UK Investor Magazine September 2015

Page 1


Jim Mellon keynotes the Gold & Bears show

ISSUE 4 // September 2015

Buy Advanced Oncotherapy and 6 more share tips

Is it a Crash or a correction? by Ben Turney

Justin Lewis of Armadale Capital

by Zak Mir

Rob Terry of Quindell: Prison Update

UK Investor Magazine — 1 — September 2015


INSIDE 4 Three shares to buy for September

Zak Mir

8 Advanced Oncotherapy Rocket Science Barry Gibb and Andy Senga 10 Three stocks to sell in September Tom Winnifrith 12 The Perils of believing in HSS, EBITDA, and the tooth fairy Chris Bailey 14 China Peril on AIM – this is a monumental scandal Tom Winnifrith 16 Jim Mellon Takes Centre Stage at Gold, Bears & Traders on November 28 Amanda van Dyke 17 Rob Terry of Quindell going to prison? It is now a racing cert Tom Winnifrith 18 Tom Winnifrith’s Death List ShareProphets 20 Crash or correction? Ben Turney 22 Company of the Month: Vislink Plc Steve Moore 23 Interview: Justin Lewis of Armadale Capital Zak Mir 25 The House View: Is it time to nibble at gold stocks?

contact us UK Investor Magazine 91 - 95 Clerkenwell Road London, EC1R 5BX E: W:

A Message from Tom Winnifrith Welcome to the September edition of UK Investor Magazine. You will see that on the front cover is my old friend Jim Mellon. That is because we are now starting the run up to our next big event: Gold, Bears & Traders which takes place on November 28. I’ll be there with Jim (as a bear not a gold bug) and there will be a host of other big name and expert speakers. It should be fun. More details and how to get hold of a free ticket are on page 16. Elsewhere in this issue we hope that again we have something for everybody. There are a few buy tips and a few sell tips. There is something for accounting geeks from myself and Chris Bailey. Rob Terry gets a mention, in case the old fraudster thought we were going to leave him alone, as he waits for his inevitable arrest and much more. While our focus is on individual stocks the past few weeks have seen the focus shifting from the micro to the macro as the wider stockmarket has taken the sort of beating my beloved West Ham handed out to Liverpool a couple of days ago. On days when the stockmarket is a sea of red, individual shares are very much like corks on waves. Whatever their own merits their direction is driven by wider forces. Flip Flop Ben Turney comments on those wider forces later on in this edition of UK Investor Magazine. Of course we should all take note of these macro forces and take a wider market view. My personal view for a good while is that the wider market has been overvalued, it has more than discounted the good news about future earnings growth of UK PLC and failed to discount the risks to those earnings. But it is important not to forget that the market is not an animal but merely a collection of individual stocks. The way to make money is to identify good well run companies and then to wait patiently for an opportunity to buy them at an attractive price. A market correction can provide such an opportunity. Investment is about bottom-up analysis of individual stocks not about watching talking heads on CNBC talk macro-babble. Best wishes

EDITORIAL Tom Winnifrith Editor Cover Jim Mellon

Tom Winnifrith​ Warkwickshire PS Remember that the Gold, Bears & Traders free ticket offer is on page 16 UK Investor Magazine — 2 — September 2015

UK Investor Magazine — 3 — September 2015

Zak Mir’s three shares to buy for September By Zak Mir A market correction throws up plenty of buying opportunities but it is not necessarily the shares that have fallen the fastest that offer the greatest upside - often it is some of the more resilient. With that caveat, here are my three buys for September.

Asiamet Resources: Return To Autumn 2014 Resistance at 4p It rather makes sense, if only in terms of continuity, that Asiamet Resources (ARS) is one of the stocks to buy for September, after being one of the top ten stocks to buy for the summer – according to the book published by Shareprophets at the beginning of June (which you can download for free HERE). For those of you who do not recognise the company name, this is because Asiamet Resources was until recently known as Kalimantan Gold. The fundamental reason for including this selection in this instance was the announcement that a highgrade copper zone of 2.9%, containing grades as rich as 9.29% at Beruang Kanan, Kalimantan, Indonesia. While this is what the bulls were hoping for, the reality of the discovery more than matched these expectations.

As far as the charting picture is concerned, there was more than a little hunting around for a suitable chart, one that has historical data from before the name change in July. The consolidated chart of the old Kalimantan Gold chart and the new Asiamet Resources shows an extended and understandable consolidation since the spike for the shares in October last year through 7p when it was announced that a better than expected 47mln tonnes averaging 0.6% copper had been discovered. In fact, it could very well have been that more euphoria was warranted in August than it was last year. This may very well prove to be the case, once the penny drops regarding the latest breakthrough. But in the meantime we have the charting position. This shows how since the peak last year an extended base has been in place towards 1p, and this looks to be solid. Indeed, the view now is that

UK Investor Magazine — 4 — September 2015

provided there is no weekly close back below this post December support one would be confident of a partial or even full retest of the best levels of last year. The timeframe on such a move could be over the next 3-4 months, or perhaps even sooner should further constructive newsflow continue. The initial target is the top of the October rising trend channel at 4p, at its resistance line projection. Ashley House : 2014 Price Channel Target Towards 17p Ashley House (ASH) may be a new name to some, but as a founding member of The Social Stock Exchange, the social housing and health property partner group has a 20 years history. But what makes it a stock to buy for September is the recent turnaround in the share price, presumably on the basis that given the cash burning and perilously

inefficient state of the ultimate white elephant project – the NHS, its services are in high demand. What is more, given the way that the possibility of any streamlining of the healthcare gravy train is a taboo subject, and combines with an ageing population, demand for the services of groups like Ashley House is at an all-time high. This realisation looks to have kicked in since May when the share price probed to the low of the year at 3p. Presumably the “austerity” of the new Conservative administration has reassured would be bulls here of the prospects for Ashley House – although one would venture to suggest the company would almost certainly be a winner whatever the shade of Government. Looking at the technical picture it can be seen how on the daily chart the change of trend from bear to bull was signalled by the recovery of the 200 day moving average now at

