John Choong. Shares in Hotel Chocolat (LSE: HOTC) have declined by an eye-watering 70% this year. Its recent exit from the US market hasn’t helped investor sentiment either, as management now expects its FY22 to be loss-making and slower growth pencilled in for FY23.

The good news, however, is that the bad news has already been priced in, and Hotel Chocolat stock may have bottomed. But more importantly, the company can capitalise on a catalyst as the UK enters a recession. The ‘lipstick effect’ — where more affluent customers downgrade purchases to more ‘affordable’ items such as chocolate — could present a boost to sales for the firm.

Having said that, I should point out that upside potential for the stock remains limited according to Berenberg, who rates the stock a ‘hold’ with a price target of £1.55. So, in the coming days, I’ll just be dipping my toes in, and may buy more stock when the retailer’s outlook improves.

John Choong has no position in Hotel Chocolat.

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