Could any of these companies double in value as they turnaround their operations?

Tesco

Shares in Tesco have fallen by 60% from their all-time high of 476p in 2007. Yet the firm still has a 28% share of the UK grocery sector. Upstart rivals Aldi and Lidl have just 5% each.

Although Tesco does have too much debt and is struggling to rebuild its profit margins, things do appear to be improving.

The firm’s recent interim results show that sale volumes rose by 1.4% during the first half of the year, suggesting the firm is reclaiming some of its lost market share.

Profits are expected to be £444m this year, rising to £743m in 2016/17. The shares may eventually double, but investors will need to be very patient.

Oxus Gold

Small cap Oxus Gold edged higher this morning after the firm reported that hedge fund RAB Special Situations, whose shares have fallen by 65% over the last three years, took an 8% stake in the firm last week.

Oxus shareholders are awaiting the outcome of an arbitration case relating to confiscated mining assets in Uzbekistan. Oxus believes it is entitled to at least $400m in compensation for the lost assets.

However, the outcome of such cases is very hard to predict. The firm has no other assets or activities, so if the ruling goes against Oxus, the firm’s shares could become worthless.

Ophir Energy

Shares in oil and gas explorer have halved over the last year, despite Ophir’s acquisition of Salamander Energy, which has provided much-needed cash flow for the group.

Ophir’s key attraction are its large gas discoveries offshore Africa. But these are long-term projects requiring billions of dollars to develop. Progress is proving slow.

In the meantime, Ophir shares trade at just over half their book value of 160p per share. Ophir remains well funded and I believe patience will be rewarded here, but possible not for several years.

Serco Group

The reputation of scandal-hit Serco Group has been dragged through the mud over the last year. The shares have done little better, falling by a whopping 65% to less than 100p.

Although a £555m rights issue has helped to rescue the firm’s finances and relieve debt pressures, Serco is only expected to report profits of around £35m in 2015 and 2016. The group has recruited highly-regarded ex-Aggreko boss Rupert Soames to be its chief executive, but does not yet look like a compelling recovery buy to me.

Drax Group

Coal power generator Drax is working hard to convert its operations to use wood-based biomass fuels.

The regulatory costs of burning coal are rising, so this makes sense.

Unfortunately, the government’s sudden decision in July to cut support for renewable power generators has thrown a spanner in the works.

Drax shares have now fallen by 52% over the last year. The firm is only expected to report a post-tax profit of £12m this year, compared to £33m in 2014. The future seems uncertain and a big dividend cut seems likely. I think it’s too soon to invest in a recovery at Drax.

The post 5 Stocks That Could Double? Tesco PLC, Oxus Gold plc, Ophir Energy Plc, Drax Group Plc & Serco Group plc appeared first on The Motley Fool UK.

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Roland Head owns shares of Tesco. 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.

However, if everything goes to plan these companies could become multi-baggers, generating impressive returns for those who are willing to take the risk. 

Arbitration proceedings

For all intents and purposes, Oxus is a lottery ticket. As stated in the company’s half-year report, “other than the ongoing arbitration proceedings…there are no other operating activities currently being undertaken by the company and its subsidiaries“. So investors who take a position are betting on the company’s success or failure in courts. 

But there is value to be found in the arbitration process. 

Oxus is currently involved in arbitration proceedings and a compensation claim related to the loss of the Amantaytau Goldfields and Khandiza mining assets. The two fields are located within the Republic of Uzbekistan, and the company is pursuing arbitration proceedings against the regional government. 

Unfortunately, these arbitration proceedings are dragging on, but Oxus believes that it is entitled to damages of up to $400m. Management is confident that the arbitral tribunal will rule in its favour although, whether or not the company can remain solvent until a decision is announced is another matter.  

Oxus is facing a cash crunch. The group was forced to issue 83k new shares to pay its Nomad for three months work back in July and has since signed a convertible loan note deal with Darwin Strategic Ltd for a total of £1.2m. 

Still, even if Oxus is only awarded 25% of the compensation management believes the company deserves, (around £70m) Oxus’ shares could jump to 12p. 

Cash call

Like Oxus, Churchill Mining is also struggling to pay the bills but the group is set for a bumper payday if its international arbitration claim pays off. 

Churchill is fighting the Republic of Indonesia for damages associated with the unlawful revocation of East Kutai Coal Project. Churchill and its partner, Planet Mining Pty Ltd. held a 75% interest in East Kutai. 

An independent assessment has calculated that Churchill’s damages from the unlawful seizure of the mine could be $1.3bn, around £833m. At the time of writing, Churchill’s market cap is only £24m. 

Worth the wait

Churchill’s arbitration case is moving through the courts at a snail’s pace. At some point during the next few months, the company should hear the results of its recent document authenticity hearing, which was held between the 3rd and 10th August. There is no set date for the Tribunal to deliver its decision. 

Nevertheless, Churchill’s potential payoff is worth waiting for, I believe. City analysts believe that if the company reaches a settlement with the Indonesian government, it could receive a cash lump sum of $9.70 per share, approximately 670p per share. 

The bottom line 

Churchill and Oxus are both high-risk/high-reward plays. If either company reaches a settlement, they’re set for a bumper payday. However, there is a very real risk that both companies could fail to negotiate a deal, run out of cash and become insolvent. 

So, in my opinion, neither company is suitable for widows and orphans.

The post Is The Risk Worth The Reward At Oxus Gold plc And Churchill Mining Plc? appeared first on The Motley Fool UK.

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Rupert Hargreaves 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.