As most of Britain focused on the surprise General Election result this morning, three popular small-cap stocks — IGas Energy (LSE: IGAS), Monitise (LSE: MONI) (NASDAQOTH: MONIF.US) and Sirius Minerals (LSE: SXX) — updated the market with new developments.
Was this simply a coincidence, or were any of these firms trying to hide bad news behind a cloud of election excitement?
IGas Energy
UK oil and gas producer IGas surged 10% higher this morning, after the firm issued a reassuring trading update and announced the departure of its highly-paid founder and chief executive, Andrew Austin.
In today’s update, IGas said that it had been cutting costs aggressively across the business, and would be making more than 25% of staff redundant.
As a result, the company’s operating costs and administrative expenses are expected to fall to around $39.40 per barrel of oil equivalent, which suggests to me that the firm should start to generate positive operating cash flow from its existing production.
IGas does still have a hefty pile of debt to deal with, which I estimate at around £100m, but the firm has just received a £30m payment from INEOS as part of March’s shale farm-out deal, which should mean that IGas can meet near-term commitments while it waits for oil market conditions to improve.
The INEOS deal also included £65m of carried exploration on IGas’s shale acreage, and this could provide attractive upside for investors over the next year. However, I suspect the shares will drift back to provide better buying opportunities before then.
Monitise
Mobile payment specialist Monitise announced a new product launch in Africa this morning, but, as usual, did not provide any financial details, making it unclear how much revenue or activity this is expected to add to the firm’s business.
In my view, investors face a dilemma — Monitise’s financial performance has been poor, but there’s clearly growing demand for the company’s services.
Monitise reported a cash balance of £129m at the end of 2014, which is expected to be enough to see it through to breakeven. I reckon it could be tight, though. The latest City forecasts suggest Monitise will report a post-tax loss of £70m for the current year, and of £30m next year.
Although the shares are trading at five-year lows, I believe the risk of a cash crunch makes Monitise quite a risky buy.
Sirius Minerals
Shares in potash miner Sirius have doubled from their low of 7p in March, as the firm has gained all but one of the planning approvals it needs to begin raising funds to build the York Potash mine.
However, the final approval needed for the mine is from the North York Moors National Park Authority (NYMNPA) — and the firm’s slipped back 3% today, after Sirius said that the NYMNPA planning committee would not meet to decide on Sirius’s application until 30 June.
In my view, an approval is likely — but I reckon this is already largely reflected in Sirius’s share price and £295m market cap. After all, Sirius is almost out of cash and has no other assets. Without planning approval, the potash resources will be worth little.
For now, I rate Sirius as a hold, but I wouldn’t buy anymore unless they fall back heavily over the next few weeks.
