Is the UKOG share price ridiculously low, or should you pile into this stock instead?

This emerging growth story could trump UK Oil & Gas Investments plc (LON: UKOG).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One-time Gatwick-gusher hopeful, UK Oil and Gas Investments (LSE: UKOG), has seen its share price plunge from a heady 9p or so in September down to today’s 1.62p. Investors’ hopes of striking oil in big commercial quantities onshore in Britain evaporated when the company became entangled with the difficulties of getting the stuff out of the ground.

One theory is as good as another

The recent full-year report is packed of optimistic and rallying language. But words are as effective as snake oil when it comes to overcoming operational difficulties, so I think it’s worth discounting them. I rather like the theory I heard that the larger oil companies all knew decades ago that the oil under the Weald Basin was too hard to access because of the geology, so they ignored it. That may or may not be true, but one theory is as good as another before the case is proven either way. It’s as good as the theory that UKOG will be a good investment because it will increase its assets by discovering commercially viable oil, for example.

During the past year, the company lost another £2.27m and raised gross proceeds of £7.46m — via the issue of equity — which it used to fund £8.72m of investments made into further exploration and evaluation. The story grinds on…

The share price is lower than it once was, but I think there’s massive potential for it to go much lower from here, so I’m avoiding the stock. I could be wrong, but upside risk is a risk, so I’m prepared to talk in favour of other investments.

One interesting situation exists in Sportech (LSE: SPO), former owner of the Football Pools, which delivered its full-year results today. After a busy year of restructuring, the company posted revenue from continuing operations up 2.3% to just over £66m and adjusted profit from continuing operations 114% higher than the previous year, at £1.5m.

A new focus and emerging growth

New chief executive Andrew Gaughan described 2017 as a year of “material change” for the firm and said 2018 is shaping up to be one of significant opportunity.”  He pointed to the positives of recurring revenue in the firm’s Racing and Digital business and additional sales opportunities and growth in the 50-50 business. He expects the firm to benefit from “a liberalisation of sports wagering in the US.”

Following the sale of the Football Pools business in June 2017, 80% of Sportech’s earnings are in US dollars and the firm has become a US-focused firm with UK-based directors resigning. We could be about to see a new growth phase emerge from the ashes of the old business. The firm is in good financial shape, with no debt and around £12m cash in the bank. There’s also a further €3.25m on the way following today’s announcement of the sale of the company’s business in the Netherlands.

Points of major change in a firm’s business, like we are seeing with Sportech today, can be opportune moments to consider the stock for investment. I think your research time could be well spent on this one.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »