Good morning!
And welcome back. I'm expecting a much busier day than last Friday, which was the slowest news day I remember seeing for a very long time!
I've run out of companies where I have anything to add, so I'll leave it there! Cheers.
Spreadsheet accompanying this report: link (last updated to: 24th July).
Companies Reporting
| Name (Mkt Cap) | RNS | Summary | Our view (Author) |
|---|---|---|---|
Land Securities (LON:LAND) (£4.3bn) | Sale earlier than planned means FY26/27 earnings will be slightly lower, with cash rec’d in FY25. | ||
HICL Infrastructure (LON:HICL) (£2.3bn) | Sold 7 PPP assets for £225m in line with Mar ‘25 book value. On track for FY26 dividend of 8.35p and FY27 dividend of 8.5p. | AMBER/GREEN (Roland) This infrastructure investment specialist is doing what it needs to do to raise cash and evolve its portfolio while its discount to NAV means it’s unable to issue new equity. While I think there’s some risk that cash generation from the portfolio may weaken as older PPP assets mature, on balance I think HICL is probably well run and has sufficient scale to adapt. From a pure income perspective, I think the 7% yield could be worth a closer look. | |
| Thungela Resources (LON:TGA) (£507m) | Interim Results | Prod +4%, rev -12% to R14,813m. EPS -80% to 192c. Weak coal demand w/ pressure on prices. | AMBER (Roland) This coal miner remains profitable and cash generative now that coal prices have returned to pre-Ukraine war levels. I am tempted to view this as normalisation rather than “weak demand” but I can see potential value here, with a forecast dividend yield of over 9% and a 50% discount to book value. More research would be needed to form any conviction, but for investors with the ability and inclination to do this, I think Thungela could be worth a closer look. |
Pantheon Resources (LON:PANR) (£332m) | 565ft hydrocarbon column in primary target, exceeding exps by 26%. Further zones encountered. | ||
| Thor Explorations (LON:THX) (£316m) | High grade mineralisation intersected at Segilola | Further positive results from an advanced diamond drilling program, targeting potential mineralisation beneath the current open pit. | |
Empire Metals (LON:EEE) (£205m) | Pitfield Project, WA, found “exceptional intercepts” with >6%TiO2 grades. | ||
Ilika (LON:IKA) (£77m) | Completed process qualification and begun production for testing and initial customer deliveries. | ||
Batm Advanced Communications (LON:BVC) (£65m) | Rev +2.5%, adj PBT -47% to $1.6m. FY25: expect rev & adj EBITDA growth. | AMBER (Graham) In my "too difficult" tray for valid reasons, I think. Open to the views of any readers who might be able to offer some insights on how to think about this one. | |
Quadrise (LON:QED) (£64m) | SP -7% Marine: commercial scale trials no longer expected in Q3 2025. US low carbon fuels: has progressed slower than expected. CEO: “We remain committed to completing these projects, to demonstrating the significant value add to our clients that Quadrise technology can bring, and to being positioned to act quickly as and when further opportunities arise." | BLACK (RED) (Graham) There have never been any meaningful revenues from this, and it has been around for a very long time. It was previously known as “Quadrise Fuels International” with the QFI ticker. The only metric that has increased is the share count (now over 2 billion). The StockRank is 13, and brokers provide no forecasts. Given these facts, I think I have no choice but to take a RED stance. | |
MicroSalt (LON:SALT) (£29m) | Pleased with H1 sales of $0.9m. Now projecting 2026 sales of $6.7m. Gross cash $0.9m. | RED (Graham) For a multitude of reasons, I decline the opportunity to upgrade my stance on this stock today. Note that today’s update is in fact a revenue warning for the current year, despite the very positive projections for next year. | |
Aurrigo International (LON:AURR) (£28m) | Project to deploy Canada’s first all-season, medium-speed autonomous shuttle trial. | ||
Aptamer (LON:APTA) (£18m) | Extension to a project following its successful completion. It involves conversion of binders to an assay. | ||
Great Southern Copper (LON:GSCU) (£14m) | Phase II results confirm continuity of high-grade Cu-Ag mineralisation with significant intervals. | ||
Capital Metals (LON:CMET) (£14m) | Reduced Stage 1 capex to $20.9m. Has completed Phase 1 drilling in Sri Lanka. Loss $1.1m. | ||
88 Energy (LON:88E) (£12m) | Divestment of 88E’s interest in Project Longhorn for $3.25m, to be redeployed into Alaska & Namibia. |
Graham's Section
MicroSalt (LON:SALT)
Down 1% to 55p (£29m) - H1 2025 Trading Update - Graham - RED
MicroSalt plc (AIM: SALT), a leading manufacturer of full-flavour natural salt with approximately 50% less sodium, is pleased to announce continuing advancement of its B2B bulk business during the six months ended 30 June 2025 ("H1 2025").
