Why Bacanora Minerals Ltd & Creston plc Are Flying High Today

Bacanora Minerals Ltd (LON:BCN) and Creston plc (LON:CRE) could offer a decent entry point right now, argues Alessandro Pasetti.

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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.

Bacanora Minerals (LSE: BCN) is up 16% today at the time of writing, and it doesn’t look like its rally is going to end any time soon. Elsewhere,  Creston (LSE: CRE) whose stock was up 4% in early trade — also drew my attention today. Here’s why. 

Bacanora Minerals

The board of Bacanora has noted the sharp increase in the company’s share price during trading in Canada last night,” Bacanora said todayThe board is not aware of any reason for the price movement (and) will continue to work towards delivering value for all shareholders.

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Its shares rose 46% to CAD2.05 yesterday on the other side of the Atlantic, and the rally continued today in London. 

Canada-based Bacanora, a lithium and borates development company focused on Mexico, released on Friday an update on its upcoming milestones, which relate to “its on-going transition from an exploration to a mine development company”.

On the face of it, the statement didn’t seem to add much to the investment case, but could the imbalance between supply and demand in lithium be behind the rally? 

Or should Tesla‘s development plan be praised? 

If you are keen to invest in Bacanora, I suggest you read this, while also considering that Molycorp, a flagship US-based rare earths miner, is reportedly about to go belly-up

Creston 

Creston, a marketing firm with a market cap of £75m, announced a strategic investment and unaudited full-year results today. The deal, according to which Creston will take a 27% stake in 18 Feet & Rising, gives the buyer access to such clients such as Allianz, Cuprinol, Kopparberg, Nando’s, and House of Fraser.

Creston said that “50% per cent of the £1 million cash payment for the shareholding will be invested in the business to help accelerate its future growth,” which valued the target’s equity at £3.7m, or about 1.4x the value of 18 Feet & Rising’s trailing revenue, which stood at £2.7m at the end of 2014. 

Creston’s unaudited full-year results for the year ended 31 March 2015 show that like-for-like revenues rose 2% to £76.6m, a growth rate in line with that of its core operating income. The group proposed a full-year dividend of 4.20p per share (2014: 3.90p per share), for a dividend yield in the region of 3%, while reporting a net cash position of £8.3m (2014: £7.5m). 

Digital and online revenue up 7 per cent in absolute terms representing 55 per cent (2014: 53 per cent) of group revenue,” Creston noted, adding that it spent £1.8m buying back its own stock at an average price of 111p per share.

Based on its forward trading multiples, its shares do not look expensive right now, although Creston has to work hard to become a more profitable entity at operating level, in my view. Creston trades at 132p, and is flat year to date, but has risen 14% since early February and 40% over the last two years. 

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