How should you react to today’s moves by three small-caps? Should you buy, sell or hold?
Sizeable acquisition
At time of writing shares in Totally (LSE: TLY) are down by 10% on the day after the company announced that it had agreed to acquire Premier Physical Healthcare Ltd for up to £6.8m. Only £372,000 of the deal total is to be paid upfront, the rest will be paid through four potential deferred payments to 2019, dependent on performance targets. To fund the transaction Totally is the issuing 10m new shares to raise a total of £6.2m.
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Premier is a private UK-based provider of physiotherapy, podiatry and ergonomics services. Unfortunately, Totally didn’t publish any financial details about the deal other than the price in today’s press release, so it’s difficult for investors to judge how the acquisition will benefit Totally and if the company is overpaying.
What’s more, it is unclear how Totally’s acquisition of Premier will affect the group’s goal of being profitable during 2016. The company was targeting maiden profitability for the fourth quarter of 2015, but it’s not yet clear if this objective has been hit.
Until there is more clarity on Totally’s financial position and outlook, it might be wise for investors to take a backseat.
Hard to value
Shares in Challenger Acquisitions (LSE: CHAL) have jumped by 15% today, although there is little in the way of news to explain these gains. It’s been a rocky year so far for the company’s shares. Last week shares in Challenger were down 41% since the beginning of the year, but still up 35% year-on-year.
Whether or not Challenger is a suitable investment remains to be seen. The company’s shares were suspended from trading at the end of last year but returned to trading after Challenger completed its acquisition of Starneth, a Dutch engineering company and its investment in the New York Wheel Project — a 630-foot high observation wheel to be constructed in New York.
No City analysts currently cover the company so it’s difficult to value the shares at present.
Just in time
Nostra Terra Oil and Gas’s (LSE: NTOG) shares have jumped by more than 40% today after the company announced that it had appointed Strand Hanson Limited as nominated & financial adviser and joint broker to the company, with immediate effect.
It was revealed yesterday that Nostra’s original nomad, Sanlam Securities UK, was intending to cease its nominated adviser and small cap broking activities and, as a result, Nostra had until today find a new nomad before its shares were suspended from trading for a month. Now that the company has found a replacement, its shares will be allowed to continue to trade.
Nostra has been taking advantage of the recent oil price slump to acquire a number of producing assets around the world. Only time will tell whether or not this is a sensible strategy. This isn’t a stock for widows and orphans, but if you’re willing to take the risk Nostra could be a rewarding play on an oil price recovery.