This Tekcapital (LON:TEK) company has been on my radar recently, after it acknowledged paying back loan funds to Tekcapital unnecessarily early - see here.
Today’s update suggests that revenues could be about to take off in 2026.
However, there is actually a revenue warning for 2025, from $2.5m to $2.0m:
The unexpected focus by the US FDA on the elimination of petroleum-based food colouring has delayed the larger rollout from Q4 2025 into 2026 which has resulted in the Company adjusting its 2025 sales estimate to $2.0m (previously $2.5m)
It’s still an impressive number for a company whose annual revenue has not yet exceeded $1m.
Looking ahead to 2026, we learn that “Customer 3”, who is “one of the world’s largest food, soft drink and snack manufacturers”, has provided volume projections to Microsalt:
While non-contractual, MicroSalt is confident in these volume projections which include a single new item, representing an addition to the Company's existing sales pipeline with Customer 3 and its divisions. The volume projections for this product (in North America only) indicate commencing rollout in Q2 2026 and resultant sales exceeding $5m in 2026 and expanding to $11m in 2027.
They are now projecting 2026 total sales of $6.7m.
Cash is a bit light at $0.9m (June 2025), even after a $2.9m fundraising in February:
The key movement in H1 2025 was a $1.2m investment in inventory to meet expected much higher sales orders in H2 2025, albeit as detailed further below, there will be some delays in new product formulations due to the US FDA's focus on the elimination of petroleum-based food colourings alongside existing low sodium initiatives. Accordingly, H2 2025 cash utilisation will be much lower than that incurred in H1 2025.
Graham’s view
With revenues expected to achieve lift-off next year, perhaps my RED stance is unfair? Perhaps. But I think I’m going to leave this on RED for the following reasons.
Despite the strong projection for next year, today’s update is actually a revenue warning for the current year. It would have been much more impressive if the strong projection had been combined with news that this year would be in line with expectations.
There are no market forecasts for any year; the only official information from the company is whatever we find in these announcements.
The revenue projections for next year, as acknowledged by the company, are not contractual orders..
Last year, the gross margin it achieved on sales was minus 58%. They do expect gross margin to improve in 2025, but they’re starting from a weak position on that front.
While the company has assured us that the recent corporate governance issue (early, undisclosed repayments of loans to Tekcapital) won’t be repeated, it is a red flag.
The existence of a 63% shareholder is not generally a positive feature of a stock for other shareholders, e.g. due to the risk of delisting or takeover by that shareholder.
The company’s cash position at less than $1m suggests little wiggle room.
Therefore, I’m going to pass on giving this stock an upgrade today. Perhaps I’ll be able to change my mind at some point over the next year - but not yet!
Batm Advanced Communications (LON:BVC)
Down 3% to 14.4p (£63m / $85m) - Interim Results - Graham - AMBER
BATM (LSE: BVC; TASE: BVC), a global provider of advanced network infrastructure, cybersecurity and diagnostic technologies, announces its interim results for the six months ended 30 June 2025.
This is a stock I’ve been cautious on - see here (August 2024), when I looked at its interim results last year. I decided to put it in the “too difficult” tray.