6.25p in June. Since then we have been treated to a progressively stronger technical picture with a test for support at the 200 day line and then rebound off the 50 day moving average at 7.25p. All of this goes to suggest that provided there is no weekly close back below the 200 day moving average we can assume that there could be a significant push to the upside for shares of Ashley House. In terms of what the upside could be we are looking to the top of a rising trend channel which can be drawn from as long ago as March last year, we have the 2014 resistance line projection heading as high as 17p. This is the 3-4 months timeframe target, although given the way the stock has taken off so far in August, one would back the idea that the target could be hit much sooner than this. Leaf Clean Energy: Bull Flag Breakout With An Implied 65p Target

This month’s three stocks to buy all have something in common on the technical side, that is the way that on their daily chart we see extended positive consolidations, ones which by implication should build confidence given how much accumulation would have occurred over these respective periods. In the case of Leaf Clean Energy (LEAF) it is evident that we are coming off the back a basing pattern in place from as long ago as June last year, and the brief probe towards 30p. While the shares did eventually head lower than this floor in March this year with a one day island reversal buy set up to 22p, this only served to back up the idea that the shares had put in a robust floor and were merely flushing out weak hands before a lasting platform was made. Indeed, it can be seen how in the wake of the March bear trap, we have been treated to higher lows above 30p, and then the recovery of the all-important 200 day moving

continues on page


UK Investor Magazine — 5 — September 2015

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average now at 32.82p. This is the dividing line between regarding Leaf Clean Energy as a bear or bull situation, with the multiple support points at and above this feature emphasizing how the shares have turned around so well. The call to make now is that at least while there is now weekly close back below the 200 day line, one would be looking to an acceleration here at Leaf Clean Energy on the basis that July and August to date have delivered an extended bull flag


breakout, with the shares already in the area of the former September 2014 40p resistance level. The view currently is that as little as an end of day close above 40p over the course of September 2015 should be enough to trigger a progressively stronger push higher towards the top of last year’s price channel at 65p. All of this would come in the wake of the sale of four alternative energy investments this year, which was announced in August.

Get your free copy of Zak Mir’s new ebook, out today, Real Bulletin Board Heroes: The Ten Stocks to Buy for Autumn 2015 by clicking here.

UK Investor Magazine — 6 — September 2015


Star speakers from the world of commodities and investment including Zak Mir,Zak Amanda van Dyke, Mellon, Evil Mir, Amanda vanJim Dyke, Knievil and Tom Willem Middelkoop andWinnifrith Tom Winnifrith.

Meet and chat to gold and commodities companies, their CEOs and Chairmen. Tickets half price for limited time. 28 November 2015 QEII Conference Centre, Westminster, London UK Investor Magazine — 7 — September 2015

Advanced Oncotherapy - Rocket Science… and the countdown has already begun By Barry Gibb and Andy Senga Research Analysts, Beaufort Securities


small, young company with limited financial resources, trying to take on giant, established international peers with exceptionally deep pockets, in a product area that both tests the limits of scientific understanding whilst also facing the scrutiny of the world’s most exhaustive regulators? Sounds like a recipe for disaster! Yet Advanced Oncotherapy plc (‘AVO’) is confident that it will demonstrate a fullscale Linac Image Guided Hadron Technology (or ‘LIGHT’ system) prototype during the course of 2016, before commencing commercial production the following year. Moreover, this wholly-owned technology appears to enjoy quite rigorous global IP protection, while possessing sufficient USPs to ensure its low-cost, second-generation proton beam therapy device can capture a good chunk of a ‘big-ticket’ US$2.5bn market that is forecast to nearly triple in size by 2018. Yet, in fact, the true global opportunity for LIGHT is potentially a multiple of this, given that it must also be considered the obvious replacement/ upgrade for operators of the giant installed base of aging and, in medical terms at least, relatively antiquated X-ray radiotherapy systems. So the reality is that if AVO delivers exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation devices all but obsolete, while also placing the obvious superiority of proton beam technology within reach of the global medical fraternity for the first time. AVO’s principal limitation would then become


simply its capacity to deliver. Given such an outcome, of course, major international competitors wishing to ‘remain in the game’ will almost certainly be willing to pay a very handsome price, one way or another, to get their hands on its proprietary

It is now widely accepted that the physical properties of protons, for precise local treatment of cancerous tumours, offer an intrinsic advantage over traditional high-energy X-rays as a source of therapeutic radiation. Facing a dramatic rise in cancer across the developed world, governments, university hospitals and specialist providers now understand the urgent need, as was most dramatically demonstrated by little Ashya King’s parents determination to escape the ‘clutches’ of the NHS earlier this year, for a major global expansion in the number of proton radiation treatment rooms to ensure facilities are available locally and at short notice for patients with advanced symptoms. So what is the problem? It is that first generation proton beam therapy facilities are exceptionally expensive to build (range US$120m-US$200m plus infrastructure) and operate (as well as being potentially hazardous), relative to more economical and proven traditional X-ray radiation

UK Investor Magazine — 8 — September 2015

devices of comparable capacity. Such units became commercially available from 1990, since when their market has become dominated by a small handful of industry players (IBA, Hitachi, Mitsubishi, Varian Medical Systems, Sumitomo), who have been largely responsible for commissioning the 54 operational facilities that offer 121 treatment rooms worldwide (August 2014). Presently, this represents less than 1% of the 21,000 or so conventional X-ray radiotherapy rooms in use around the globe. The latter being available since the 1950s, with commissioning and operation more elementary while unit cost is around just one-fifth of presently available proton facilities.

University in Syracuse, NY, during 2016. It has also secure financing to cover all remaining anticipated capital expenditure, prototyping, fitting-out and regulatory submissions. Recognising the groundbreaking potential for this technology, AVO has already received one firm order from a Chinese hospital (with a second seemingly imminent) along with eight formal ‘Letters of Intent’ from, amongst others, BMI and Spire Healthcare, which suggests that neither credibility for the project nor interest in the final product can be in any doubt.

