It’s been a stellar week for Naked Wines PLC (AIM:WINE, OTCQX:NWINF), with CEO Rodrigo Maza hitting the reset button to great applause from the market as the focus shifts to cash and, in time, shareholder returns.
The home wine delivery specialist was a lockdown favourite among those who couldn’t nip to the office.,and actually fancied something more sophisticated than a few dusty cans of warm lager. So much so, the shares peaked just shy of 880p in July 2021, firmly in overbought territory.
Now, it would be easy to blame fashion and fad for the dramatic retreat in the share price. But there have been internal issues too, which have been widely chronicled. Thursday, however, felt like the beginning of a new chapter as Naked set out its turnaround plans.
Maza’s blueprint is to significantly grow profits and shave around £23 million off the cost base. Interestingly, the company plans to “liquidate” £40 million worth of wine – which, one assumes, means sell rather than pour it down the sink like last night’s over-tannined corner shop “red”.
With around £33 million in cash on the balance sheet and stock being sold off, the total now comfortably exceeds Naked’s £50 million market capitalisation.
No surprise, then, that Panmure Liberum has developed a crush on the stock, upgrading it to ‘buy’ with a punchy 150p price target – triple its previous valuation.
At 85p, up 61% on the week, there’s still plenty of upside based on the broker’s sums. A valuation mismatch seems apparent, even at these higher levels.
Turning to the wider market, the AIM All-Share is now on a two-week winning streak, up 1.3% at 698.77. It outperformed a rather lacklustre FTSE 100, which barely got out of bed in the same period as investors fretted about a Trumpian trade war – fears that appear to be coming true.
Next up, and I’m using an old local newspaper cliché here, ‘mystery surrounds’ the 205% price rise of Premier African Minerals Ltd (AIM:PREM, OTC:PRMMF), run by George Roach, one of the microcap market’s more colourful and entertaining CEOs. There’s been no news since a discounted interim fundraiser earlier this month, though the company did say it was hunting a “fully funded solution” for its Zulu Lithium and Tantalum Project in Zimbabwe. Perhaps an update is imminent.
It was a similar story for Metals One PLC (AIM:MET1), up 86% after a piddling £100,000 retail investment round, though earlier news that it planned to pick up copper projects in Finland likely stirred some interest.
Now, onto the fallers. In yet another example of AIM being a very poor arbiter of value, ADVFN PLC (AIM:AFN) (down 50%) is quitting the junior bourse. I know, I know, I’ve been banging on about the ‘exodus’ of smaller companies from the public arena for more than a year, and frankly I’m sick and tired of writing the same old dirge. But for those of us who’ve been covering small-caps for so long, this exit presents a double disappointment: it marks the end of an era and underlines the lack of interest in AIM stocks.
ADVFN has been the backbone data and bulletin board service for UK private investors since it was founded by Clem ‘Hadrian’ Chambers (Wiki says that’s his middle name) in 1999. Beloved and detested in equal measure, its front end hasn’t evolved much since the early noughties – a modern internet QA would have a heart attack just looking at it. But for small-cap nerds like me, it’s been a staple for 25 years.
Following a collapse in the stock price after the de-listing announcement, it will limp off the market with a valuation of £2.55 million, despite having £3.5 million in cash on the books. The idea of the market being a decent judge of value goes out the window with this sort of carelessness. For those who bought in three years ago when the stock was worth ten times as much, the pain must be acute.
It was a similarly grim tale for Celadon Pharmaceuticals PLC (AIM:CEL), whose shares fell 46% after it confirmed plans to delist and announced the immediate resignation of four non-executive directors.
Finally, a quick look at Newmark Security PLC (AIM:NWT). The shares rose 14%, but its £7.5 million market cap still doesn’t reflect the potential here. That’s just 3.4 times last year’s underlying earnings (EBITDA). A trading update last week suggests the business, which focuses on physical and electronic security, is on track to comfortably beat last year’s numbers. A tie-up with software giant Oracle has gone largely unnoticed but could prove a real value-kicker. The recurring revenue base is growing too. Probably one for the watch list.