What it does: this is the tricky part! (for me). BATM is “a high-tech enterprise specialising in cybersecurity, telecommunication networking and medical diagnostics”. That’s a lot of different sectors for a company worth less than £100m!
BATM Networks: “Empowering service providers to modernize infrastructure and deliver secure, scalable connectivity from the core to the edge.”
BATM Cyber: “Providing quantum encryption solutions that secure essential data-in-transit for mission-critical applications.”
BATM Diagnostics: “Enabling effective disease detection and management with accurate, rapid molecular diagnostics powered by innovative PCR instruments and high-quality reagents.”
I don’t understand what synergies these might have with each other. Networks and Cybersecurity together - I guess that can make sense. But then throw in medical diagnostics, and I don’t get it!
Governance: BATM’s headquarters are in a small city near Tel Aviv. The founder and former CEO, who owns 22% of the company, remains on the Board as a NED.
Today’s results show some top-line progression over last year, but profitability has moved backwards:
The numbers are in line with expectations.
Looking ahead, the outlook statement doesn’t provide the sort of reassurance I’m looking for; one of the divisions is said to be in line, but the other divisions don’t receive that precise confirmation.
The conclusion of the outlook statement is also rather imprecise:
…the Group expects to report a year-on-year increase in revenue and adj. EBITDA for FY 2025.
Forecasts: many thanks to Shore Capital for publishing a note this morning and confirming that they are leaving forecasts unchanged, except for the impact of business disposals.
FY25: revenues to grow to $125m, adj. PBT $3m.
FY26: revenues $135m, adj. PBT $5.8m.
CEO commentThis has been an excellent six months of progress towards our strategic goals. The action that we took last year is beginning to deliver results, with a return to growth in BATM Networks and for our proprietary products in BATM Diagnostics as well as an improvement in gross margin in all of our core divisions. We achieved a major milestone in BATM Cyber with the delivery of our first encryption platform for the commercial markets. At the same time, we continued to execute on our strategy to become a more focused business with the sale of three non-core activities during the period. Accordingly, we exited the first half of 2025 in a much stronger position than when we entered. With positive momentum having continued into the second half, we are on track to deliver year-on-year growth for the full year."
Graham’s view
The business has been slimmed down with the removal of three “non-core activities”, but it’s still overly complex for me. You can perhaps understand why I put it into the “too difficult” tray last year! And it’s going to stay there for now.
The StockRanks are neutral:
And I’m going to leave my AMBER view unchanged
Roland's Section
HICL Infrastructure (LON:HICL)
Up 1% to 120p (£2.3bn) - Roland - Interim Update - AMBER/GREEN
Infrastructure investment group HICL can probably be described as ‘boring by design’. But it’s one of the oldest listed UK stocks in this sector and has provided a reliable income stream for investors since its IPO in 2006:
The 7% dividend yield on offer today reflects the share price declines seen across this sector as interest rates rose.
Back in early 2022, the yield was just 4.8%.
HICL faces some other challenges, too.
Its portfolio is split into yield and growth assets. The yield segment generates the majority of cash flow and can broadly be seen as PPP assets – UK public infrastructure projects that were funded through the Private Finance Initiative (PFI) that was discontinued by the government in 2018.
As the chart below from the FY25 results shows, these yield assets generate a high cash income but have relatively short duration – a number of these projects are due to be handed back to the public sector in the next 10 years.
The other part of the portfolio – growth investments – are expected to have a much longer lifespan but currently generate much less cash to support the company’s dividend:
Managing the transition between these two halves of the portfolio while ensuring the dividend remains sustainable is a key challenge for management.
Today’s updates suggest HICL is proactively scaling back its exposure to PPP assets while retaining some economic interest in them.
£225m portfolio sale
HICL has sold a portfolio of seven PP assets to APG, “the largest Dutch pension services provider” for a total consideration of c.£225m. The sale is said to be in line with March 2025 valuation estimates.