So what next? AVO has provided its shareholders with a stream of technological updates and other news over the past year. To date, each highly So the reality is that a dramatic improvement sophisticated step has confirmed that the Group in the underlying is moving closer to Clear Path for Delivering the First LIGHT System economics of proton its stated ambition therapy needs to be found of demonstrating if MEDraysintell’s growth a first full-scale projections of a tripling working prototype of the global market for before end-2016. At proton therapy systems the end of August by end-2018 are to be it announced that delivered. It calls for a the two Coupled second generation of Cavity Linac (‘CCL’) modules that devices. One that provides form part of its equivalent therapeutic proprietary proton excellence, without such accelerator are now commissioning and ready for highoperational complexities, all of which come at a price much closer to that power testing at the Group’s facility in Geneva. of a conventional radiotherapy unit. This is AVO’s Results from this work might be expected as promise. And quite clearly, it would never have early as Q4’15, before moving onto running 12 been able to assemble such a prestigious line up or so as a banked series of accelerators in order of Board members, NEDs and advisors, along with to achieve the 230MeV output required to meet a long list of ‘highbrow’ academics and industrial clinical requirements. Once demonstrated, the collaborators, unless its concept also came with most significant technological hurdle will have been successfully negotiated, leaving only a significant scientific credibility. number of less challenging tasks ahead. While Moreover, AVO has scientific USPs buried Beaufort itself considers that the over-rigorous deep within its 100%-owned subsidiary, ADAM diligence routinely demanded for FDA approval (Application of Detectors and Accelerators to could potentially hinder product approval Medicine). Being the first and only medical spin-off for somewhat longer than is presently being enterprise from CERN (the European Organisation suggested, the extent of interest from other nonfor Nuclear Research, the world’s largest particle dependent international territories (in particular physics laboratory), it brings the necessary techthat presently being shown from China) suggests credentials to develop a ‘game changer’ in the the Group will find itself overwhelmed by demand radiotherapy world. Following investment of some for LIGHT as soon as units become commercially €14m in development of the core technology, AVO available. Given such an outcome, of course, major exchanged 29.9% of its enlarged capital for 100% international competitors wishing to remain in of LIGHT in September 2013. Since then, the the game will almost certainly be willing to pay a Group has taken a series of major strides forward. very handsome price, one way or another, to get It has pieced together the necessary industrial their hands on AVO’s proprietary technologies. collaborators to oversee the commissioning of Advanced Oncotherapy plc is one of Beaufort’s a full-scale prototype in two locations, namely key investment recommendations for 2015. London’s Harley Street and the Upstate Medical At Beaufort Securities we offer a bespoke advisory service. Our people are dedicated to the markets day in and day out for one reason and one reason only - to help our clients profit. To discuss your strategies with a broker, please call us on 020 7382 8384. Beaufort Securities Ltd is authorised and regulated by the Financial Conduct Authority, registered number 155104 and is a member of The London Stock Exchange and ISDX.

*Beaufort Securities Limited act as Corporate Broker to Advanced Oncotherapy plc. UK Investor Magazine — 9 — September 2015

Three stocks to sell in September By Tom Winnifrith


t the end of West Ham’s demolition of Liverpool I imagine that those who had travelled up from East London were chanting “can we play you every week” at the poor scousers as they trudged out of Anfield and back to their slum dwellings in the welfare safari. I feel pretty much the same way as I write this column

each month about Daniel Stewart (DAN). This preposterous little broker now sees its shares trade at 1.65p each. It has sod all free cash and is not making any money. The macro climate is getting worse for all in this sector and Daniel Stewart is linked at the hip to fraudster Rob Terry of Quindell infamy. Its shares are worth no more than 0.2p each and probably a lot less. But it would

be boring if I just pointed out what a rum and coke its share price was every month. But just for the record, it remains my top sell on AIM. But in the same neck of the woods is WH Ireland. I reckon that its free cash is sub £1.5 million and cannot see that number going up in the coming months. It is frankly not a very good firm. But as a bonus it is now embroiled in what could be a toxic, company destroying scandal. It had just written a cheque for £185,000 to a 78 year old pensioner who entrusted his life savings to senior director John Molyneux to manage on a discretionary basis. The bastard Molyneux stuffed this poor pensioner into a raft of penny stocks, mostly shite corporate clients and so destroyed his life savings. Molyneux “retired” suddenly as this scandal broke but I gather that this was a far from isolated incident. It would not take that many pensioners who had been similarly mugged going to the Financial Ombudsman and the free cash of WH Ireland would disappear altogether. And that would require a rescue bailout. The market cap at 108p is £26 million. My initial target here is 60p.

Second up is an old favourite from ten years ago Eden Research which at 18.5p is valued at a joke £30 million. This company and I had a bit of a legal battle a decade ago as I exposed its wrongdoings. It UK Investor Magazine — 10 — September 2015

goes without saying who won but it was a bloody fight. It may have a new management but some of the old names and ruses of the ancien regime keep cropping up. Until a week or so ago Eden was almost out of cash. But it then announced that a joke company Terpenetech (assets and sales sod all and partly set up by a long time Eden crony) had bought lifetime rights to one of its joke products for an upfront fee of £600,000. Where did it get the cash from? Who knows? At the same time Eden issued Terpenetech with £920,000 of Eden shares which it can flog immediately to get a 29% stake in Terpenetech. How did it justify that valuation? Er god only knows. But at least Terpenetech can get its £600,000 back PDQ (£920,000 minus CGT should cover it nicely). This deal stinks. But it only keeps the show on the road for a few more months. Anyone who backs this needs their head examined. Sell at 18p – target (for starters) 9p. And finally, last up is an old favourite, LGO Energy. The oil price must be crucifying this company and its failure to generate cash from its operations in Trinidad is legendary. In the old days Big Dave

Lenigas was able to promote it aggressively and get away confetti issue after confetti issue. There ae as a result just over 3 billion shares in issue. You would guess that there will soon be more and at 1.45p the market capitalisation is c£45 million which at current oil prices is just not supportable. I am not sure without Big Dave to promote fund raisings will be as easy for LGO as they once were. Investors hate oil and are tired of years of hype and non-delivery from this company. Ahead of the next – inevitable – fund raise the shares are my third sell of the month.

