Big discount?

The sale of the division will considerably strengthen Molins’ balance sheet and cash-positive position (net cash at the last year-end was £0.8m). It will also enable the company to accelerate investment in its Packaging Machinery division and acquire complementary businesses.

The company had net assets of £35.4m at the last year-end and says that the £27.3m from the sale of the Instrumentation & Tobacco Machinery division is similar to the book value of the division’s net assets. Even after the rise in the shares to 101.5p, Molins’ market cap is just £20.5m — a 42% discount to net assets. Put another way, if the shares traded in line with net asset value, the price would be 175p.

Meanwhile, the company says it’s “confident that the Continuing Group’s sales in 2017 are likely to be significantly ahead of last year” and has implicitly guided on £51m. If we apply the 0.78 times sales multiple at which the Instrumentation & Tobacco Machinery division is being sold to the remaining Packaging Machinery division, we get a share price of 197p.

There are execution risks with Molins’ strategy to acquire complementary businesses and the company also has a significant pension deficit. The current deficit recovery plan involves payments of £1.8m a year (increasing by 2.1% a year) through to 2029. Nevertheless, the size of the discount of the share price to my fair-value calculations of 175p-197p persuades me that there is potential for significant gains for buyers of the stock today.

Stamps licked?

Shares of Stanley Gibbons (LSE: SGI) shot up 18% to 13.13p on Friday after it announced an unsolicited approach from private equity group Disruptive Capital regarding a possible offer. However, the shares have retreated to 11p today after a further announcement from the stamps and coins company and an announcement from Disruptive Capital.

Stanley Gibbons had a peak market cap of £179m just a few years ago but is currently valued by the market at just £19.7m after accounting shenanigans, difficult trading conditions, debt problems and an emergency fundraising. On the face of it, there could be value here, because the shares are trading at a discount of 56% to net asset value at the last balance sheet date (30 September) and at just 0.39 times trailing 12-month sales.

However, 30 September is a long time ago and sales were in decline at that time. More recently, the company reported little headroom on its borrowing facilities at 31 March, saying it was “utilising £17.2m out of its total facilities of £18.3m”.

In today’s announcement, Stanley Gibbons formally put itself up for sale, saying further investment is required. At the same time, Disruptive Capital announced it didn’t have key information “to evaluate whether or not to make an offer” and is not making one. Similarly, I think there’s currently insufficient information to evaluate whether the shares are good or poor value at their current level.

The post Could these small-cap ‘special situations’ help you retire early? appeared first on The Motley Fool UK.

The intention is that the acquisition will be implemented via a court-sanctioned scheme of arrangement, and ARM’s directors are unanimously recommending that shareholders vote to approve the scheme, which should happen as soon as practicable in Q3.

With the shares trading at 1,675p, as I’m writing, there’s little upside for buyers today if the deal goes ahead: a mere 1.7% including the 3.78p interim dividend holders will receive on top of the 1,700p return.

Analysts are divided on the likelihood of a counter-bid coming in. I wouldn’t buy today on the hope of such a bid, but if I already held the shares I’d be inclined to hang on just in case another suitor emerges with a higher offer.

Out with the old, in with the new

Shares of Stanley Gibbons (LSE: SGI) dived on a profit warning last autumn, and completely cratered earlier this year when it emerged that things were so dire an emergency fundraising was required.

The troubled stamps and collectibles group, whose shares had traded at 300p not much more than a year earlier, raised £13m at just 10p a share. However, following a corporate and audit update, and a boardroom clearout, announced last Friday, the shares have stormed up to 14.37p this week.

The good news is that the company has already exceeded the targeted annualised operating cost savings of £5m it set out in March and management has identified further savings. Past accounting was clearly over-aggressive, and there will be restatements and writedowns reducing net asset value. However, these won’t impact the cash position, and together with the departure of the executives who oversaw the destruction of shareholder value, a line seems to have been drawn under the inglorious past.

