What’s going on? And is this a buying opportunity for my portfolio? Let’s take a look.

A growing alternative energy business

I’ve previously discussed Powerhouse Energy. But as a reminder, the business is an energy producer that developed a proprietary technology to convert waste plastics into a usable synthetic gas called EcoSynthesis. This has the same desirable traits as natural gas and can be used in gas turbines that power the vast majority of UK homes.

But it also contains a large quantity of hydrogen that can be extracted to make fuel cells at a relatively low cost. Given that hydrogen-powered technology is a key aspect of the UK government’s plan to become carbon-neutral by 2050, there could be massive room for growth of PHE’s share price over the long term. So why has it been falling?

What’s happening to the PHE share price?

The market, in general, has seen a pull-back over the past few weeks after concerns surrounding rising inflation and interest rates. Growth stocks like Powerhouse Energy have particularly experienced large drops in share prices due to their already substantial valuations.

Beyond macroeconomic factors, the fall in the PHE share price can also be attributed to a dilution effect. Over the past three months, approximately 15m new shares have been issued to raise additional capital. Why? Because while the company has the technology to turn plastic into power, it has yet to acquire the facilities to do so.

Powerhouse began construction of its first energy plant last year. Once complete, it will have the capacity to power more than 250,000 UK homes. However, a project of this scale will likely take several years to become fully operational. And the management team has not given any indication of when that might happen.

In other words, the business will not be generating any significant amount of revenue for the next few years. And therefore, will have to continue raising capital through additional equity issues or debt to cover expenses. This means more dilution to the PHE share price is likely to occur in the future. At least, that’s what I think.

The bottom line

The global waste-to-energy market is expected to reach $55bn by 2027. That’s almost 80% larger than it is today. Needless to say, that offers substantial room for Powerhouse Energy to grow.

The firm needs to successfully complete the construction of its energy plant, meet performance expectations, and not run into any major problems along the way. If it can do that, then I believe the PHE share price can climb even higher in the future. But that is quite a big ‘if.

Currently, there are simply too many unknowns about the business and the effectiveness of its technology. Therefore I’m still not adding the stock to my portfolio, even at the currently reduced share price.

The post What’s going on with the PHE share price? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Powerhouse Energy. 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.

Mining recovery

After a five-year share price slide of 57%, will Rio Tinto (LSE: RIO) recover? It surely will, and the only real question is when — but if you’re investing in an ISA for several years then the timing really shouldn’t bother you too much. The commodities price slump has led to a bit of a collapse in earnings per share (EPS) for the mining giant in the last couple of years, and there’s a further 50% drop forecast for the current year to December 2016.

But the prices of aluminium, copper, iron, gold are picking up again, and along with that should come an upturn in Rio’s fortunes. In fact, since 20 January, the share price has already gone up 26%, to 1,990p. And the City’s analysts have a recovery in EPS pencilled in for 2017 and they’re putting out a strong ‘buy’ consensus on the stock.

When Rio revealed full-year results in February, we heard that its progressive dividend policy is to be curtailed and that the payout should drop by nearly half in 2016. But that would still yield around 4.5%, and it is surely in the best long-term interests of shareholders as the firm continues to cut its costs. Yes, I see Rio as an attractive ISA buy now.

Minerals punt

There’s something a good bit riskier, but possibly very lucrative, in the shape of Sirius Minerals (LSE: SXX), the company at the heart of the York Potash Project. The shares tend to spike up on good news before falling back again, but they’re up 55% over 12 months to 14.7p today, and could well have a lot further to go.

On 17 March we saw the Definitive Feasibility Study, which valued its polyhalite potash development at a net present value of $15bn, rising to $27bn by the time production commences (although that’s not expected until 2021). With the deposits being of such high quality, and with fertilizer in such great demand, it should be a high-margin business too, with cash margins estimated at 70-85%.

So why is Sirius only valued at around £300m? The thing is, oodles of cash will be needed for developing the project before any profits can be made, and there’s a great deal of uncertainty over how much will find its way into the pockets of those who provide the capital and how much will be left for existing shareholders. But if you don’t mind the risk, I think things are looking good.

Too late?

You might think I’m a day late introducing Intelligent Energy (LSE: IEH) as a last-minute ISA candidate, with its shares having spiked up 65% on the day to 16p. But what’s happened? The company develops fuel cell technology, and there are sure to be some big profits for the winners in the field, and today we heard news that should boost Intelligent Energy’s prospects of getting to that magic profitability point.

The company is still in discussions to secure the funding it needs, and though there’s no certainty they will conclude successfully, it seems optimistic, saying it hopes to finalize something shortly. Perhaps more importantly, the board intends to restructure the company to focus on the best market opportunities, which apparently means mainly its “class leading and power dense sub 1W to 20kW air cooled fuel cell technologies which are targeted towards small to medium-sized, highly distributed applications to power a range of off-grid devices“.

