VSA Capital Tech & Transitional Energy 100926

(upbeat music) And welcome to VSA Capital Tech and Transitional annual podcast on Thursday, 10th September. It's myself Andrew Munk and Phil Smith, a tech and technical, energy analyst. We've been away a lot for the summer. You've been away a lot of new, Phil. - Well, I'll take you by usual some old F2 weeks, but yes, I was away. I was away in Nova Scotia in Canada. - And you've been away too, Andrew. - Yeah. - Very nice. No, I've been away. I've been doing mining things in Namibia and all around Cornwall and that sort of thing. So anyway, we're back. Have we missed much in the summer? That's the question. Has the sector really changed? Are there any other different sort of big fundamental things that would have changed any of our views, do you think, Phil? I mean, I don't think an awful lot has really changed. I mean, the world is still completely upside down and crazy. We've got wars. We've got interest rates going up. We've got the oil price going up, gold going up, which makes it all very difficult. AI is still a big talk out there. Data center, still people are talking about that. I don't know, have you seen any big changes, Phil? - Not on the technology side. I mean, there's been some old recent news about AI and fears over AI and actually governing it. You know, will it destroy us all? But in terms of the markets, I'm doing, yeah, those general themes and of course government debt, I think has been holding a lot of focus over the summer. - I mean, it's interesting what you say about AI, because I do talk to clients a lot about it. And actually, my middle son is heavily involved in it. I don't understand what he does really. And he tells me things that I really, to be honest, you can't completely understand. But what I do know is that I know I use chat GPT. I think it's called Plus, so I pay about $21 a month. I think a lot of people would prefer in our industry, Claude, and pay whatever it is to get there, enhanced thing. My son actually pays pros. He's paying $89 a month and really does make it think hard. And he's got me actually now looking very much at, so we're on chat GPT five, even though they've actually launched chat GPT six, which he gets. But to look at either chat or work and in work, you can obviously set the level of thinking. So if you have high level thinking, it goes away and does a lot of a deeper search. It is amazing. I'm finding more and more. I spent a lot of my day now, not talking to people like yourself, Phil. But actually talking to chat GPT, it's extraordinary. Yesterday, I probably spent three or four hours on chat GPT asking it to do certain things for me in our industry, sort of M&A activity. And it's extraordinary what comes out. Now, it doesn't get it right all the time. And of course, it's the information you feed it that is so key. And you then need an analyst or a corporate financier to go through it and check it. And then Tinker with it a bit more and feed it back in again. So it doesn't destroy our industry. But it's certainly changing it. I mean, our industry was changed dramatically when the internet came in, because basically, that knocked out all the secondary, because people realised they could trade with each other and not pay a brokerage commission. And they also realised that information was pretty freely available out in the internet farmer impression that we've had before. But I think AI is going to change the primary part of interest as well. Not completely, it's still there, but it can't ignore it. I'm using it certainly more and more and more. But the money is still being pumped into it. And we're talking vast sums. I'm not talking about little sums. We're talking about basically trillions of dollars. And so that has to go somewhere. And so it's still a great growth area. If you've got companies involved with it, and the same as you said with robotics and autonomy, that is also still growing. I mean, in London now, you can get, I believe, an autonomous taxi. But you will have someone sitting in the passenger seat just to make sure it all works fine. But we are moving down that channel of robotics and autonomy. And certainly over the summer, I saw Chinese robots playing table tennis. Oh, yeah. Run and sprint running. I mean, you name it. They do everything now, don't they? Yeah. Well, you know, that may upset a few people. But anyway, but it is, it is all still happening, isn't it? Yes, yes, yes. The capital is still playing into the sector, but the advances are being made. And yeah, I mean, I use, I use Claude, I'm frockic. And it is amazing in trying to find information, do it really, really quickly. But you have to double check. But yeah, for sure, it's great. Yeah. And of course, it would be wrong to have a podcast and not mention our favorite autonomy company, but interesting enough, over the summer, if there was one stock that's maybe had a really good move over the summer, it is a rigo. It's just been ticking up beautifully. We've always, obviously, we do talk very positively about it. But if you look at the industry it's in, which is air-side autonomy, and all the things that are going on in that way, it is very well positioned. But I mean, the stock's basically gone from 70 piece, 120 piece now, it's gone straight through that 100 million market cap sort of barrier, which is good. And they are obviously doing a lot of very interesting things. We're here more at the end of this month, because they'll have some results. Hopefully they'll be good. And hopefully the price will keep going. Yeah, absolutely. You think? Well, I visited there this week. I mean, I went to their new operations up in Covertry. And they're on a fantastic site. It's located about two miles from where they were. It's far bigger. Space for them to build out for manufacturing. But also for the development work. But I was quite amazed that the managed to pick up a site