Frontier Tech Investor 2021 stock-take (part 2)
23rd December 2021 |
This week we continue our stock-take of our buy list positions to help you understand our position on the stocks, and where we see the year having gone and the year coming ahead.
If you missed the first part of our stock-take last week, or you just want to revisit it, you can do so here.
Here is just a reminder that this is your final weekly update for 2021. We won’t be sending anything next week as we’ll be taking time off as many do around this time to spend with family and friends.
We’ll be back with you again on 6 January 2022 with your first New Year update, and shortly after a new recommendation to kick off 2022.
But until then, here are the remaining stocks in our buy list for our 2021 stock-take…
NB: The yearly share price changes have been calculated from the first trading day of the year, 4 January 2021, through to 14 December, unless the stock was purchased after 4 January, in which case we took the price on the date of recommendation.
IOTA (Crypto: IOTA)
Yearly price change: 199%
It has been a very busy year for IOTA, a crypto in the Frontier Tech Investor portfolio.
A key development was the migration to the Chrysalis network, another massive step towards the end game of IOTA 2.0 as it is known.
This meant a bit of patience required from IOTA holders as there were a few bumps around token migration and the move to a new wallet, Firefly. This took some time to integrate with hardware wallet provider, Ledger.
But it got there in the end – and IOTA’s network is humming along.
We continue to see ongoing development and progress with the project and IOTA’s move towards full decentralisation.
Most notable on 16 November was the announcement of IOTA staking.
This doesn’t make IOTA a “proof-of-stake” network as it has DAG (directed acyclic graph) technology behind it. But it does mean that IOTA holders will be able to stake their IOTA and earn “rolling airdrops”.
It’s important to know that (according to IOTA):
The IOTA supply is capped and IOTA is one of the few networks without inflation. When someone stakes IOTA tokens, the staking rewards are therefore not paid out in newly minted IOTA tokens, but in the tokens which are launched on the IOTA network and on other networks.
IOTA continues on to say, “IOTA staking offers token holders the opportunity to be early in the token distribution of new projects and networks.”
The terminology is confusing. But by “staking” it’s not really staking in the traditional sense but unlocking access to future token airdrops on IOTAs network.
Either way, it’s an interesting development that has people excited, and shows that IOTA is still making great progress in scale and decentralisation.
IOTA remains a buy up to a limit of $3.61
IQE (LSE: IQE)
Yearly share price change: -59.6%
IQE is a leading supplier of semiconductor parts.
The company’s progress has been somewhat hindered by the global semiconductor shortage and supply chain bottlenecks.
This is reflected by the current portfolio loss of -59%.
However, with the shortage gradually easing, it could mean that better days lie in sight for IQE.
This year, the company has had some commercial success.
Of note, IQE announced a collaboration with GlobalFoundries (GF), a multi-national semiconductor manufacturer.
In the deal, IQE will supply its wafers to GF’s Fab 9 facility in the US state of Vermont, to develop GaN on Si (gallium nitride on silicon) technologies for mobile and wireless infrastructure.
GaN on Si is the industry standard for 5G networks, which are currently being deployed at scale around the world.
For the six months ended 30 June 2021, revenues were £79.5 million. This is an 11.6% decrease on the previous corresponding period (pcp). The company was also operating at a loss of £0.9 million for the six months ended 30 June 2021, after being £4.3 million in profit for the pcp.
We think that these uninspiring financial results reflect the impact of the semiconductor shortage.
For now, we are changing our recommendation on the stock to a HOLD. You can find the original recommendation here.
Kanabo Group (LSE: KNB)
Yearly share price change: -50.28%
Kanabo Group is a producer and distributor of medicinal cannabis products.
The company has had an action-packed year, which has seen it develop in a commercial and business sense.
Kanabo introduced the world’s first medical grade vapouriser to the UK markets. Each “VapePod” mechanism is comprised of 86% cannabinoid (CBD) and gives more than 300 doses per cartridge.
Meanwhile, Kanabo announced the potential acquisition of Materia, a Maltese-based processor and distributor of medicinal cannabis products.
It’s still yet to complete, but if it does, it will give Kanabo direct access to Europe’s biggest CBD product market – Germany, where Materia owns a licensed medicinal cannabis wholesaler (Materia Deutschland GmbH).