I like Stanley Gibbons’ new strategy of “realigning the business around predictable revenue streams, such that the company does not have to rely upon material one-off high value sales or major auction consignments to achieve profitability.” However, I believe prudent investors would be wise to wait for the company’s results and some visibility on future earnings.

Wheels up, or wheels off?

Fastjet (LSE: FJET) is another small-cap whose shares have collapsed from pounds to pence. Profit at the African budget airline has failed to get off the ground, and amid boardroom turmoil, the company was hurtling towards the end of the cash runway.

However, the shares rocketed from 23p to as high as 41p yesterday, following the announcement of a £15m fundraising. And a bizarre fundraising it was too. The price was set at 50p (a whopping 116% premium), in order — the company told us — for a number of fund managers “to satisfy their internal ownership limits”. What does that mean? Well, you’ll get a good idea if you can imagine a ‘Dragon’ on Dragon’s Den being offered, say, a 30% share in a business for £100,000, and saying: “No, but I’ll give you £100,000 for a 15% share“!

Good news though the funding is for Fastjet, potential profitability is both far off and uncertain, so, as with Stanley Gibbons, I think this is another case of ‘wait and see’.

The post Should you buy this week’s flyers ARM Holdings plc, Stanley Gibbons Group plc and Fastjet plc? appeared first on The Motley Fool UK.

Alongside this, Gulf Keystone will have around $95m of cash, with an equity raising of up to $25m helping to boost its balance sheet strength. And with Gulf Keystone having a lucrative asset base that’s already producing around 40,000 barrels of oil per day (bopd), it could be argued that its future is now relatively bright.

However, Gulf Keystone is still at risk from a falling oil price. And the potential for disruption in production due to the conflict taking place close to its asset base, as well as the squeeze on equity holders in the restructuring, mean it may be prudent to wait for further news before buying a slice of the business.

Change ahead

Also rising today is stamp collector Stanley Gibbons (LSE: SGI). Its shares are up by 23% following news released last week regarding a restructuring. Encouragingly, Stanley Gibbons has already exceeded its planned £5m in targeted cost savings from its rationalisation and repositioning strategy. Furthermore, since much of its business is concentrated in the UK, it’s considering whether to end its offshore status.

In addition, Stanley Gibbons has changed its management team, with the CEO and CFO stepping down. All of these changes appear to have been well-received by the market judging by today’s share price rise.

Looking ahead, Stanley Gibbons acknowledges that there will be a challenging period as it seeks to fundamentally change its business model. As such, it may be prudent for investors to await further news before buying-in, as it’s clearly a fluid and rapidly changing period for the company.

Closer look?

Meanwhile, shares in Aureus Mining (LSE: AUE) are up by 19% today after it announced on Friday the closure of Tranche 2 of the equity financing with MNG Gold Jersey. This has raised gross proceeds of $15m, which takes the total raised in the recent period to $30m.

Clearly, Aureus Mining has benefitted from a rising price for gold, with the company’s share price increasing by 28% in the last month. With investors being nervous about the prospects for the global economy following Brexit, it seems likely that the price of gold will continue to rise over the short-to-medium term. While there are larger and more financially sound gold-focused stocks than Aureus Mining, it may nevertheless be worth a closer look for less risk-averse investors.

The post 3 double-digit risers to buy today? appeared first on The Motley Fool UK.

Vodafone

When I looked at Vodafone in January the shares were 220p. The forward price-to-earnings (P/E) ratio for the year ending March 2017 was 38, the price-to-earnings growth (PEG) ratio was 2.1, and the dividend yield was 5.2%.

I thought the P/E and PEG were unattractive, particularly given continuing economic fragility in Europe (by far Vodafone’s biggest market), and I was also concerned that the company seemed to be behind the curve on the market’s move towards converged services of fixed line, broadband, public Wifi, TV and mobile.

However, there’s been some encouraging news this year, both on Europe — a first quarter of positive revenue growth since December 2010 — and on converged services, with the company announcing deals in the Netherlands and New Zealand.