Tom Winnifrith’s

5 mo de l por tf ol i o s : Growth Income Gold Recovery Penny Shares

S u b s c r i b e t o day UK Investor Magazine — 11 — September 2015

The Perils of believing in HSS, EBITDA, and the tooth fairy By Chris Bailey Financial Orbit


y formative investment years were so long ago that I remember the daily thump that announced the arrival of the physical research pile from a variety of investment banks. As a callow youth I used to devour these publications believing them to be a route to insight and riches. The latter was true – although almost exclusively not to the readers of such ‘research’. The reason for this walk down memory lane was that I was reminded by an article from Tom Winnifrith – see below - of a report I kept by my desk for months

titled something like ‘why EV/EBITDA is the most important statistic for fund managers today’. Suffice to say the quality of my investment insights all those years ago improved materially after I had a desk tidy-up… Tom is very correct to lampoon the use of EBITDA and I was reminded of this when I saw that HSS Hire (HSS), a self-styled ‘leading provider of tools, equipment and related services’ had published its half year update…and slipped in a

EBITDA is a metric for fools in a bull market only


By Tom Winnifrith

BITDA is otherwise known as profits before a stack of costs. It is a meaningless metric. Profit is always a matter of opinion but EBITDA does not even equate to profit, it is a totally worthless indicator of performance. As such it is used only by those trying to fool either investors into overpaying or fool themselves into thinking they run a viable business. It is a measurement only believed by fools and only believed in a bull market. Let’s look at the dog blinkx. The other week it warned that the H1 EBITDA loss was going to be between $5 million and $8 million. But it also noted that at the end of H1 cash would be between $82 and $85 million. Hang on Henry… cash at the start of H1 was $96 million. So that means that while the EBITDA loss will be $5-8 million the cash sent to money heaven will be $11-14 million. Spot the difference? Yup it is $6 million. The market may value a business on an EV/EBITDA basis on a PE basis but ultimately its fundamental value to which it will gravitate is simply the Net Present value of its balance sheet and future cashflows. Companies such as blinkx or Globo (GBO) scream EBITDA at you because they just do not generate cash or if they do it is in trivial amounts. That should tell you everything. The EBITDA screaming companies with less than proven business models are darlings of a bull market. We are now in a bear market. That makes them screaming shorts.

UK Investor Magazine — 12 — September 2015

further profit warning. Yes, to quickly summarise the period since their February IPO above two quid a share, this would make the second explicit profits woopsie they delivered for their expecting shareholders. Not exactly a dream start to their life on the stock market… Two months ago the company talked about weakness across a number of sectors including a reduced demand for cooling equipment. The shares got a caning back then but are down a further 30% the other day on the basis of ‘softer conditions in August’. It was the details that struck me however. The company may talk about growing market share above peers, opportunities from developing a national distribution centre and cost optimisation initiatives but my attention was drawn to the ‘adjusted earnings calculations’ and the cash flow statement. Yes ‘adjusted’ earnings because reported operating profit was unfortunately a loss of £1.5 million but – no fear – ‘adjusted EBITDA’ was £28.9m (flat yearon-year) and ‘adjusted EBITA’ was £4.5 million via a wealth of depreciation, amortisation and nonfinance exceptionals adjustments. Still even all this was not enough to cover the reality of an ‘Adjusted loss before tax’ line of £6.0 million. The interim cash flow statistics were also poor with operating cash flow less capex running at a deficit of a mere £44.4 million reflecting a big bump in capex spend

over the last year as they build their business out. All of the above is fully in line with accounting convention and does reflect a high level of investment and acquisition activity by the business both of which will fade sharply away over the next year. Broker bulls will extrapolate the ‘adjusted EBITDA’ line for the full year to around £60 million and work out that magically the stock is cheap today in the low x5s EV/(‘adjusted’) ebitda… and for a growing business with a strong balance sheet that would be true. Suffice to say I am not convinced by a disappointing growth business with currently poor cash flow capabilities - a conclusion the quant geeks would also probably draw using my preferred EV/ebit or free cash flow filters. Investment is all about anticipating and gauging the future and not solely results in the rear view mirror. I remain a long way from being convinced on HSS Hire even if I make some heroic cost and capex cutting assumptions about the next year or so. Despite the dumping of the shares today they do not interest me. Generally lousy IPOs end up as lousy investments. Yes, the patchy economic backdrop for an industrial-facing business with exposure to the consumer and housing sectors has not been easy but successful businesses find a way and don’t issue two profit warnings on the bounce. Avoid.

Chris Bailey is the founder & editor of

Hot Stock

ROCKETS SStoc toc kkss R e a dy to tak e o ff take UK Investor Magazine — 13 — September 2015

The China Peril on AIM – this is a monumental scandal By Tom Winnifrith


he owner of AIM, the London Stock Exchange, has denied that there is an issue with fraudulent companies from China listing on AIM. Indeed it has sent its top salesman out to China to recruit more. That may make the LSE money and make money for fat cat City advisers but for investors and for London’s reputation as a global financial centre it is a disaster. A few weeks ago I launched the Filthy Forty. That is a tracker of the 40 Chinese stocks listed on AIM on June 1 2014. Of those 40, ten have already been booted off with horrific fraud cited in most cases. Another couple are suspended and will be booted off within weeks and others such as Camkids have been shown to be complete frauds but AIM is so terrified of seeing another enforced departure that Camkids is yet to get its well-deserved bullet in the head. By Christmas I predict that between 15 and 20 of the Filthy Forty will have left AIM. If the LSE cannot see that this is a problem it is blind. As the Chinese economic bubble goes pop more fraud will emerge. And myself and Nigel Somerville are now watching ever China AIM stock RNS like a hawk. We have already racked up a good half dozen “kills” and we and now gunning for more. The table below makes it clear that investors in Britain who are daft enough to buy into a Chinese AIM IPO deserve all they get. Good Chinese companies list in China or Hong Kong. It is the junk that floats ( and then sinks) overseas. The average loss from IPO is 43%. But that is skewed by the two big winners. Remove them and (to be fair) the two worst performers and the average loss on the remaining 36 is 73%. The LSE seems oblivious to the damage that such disastrous returns are doing both to UK Investors and also to the reputation of London as a financial centre. Nigel Somerville and I are already in dialogue with Business Secretary Sajid Javid about the car crash that is AIM and this is yet another issue that we are now raising with him. Meanwhile, anyone who buys shares or indeed still owns shares in any Chinese company listed on the AIM Casino needs their head examined.