In addition, Kanabo announced a partnership with medicinal cannabis producer Medocann Group, to distribute cannabis products to the UK and German markets. The UK is home to Europe’s second largest CBD market.
There’s no doubt that Kanabo is well positioned for substantial growth, as it looks set to gain a larger market share and achieve greater supply chain control. And with Germany looking set to legalise recreational use of cannabis under the new “traffic light” coalition government things could really go well for Kanabo in 2022.
Admittedly, its share price is still yet to take off, and currently shows a portfolio loss of -50%.
However, we think that its disruption of Europe’s two biggest medicinal cannabis markets will drive the company’s valuation higher in the coming months.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
HANetf ETC Group Digital Assets and Blockchain Equity UCITS ETF (LSE: KOIP)
Yearly share price change: -11%
The KOIP exchange-traded fund (ETF) is an investment fund which tracks the Solactive ETC Group Digital Assets and Blockchain Index, comprised of 30 blockchain-centric stocks. It even includes crypto exchange giant Coinbase (NASDAQ: COIN).
The ETF fund provides an exciting, albeit unconventional route into the crypto market. It gives easy, direct exposure to a variety of crypto assets, that would otherwise be difficult to access. Of course, exposure to the crypto market largely means investing overseas, which brings bureaucratic and regulatory challenges.
The fund is ever evolving, with it being adjusted on a quarterly basis as it seeks to include the latest pure-play crypto stocks (i.e. a company that generates a significant portion of its revenues from the blockchain industry).
Going forward, as new crypto-centric stocks hit the markets, we may very well find new stocks enter the KOIP fund. This means the fund will keep pace with the larger crypto pure-plays and grow in line with our high expectations of the crypto market.
Of course, much of the progress of the fund will be reliant on the success of the wider crypto market. So, it’s not surprising to see its downward trajectory has coincided with the recent sell-off in the crypto market.
However, we’re not alarmed by this. We view crypto as an unstoppable trend that will continue to transform our personal and financial lives heading into 2022.
We reiterate our BUY recommendation. You can find the original recommendation here.
Marston’s (LSE: MARS)
Yearly share price change: -3.53%
Marston’s is an operator of pubs and hotels in the UK.
Like much of the hospitality sector, Marston’s endured a difficult lockdown period, with footfall to its pubs restricted by Covid protocols.
But as restrictions have eased, Marston’s has fared a lot better.
For the year ended 2 October 2021, sales were at £402 million – representing 78% of sales over the pcp.
Also, after reaching a low of 28.34GBp in March 2020, its share price is now 72GBp at the time of writing. However, it is on a downward trajectory, after reaching a yearly high of 101.20GBp in April 2021.
Has the recovery reached its peak? Or is the stock still wearing the uncertainty of an industry on a knife’s edge thanks to government interference?
We think the long view here is still intact. Yes, the company’s commercial activities have been limited this year and it may be a bumpy ride for a few months still. However, we see Marston’s coming out of all this pandemic uncertainty stronger and better than before.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
Meggitt (LSE: MGGT)
Yearly share price change: 65.58%
Meggitt as an engineer of component parts and systems for customers in the defence, aerospace and energy storage industries.
This year, Meggitt caught the attention of two US-based engineering conglomerates, who sought to take over the company.
The first was from Parker-Hannifin, who offered to buy all outstanding Meggitt stock for 800GBp per share on 2 August 2021. It was approved by shareholders on 21 September 2021.
The second bid came from TransDigm Group, which eventually withdrew its pursuit after failing to follow through with its 900GBp per share buyout offer.
The Parker-Hannifin takeover will give Meggitt greater financial backing and expertise in driving a more environmentally sustainable engineering industry, which it is already having great success in doing.
For example, this year, Meggitt secured a contract with energy giant MAN Energy Solutions for the supply of printed circuit heat exchangers. Printed circuit heat exchangers deliver sustainable energy through the use of hydro and wind power.
For the full year ended 31 December 2021, the company expects operating profit to be in the region of £170 million to £190 million. It also expects revenues to be 5% down on 2020’s figure.
We reiterate our HOLD recommendation on the stock in anticipation of the completion of the Parker-Hannifin takeover. You can find the original recommendation here.
