Why Are Penny Stocks Pantheon Resources Plc, MXC Capital Ltd & Seeing Machines Limited On A Roll?

Pantheon Resources Plc (LON:PANR), MXC Capital Ltd (LSE:MXCP) and Seeing Machines Limited (LON:SEE) are under the spotlight.

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Pantheon Resources (LSE: PANR) was up as much as 5% at one point today, and has risen around 40% so far this year — its rally seems unstoppable.

Elsewhere, Seeing Machines (LSE: SEE) is up 10%, following an announcement that it’s received its first order for its new fleet product. 

Here I investigate whether it would make any sense to buy either stock, while taking into account the possibility of investing in another tiny company, MXC Capital (LSE:MXCP), which is up close to 4% so far today, and has already doubled in value this year.

Pantheon (Market Cap £39m)

Oil and gas explorer Pantheon is one of the most discussed companies in many share forums — but for no apparent reason. Based on its trailing financials, it did not generate any revenues between 2012 and 2014, while its cash-burn rate from operations is about £20,000 a day, according to my calculations. 

As far as the top-line is concerned, things won’t be any different for a couple of years at least, I’d argue. If anything, Pantheon may need more capital for heavy investment. Trading volumes have risen significantly since the end of 2014, and have supported the rise in its share price , which is at least encouraging. 

Pantheon has a 50% working interest in several projects within Tyler and Polk, in East Texas — and management is now engaged in a marketing push. “Jay Cheatham, CEO, will be making a series of presentations to investment analysts, media and institutional investors during the course of the upcoming week,” the group noted on Monday.

MXC Capital (Market Cap £69m)

An investment and advisory firm, its share price in the year-to-date has risen over 100%.

Trading volumes are thin (1.5 million shares are traded), and the shares change hands at 3.5p, or 26.3% below their 52-week high of 4.75p as of 11 May. The good news is that MXC raised gross proceeds of £12m from a placing in early May. 

It’s fair to say that MXC is a name to keep on the radar, but I doubt I’d invest in it until the company reports meaningful updates about its financial performance. The way it looks now, it could well be a money pit — it generated no revenue between 2013 and 2014, while its cash-burn rate from operations is at least £1m a year, based on trailing financials.

Seeing Machines (Market Cap £42m)

At 4.65p a share, where Seeing Machines currently trades, its value has halved since the shares climbed to a record high of about 9.1p in January 2014. 

Today’s announcement is not a game-changer, but it allowed some investors to take profit. As opposed to Pantheon and MXC, Seeing Machines generates revenues (AUD11m and AUD17m in 2013 and 2014, respectively), but it’s at that stage of maturity where it has to reach a critical mass to be profitable at operating level. 

As it grows, it cash-burn rate will continue to rise for some time, which points to dilution risk, so I’d keep an eye on break-even projections. One element I certainly like is that on several projects it has teamed up with top-tier players in the aerospace and mining sectors.

In a news release this morning, Seeing Machines reported that it is 

“currently engaged in a successful research collaboration with Boeing Research & Technology – Australia (BR&T-A), providing the eye tracking technology that monitors and measures a pilot’s situational awareness.  The jointly developed solution was recently installed in a Boeing Flight Services 737 Flight Simulator at the Brisbane International Airport

adding that it continues to work with Caterpillar through the agreed phases of their global alliance agreement.

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.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Editorial note: A comment regarding investors who bought shares in  MX Capital  3 years ago has been removed  in light of the fact that MX Capital came into existence in August 2014, as the result of a reverse takeover.

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