Peter Brailey has already offered his list of sells for 2020 in the form of his Vomit List of useless oilers, so here is my 2020 list of Slam-Dunk sells. I doubt there will be much borrow available, so shorting may not be possible (although two might offer up some) but the main message is stay away! First up is a seemingly still obligatory member of the ShareProphets AIM-China Filthy Forty, Walcom (WALG) – a surviving sell from last year’s list which I had assumed would have been taken out and shot by now. But it has not…yet. Its balance sheet is a total disaster zone and survival even to the end of this month is dependent on the CEO again offering up loans to keep the lights on in the wake of a series of profit warnings, a bank loan which the company cannot repay and the default on monies owed by its formerly best customer. Indeed, the last we heard was that it only had enough cash to see it through to the end of 2019 and the CEO is yet to sign on the dotted line. I would have thought that a suspension is needed until financial clarification can be offered up, but it seems that AIM Regulation and the Nomad think differently in that a currently insolvent company can continue to trade on the world’s most successful growth market. That the shares are still trading is therefore, surely, a massive indictment on all concerned.
Second up is a Cynical Bear favourite, AIM-listed URU Metals (URU), which offered up Red Flag strewn interims at 4.23pm on New Year’s Eve Eve showing that it might be mining its own (and other companies’) shareholders but the idea of getting a spade into the ground itself seems beyond it. Oh, and the cash must be all but gone right now, with the company admitting that it will need to raise further capital in the future. Too right: the balance sheet is a mess and whilst I’m sure some spivvy bucket shop will raise a few coppers for the meter to keep the lights on, the discount will be huge and thus the shares, which have fallen from the equivalent of £22 in May 2017 to the current mark of just £1.50, are surely going to carry on dropping sharply. Sometimes the past is a very good guide to the future (but don’t tell the FCA I said that!).
Third up is AIM-listed Catenae Innovation (CTEA) which makes a return to the slam-dunk sell list after having had a year off. It too offered up a Red Flags at Night RNS over the Christmas break, at 5.02pm on Friday 20th December in the form of a profit warning which stank to high heaven, given that it had offered up a reassuring RNS just the day before but all of a sudden trading performance continues to be below management expectations and the Company's financial position remains weak. The stock is currently 1.1p in the middle, valuing this outfit – the former disaster that was Milestone Group – at just £0.35 million, which makes a fundraise even to feed the electricity meter a big ask. With a discounted bucket shop placing surely inked in ASAP, and certainly by the time FY19 numbers are released - and a warning from the company that without new money it will be a one-way trip to the corporate undertakers in the next couple of weeks, the stock is a sell.
Fourth up comes AIM-listed jam-tomorrow AIM investment company Tern (TERN), which I made my sell of the year in the ShareProphets New Year 2020 tipsfest. The shares have had an absolutely wild ride since it came to the Casino in a refinancing and reconstruction of Silvermere back in 2013 and whilst the talk has always been positive the facts are that it is still pumping money into cash-guzzling dogs which are yet to offer up any measurable income, shareholders are being diluted with regular placings and the company has sailed very close to the wind in terms of keeping the market fully informed. The shares stand at 8.5p in the middle – a healthy premium to the last stated NAV per share of just 6.9p. And since most of that comes from a cosy deal in the merger which formed its principal investee, Device Authority, in that the two main parties were able to mark up their shares on the back of their own valuations, that 6.9p looks a tad on the generous side. Eventually the market will get bored of waiting for the Hartleys’ lorry to attend, at which point the stock will trade at a big discount to NAV. And after a good few years riding the bull market, I fancy this year will see patience run out – at which point the next fundraise will be at a steep discount and panic will set it. And of course Device Authority could prove to be a busted flush this year, with bigger and better competitors entering its IoT security market, and still no big contract to boast of. Finally, there is another survivor from last year’s list in the form of AIM-listed Yu Group (YU.). The balance sheet is a mess and it has just come out of an accounting scandal which crashed the shares but at 86p in the middle there seems to me to be plenty still to go wrong: at its last results, interims to June, showed net current assets had dropped from £6.7 million to just £3.1 million in six months. It doesn’t take the mathematical skills of Albert Einstein to see a problem here and the stock remains a stand-out sell – especially in view of its apparent cash need and a market cap of £14 million. So that is my selection for 2020. If you hold any of these, well……you’ve been warned!
Filed under: Walcom, URU Metals, Catenae Innovation, Tern, Yu, Hurricane Energy, Patisserie Valerie
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