Today I am looking at the investment potential of four London laggards.
I suppose an extra share price slide over at Antofagasta (LSE: ANTO) comes as little surprise as copper prices keep on tanking. The bellwether metal — so-called because it is used as a barometer of the health of the wider global economy — came within a whisker of sinking to fresh six-year lows of $5,000 per tonne in September. Consequently the Chile-focussed business saw its stock descend an additional 18% during the course of the month.
And I expect further price weakness to materialise at Antofagasta due to a worsening market imbalance. Shrinking activity on China’s factory floors threatens to put the dampeners on demand growth, while the mining industry remains committed to cranking up its excavators and indulging in vast new projects. The City expects Antofagasta to suffer a 43% earnings dip in 2015, resulting in a ridiculously-high P/E ratio of 29 times. I believe the firm has plenty of room left to fall.
Like Antofagasta, payment play Monitise (LSE: MONI) had a month to forget in September and the share price clattered 53% lower in the period. And this comes as little surprise — latest results showed sales slide 6% during the period to June 2015, forcing post-tax losses to widen to £55.3m from £43.7m a year earlier.
Quite what the future holds for Monitise is anyone’s guess. The departure of chief executive Elizabeth Buse has led some to speculate that a takeover bid may be incoming, but I believe investors should be more concerned with the rate at which the firm is burning through cash, not to mention key partners like Visa jumping ship and blue-chip competitors upping the ante. With Monitise warning not to expect revenues growth any time soon, the City expects Monitise to rack up yet further losses in 2016. I reckon investors have little reason to invest at the current time.
I am not so bearish on building material specialist CRH’s (LSE: CRH) fortunes, however, and expect steady improvements in the North American and European construction sectors to underpin strong earnings expansion in the years ahead. The share shed some 9% of its value in September, but I believe this represents a fresh buying opportunity as the firm’s acquisition-led growth strategy should deliver mammoth returns.
Indeed, CRH announced last month it had completed its colossal €6.5bn purchase of Lafarge and Holcim’s cement divisions after finally hoovering up the Filipino assets of the newly-created group. With further purchases expected, the number crunchers have pencilled in earnings expansion of 35% in 2015 and 54% in 2016, causing a P/E multiple of 21.8 times for this year to slump to just 14.2 times for the following period. I reckon this is a steal given CRH’s blockbuster growth prospects.
I am not so optimistic over the earnings outlook of Premier Oil (LSE: PMO), however, as a sinking oil price plays havoc with the firm’s revenues picture. Indeed, the oil producer’s 37% share price descent during September has reflected the Brent crude benchmark’s failure to break back above $50 per barrel, leading many to believe a fresh dive to multi-year lows is on the cards.
Like Monitise, the City expects Premier Oil to record another year of losses in 2015 as the top line suffers. And this situation is not likely to get much better any time soon, in my opinion — OPEC producers remain committed to keeping the pumps switched on; US and Russian output continue to climb; and a toiling Chinese economy is failing to pick up the slack. Against this backcloth I reckon the black gold price is in severe danger of sinking still further, also putting the future of Premier Oil’s flagship North Sea development assets in serious jeopardy.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of Monitise. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.