As the UK economy continues to open up, I’ve been looking for penny stocks to add to my portfolio. Here are two companies I’d buy ahead of the next stage of reopening in June.
Penny stocks to buy
Marston’s is already starting to reap the benefits. In its latest market update, the business reported that pubs allowed to open outside on the 12 April had reported sales of around 80% of pre-Covid levels.
At that rate, the company noted, it was on track to break even on an earnings before interest, tax, depreciation and amortisation (EBITDA) basis. In addition, management believes there will be further sales growth as the lockdown continues to ease.
Based on these projections, I think Marston’s could be a great addition to my portfolio of penny stocks for June. Assuming the government’s roadmap for reopening isn’t disrupted, the group could be back to normal by the end of August.
In my opinion, in this best-case scenario, the stock could be worth more than it is today. That’s why I’d buy the shares.
However, if the government has to delay the full reopening, Marston’s may hit the rocks. It has had to take on considerable debt over the past 12 months to survive. With this additional borrowing, it may struggle to pull through another lockdown. That’s the most considerable risk facing the enterprise right now.
As penny stocks go, NewRiver REIT (LSE: NRR) is quite risky. The value of its commercial property portfolio has been thwacked over the past year. Book value per share, which can be used as a quick way to identify how much a business is worth after deducting all liabilities from assets, has fallen from 295p in 2018, to 169p. This is a decline of 43%.
The value of the property portfolio could fall further if there’s another lockdown. That would cause even more pain for the business, which has been pulling out all the stops to survive over the past year.
Still, I’d buy this business for my penny stocks portfolio in June as a recovery play. Green shoots are already appearing in the firm’s property portfolio. At the end of March, retail occupancy was 95.8%.
Meanwhile, rent collection in the quarter to the end of March was tracking ahead of the same period last year. The group also ended its fiscal 2021 financial year with £198m of cash and undrawn financing facilities, giving management a level of balance sheet flexibility.
As the economy continues to open up, I think rent collection will improve. This, in turn, could have a positive impact on NewRiver’s shares. As confidence returns to the retail sector, demand for the company’s properties may also increase, pushing up rents.
These are the key reasons why I’d buy the company for my portfolio of penny stocks today.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Marstons. 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.