UK Investor Magazine — 14 — September 2015

The Filthy Forty List Date





Biometrics 10


EASTBRIDGE (EBIV) (ex Qihang, ex C Wonder)




Support Services




Food Producers










HUTCHISON CHINA MEDITECH (HCM) Pharmaceuticals & Biotechnology 275





Investment Company




Industrial Engineering

de-listed - 23/01/2015



Real Estate Investment & Services 36.75




Electronic & Electrical Equipment 1,000




Pharmaceuticals & Biotechnology 10




Investment Company





Food Producers







Food Producers



Food Producers cancelled - 16/06/2015 NOMAD resignation



Investment Company




General Retailers




Support Services



Alternative Energy


IPO Price (p)

31/07 (p) 24 0.68 1.25 10.125 0.3

cancelled - 29/12/2014 accounts not published


Software & Computer Services 30


2.375 27


cancelled - 29/12/2014 accounts not published

1.125 40.5

cancelled - 01/04/2015 NOMAD resignation








Foreign Exchange Services





Alternative Energy










CHINA CHAINTEK UNITED CO (CTEK) Industrial Transportation





Leisure Goods










Personal Goods





Investment Company







Household Goods cancelled 27/02 NOMAD resignation, now on ISDX



General Retailers





Household Goods








Travel & Leisure




Food Producers




Nonequity Investment cancelled - 23/06/2015 NOMAD resignation

Personal Goods

cancelled - 22/05/2015 NOMAD resignation

UK Investor Magazine — 15 — September 2015



58 5.25 27

Jim Mellon Takes Centre Stage at Gold, Bears & Traders on November 28

By Amanda van Dyke


unning one great investor show is not enough – following the amazing success of UK Investor in 2014 and 2015 I have been brought on board to launch a second sister show: Gold Bears & Traders and it takes place on Saturday November 28 in London – we have 50 free tickets to give away to readers of this magazine this month. The lead speaker is Tom’s old pal Jim Mellon who leads up the traders brigade which also includes Zak Mir and Chris Bailey who you all know well. On the bears side we have Tom Winnifrith plus Evil Knievil, Matt Earl and Lucian Miers plus new boy Graham Neary. And we have the leading Aussie bear John Hempton of Bronte Capital And on the gold side there is myself, Dominic Frisby, star fund manager Angelos Damaskos, best-selling author Willem Middlekoop plus a host of CEOs including Colin Bird, Richard Poulden and Christian Schaffalifsky

And we still have three more big name speakers to announce – watch this space. Plus there will be 70 stands with dozens of mining and trading companies doing individual presentations throughout the day. All the talks and stands will be hosted on one floor at the QE2 centre in Westminster on Saturday 28 November and that means that there are less than 1500 tickets available with one third gone already. There are two classes of tickets: A Golden Ticket costs £60 and also gives you a place at the after show party with the speakers and CEOs. An Investor class ticket gives access to all events at the show and costs £12. But we have 50 free Investor Class tickets for readers of this magazine to give away on a first come first served basis. Just enter the promotional code UKIM when booking your tickets HERE It will be a fun and sparky day on November 28 and I look forward to seeing you in Westminster.

UK Investor Magazine — 16 — September 2015

Rob Terry of Quindell going to prison? It is now a racing cert Update

By Tom Winnifrith


n the last issue of UK Investor Magazine I explained why Rob Terry of Quindell should and would go to prison. Events moved quickly after publication and it is now a racing cert that the fraudster is going down. Good! In case you missed that article you can access it in the last issue HERE. Terry must now be sweating like a man eating a vindaloo in a sauna. The article I published a month ago laid out specifically a number of the frauds that Terry – and others including Rob Fielding had committed at Quindell. The allegations were specific but at that stage some of the diehard supporters of Terry were still prepared to dismiss them even though they had been sourced by hard documentary evidence months previously. That all changed on Wednesday 5th August when Quindell published its 2014 results but also restated accounts going back to the 2011 IPO year. In 75,000 words it took apart bent deal after crooked deal exposing to a wider audience the crimes of Terry, Fielding, hapless FD Larry Moorse and others. Within hours the Serious Fraud Office had formally confirmed that it was on the case. A few days later the FCA which had belatedly begun an enquiry in June 2015 despite being presented by me with clear documentary evidence of fraud back in 2014 said that it was letting the SFO take the lead. That should be no shock because – as ShareProphets readers knew already – the SFO has been looking into Quindell for many, many months. I am aware of at least one individual who was interviewed as long ago as February by case officers who were even at that stage very well briefed indeed. The admissions made by Quindell will not have contained that many surprises for the SFO although given the scale of the fraud that took place I am sure that there will have been a few new gems unearthed.

The SFO will now be trying to fill in a few gaps. Where has the money gone? Can it demonstrate the intent behind some of the frauds given that the old managers at Quindell refused to explain or provide documents for many of the “curious” deals done by Terry? Inevitably in due course this will lead to dawn raids on Terry and his accomplices, the seizure of hard drives, bank records and other documents. My sources suggest that this next phase will not be long in coming. Thereafter we move to the arrest and laying of formal charges. Make no mistake Terry and others will go to prison for their crimes. It is now just a matter of waiting and seeing how many others have their collars felt. I am now writing a book on the Quindell fraud. A number of fascinating new characters have come forward to assist with material of which I was not previously aware which I shall be saving for the book which will be published in the autumn. I am not sure if Terry will have been arrested before publication but if not we won’t have to wait too long for the great day when justice starts to be seen to be done.