This portfolio contains:
50% of HICL’s interest in Southmead Hospital and Pinderfields and Pontefract Hospitals
HICL’s whole equity interest in four UK LIFT* projects (*NHS Local Improvement Finance Trust)
HICL’s entire equity interest in Edinburgh Schools
Prior to this sale, these hospital investments were the among the largest in HICL’s portfolio, accounting for 7.4% in total:
This sale will reduce exposure to these assets by half, leaving HICL with 31.25% of Southmead and 50% of Pinderfields & Pontefract. HICL’s investment manager, InfraRed, will also continue to manage the stakes being sold on behalf of APG.
The company says the sales will reduce HICL’s portfolio exposure to healthcare assets from 22% to 16% of gross portfolio value.
Completion is expected before the end of 2025. Proceeds will be used to fund existing investment commitments of c.£110m and fully repay debt drawn down to fund buybacks (currently £30m) and fund further buybacks.
Like most of this sector, HICL shares trade at a discount to book value meaning that it cannot issue new equity to help fund investments as it did in the past:
Instead, HICL is selling older assets to raise funds for new investments and share buybacks, which also represent an attractive return on investment. The company has now sold £725m of assets over the last two years.
While I think this is probably a pragmatic and sensible approach in the circumstances, the downside of this strategy is that it may also shrink the overall business. That’s not necessarily desirable in a sector where scale is advantageous.
Dividend: today’s update reiterates support for HICL’s previous dividend guidance:
The Company remains on track to deliver its covered target dividend of 8.35p per share for the financial year to 31 March 2026 and the Board reiterates its dividend target of 8.50p for the year ending 31 March 2027.
However, the commentary emphasises that the dividend remains dependent on cash flows from the portfolio’s older, yield assets:
Portfolio cash generation remains consistent with the 1.1x targeted dividend cover for the financial year to 31 March 2026. This is predominantly supported by HICL's yield assets, but also reflects increasing cash generation from growth assets.
Outlook: in its broader portfolio update today, the company notes that higher government bond yields in the US and Canada could have a slight adverse effect on the portfolio’s net asset value, but says current inflation levels in North America could be beneficial. The overall net effect today might be to add c.1p to NAV, but this could change before the next valuation date at the end of September.
Roland’s view
HICL is one of the larger and older players in this market and its investment manager InfraRed is highly experienced in this sector.
Dividend cover remains adequate at the moment and HICL has a clear path to deleverage as its assets mature.
The main risk I can see here is the ongoing transformation of the portfolio as PPP assets mature. New investments being targeted by HICL seem suitable and potentially attractive to me, but I don’t have a clear view on how cash generation from the portfolio is likely to evolve over the next decade.
With this caveat, I am inclined to view HICL as a relatively low risk income stock. With the shares trading at a c.20% discount to NAV and yielding 7%, I can see some attraction here from a pure income perspective.
I’d be more cautious about buying in hopes of significant capital gains from closing the discount to NAV – with interest rates at current levels it seems to me that a 6%-7% yield is about right for this stock – note also that consensus forecasts show a small drop in earnings next year:
On balance I’m going to take a moderately positive view today, reflecting HICL’s larger size and long reputation in this market. AMBER/GREEN.
Thungela Resources (LON:TGA)
Down 4% to 373p (£500m) - Roland - Interim Results - AMBER
Coal isn’t everyone’s cup of tea as an investment – but the StockRanks are ESG-agnostic and will highlight opportunities wherever the algorithms see potential opportunity. It’s up to us, as investors, to add a more selective overlay if we wish to.
Coal producer Thungela Resources was created when FTSE 100 giant Anglo American (LON:AAL) spun out its thermal coal business in 2021. The shares currently trade at a deep discount to book value and are rated as a possible Contrarian opportunity by the StockRanks:
This isn’t a stock we’ve covered in the DSMR before, as far as I can see. But it’s been a surprisingly interesting story so far for investors, thanks to the spike in coal prices that was triggered by Russia’s invasion of Ukraine:
This gave rise to extraordinary profits and some extremely generous dividends:
Market conditions have normalised somewhat since then:
Let’s see how this has affected Thungela’s trading – and whether the 50% discount to NAV and 8% forecast dividend yield suggested by the StockReport could be worth further investigation.