was already previously being used for automotive technologies. And it was so well fitted out. So they've got a fantastic opportunity within that operation to get this business. Anyway, there we go. We talk about them a lot. And we've started-- We've come back from the summer and talking about them again. But hey, why not? It's our podcast. All right, moving on. Are there any other sort of big type stock themes that you wanted to catch up on Phil before we go through any-- Not yet. --to be done recently? I don't think-- no, not particularly. But clearly, AI is the continuing theme. Yeah. OK, so let's turn what sort of news have you got for us that could be out this week, Phil? Well, it's been very much interim to the June ending period, Andrew. And the first of those, I'm sticking with our AI. The AI focus on news flow. Computer center. Yeah, that was so good. Oh, weren't they just? I mean, the Ticcus CCC, this is a company that Andrew and I have mentioned many a time on the podcast previously. The shares are now up by 126% in the last 12 months. Marketcaps now 5.6 billion. But this company's been listed for a long, long time. So let's look at what's driving now. I mean, what computer center do is this is all about technology deployment. It's sourcing text, deploying text, managing technology for governments and for large corporations. And it's cross cloud and infrastructure services networking security. So naturally, with a build out in AI infrastructure, they are benefiting. And this came across very strongly in their interest rooms. And the line revenues up by 71.6%, so 6.8 billion pounds. Gross margin, they commented was down by 300 basis points to 9.6%. But we'll see what happened with operating profits. They rose by 86.5%. Given that strong growth in sales, 253 million. And that kicked through to earnings as well, dropped by over 90%. Now, what drove this was North America, clearly AI infrastructure build out. And they commented that operating profit in states doubled, and now accounts for 60% of the group profit. So with all of that going on, they've also had a strong start to the second half. What a battle of up of 9.3 billion. Up over 300% of God, you can see where those trillions of dollars I mean, that money Andrew talked about has been deployed. Raise their full year outlook as well. Expect to eat significantly ahead of prior market expectations, dividend up as well. So what is, as I say, what's not so long? It was very good and it really does demonstrate how this whole sort of AI boom filters down through the whole value change, shall we say. Because if you're going to start using AI dramatically, you're going to need all of the better laptops, better computers, better this. It all needs servicing. And these guys are right in it. And so it does filter down through the value chain. Yeah, I'm absolutely right. I'm filtering even further down the component level IQE. Market cap now is 629 million pounds. The shares are up fivefold. Now we've talked about IQE before. We've been listening for a long, long time. And also I've came in the city many years ago. They reported their interest. I mean, IQE makes compound semiconductor wafers. And of course, the wafers are sliced, diced, tested, and ultimately made into chips. But the semiconductors, the technology that they make, is used in the wireless transmission, but also in photonics. And they delivered just in terms of their interim revenues up by 43% to 64.6 million pounds. But importantly, the company moved into profit. But it's not a lot before tax, but that's reducing. It moved into profit, EBIT, dial level. But folks are looking for what's happening within the two core divisions. They're wireless revenue rose by 40% to 26 million pounds. But importantly, the photonic revenue-- and this is exposure to AI data centers, but also US military defense was up by 45% to 30% 8.5 million pounds, but looking at that share price run, it's not just growth and the business has behind it, but we caught it on this when it happened. For the company raised, 80.8 million pounds in May, and that included 30 million pounds of strategic equity investment from make-com technology. So this company is now very well backed for growth and its exposure in AI, they have just reaffirmed their guidance for growth in the four-year period. They've also been so interesting, Andrew, they're moving from aim to the main market of the LSE. Well, there's quite a few companies obviously doing that, and there's quite a few companies you know, getting taken over, and the number of stocks on aim is just shrinking by the day. It's so tough. I mean, I think they've obviously aim have recently implemented some changes to try and stop the drain. They have made a few good ones. The trading hole is a really good one. I think what makes placing is a lot easier in aim, but it probably needs a bit more of a radical shakeup than what they've actually done, but at least they're trying. We'll give them credit for that, should we film? Yeah, yeah, absolutely. I mean, whilst we're on AI, because it is important, there was also a fascinating chat with the CEO of ARM that came out, I think was last week, actually. And some of the comments he was making were fascinating. What do you say to actually, he said, you know, the thing that really caught my eye, he thinks that AI will be what finds a cure for cancer, because he said it can just think so fast and look at so many options and opportunities that in his view, that was the way it potentially gets solved, which I thought was a fascinating interview. I don't know if you saw it at all. I just saw the headline for it. No, not as true, but the medical applications for AI are phenomenal, because of the combinations and compounds that can look at how fast it can do things. Wow, but if it can achieve that, then that will be something really positive. Yeah, well, we'll see. Anyway, sorry, that was just