UK Investor Magazine — 17 — September 2015

Tom Winnifrith’s Death List – Just a bit of fun but isn’t he doing well? By ShareProphets


n 12 June Tom published a list of 21 companies he expected to go bust or to 0p. It was just a bit of harmless fun. So far one of them (Afren) has done the decent thing and gone bust. Shares in all bar one (Mariana Resources) are down and the average loss (mid to mid) of the death list is a stinking 38%. Over the same period the AIM All Share lost 7% and the FTSE All Share 11%. So the death list constituents are delivering as Tom expected. Tom has now replaced Afren with Daniel Stewart in his Death List portfolio which you can see below and which will run until December 31 2016. If you own any of the stocks mentioned below you have been warned. We asked Tom which was his hot bet for next to go pop? It will not surprise you that he said: “Camkids. I have already demonstrated that both its balance sheet & P&L are complete works of fiction. That Nomad Allenby and the oxymoron that is AIM regulation allow its shares to continue trading is a total rum and coke. I would expect this company to be put out of its stockmarket misery very soon indeed.” Code


Share Price (p)

Share Price (p)


Close 12/06/2015 Close 26/08/2015






CAMKIDS GROUP 16.5 4.875 -70%


CHINA CHAINTEK 32.5 15.5 -52%



10.625 7.625 -28%


JERSEY OIL & GAS (formerly Trap Oil)







OUTSOURCERY PLC 23 18.5 -20%






SAREUM HOLDINGS 0.255 0.215 -16%






SEFTON RESOURCES 0.145 0.04 -72%














TUNGSTEN CORP 70 67.75 -3%

Suspended @87 7.625 -54%



2.75 -31%

13.75 5.765 -58% 0.5


28 20 -29% 209


2.725 25%

1.915 0 -100% 247.5 176 -29%



774.45 716.56 -7%


3702.01 3297.33 -11%

UK Investor Magazine — 18 — September 2015

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Crash or correction?

Major events in September could prove to be decisive for global markets By Ben Turney

The global selloff in stocks in the second half of August has been painful, but is this the beginning of something far worse or just the start of a healthy market correction?


t the time of going to press, wild daily swings in equities are commonplace across the world. Media commentary veers from jubilant to despondent and back again, sometimes as often as several times over the course of a dealing session. Known as the “fear index”, the CBOE Volatility Index (the VIX) briefly crossed into full

buying opportunity. The FTSE100 hasn’t been below 6,000 since the start of 2013. In the intervening period this market has traded gradually higher, in a fairly tight range. Although Britain’s leading index finally broke through 7,000 at the start of April, after a mere fifteen-year wait to set a new high, it failed to capitalise on this and move higher. A possible explanation for this lacklustre performance was the lack of momentum on reaching the new high.

VIX 1 year chart. SOURCE:

crisis territory, with a day’s worth of readings at >40 on 24 August. If past market behaviour is anything to go by, this won’t be the last time we see >40 readings before the end of September, combined with more turbulent trading. In particular, expect to see a retest of the recent lows, which could prove to be the acid test for global stocks. In such an emotionally fraught environment, the only sensible thing to do is to keep calm. Those that were over-invested in the market face difficult choices about whether or not to cut positions, but for those who sensibly took profit and moved into cash the challenge will be to identify whether or not this is indeed just a pullback and if there is a

FTSE100 5 year chart. SOURCE:

Part of the problem of the FTSE100’s ungainly advance into record territory was that it took so long. Along the way there wasn’t a decent pullback for the smart money to take advantage of and pile into. However, the latest drop could offer investors just such an opening, so long as the current situation doesn’t turn into a rout. But, what chance is there of a full-scale panic and crash? A rational examination of macro conditions

UK Investor Magazine — 20 — September 2015

identifies clear risks, but most of these have been around in one form or other since the Financial Crisis erupted, just over seven years ago. At some point there will have to be a reckoning, but it is unclear whether or not we have reached that stage just yet. Starting first with fears of China imploding, the obvious risk is the threat of contagion. The collapse in Chinese stocks could prove to be a profound event in that country’s development. If press reports are to be believed, large swathes of Chinese retail investors have been wiped out by the dramatic collapse in domestic share prices. There are indications that many of these people (which in China could mean millions) were severely over-leveraged, having borrowed too much to trade on margin. Widespread and sudden wealth loss among populations has often historically been a catalyst for social upheaval and change. Whether this will happen in centrally controlled China remains to be seen, but dramatic official interventions by Chinese policy makers are an indicator of a growing panic. However, thanks to the reporting restrictions imposed by the Chinese Communist Party, it is nigh on impossible to have much faith in anything we are told about what is happening in that country. It is far better for us to assess more reliable data sets, which might offer some insight into the state of global growth. In last month’s magazine I wrote about the Baltic Dry remaining mired in the doldrums. Apart from a brief spurt in activity at the start of 2014, the world’s shipping lanes have been heavily underused since late 2011. Yet this hasn’t stopped global equity markets surging. The point here is that since the introduction of Quantitative Easing, there has been a clear disconnect between genuine economic performance and share price appreciation. Whether world stocks require Chinese growth for sustenance is highly doubtful, in the distorted financial system we’ve become accustomed to. This has been true in American, European (including British) and Japanese markets, which brings us to the next macro condition to consider; central bank actions. In addition to fears about China, the neverending Greek saga has hit European stock markets. In the latest twist of this sorry tail, former Prime Minister Alexi Tsipras suddenly quit on 20 August and declared a snap general election, scheduled for 20 September. Greek voters now have a clear choice to make whether or not to accept the terms of the latest bailout or to quit the eurozone. As of writing, no official opinion polls have yet been released, but judging by the resounding “No” vote in the recent bailout referendum there is every possibility that the Greeks could decide they’ve

