There are a handful of ASX small caps exposed to Brexit, some domiciled in the UK and Ireland while others are Australia domiciled but dual listed in London.

Prime Minister Boris Johnson has promised Brexit will happen by October 31 even if no deal has been reached.

As the deadline looms it seems less and less likely that a deal will be reached.

In fact, as Scotiabank chief forex strategist Shaun Osborne told clients earlier this week, it’s not clear Johnson is even trying to make a deal or if he is that there’d be time to implement it.

‘The government has shown itself to be adept at keeping no-deal on the table — ostensibly as a bargaining tool — but the unwillingness or inability to advance the process makes this look more like a base case position,” he said.

 

ASX small caps

Stockhead last looked at Brexit affected small caps six months ago. All but one of these was Britain-domiciled, with the odd one out being Ireland-based Oneview Healthcare (ASX:ONE).

Since then it has been joined by fellow Irish stock Fineos (ASX:FCL) which was the largest foreign tech listing in ASX history. It has gained 24 per cent since listing, although on average stocks have lost 8 per cent in the last six months.

The biggest gainer is communications stock Etherstack (ASX:ESK), which has won government contracts in the US and Australia.

Code Name Price Market Cap 6 Month % Return
ADT ADRIATIC METALS PLC-CDI 0.91 $141.4M 5
JHL JAYEX HEALTHCARE LTD 0.029 $5.2M -12
ESK ETHERSTACK PLC-CDI 0.29 $32.4M 7
NZC NZURI COPPER LTD 0.295 $87.3M -6
UNV UNIVERSAL COAL PLC - CDI 0.275 $143.7M -12
SMN STRUCTURAL MONITORING-CDI 0.845 $97.8M -4
KP2 KORE POTASH PLC - CDI 0.023 $19.8M -52
ONE ONEVIEW HEALTHCARE PLC-CDI 0.28 $46.8M -27
RRS RANGE RESOURCES LTD 0.001 Suspended 0
FCL FINEOS CORP HOLDINGS PLC-CDI 3.09 $830.2M 24

But stocks that are dual listed in London have been feeling the pinch. The average loss of these stocks on the ASX is 20 per cent, while in London it is 13 per cent.

Even stocks that have gained on the ASX, such as Salt Lake Potash (ASX:SO4) (up 43 per cent on the ASX), have seen falls in the Old Dart (specifically 24 per cent in this company’s case).

Code Name Price (I) Market Cap (ASX) 6 Month ASX return % 6 Month London Return %
SO4 SALT LAKE POTASH LTD 0.855 $217.6M 43 -24
DNK DANAKALI LTD 0.655 $173.8M -14 23
MCM MC MINING LTD 0.515 $72.6M -46 -1
MOD MOD RESOURCES LTD 0.425 $142.9M 31 -19
PDZ PRAIRIE MINING LTD 0.3 $63.7M -19 -41
BKY BERKELEY ENERGIA LTD 0.245 $63.3M -46 -6
BSE BASE RESOURCES LTD 0.235 $274.2M -19 -17
EMN EURO MANGANESE INC-CDI 0.155 $27.1M -42 12
TOU TLOU ENERGY LTD 0.091 $43.2M -1 -56
KP2 KORE POTASH PLC - CDI 0.023 $19.8M -52 -12
GBP GLOBAL PETROLEUM LTD 0.021 $4.3M -30 -33
88E 88 ENERGY LTD 0.013 $88.6M 0 -21
THR THOR MINING PLC-CDI 0.012 $9.9M -45 -31
RMP RED EMPEROR RESOURCES NL 0.01 $5.3M -23 -29
AEE AURA ENERGY LTD 0.008 $11.4M -31 -18
OEX OILEX LTD 0.004 $11.5M -20

 

Navigating ‘unchartered waters’

According to Rabobank’s Stefan Koopman an early election would likely cause another hung parliament, with the UK and EU too far off for a deal to be reached in a few weeks, and another extension would not solve anything.

Koopman, however, believes a special arrangement with Northern Ireland, leaving it in the single market and customs union, was feasible.

In fact, it was one of the few options that delivered Brexit but would have minimal change on the Irish border.

Johnson has shown a willingness to create an ‘all-Ireland agri-food’ zone in which it could follow EU laws with respect to agriculture only.

Nevertheless, a concern is that Northern Ireland would likely be more closely aligned with the Republic of Ireland than the rest of the UK.

“The country is in unchartered waters,” Koopman said.

“There is no script and nobody knows where the show is going. Brexit is a huge clash between reality and deception with no easy ways out.

“Johnson doesn’t have the numbers and looks to be just as stuck as [Theresa] May unless he manages to extract some significant concessions from the EU in the next few weeks.”

Read More:

16 ASX mining small caps are dual listed in London. And analysts are noticing. 

‘Country of risk’: Here’s how ASX stocks exposed to Brexit are dealing with the chaos