back. I mean, AI is more than just data centers. I thought we should remember it. It is changing the whole way we look at things in general. We know, for instance, in mining, because that's another specialist area of ours, that AI is being used to identify where to drill. And that's sort of thing. So anyway, there you go. That's AI for you again. Right, keep going back to the companies. Right, defense. Clearly another theme for this year and years ahead. Concurrent technology is ticker CNC. Market cap is 2.26 million pounds. Now, those shares are up by 36% or last 12 months. Concurrents being listed again, listed for a good number of years, one we discussed on a podcast. What they do is they take advanced Intel processor technology and they build computers systems and they ruggedize them. And this is for applications in defense, aerospace, telecommunications, a really high performance computers, but also very rugged technology and quite clear if using defense, you know, exposed to heat vibration, electronic emissions, etc. So they ruggedize the tech. They had interim to six months and then June revenues up by 10% to 25.2 million pounds, profit for tax up by 19% to 3.2 million pounds. But you know, again, you know, defense, you're looking at forward all the books on what's happening there because products all the term. Their order intake was up by 110% to 46.9 million pounds. And they, you know, they said this was previously announced largest ever single contract worth 17 million from a European customer. So that's all progressing well. They moved into new HQ, I think. Also, they said the systems had division. This was an acquisition I did for aerospace in 23, has delivered for different profitability as well. That cash is increasing despite investment into the business. And the board is quite confident with seating for year 26 market expectations. So there you go. That's concurrent technologies. I mean, it was just on defense. I mean, obviously a lot of the defense stocks have already performed remarkably well, but the one thing about defense is that you know it's for a bit of a growth space because more and more countries can have spend more and more money on defense. So you know, it's got growth there. I said as well, you also know that when you're dealing with governments and the MOD, they tend to just throw away money to a certain extent and not worry too much about what they're paying. And so there's great profitability opportunities for companies that get involved in it. I think the way I would be looking at defense to a certain extent now, there's some of the defense stocks have performed incredibly well. You can hold on to them, but it's maybe which new companies who have certain skill sets that they can then adapt to actually pick up on the defense bandwagon. We sort of need to be looking at some of those to to get them before they perform, maybe nothing springs to mind. I mean, it's just my thinking is, do I want to go and buy a stock that's already up fivefold like a Rolls-Royce side because it's defense? Or do I try and find something which actually today isn't necessarily in defense, but tomorrow it will be? Well, that's a very good idea. I mean, we always, yeah, for technologies that can be adapted to do, you know, other things are getting to growth markets. Maybe a guy might think about that one feeling. Yeah, come back to some answers. Anyway, how's I keep saying? Back to stocks. Back to stocks. Right, moving on to outside of AI and defense, transport information systems. This is a journey. I would think it was JNEO, 98 million market cap shares up by 11% this year. You, you know, take the train, see the advanced passenger display systems showing information. They manufacture developed display systems, but also software that's behind them working with the rail operators. They have solutions for critical national infrastructure protection, but also services that design deliver solutions for transport markets, including CCTV, video surveillance on buses, et cetera. Anyway, the first art performance, they said, quote, revenues up by 53% to 36.6 million, and the gross profit up by 57% to 14.5 million. So really, really strong growth, but no, this is organic growth and contribution, quote, mathematicians. And I was just looking at this. And it said that the, yeah, they acquired inf protection in the infrastructure protection segment, nearly quite comfortable, they contributed 10.6 million pounds to the overall revenue growth of 13.1 million pounds, but still strong organic growth up behind that underlying profits up by 10% to 3 million pounds. Anything else in there? Expect to be relying on market expectations ahead. Midterm expectations where revenue is 150 million pounds on where they are today at 37.6, a lot of people will be like, both in M&A. There we go. That was journey, oh. And then to a much smaller company, I want to talk about for it, is a zero zero technology. Yeah, washing machine technology, 9.6 million market cap. So it's a very small company, but they are developing. What's more interesting here is in terms of technology that saves on signal water use, on chemical use, in processes, and completely washing, which is huge, use of water worldwide. They were reporting revenue for their first half. This is early stage technologies, revenue is 0.1 million pounds. And the need bit dial lots of 1.6 million pounds. So clearly, still developing technology, but quite importantly, I thought from this one, was how it's developing in the market space, and building its customer base. Now it's the larger care technology, which you call X-Obs, or is it going to the washing machine. In that, they really got an advanced agreement on the world's largest washing machine, brands, and ongoing technical verification by to the top 10 manufacturers. So they're making technical progress with that, but they did point, and this hit the share price a