The share price is around the same level as in January, but earnings upgrades have brought the P/E down to 35 and the PEG to 1.4. This is still a bit rich for my liking, but coupled with a highly-attractive 5.2% dividend yield, I believe Vodafone’s shares could now be worth buying.

Rolls-Royce

After a long string of profit warnings, Rolls-Royce’s shares were languishing at 565p early this year. I acknowledged the company’s strong order book and that new chief executive Warren East is a class act. But with a forward P/E of 19 and the dividend under threat, I felt a turnaround and the rebuilding of investor confidence could take some considerable time, and saw little reason to rush to invest.

The shares rallied strongly after the company’s results in February (reaching well over 700p in March), for although the dividend was slashed in half, the market was relieved there was no further profit warning.

The shares have since drifted lower, but at 595p are still 5% higher than January, while the forward P/E is now up to 24.5. The elevated valuation and the potential lengthy timescale of a turnaround keep me on the sidelines for the time being.

Stanley Gibbons

When I looked at stamps and collectibles group Stanley Gibbons, the shares were trading at a depressed price of 83p in the wake of a profit warning in October. On the basis of the company’s past form on this front, I said I wasn’t prepared to bet against there being a further profit warning during 2016/17.

My fears were quickly confirmed when trading proved to be so poor and debt so onerous that the company was forced into an emergency equity fundraising of £13m at 10p a share. At the same time, the chairman announced he was stepping down.

The shares of Stanley Gibbons are trading at 13.5p as I write — 84% down from January — and I’m not even going to look at valuation. This is a business I’ve never liked (it’s dependent on the “greater fool theory”) and it’s in a mess. As such, it stays on my ‘avoid’ list.

The post Should you buy or avoid Vodafone Group plc, Rolls-Royce Holding plc and Stanley Gibbons Group plc? appeared first on The Motley Fool UK.

Gibbons has sold the lease on its flagship Mayfair premises and a neighbouring property for £2.5m, which should result in a £2.4m in total debt. Part of the firm’s Madison Avenue premises in New York has also been sublet to reduce cash outgoings.

The overall effect is expected to be a £1.3m annual reduction in cash outgoings and a corresponding increase in profit. This is the firm’s first step towards a cost-saving target of £5m per year.

However, while today’s statement is good news, I’m not sure it’s a good enough reason to buy the shares.

Deep value, or a trap?

Stanley Gibbons shares currently trade at a 38% discount to their last reported tangible net asset value of 23.9p per share. This asset value is based on the purchase cost of the firm’s inventory of rare stamps, coins and antiques.

In theory this should be a good buying opportunity. However, my reading of Stanley Gibbons’ interim results is that the firm has seen a sharp downturn in sales to Asian clients. It could be forced to cut prices in order to stimulate demand. The true cash value of these tangible assets isn’t certain.

In my view, cost-cutting is only part of the challenge facing the firm. We also need to see some improvement in sales performance. For this reason, I think it’s too soon to buy.

Debt pressure is rising

There was more bad news from Xcite Energy (LSE: XEL) this morning. The firm confirmed that it won’t be able to repay $135m of bonds due on 30 June 2016, unless it finds a new funding partner. As yet, Xcite has not been able to find a partner willing to refinance its bonds and fund the development of Xcite’s Bentley field in the North Sea.

The company said today that it is having “continuing discussions with bondholders”. Xcite’s bondholders know that they have the upper hand, as Xcite has zero production and no revenue. I expect bondholders to push out discussions until Xcite is forced to default on 30 June. The shares will then be suspended and the bondholders will be free to decide on the best way to recover their money from Xcite.

Xcite’s reassurance today that Bentley’s proven reserves have a discounted net present value of $2.3bn is not sufficient reason to invest, in my opinion. Xcite couldn’t find a partner to develop Bentley when oil was trading at $100 per barrel. I’m not sure they will be any more successful now that oil is under $50.