Mirriad Advertising (LSE: MIRI)
Yearly share price change: -9%
Mirriad is a video technology company that dynamically inserts content into advertising after it has been produced.
It’s an industry first, that allows ample opportunities for broadcasters to sell advertising campaigns, in which Mirriad takes a cut.
Mirriad is in the process of commercialising its technology.
Notably, in June 2021, it renewed its collaboration agreement with Tencent Holdings for an additional two years.
Tencent is a giant technology conglomerate, and the world’s largest video games publisher.
It’s a real feather in Mirriad’s cap and gives the company exposure to the rapidly expanding Chinese advertising market.
What’s exciting is that Mirriad has plans to infiltrate the largest advertising market in the world – the United States. According to CEO Stephan Beringer, it has commercial deal with a “household food and drink business” in the pipeline.
Another positive is that for the year ended 31 December 2020, Mirriad’s revenues were £2.18 million. This is almost double its revenues for the pcp.
We remain hugely excited by Mirriad’s potential.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Mode Global Holdings (LSE: MODE)
Yearly share price change: -54%
Mode is a payments ecosystem that allows users to pay with and manage digital currencies such as bitcoin.
It has been a successful year for Mode, which saw the official launch of its very own payments app in February 2021.
It has kicked on from here, securing several yet significant commercial deals that has seamlessly moved crypto adoption further into the mainstream.
Of note, it signed a contract with THG in June 2021, with 30 of its brands (including gym supplement giant Myprotein) being offered Mode’s payment option at the online checkout.
In addition, Mode announced a partnership with UK payroll provider PayEscape, which will see Mode convert a portion of its payroll users’ income into bitcoin.
Mode is bringing bitcoin into the mainstream in more ways than one, providing easy access to it and removing any uncertainty that first-time users may have towards crypto.
For the six months ended 30 June 2021, Mode’s revenues were £0.8 million. Incredibly, this is a 20-fold increase from the £0.03 million figure recorded over the pcp.
As crypto adoption accelerates, our optimism towards Mode is reinforced. The stock price will remain volatile and swing with the crypto market performance, but we embrace the volatility of this one. For the long term, we still see great potential for Mode as a business.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Ocean Outdoor (LSE: OOUT)
Yearly share price change: 35.44%
Ocean Outdoor is an operator of premium advertising space in the UK.
If you’re in Piccadilly Circus this Christmas time, remember to look up at the billboards which light up the night sky: they are operated by Ocean Outdoor.
The company has had a solid year of trading.
Of note, it was awarded a £25 million-valued contract to market and sell advertising space at Edinburgh’s newly renovated St James Quarter shopping outlet. The contract was inked in May 2021, and it is due to last ten years.
In August 2021, Ocean was also appointed media partner to Canary Wharf Group, which will see it operate 40 digital screens in London’s financial district. The contract has a lifetime value of £30 million.
For the six months ended 30 June 2021, revenues were £40.6 million. This is an 11.2% increase on the pcp.
After a dormant lockdown period, in which demand for advertising space was limited amongst retailers, Ocean Outdoor is seeing a resurgence in trading, as shown by the rise in revenues.
We reiterate our HOLD recommendation on the stock. You can find the original recommendation here.
Rolls-Royce Holdings (LSE: RR)
Yearly share price change: 13.51%
Rolls-Royce Holdings is an engineering company, focused mainly on propulsion systems.
Rolls-Royce has been involved in a number of projects over the past year, which give rise to it being a key driver of sustainability in economies around the world.
In particular, in September 2021, Rolls-Royce completed the first flight of its all-electric aircraft, known as “Spirit of Innovation”. This could prove to be a key step in the decarbonising of the aviation industry.
In addition, in November 2021, Rolls-Royce unveiled plans to develop up to four small modular reactors (SMRs) in the UK, after securing up to £210 million of UK government funding.
Approval for this would not only be a huge step for Rolls-Royce, but for the nuclear energy industry as a whole.
It could lead to the safe deployment of commercial-scale nuclear energy sources, which could go a long way in helping the UK and the world meet stringent, sustainable energy targets.
Rolls-Royce is already showing huge powers of recovery since it announced catastrophic losses of £4 billion in 2020.
Since October 2020, when is share price was a meagre 38.98GBp, its share price has risen to 140.2GBp at the time of writing.