Half-year results (6mo to 30 June 2025): Thungela’s management have taken a fairly downbeat tone about market conditions today:
The global operating environment was characterised by increasing geopolitical uncertainties and tariff escalations disrupting global supply chains. These uncertainties resulted in weak demand in key coal demand regions resulting in softer prices, last seen during the Covid-19 pandemic.
As a result, average realised export coal prices from the company’s mines in South Africa and Australia fell by 11% and 10% respectively. A weaker USD/ZAR exchange rate did not help either, resulting in a sharp drop in financial performance compared to H1 2024:
H1 revenue -12% to ZAR14,813m
Adjusted EBITDA -68% to ZAR691m
Net profit -79% to ZAR248m
Earnings per share -80% to 193c
Dividend per share unchanged at 200 cents per share
Net cash down 6% to ZAR6,250m (approx. USD355m)
This interim dividend is not covered by earnings and both EPS and the dividend appear to be significantly less than half the full-year consensus forecasts shown on the StockReport:
FY25 EPS: 1,039c
FY25 DPS: 779c
However, today’s results leave full-year guidance unchanged, suggesting a strong H2 weighting is expected:
The Group remains on track to achieve full year guidance
Trading commentary: management says Thungela is focused on controlling the controllables and points to operational improvements in South Africa at some of the company’s mines and improved rail performance (needed for exports).
Export saleable production from South Africa rose by 4% to 6.4Mt during the first half of the year. Costs were 6% higher, but the full-year outlook for costs and full-year production is said to remain in line with guidance.
Performance in Australia was weaker due to “challenging geology”. Production fell by 16% to 1.6Mt and costs rose by 25% to R1,694/t, “above the upper end of the guidance range”. Production is expected to improve in H2 but is now expected to be closer to the lower end of guidance. As a result, costs per export tonne are expected to be at the top end of the guidance range.
An additional point worth flagging up is that the company’s South African portfolio is going through a period of change. Life extension projects at Zibulo and Elders are “beginning to produce export saleable production” as they ramp up. This is needed to offset the decline in production expected when the Goedehoop and Isibonelo mines approach end of life later this year. I’m not sure what the net impact on production is expected to be.
Outlook: the company continues to prioritise shareholder returns and will return 87% of H1 free cash flow to shareholders through dividends and a buyback of up to ZAR140m, “subject to favourable market conditions”.
A recent note from broker Panmure Liberum suggested that 2025 free cash flow may be relatively lower compared to recent years, as the company increases capex to develop its portfolio. However, PanLib’s analysts suggest the group’s net cash balance will be used to maintain payouts if coal prices don’t improve.
PanLib’s current forecast is for a dividend (in GBP) of 34.7p in FY25, implying a potential yield of almost 9.5% at 370p.
Roland’s view
I think it’s still reasonable to view coal as a mature business in long-term decline. But this doesn’t mean that attractive returns may not be available for some time to come. Demand for coal for power generation remains robust, especially in Asia, and seems unlikely to disappear overnight.
In addition, the position of coal as a legacy fuel may mean that investment in new mines is limited, reducing competition and supporting prices. Coal could be a bit like tobacco, in this respect.
A quick look at Thungela’s H1 balance sheet shows net assets broadly unchanged at ZAR24,350m, or c.£1.0bn.
With a market cap of £507m, these accounts confirm that the stock is trading at a discount of almost 50% to its 30 June book value. There could be value on offer here, if you accept the company’s valuation of its (tangible) assets:
I would have to spend more time investigating this business to get an understanding of the potential value on offer. In particular, what effect on production and costs is the portfolio transition in South Africa likely to have?
Potential investors will also need to take a view on currency risk in South Africa and on future coal prices and demand. Today’s commentary mentions “weak demand”, but I think we could alternatively argue that prices have simply normalised after a period of exceptional demand.
I’m going to take a neutral view on Thungela today with this initial review. But for an investor with interest and understanding of this market, I can see that this business could be worth more in-depth research.
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