had enough of forlornly trying to remain part of the great euro experiment. Whichever way Greece jumps, in its current travails the market appears to have forgotten that the European Central Bank (ECB) has opened its monetary floodgates. Before the Greek Far Left started playing policy chicken, the German DAX30 surged just over 28% in the three months following commencement of the ECB’s intervention at the start of the year. As a result of the global sell-off, the DAX30 has since given up nearly all of these gains. Unless the direct correlation between Quantitative Easing and surging stock markets has now broken, there is no reason that European stocks (Germany’s in particular), won’t resume their march higher, once the current obstacles have been overcome. The same goes for Japanese stocks, with the Bank of Japan’s Quantitative Easing programme continuing to roar ahead on all cylinders. Although the Nikkei225’s decline wasn’t as dramatic as the DAX30’s, it still shed 12% since the middle of August. It is true that Japan has more direct exposure to Chinese economic weakness, but the comparative strength this market has shown, suggests both that the QE/stock price relationship remains as strong as ever and that fears of a contagious Chinese meltdown are somewhat overblown. This leaves the USA and the Federal Reserve (the Fed) to consider. Under Janet Yellen’s stewardship, the Fed has been scaling back its Quantitative Easing measures since 2014. Market expectation was for an interest rate increase, possibly as soon as September. Recent developments could have spiked this plan. As much as the Fed claims to be data driven it must also be equally forecast driven. Renowned Fed-watcher Jon Hilsenrath made this point recently in his regular Wall Street Journal column and this is a sign that perhaps US policy makers are changing their stance towards nearterm “policy normalisation”. If it turns out that dovish tendencies are back in the ascendency at the Fed, global investors could well seize on this as encouragement to start buying again, leading to a rising tide once more. The Federal Open Market Committee is scheduled to meet on 16 & 17 September. The accompanying statement will no doubt be keenly anticipated. Quite what state equity markets will be in by this point is impossible to predict, but previous stock market pullbacks suggest there will be at least four weeks of skittish, volatile trading. With a number of key scheduled events due to happen over the course of September, together with the likelihood of some unexpected actions to calm global markets, watch carefully for any sign of genuine recovery. If stocks do retest their recent lows and find their footing, this could be a sign that the bull market remains intact.

UK Investor Magazine — 21 — September 2015

company of the month

Vislink (VLK)

Growth potential v. boardroom greed

By Steve Moore


n the first issue of this magazine automation software and wireless communications products and services-focused Vislink plc (AIM: VLK) featured having been, at a 38.5p offer price, one of my three picks for 2015. Despite a re-rating to 56p, I concluded that the rating and dividend yield looked to remain quite attractive and that there looked to still be upside potential to come. However, subsequently… On 1st July the company released an RNS entitled “Grant of Executive Directors’ Awards”. This informed that the company has adopted a three year from ‘2015 Value Creation Plan’ which would see Executive Chairman John Hawkins, Financial Director Ian Davies and a senior manager (Simon Derry) awarded shares in aggregate totalling 15.38% of a market capitalisation above £85 million (adjusted for placings/share buybacks etc, £85 million being just over 20% more than the closing market cap on 30th June 2015). This was with the company’s Remuneration Committee having apparently decided that “to build on the progress… there is a need for the implementation of a new long term incentive policy” and it, having consulted with its nominated adviser, N+1 Singer, considering that the terms “are fair and reasonable insofar as the company’s shareholders are concerned”. The shareholders though seem to disagree – a shareholder action campaign poll currently showing no votes for the scheme and 4,308,750 (more than 3.5% of the total voting rights) against, with comments including; “The directors are already paid very handsomely for performance and frankly their pay is far too high for merely hitting the hurdle rates mentioned let alone to take 15.4% of the company on top!! They also have the disrespectful attitude to do this immediately after an AGM... why not show your hand to the owners and shareholders rather than grasping what you can without asking and letting us vote on whether it is fair and reasonable? The chairman of the RemCom should resign IMO and if this does go to a vote he may have to!”

Executive Chairman John Hawkins “Directors are already very well paid for the job they do and the size of company. The implication of these type of awards is that they really don’t need to try very hard unless there’s totally disproportionate and unreasonable bonus for what is nothing more than doing a normal job. If they feel unable to do a top quality job with their already high pay, they should be replaced by people who can perform well without such ridiculous levels of incentive.” “The scheme is a disgrace, almost dishonest, incentivising the manipulation of the share price over the short term at the potential long term expense of the company. The incentive at the end of three years is to boost profits by cutting back on investment, marketing and sales to maximise the appearance of growth.” Tom Winnifrith and I responded along the same lines and downgraded our stance to bank gains and sell at 55p. However, we noted that on known fundamentals there still looks decent upside potential and those content still to hold on this basis should certainly consider supporting the shareholder action campaign at http://www.

UK Investor Magazine — 22 — September 2015

Zak Mir interviews Justin Lewis of Armadale Capital By Zak Mir Zak Mir: Let us start off with your view of the mining sector as a whole. Obviously we have heard a lot of contradictory and indeed, contrarian views over recent years. But what is your view of the situation in the summer of 2015? Justin Lewis: Well I think selfevidently it’s a pretty tough time at the moment for the resources sector as a whole, and obviously commodity prices generally are right down from where they have been. So, hopefully we’re at the bottom of the cycle, but I guess we’ve all been saying that for a bit of time now.

very robust project; even at current prices and lower. And we think in the Mpokoto project, which is one we’re developing, is one where we have found this. ZM: So it is about taking situations on a case by case basis, and looking at things in a cool headed and cold hearted way? This is rather than assuming any cyclical upturn to help your project?

JL: Well I think if you’re relying on a cyclical upturn to make your project viable, you’re very unlikely to see it financed in the current market. I think that’s the simple thing. Now ZM: Is there any particular way of that is what creates the cycles isn’t knowing, from your experience, whether it? Because everyone stops exploring we really are or not at the bottom of the and stops developing projects and cycle? For instance, from the way the then what happens is there becomes cost of production has gone above the a shortage of various commodities. market price? Are there any tell-tale Zak Mir So then all of a sudden the price starts signs: capitulation, sentiment, aspects shooting up and the people start, you know, you like that? get this massive overshoot and that’s who the cycle JL: I wouldn’t profess to know them to be honest. keeps on going. Sure enough we’re seeing it all I’m sure there are, or I’m sure there are all sorts of over again. people who have all sorts of theories about them. One I hear people talking about is additional M & ZM: Let us go on from the general view to Armadale A activity. I think there is a really important aspect Capital itself. Natural resources in Africa, why Africa, as in these things particularly when you’re looking opposed to any other geographic location? at developing projects, and particularly when you are in a fairly low level of commodity prices. The JL: I think there’s a huge opportunity in Africa. critical thing is to have projects where you can It’s obviously less explored than many other more produce whatever the commodity is at well below established areas. For instance, I live in Australia which has a lot of resources but probably less the current price. opportunity to go and find them. So there are So if you think that the current commodity price more opportunities to find things in Africa. That is at a level where you can make a reasonable profit doesn’t mean it’s necessarily much better to be even when commodity prices are right down low, there than anywhere else. Africa is a place where then that is the one to go for. I guess the mistake there’s opportunity, and I guess that’s where as a that people have historically fallen into is looking company we have experience operating. at developing projects on the assumption of historically high commodity prices. So one of the ZM: In terms of the risks of being in Africa – politic risk, things we’ve tried to do at Armadale is look for or Ebola risk, things like that, is this something which really low cash-cost opportunities - that was what you can get away from? we originally set out to do - and look for projects JL: I think there are self-evidently risks in operating where we can produce the commodity well within in emerging economies. I don’t think they’re the current price. Then it can be described as a UK Investor Magazine — 23 — September 2015