We believe that Rolls-Royce has an integral part to play in decarbonising industries across the world.
We reiterate our BUY recommendation on the stock. You can find the original recommendation here.
Surface Transforms (LSE: SCE)
Yearly share price change: -14.62%
Surface Transforms is a developer of carbon ceramic brake technology for supercars.
It currently serves a very niche market, and seeks to provide durable, efficient brake systems that can operate at extreme temperatures and speeds.
In fact, according to its website, it can provide up to 70% in weight savings, setting the industry standard.
This year, Surface Transforms has secured two notable commercial deals with automotive manufacturers.
The first was with Lamborghini, in which it has created a specialist brake disc kit for the Huracán and Huracán Performante models. The deal was announced in June 2021.
Secondly, Surface Transforms announced the launch of a brake disc kit for the McLaren 765LT supercar, in September 2021.
Both deals give rise to Surface Transforms’ capability in providing high-quality, robust brakes that are suitable for the most high-end, high-performance cars on earth.
For the six months ended 30 June 2021, revenues were £1.2 million. This is a 34% increase on the pcp.
We are looking forward to seeing what next year has in store for Surface Transforms. It is in the process of expanding its Liverpool-based manufacturing facility, which according to CEO David Bundred, will generate £35 million worth of revenue capacity.
However, this expansion of its facility hasn’t come without its difficulties. The company finds itself in a transformational period, with the facility currently unable to keep pace with order volumes. By and large, this is thanks to delays in the commissioning of the upscaled production capacity at the Knowsley facility.
As a result, it has warned its revenues will be “significantly short” of market expectations, which is hardly surprising given the circumstances. Surface Transforms is hopeful the problem will be fixed by Q2 2022.
In truth, we view it a good sign that Surface Transforms’ order volumes are greatly exceeding expectations. Also, according to its management, it is expecting further contract awards heading into next year.
As such, our positive long-term outlook towards Surface Transforms remains intact, although we will of course keep you updated on the latest developments regarding its facility.
We reiterate our BUY recommendation while the stock trades under its buy limit. You can find the original recommendation here.
Saietta Group (LSE: SED)
Yearly share price change: 70%
Saietta is an engineering company that manufactures electric propulsion motors for the light electric vehicle (EV) market.
Saietta’s target markets include East, Southeast and South Asia, where motor traffic is dominated by light vehicles.
In this context, light vehicles refer to two-wheelers such as motorbikes and motor scooters and three-wheelers such as tuk-tuks (motorised rickshaws).
These are markets where the transition towards greener energy alternatives is accelerating, typified by India’s commitment to achieving net zero by 2070.
Saietta has signed a contract with Padmini VNA, one of India’s leading automotive suppliers, for the provision of its flagship axial flux technology (AFT) motors.
In addition, Saietta is expanding into other areas of the EV market. In September 2021, it announced a deal with Electric Assisted Vehicles (EAV), a market leader in lightweight vehicle engineering.
In this transaction, Saietta will provide its AFT to lightweight inner city and last-mile vehicles, which are becoming more ubiquitous in cities around the world.
In the 12 months ended 31 March 2021, revenues were £870,966. This represents growth of 440% on the pcp.
Its most recent figures are also hugely encouraging.
For the six months ended 30 September 2021, its sales revenues were £795k. This is a 1319.6% increase on the pcp.
Saietta also announced that it is on track to deliver its target production capacity of 100,000 axial flux technology (AFT) motors by 2024.
In our view, Saietta has the potential to become a global player in the EV market in its own unique way.
We reiterate our BUY recommendation. You can find the original recommendation here.
Spirent Communications (LSE: SPT)
Yearly share price change: -1.24%
Spirent is a provider of network testing and assurance solutions.
Its solution is adaptable to a number of industries, including 5G networks, cybersecurity and autonomous vehicles.
Before deploying 5G network capabilities, companies must ensure their infrastructure is secure and efficient.
Spirent ensures this through its highly specialised assurance solution, that can easily detect faults.
Spirent has secured several commercial deals this year.
On 2 June 2021, the company announced a collaboration with Amazon Web Services (AWS), in which it will bring 5G automated network testing capabilities to the Amazon network. It is hoping to reduce operational costs and time in comparison to manual testing.