bit, that projects, some of the projects have slipped because of wider quote, applies industry headwinds, professional lower cost Asia competitors. Well, to take advantage of that competition, they've also launched a own design machine using their technology, and they'll offer that design to emerging customers in Asia. So hopefully, speeding into the, you know, speeding the product and technology into market. The microfilters for plastics, that's making progress, they've launched the product in Germany, and they've done in finishing markets, you know, huge global clothing product that they partnered with a Turkish manufacturer, and they widen their geographical presence. So despite the setback in some of the core, you know, projects, particular washing machines, clearly making progress in a lot of other areas, and the developing new strategy in the washing machines. So that will help. There we go. I mean, it's one we've looked at for a long time. It was came out of IP group event, the region. Yeah, that's right. And of course, there was a high flower. I think at one stage, had a market cap of over 300 million pounds, and it's obviously just, it's really had a history of struggling to really get momentum. They've changed management. They've changed the way they're looking at things now. I've got to say, it's always difficult, you know, it's catching a falling knife, isn't it? But you can't feel actually, it's got through this far. It's managed to keep going. And if it does turn, it could have really quite a bit. bands. It's probably a bit more work to be done, but it does start to look pretty interesting, doesn't it? Yes, I think so. So we'll keep a close eye on that film. We will, we will indeed. Dialite ticket is DIA, market cap 234 million pounds, one we've discussed before, the shares are up by 157 percent. Dialite, okay, it's awful about patience with these things, isn't it, Andrew? You know, as you say, you've got changes of management since in strategy, but just, you know, keeping going with it, especially if you've got, you know, a degree of market penetration. But Dialite, this is LED lighting for heavy industrial applications. They also provide optimum electronic components. So this is a sort of LED lighting that is definitely not going into your house. This is going into, you know, great big sheds being the warehouses, operations, probably data centers to mention, but industrial applications. They reported, you know, they're previously reported that their order backlogs were growing. This was back in June and we recommitted on that. And in July, they were seeing sales growth that was, you know, exceeding their expectations, reduced the three to five percent growth and growth in the margins as well. And so they're saying that, look, this is all continuing. And that while there's a significant portion of financial years still to be delivered, the more now believes that the groups adjusted profit for tax for the financial year and in March 27 might be significantly ahead of its previous expectations. And, you know, and again, with this, it is often, well, it's, say, often, it's all, you know, it's about the management, isn't it? And this was, this company's been turned around by Steve Blair that came in from E2V that was previously listed. And he's turned around. So that's dial-ite. Gamma Communications, under one, well, Billy Market Cup now, they were reporting Entremes as communications that they provide sort of a cloud PVX services and high-speed data lines into companies. So they're reporting their Entremes. But I think with gamma, unfortunately, looks like this is another company that is leaving the market. And they had accepted the recommended cash offer from Ipiris for the entire share capital of gamma. And that was announced in the first of September. Yeah, there it is. Molten Ventures. Ticket is grow. Their shares are up by 87% in 12 months. Molten Ventures invest into investment in companies, but let's just talk about more about what they do do. They've announced the first closer to a new growth fund at 175 million pounds. And this has been called the Stone by the British Business Bank, which invests in a number of funds, as we know. And it says that Molten, so they invested British Business Bank 75 million, Molten contributed 100 million to that fund. And this is dedicated to a back, a high growth UK and European tech companies, as they scale from early growth to later stage rounds, certainly targeting space AI, in tech quantum, deep tech hardware. What's interesting about this firstly is that it is targeting those sectors. So it's not just purely into AI software in particular. So it's going into wider deep tech, but also what I thought was quite interesting about this so that they quote it. It's, you know, it's recognising the funding gap for scale-up technology businesses in the UK. And one of the big challenges we have in the UK is, whoops, we are. Very well funded from venture capital suspectif, and from a wider piece perspective, but there is this, there is again, sort of mid-stage scaling of businesses. And so they're looking to fulfill that gap. And in multi-ventures already got 700 million pounds invested across 40 growth stage deals over time. There we are. It's leading us probably ended. That was a show that we're doing it live. It wasn't me, it wasn't you, but there you go. I think that covers pretty much everything actually film. We've got on for quite a long time, so we'll give listeners a little bit of a break, but we are back to normal service now. We will be talking even though now in the mornings it's dark and sometimes we're not a pleasant cycle ride, but we're back. We're back in on to normal track. We'll be back next week, thanks. This podcast has been produced and edited by VSA Capital. It is intended for information purposes and not as investment advice. 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