necessarily a lot worse in Africa. I think there is political risk really in operating in any economy now as we’ve seen, as governments do change tax legislation. Actually if you look at the history of Africa, certainly in the last ten years or so, or even longer than that, the political risk is not significant to a lot of these projects. It is possible to build quite big projects, and you know, be able to work with local governments and local authorities and stuff like that.

So when you compare that with our current market cap of about £3 million, I think it is, so there’s quite significant upside to that. ZM: One of the key points I have noted in terms of the people I have interviewed over the years in the mining sector is that it really does seem to make a big difference in terms of the experience that the management have. With some companies you really cannot gauge those on the board, whereas with other it is clear there are wise old heads who have plenty of experience in turning £1 million or £2 million companies into £50 million or of course much, much more. What is the experience of the management at Armadale Capital?

Although obvious mines anywhere have to ensure that they maintain their social conscience. In terms of other things like, I guess you talk about Ebola it’s not an issue where we are. But you have adapt for some of the places you Justin Lewis JL: The board has fairly are, and often a lot of these broad experience, even projects are located in fairly remote locations, and though there is only three of us. Peter Marks is the one has to adapt to cover that. Chairman and comes very much from a financial ZM: In terms of the projects you have, what would you background, but has a lot of experience of working say are the ones that investors should focus on most, and with small quoted companies. Myself, I come from what are the most exciting going to be over the next more of a financial background, although I’ve spent a lot of the last ten years focused on the mining couple of years. sector and funding mines. I also have experience of JL: Well I think very much our focus at the moment running a mining group within Africa, which had is the Mpokoto Gold Project which is based down a project in Mozambique. And then Andrew Tunks in the south-west corner of the Congo. That is a is the other director, who’s a very experienced gold project that currently has a resource of about geologist who has run companies and projects in 670,000 - 680,000 ounces, which we’re just in the Africa, in South America, and in fact recently sold final stages of financing, with a view to constructing a company called Auroch Minerals or the projects over the next six to nine months and bringing in to for a company called Auroch Minerals out in Africa production by the middle of next year. So that’s which was really successful. something that is real near-term cash flow and On the ground we have a very experienced significant upside. management team in the Congo, people who have ZM: You had a placing in August. Does that now make operated out there and live out there. I think we you secure in terms of driving your projects and overall have demonstrated that by the progress we have business forward? made over the last 18 months or so since acquiring JL: Yes, it puts us in a strong position in terms of our the project. balance sheet and allows us to keep momentum up on the ground, which is the reason for doing the funding. We previously, in July, entered into a fairly detailed heads of terms to finance the project, which will bring approximately $20 million worth of debt to actually fund the construction of that. We are in the final stages of putting together definitive documentation on that and looking as we’ve said, by the end of this quarter, to finalise that funding agreement so construction can commence. In additional to that we also have approximately £1 million worth of quoted equities, and in particular an investment in a South African listed company called Mine Restoration Investments, which we’ll also look to realise over time.

ZM: In terms of what you might do over the next year or two: in the present environment there are obviously going to be some distressed sellers out there, as well as value situations. Are you prepared to put to your hand in your pocket and go for these possible opportunities? JL: Well I think you know our focus very much in the short term is the Mpokoto gold project. So ensuring that that is funded, developed and gets constructed. Once we have done that, certainly we remain opportunistic. We will look at other opportunities, but we’re not going to lose focus of our sort of short-term objective: getting Mpokoto up into production and getting value for it.

UK Investor Magazine — 24 — September 2015

the house view

Is it time to nibble at gold stocks? Why are gold stocks so totally unloved? We suspect that the excesses, the frauds, the executive greed of the last bull market have yet to be forgiven by investors. And we suspect that with most gold stocks having taken the caning of the century only the very brave will be buying now. In fact it seems as if no-one is buying.


ndeed folks are still selling. The bear market has continues to see the forced closure of specialist funds when then forces fire-sales of shares which gives the bear market another leg. It is a vicious circle. Even among our staff, those whose Austrian economicsbased approach would make them natural bulls of gold, refuse to tip or buy gold stocks. They are just terrified. Among investment analysts there is an equal reluctance. Why advise buying a gold share? No-one will be interested. Your research will be ignored. Unless that it is the bear market continues in which case you will be reminded of your failure.

more downside are you? And when the gold price turns you could be seeing some violent gains. It is a when, not an if. All metals are cyclical and gold is like any other metal in that regard. But you may have to wait a while. What could spark a rally in gold? Typically it is fear. When one of the four horseman of the financial apocalypse rises into town: war, a mammoth terror attack, a stock market implosion or economic collapse in a major economy. We suggest that ISIL, China, the clear overvaluation of Western and Oriental stock markets in fundamental terms and the fact that the world is drowning in debt, mean that the horseman could saddle up at any time.

But surely with many gold mines now producing at close to a loss or even at a loss the gold price simply cannot go that much lower. If you are invested in a company that is solvent and has real assets you are not going to see that much

Or they could wait a while. After three terrible years for the sector it is all too easy to remain on the side-lines but the argument for having a nibble or at least some exposure, does seem to have its attractions.

UK Investor Magazine — 25 — September 2015

UK Investor Magazine — 26 — September 2015

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