Interactive Investor

Insider: big bets placed on these two strugglers

11th October 2021 08:55

Graeme Evans from interactive investor

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Things haven’t gone well for these two recently listed companies, but directors have invested heavily at what they think are bargain prices.  

Moonpig (LSE:MOON) chair Kate Swann and THG (LSE:THG) director Zillah Byng-Thorne have spent a combined £250,000 backing their companies to pull out of long share price losing streaks.

Their purchases appeared to deliver an injection of stock market confidence, with Moonpig shares up 9% since former WH Smith and SSP boss Swann bought her £200,000 worth of shares on Wednesday. Hut Group e-commerce business THG is also up 11% after Future chief executive Byng-Thorne picked up £50,000 worth of stock on the same day.

Both companies had been on their worst runs since February's listing at 350p for online greeting cards firm Moonpig and 500p for THG in September 2020.

About a third was wiped off THG's value after it fell for nine sessions in a row, culminating in a low point of 403p at the start of trading last Wednesday. Byng-Thorne, who has been on THG's board since 2018, bought her shares at 408p, while there was also a purchase by fellow non-executive director Iain McDonald for £105,000 at a higher price of 423p.

The stock had been at 800p in January, making it more valuable than Burberry and Sainsbury's, and looked well placed to head over the 1,000p threshold according to analysts at Liberum.

But sentiment has been shaken in recent weeks following interim results and the disclosure of plans to create a separate stock market listing for the beauty division, which features eight brands and a beauty box business with over 500,000 subscribers.

A capital markets event tomorrow will give founder and executive chairman Matt Moulding the opportunity to win over the City doubters, as he is due to give more details on the strategy for the company's all-important Ingenuity business.

Ingenuity powers the online operations of THG's brands and is also reducing digital complexity for partners including Nestle, PZ Cussons and Group L’Occitaine. THG recently added Japan's Softbank as a key investor, with the option to acquire a 20% stake in Ingenuity.

THG's share price tumble has also reflected the influence of short-sellers, as well as pressure on all London-listed ecommerce stocks since a warning by household electricals business AO World highlighted supply chain pressures such as the shortage of delivery drivers.

Moonpig

The Moonpig reversal saw its shares fall in the wake of its AGM update on 28 September, even though it raised revenues guidance for the 2022 financial year to between £270 million and £285 million. That represents growth of 65% on two years earlier, but a fall of 22% on the previous year when it benefited from a surge in online orders during pandemic lockdowns.

Davy analyst Dave Reynolds last week initiated the broker's coverage with a “neutral” recommendation and target price of 345p, arguing that the risk/reward profile did not appear compelling. He believes the forward price/earnings multiple of 39.2x “seems full” based on a consensus 2022 earnings per share of about 11.3p and 2020-23 growth rate of 27.5%.

Moonpig's shares fell to a low of 281p on Wednesday, prompting Swann's purchases in three separate tranches at prices close to 286p. She has led Moonpig's board since August 2019.

Moonpig shares closed the week at 311.2p, with THG at 452.8p after falling back 3% on Friday.

AFC Energy

AFC Energy (LSE:AFC), the hydrogen fuel cell technology company whose offices are next to the Top Gear test track at Dunsfold Aerodrome in Surrey, has seen buying of its AIM-quoted shares by new chairman Gary Bullard and recently-appointed chief technology officer David Harvey.

Their purchases worth £14,000 and £11,500 were made last week at prices of 46.3p and 45p respectively, which compares with more than 80p at the start of this year after they had rocketed from 18.5p last October.

AFC Energy was formed in 2006 through the acquisition of assets from Dutch energy Eneco and listed on AIM a year later when it raised proceeds of £2.4 million. It is one of a number of London-listed companies offering investors exposure to the potential of hydrogen to generate clean energy in support of the global low carbon transition.

The company's systems providing off-grid, zero emission power are already being deployed for rapid electric vehicle charging and the replacement of diesel generators. AFC is also working on the deployment of products for data centres and the rail industry.

It boosted its finances in April with an oversubscribed fundraising of £36 million that included strategic investment from technology group ABB and Dubai-based project developer Dutco. Other highlights this year have included delivering the primary power source for the charging of vehicles for Extreme E, the all-electric off-road race series.

WH Ireland analyst Brendan Long said the performances in the three races so far in Saudi Arabia, Senegal and Greenland demonstrated that AFC's systems have “the inherent qualities” to replace diesel generators with 100% emissions free hydrogen power. In his note last month, he reiterated a fair value estimate for the shares of 159p.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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