Should You Buy Xcite Energy Limited, Jubilee Platinum PLC And AFC Energy plc Today?

Is It Time To Buy Small Caps Xcite Energy Limited (LON: XEL), Jubilee Platinum PLC (LON: JLP) and AFC Energy plc (LON: AFC)?

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Shares in Xcite Energy (LSE: XEL) spiked up on 4 March, prompting the company to tell us on the following Monday that it knew of no reason for the movement. Perhaps an end-of-week rumour about something or other was taken a bit too seriously? Whatever it was, it’s a good reminder that shares in smaller companies often gyrate rapidly even when not much is happening.

The shares are still up 34% from their 29 February low, at 16.1p, so are we looking at a recovery bargain now? There really are two sides to the answer. On the upside, Xcite does have some pretty impressive assets in the shape of its Bentley oil field in the North Sea, with estimated reserves uprated in the firm’s Q3 update.

But on the downside, Xcite has $139m in bonds due for repayment in June, but doesn’t have the cash to meet its obligations in full, and at Q3 time the company also told us it will need new financing before the bond maturity date — maybe there will need to be a new equity issue? This is not the kind of risk I like, so I wouldn’t buy right now.

Precious

Jubilee Platinum (LSE: JLP) shares have gained 125% in the past 12 months, to 3.4p, with news that the firm’s platinum processing plant at its Dilokong Mine is fully commissioned and has reached 85% of its design throughput. This, together with the firm’s other plants, should provide a processing capacity of more than 900,000 tons per year — with 2016 hopefully being a turnaround year that will propel Jubilee towards future profit.

Sufficient funding “from a major financial institution” has been secured to bring the platinum projects into operation, so there doesn’t seem to be any great risk on that front. It’s hard to put a value on Jubilee shares in the absence of any profit forecasts, and brokers recommendations are thin on the ground, but I’m cautiously optimistic.

And the price of platinum has been creeping up a little recently after a lengthy fall, which all helps — Jubilee Platinum could turn out nicely for shareholders.

Hydrogen power

AFC Energy (LSE: AFC) is another company that has yet to reach profitability, but it has hit a few important milestones of late and has an impressive plan in place for the development of its fuel cell technology through 2016.

There is one key fact that cannot be ignored, however, and that’s a 73% share price fall since July 2015 to 16p today. Investors don’t seem to be impressed, so what’s the problem? One thing that keeps cropping up with blue-sky technology companies is that expectations can run ahead of reality, and when a firm does not meet those inflated expectations there can be something of an exodus — and 2016’s progress could be seen by some as disappointingly slower than 2015’s.

But I can’t help feeling that there’s been something of an over-reaction and that the shares are too heavily sold. Again we don’t have brokers’ recommendations to help us, but AFC could be a risky bargain.

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.

Alan Oscroft 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.

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