Xcite’s assets may end up being sold to a trade buyer to repay some or all of its bonds. Alternatively, the firm may be recapitalised by issuing a large number of new shares in exchange for its bonds. In either case, the value of the existing shares would be likely to fall sharply, possibly to zero. 

Indeed, I believe further losses are almost certain for current Xcite shareholders, so rate the shares as a strong sell.

Unfortunately, both Stanley Gibbons and Xcite face serious challenges that could result in further losses for shareholders.

The post Should you buy or sell Stanley Gibbons Group plc & Xcite Energy Limited after today’s updates? appeared first on The Motley Fool UK.

A very important development

Shares in GTS Chemical (LSE: GTS) have soared by around 17% today after it announced that it has received a certificate of registration from the American Petroleum Institute for conformance with the API Specification Q1.

This specification should further establish GTS’s brands, which in turn could attract more distributors and differentiate the company from its competitors. And with its being received for the quality management on nine of GTS’s products — including the core business divisions of ammonium sulphite, ammonium bisulfite and lubricating oil — it could prove to be a very important development for the company.

Looking ahead, GTS is forecast to post a fall in earnings in the current year of 6%. While this could hurt investor sentiment in the short run, the speciality chemicals company is due to increase its bottom line by 13% next year. This puts it on a forward price to earnings (P/E) ratio of just 3.9, which indicates that its shares are cheap and could be due for an upward rerating over the medium to long term.

Disappointing performance 

Also among today’s major movers is Stanley Gibbons (LSE: SGI), with the antiques and stamp collector posting a fall in its share price of around 9%. Given the company’s woes during the course of the year, this is perhaps unsurprising since investor sentiment is now rather weak. In fact, Stanley Gibbons’ shares have fallen by 84% since the turn of the year and there could be more pain to come. That’s because the company is set to endure a challenging period, with profitability forecast to come under pressure in the next financial year.

While Stanley Gibbons has the potential to turn its disappointing performance around, its risk/reward ratio seems to be relatively unappealing. That’s especially the case since there are a number of other smaller companies that are on the cusp of improved financial performance and which offer good value for money at the present time.

In a stronger position

Meanwhile, shares in Redx Pharma (LSE: REDX) have been down by as much as 10% today despite the drug development company having released no significant news flow. Of course, Redx recently conducted a £10m placing and the proceeds are set to be used to progress the company’s drug pipeline and to also further develop Redx’s other assets in immune-oncology, infection and immunology. And with the net proceeds strengthening the company’s balance sheet, Redx seems to be in a stronger position after the placing.

Clearly, Redx’s share price performance since the start of the year has been very poor. Its valuation has declined by around 55% and while it has significant long term potential, it may prudent for risk averse investors to look for greater stability and consistency elsewhere in the health care space.

The post Why are GTS Chemical plc Hldg (+17%), Stanley Gibbons Group plc (-9%) and Redx Pharma plc (-10%) among today’s major movers? appeared first on The Motley Fool UK.

But at least the production volumes from the firm’s Shaikan development, which has a maximum sustained output of around 40,000 barrels of oil per day (bopd), offers a solid bedrock for the Gulf’s future… doesn’t it?

Well, Thursday’s results for 2015 dealt a further blow, revealing that production from Shaikan “may begin to exhibit natural declines later in 2016“. To maintain production at current levels, and then potentially increase it to 55,000 bpod, will require the investment of new capital. It’s going to need between $71m and $88m in new capital expenditure, but there was only $44m in cash and equivalents on the books on 31 December 2015, which is not going to last long at the current rate.

As well as recording a $51m gross loss in 2015, Gulf had to stump up $52m in finance costs. And for this year, the firm admitted it will face difficulty in meeting debt repayments of $250m in April 2017 and $325m in October 2017, telling us it “continues to actively review options to secure new funding“. Unless the new funding is found, Gulf Keystone seems certain to default on its debt payments. And even of it can attract new cash, the dilution affect on current shareholders may well render their holdings worthless.