Another highlight was Spirent’s move into the autonomous vehicles market. It announced the launch of GNSS Foresight, a cloud-based navigation solution that can detect areas in which unmanned vehicles can operate safely in advance. Often time, GPS signals for autonomous vehicles can be obstructed in built-up areas.
For the six months ended 30 June 2021, revenues were $255.1 million. This is a 9% rise on the pcp.
Adjusted operating profit for the six months ended 30 June 2021 was $44.7 million. This is a 13% increase on the pcp.
We remain excited by Spirent’s potential, especially seeing as it is generating revenues from two burgeoning markets – in 5G networks and autonomous vehicles.
We reiterate our BUY recommendation. You can find the original recommendation here.
Trackwise Designs (LSE: TWD)
Yearly share price change: -30.72%
Trackwise Designs is a manufacturer of printed circuit boards (PCBs). PCBs are a critical component in semiconductor chips, which are used to drive many devices such as mobile phones, computers and even automotive.
It has been a relatively quiet year for Trackwise.
The company completed the planned acquisition of a 77,000 sq ft production facility in Gloucestershire, in which it will scale up production of its flagship Improved Harness Technology (IHT) PCB.
Meanwhile, the company has a deal with major aerospace components supplier, GKN Aerospace, in the pipeline.
Trackwise’s PCB is unique in the sense that it can provide weight savings of up to 60% in aircraft, because it reduces the need for long, heavy traditional wiring harnesses.
For the six months ended 30 June 2021, revenues were £4.1 million. This is a 70.8% rise on the pcp. Losses also reduced by around a third.
For now, we reiterate our BUY recommendation. You can find the original recommendation here.
Velocys (LSE: VLS)
Yearly share price change: 30.8%
Velocys is a supplier of sustainable aviation fuel (SAF) that converts biomass and forest residue into fuel used by aircraft.
Velocys has made great progress in commercialising its SAF this year, and is playing a key role in decarbonising the aviation sector.
Notably, in June 2021, Velocys powered the first commercial flight to use SAF, which was a Japan Airlines Flight from Tokyo to Sapporo.
This was a huge step for the aviation industry and shows the viability behind SAF as an alternative to traditional jet fuels such as kerosene.
In addition, Velocys announced a landmark agreement with airline conglomerate Southwest Airlines. In the deal, Southwest Airlines will purchase 219 million gallons of Velocys’ SAF over a 15-year period. According to Velocys, it will generate “multi-billions” of revenues.
Velocys’ latest financial figures are hugely impressive and vindicate our position in the stock.
For the six months ended 30 June 2021, revenues were £8.2 million. This is a whopping 4,000% increase on the pcp. Losses are also narrowing, falling from £2.6 million to £2 million.
The positive news flow has been reflected in Velocys’ share price. It rose 114.2% from 6.30GBp on 9 November 2021, to 13.5GBp on 11 November 2021 following the Southwest Airlines deal. However, it has since fallen to previous levels.
We reiterate our HOLD recommendation. You can find the original recommendation here.
WANdisco (LSE: WAND)
Yearly share price change: -31.87%
WANdisco is a provider of data management infrastructure.
In particular, it helps to migrate sensitive data from on-premises work locations in a secure way. It helps mitigate against the growing phenomenon of cyber-attacks, which provide huge financial and reputational costs to businesses.
In October 2021, the company deployed its flagship LiveData Migrator to the Amazon AWS platform. It will allow users on Amazon’s network to safely transfer on-premises data to the cloud without operational downtime.
A global conglomerate such as Amazon using the LiveData Migrator speaks volumes for WANdisco’s efficient solution.
Also, on 20 December 2021, WANdisco announced the securing of a $3.33 million contract with tech conglomerate IBM. It will see IBM utilise WANdisco’s flagship LiveData migrator solution to move on-premise data into the cloud.
For the six months ended 30 June 2021, revenues were $3.4 million. This is slightly down from the $3.6 million figure recorded over the pcp.
It’s a steady return, which we believe will be bolstered by the IBM contract. Progress next year may also be more likely when headwinds from Covid shouldn’t be as much of an interference.
We reiterate our BUY recommendation. You can find the original recommendation here.
We look forward to seeing you in the New Year,
Sam Volkering
Editor, Frontier Tech Investor
Elliott Playle
Junior Analyst, Frontier Tech Investor
