Articles and More!: SMALL CAP MOVERS: Buoyant technology sector gears up for takeover battles

SMALL CAP MOVERS: Buoyant technology sector gears up for takeover battles
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By Jamie Ashcroft, Proactive Investors

PUBLISHED: 09:14 EST, 16 November 2013 | UPDATED: 09:14 EST, 16 November 2013

Investors in small cap technology companies can look forward to a new wave of consolidation driven activity, as takeover speculation adds to what has already been a buoyant year for the sector.

Perhaps unsurprisingly, given the volatility in commodity markets, small cap technology shares have generally outperformed their natural resource harvesting peers on AIM.

Throw into the mix a rejuvenated appetite for new technology listings and share sales and it is clear that technology firms big and small are enjoying a renaissance.

Buoyant year: Small cap technology shares have generally outperformed their natural resource harvesting peers on AIM

On AIM this week, the spotlight was on Belfast-based high-end imaging specialist Andor Technology, which met Oxford Instrument’s £160mln advance with an aloof response.

Andor says it is willing to negotiate takeover proposals, however, it described the publicising of an indicative 500p per share offer as ‘premature and unhelpful’.

The market reckons there’s still more to come and that other suitors may yet make a play for the company. Andor shares gained 25 per cent this week.

This could just be the first of many takeover battles, according to Steve Asfour, market maker at FinnCap Securities.

‘I’m surprised we haven’t seen more [deals in the sector] already,’ he said.

‘There are a lot of technology stocks that are trading at big discounts to where we feel they should be. The technology and bio-pharma sector has been very buoyant recently. I’d be very shocked if there is not more activity.’

“Some of these [larger] companies that are sitting on piles of cash – they’re either going to have to use it or give it back to shareholders. So, I would imagine they’ll be trying to use the war chest now.”

The week’s other technology winners included eye-tracking specialist Seeing Machines, which won another safety system deal for mining trucks.

Drug developer GW Pharmaceuticals moved about 20 per cent higher, whilst telecoms innovator Tangent Communications climbed strongly as well.

Standing at 3,666 the FTSE AIM 100 only managed a marginal rise this week, though trading volumes do remain healthy.

In particular, oil and gas junior San Leon has been a busy stock. One trader reckons most of the stock’s recent sellers have now been mopped up and have been bought up by “safe hands”.

In the recent week’s the firm acquired new near-production assets in Turkey, to supplement its high impact exploration, though an accompanying share placing dampened the enthusiasm for some.

The expectation, now, is that a busy period with lots of newsflow will drive a meaningful rally in the share price.

The trader said: ‘It feels like the majority of the sellers are gone – I’ve taken most of them out!’

Ambitious Irish oil explorer Fastnet revealed a double helping of good news for its prospects in Morocco.

First it unveiled a new assessment of the Tendara Lakbir licence, onshore, near the Algerian border, which supports the belief that it could potentially resemble the giant tight gas fields that the neighbouring country is known for.

The crucial issue for this project, however, is recoverability. The company is confident its plan to deploy modern technologies will work. So much so, an ‘in house’ reckoning gives next year’s drill programme a 75 per cent chance of success.

On Thursday, Fastnet revealed its process to sell a portion of its 18.75 per cent stake in the Foum Assaka offshore project – alongside BP and Kosmos Energy – has moved into the final stages.

The bidding process has now ended, with one potential buyer now entering into an exclusivity agreement so that the finer points of the deal can be negotiated. The identity of the thus far un-named buyer, and the terms of the deal are likely to be revealed next month and the deal will be completed in early 2014 ahead a possible Q1 spud date.

Exploration is, of course, a risky business and investors in AIM quoted Wessex were reminded of this painful fact once again this week as a Shell-led drill campaign offshore French Guiana came to an unsuccessful end – all four wells failed to build on the 2011 success of the Zaedyus discovery well.

Having spurned a £71mln takeover from major exploration partner Total, last March, Wessex shares are worth just £3mln and there are doubts over the micro-caps ability to pay its share of any further work on the very large licence block.

A Chinese supply deal was the catalyst for Atlantic Coal shares. Through an agreement with CIC Brancepeth Coal it will supply at least 100,000 tonnes of anthracite coal a year from its mine in Pennsylvania.

Africa-focused gold explorer Alecto Minerals received a welcome surprise as its team of geologists returned to the Kossanto area of Mali to find a mini gold rush, which has sprung up a village of artisanal miners, had unearthed precisely the kind of high grade gold veins that the company was hoping to pursue in the new field season.

It gives the firm a great start and will help the targeting of holes for the next drill programme, which will get underway before the start of the year.

The tetchy story of Nyota Minerals continued this week as the company tries to close a deal to sell two-thirds of the 3mln ounce Tulu Kapi gold project in Ethiopia for £4.5mln.

First the government confirmed the formal extension of the exploration licence for the project, and, on Friday, shareholders voted against Centamin’s bid to oust chief executive Richard Chase.