The shares have lost 32% of their value since the results were known, and are now down 92% over the past two years. Sad though it is, Gulf Keystone is firmly in bargepole territory for me.

A lifeline?

From my stamp collecting schooldays I have fond memories of Stanley Gibbons (LSE: SGI), and it’s painful to see the company’s shares crashing by 94% in the past 12 months, to 17p. The latest downward pressure came from the firm’s confirmation on 14 March that it is to go ahead with a new share issue to the tune of £13m, with the majority being placed with institutional investors — though there will also be an open offer for existing shareholders to subscribe to eight new shares for every ten currently held. But the offer price is a low 10p per share, 40% below the market price as I write.

Problems stem from falling turnover, weakness in the collectibles market, and a failure to achieve the cost savings levels expected from recent acquisitions — and a plan to return to “more disciplined buying and selling strategies” suggests its has got a lot wrong there too. The company now says it expects to report a pre-tax loss of between £1m and £2m for the year to 31 March, which is a pretty big whack for a company with a market cap of only £13m.

This is a big share issue, with the new shares representing around three quarters of the total shares, so existing holdings will be reduced to just a quarter of the newly-financed firm.

Whether this is enough to keep the company going in the long term, or whether it will turn out to just be a short-term stopgap, remains to be seen. I hope it’s the former, but Stanley Gibbons is definitely another one to avoid for me.

The post Is It The End Of The Road For Gulf Keystone Petroleum Limited And Stanley Gibbons Group PLC? appeared first on The Motley Fool UK.

The new shares will be issued at 10p per share, a massive 56.5% discount to Friday’s closing price of 23p.

Approximately 71% of the new shares will be sold in a placing to institutional investors. However, Stanley Gibbons is also giving existing shareholders the chance to participate by way of an open offer.

This will give shareholders the right to buy 8 new shares for every 10 shares currently held. Shareholders who choose not to participate will find that the value of their stake in the firm is heavily diluted.

After the fundraising is complete, the new shares will account for 73% of the group’s total share count. This will mean that a 1% stake in the firm is reduced to 0.27%, if no new shares are purchased.

What’s gone wrong?

Stanley Gibbons’ most urgent problem appears to be debt. At least £6m of the funds raised will be used to repay short-term loans the company has drawn on since trading started to decline last year.

A second problem is that trading has continued to worsen. Sales of rare stamps and other collectibles have slowed over the last year, and prices have fallen.

At the same time, cost savings from acquisitions have been smaller than expected. The group has also continued to plough money into developing its own eBay-like online marketplace.

Stanley Gibbons said today that the firm’s finances are “under severe pressure” and that an adjusted pre-tax loss of £1m to £2m is expected for the 2015/16 financial year.

Question over asset backing

Stanley Gibbons large stock of stamps and other collectibles means that, based on the group’s most recent accounts, the stock currently has a tangible net asset value of 90p per share. Even after the proposed fundraising, tangible net asset value per share should be 24p.

The problem with relying on this asset backing is that the value of collectibles is entirely dependent on market conditions. It seems that prices have fallen steadily over the last year.

Today’s update said that the group will work towards “a return to more disciplined buying and selling strategies which should help to improve the stock profile” over the next 12 months.

To me, this suggests that Stanley Gibbons may have paid too much for some of its current stock. I suspect that the book value of the firm’s inventories will be reduced in its next set of accounts.

Buy now or wait?

As I write, Stanley Gibbons shares are still changing hands for 20p, double the placing price of 10p. Will the placing shares pop up towards 20p, or will the shares all fall to 10p once the placing and open offer are completed?

I suspect the shares will end up falling much closer to 10p. Stanley Gibbons’ situation appears serious to me.

I plan to take a fresh look at Stanley Gibbons when the fundraising is over and we’ve seen a current set of accounts. Until then, I believe the shares are too risky to buy.

The post Should You Take Part In £13m Rescue Deal For Stanley Gibbons Group PLC? appeared first on The Motley Fool UK.

