Brave investors like to take an early position in a potential growth stock to see where it takes them. Could the following two take your portfolio to exciting new places?
Frontier Smart Technologies Group Limited (LSE: FST) has hit the right frequency with its share price up more than 10% on publication of today’s results for the six months to 30 June. The £56m micro-cap is a pioneer in technologies for digital audio devices, and investors like what they are hearing.
Financial highlights include a 44% leap in revenues to £19.7m, up 27% on a constant currency basis. EBITDA of £1.1m reverses a loss of £0.04m in 2016. Cash and cash equivalents rose 41% to £4.8m, with R&D expenditure stable at £2.9m. The firm has benefitted from the digital switchover to DAB radio in Norway, and robust volumes in continental Europe. It also posted its first material revenues from its Smart Audio business, which offers technologies for internet radios providing access to online music services, such as Spotify.
The London headquartered company boasts an impressive roster of big-name customers, including Bose, Denon, Grundig, Panasonic, Philips, Pioneer, Pure, Roberts, Sony and Yamaha, and CEO Anthony Sethill says post-first half trading remains strong. The board now expects full-year 2017 EBITDA to be “significantly ahead of current market expectations”.
Its main business provides chips and modules for DAB radios while Smart Audio offers more exciting growth potential. The market is driven by large US technology companies such as Google and Amazon, and overall volumes are forecast to spiral from 14m units in 2016 to 76m in 2020. Frontier is risky but today it has plenty of good news to transmit.
Investors in Yorkshire-based potash mining prospect Sirius Minerals (LSE: SXX) have been hanging on for similarly good news, but many have got bored and moved on, with the share price sliding 20% in the last three months. Investors who have bailed out of Sirius arguably bought it for the wrong reason, because the one thing this stock needs is patience. It is pouring billions into developing its mine and transport facilities at Teeside and does not expect to dig up any revenues until 2022 at the earliest.
There will be share price slippage along the way, as we saw last month, when Sirius reported a £14.7m operating loss. What did investors expect? With no revenues, all operating costs are losses. However, the total loss was £151.3m before tax, including £112m from the fair value re-measurement of the derivatives associated with its convertible bond. Sirius still has £584.6m of bank funds available.
CEO Chris Fraser reassured investors that the company, which listed on the FTSE 250 in June, was making good progress and the market for polyhalite remains strong. However, at least one more funding round is required, in 2018, to complete development. Shareholder dilution is a danger. Only buy Sirius if you are feeling brave, have bags of patience, and the share price is down in the dumps. Today’s 26p is well below its year-high of 42.75p. Tempted?
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Harvey Jones holds shares in Sirius Minerals. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.