Stanley Gibbons has already identified at least £5m of cost savings that are set to be implemented alongside other initiatives designed to make the company more efficient. However, the bulk of the £10m raised will be used to repay an approximately £6m overdraft, which needs to be repaid by the end of March.

With the company continuing to experience lower sales throughout its business, it continues to offer a relatively unappealing near-term outlook. Certainly, Stanley Gibbons has potential as a turnaround play, but with an adjusted loss before tax of up to £2m now set to be reported this year, it appears as though it’s a stock to watch rather than buy right now.

Asian opportunity

Meanwhile, Prudential (LSE: PRU) continues to record a disappointing share price performance. Its value has fallen by 18% in the last three months, with weakness in China being a key reason for this. However, with financial product penetration in the world’s second largest economy being relatively low and Asia being underrepresented in terms of the financial products people have, there’s an opportunity for Prudential to deliver strong sales growth in future years.

Certainly, the company’s bottom line performance continues to be strong and Prudential is expected to report a rise in its earnings of 14% in the 2015 financial year. This has the potential to positively catalyse investor sentiment in the stock, with further growth of 9% expected in the current financial year. Therefore, Prudential seems to be performing well but is suffering from weak investor sentiment, which could prove to be an ideal combination for capital gains over the medium-to-long term.

Return to growth?

Meanwhile, shares in Tesco (LSE: TSCO) may seem to be a poor performer when looked at over the last year, with them being down by 24%. But they’ve experienced a revival in recent months, rising by 13% in the last month alone. Part of the reason for this is a gradual realisation by the market that the company’s new strategy could be starting to pay off and could return Tesco to profit growth as soon as this year.

In fact, Tesco is forecast to increase its earnings by 78% in 2016 as a more efficient supply chain, reduced opening hours and a staff pay freeze begin to have a positive impact on margins. With the company’s shares trading on a price-to-earnings growth (PEG) ratio of only 0.2, they appear to offer excellent value for money. And with investor sentiment on the up, now could be a good time to buy ahead of further share price rises.

The post Is Now The Perfect Time To Buy Tesco PLC, Prudential plc And Stanley Gibbons Group PLC Following Weakness? appeared first on The Motley Fool UK.

Clearly, Stanley Gibbons is undergoing a very challenging period at the present time. As it stated in its most recent results, its targets were overly optimistic as it sought to integrate various investments in a relatively short timescale. This was a key reason for a decline in sales of 21% in the first half of the year and this is due to contribute to a fall in the company’s bottom line of 33% in the current financial year.

While Stanley Gibbons trades on a price to earnings (P/E) ratio of just 7.1 (even taking into account the anticipated fall in net profit), the uncertainty surrounding the company makes it a relatively unappealing purchase. Although it could have a bright long term future, it’s a stock to watch, rather than buy, until more details are known about its financing arrangements.

Also enduring a challenging period is global banking giant Santander (LSE: BNC). Its shares have declined by a third in the last six months alone, with a deterioration in the outlook for the Brazilian economy hurting Santander’s financial performance. And with it being a major market for the bank, further slow or negative growth from Brazil could lead to additional volatility in Santander’s share price.

With Santander forecast to increase its earnings by a rather disappointing 5% in the current year, many investors may be put off investing in it at the present time. However, with its recent results showing that its performance in the UK and in other key markets remains relatively strong, Santander has the capacity to post improved results over the medium to long term.

Furthermore, with its financial standing having been improved by a placing conducted around one year ago, Santander appears to be in a relatively strong position to ride out turbulence in the global economic growth outlook.

Trading on a P/E ratio of just 8.2 and having a high degree of geographical diversification, Santander offers a degree of resilience as well as significant scope for an upward rerating. And with a yield of 5% from a dividend that is covered 2.4 times by profit, there is the potential for brisk rises in shareholder payouts over the medium to long term.

The post Should You Buy Or Sell Banco Santander SA And Stanley Gibbons Group PLC On Recent News Flow? appeared first on The Motley Fool UK.