Analysts are forecasting first profits in 2017, making Intelligent Energy definitely one to watch.

The post 3 Last-Minute ISA Picks: Rio Tinto plc, Sirius Minerals PLC, Intelligent Energy Holding PLC? appeared first on The Twelfth Magpie.

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• The only FTSE 100 stock I own right now

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Quarto is an illustrated book publisher and distributor, with a market cap of around £50m, and it’s just released full-year results that beat expectations. With adjusted pre-tax profit up 18%, adjusted earnings per share rose 13%, and the total dividend of 9.5p per share is 6% ahead of last year and yields 3.8% — and it’s covered 3.4 times by earnings. Net debt was cut by 10% too, which is a good sign, with chief executive Marcus Leaver telling us that the firm intends to “steadily reduce net debt further“.

Forecasts suggest two years of EPS growth at 11-12% per year, which would put the shares on a P/E multiple of under seven for 2016, dropping to just six on 2017 forecasts, and would provide PEG ratios of around 0.6. That suggests good growth value to me, and on these fundamentals I’d say Quarto is looking attractive.

Solar power

Shares in PV Crystalox Solar (LSE: PVCS) perked up 4% in early trading to 9.7p, after full-year results revealed an increase in revenues from €53.3m to €64.5m. The company makes photovoltaic silicon wafers, used for capturing solar energy, and it’s been suffering from weak pricing. But chief executive Iain Dorrity told us that the price of wafers “has shown some modest recovery during recent months while the price of polysilicon, the key raw material, has fallen to historic lows“, and that wafers can now be sold at more than their cash cost of production.

The company still widened its loss for the year and is extending a strategic review of its business in what are still difficult trading times. Vernalis had net cash of €12.7m on its books at the end of December, albeit down from €24.6m a year previously and possibly close to the limit if it suffers a further loss in 2016. But analysts are expecting just about break-even. It sounds like 2016 could be a pivotal year — and if demand for solar energy is on the rise, we could be at a good (if risky) buying point.

Medical recovery

My third candidate today is pharmaceuticals firm Vernalis (LSE: VER), whose first-half results led to a 12% drop in the share price to 52p. The shares soared to 87p back in September 2015 on the back of hopes for the firm’s Tuzistra XR cold treatment, but since then shareholders have been hit with a 40% fall.

Interim results showed a revenue increase to £6.1m from £5.7m, with Tuzistra XR contributing £0.6m to that — and it represents the direction the firm is going in the “major transformation in our business” described by chief executive Ian Garland, to specialize in cough and cold treatments.

There’s no annual profit forecast yet, but predicted losses per share are tumbling and the four brokers offering an opinion have Vernalis as a ‘strong buy’. It’s another risky one, but if profitability can be achieved by 2018 then we might be on to a winner.

The post 3 Small Caps Set To Soar: Quarto Group Inc, PV Crystalox Solar PLC, Vernalis plc? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft 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.

Xcite Energy (LSE: XEL) shares have plunged by 70% since their 2015 high point in May, and stand at just 12.6p as I write these words. But there’s been a little bit of optimism of late after the firm announced that its licence containing the undeveloped Bentley field in the North Sea has been extended until June 2017. The company is facing the twin tasks of finding the funding to develop the field and also to repay outstanding senior secured bonds which are due for repayment in June 2016.

This licence extension is expected to help with both of those with Xcite telling us it has “received indicative proposals for development funding“. There’s plenty still to do, but chief executive Rupert Cole says the company is “focused on delivering a funded first phase field development plan, including repayment of the outstanding bonds“. If Xcite can pull it off, the timing could be near perfect for an oil recovery.

Picks and shovels

AFC Energy (LSE: AFC) is one of those “picks and shovels” companies working in the energy industry, with its focus on developing alkaline fuel cells for industrial use. The hydrogen used by such cells still has to come from somewhere and the main source is still petrochemical, but efficiencies and cleanliness should still boost the business further as the cost of the black stuff rises.

AFC is nowhere near turning a profit yet, but the company has managed to achieve electrical output of more than 200KW at its development plant in Germany. A new strategic partnership with German engineering consultancy plantIng won’t do it any harm either, so it AFC a good buy now?

I reckon it’s only one for risk-tolerant technology investors, but with the shares down 63% since July 2015, to 20p, we might be looking at an attractive turnaround point.

Shooting up?

Victoria Oil & Gas (LSE: VOG) is an oil explorer with a difference as its share price has spiked up 86% since 20 January, to 51p — although it is still down 46% since its April 2015 peak. The latest price driver was the firm’s announcement of its purchase, from a Glencore subsidiary, of a 75% stake Cameroon’s Matanda licence.

The news came on the back of January’s operations outlook for 2016, which predicted a 30% increase in supplies of gas to customers and the drilling of two more wells, coupled with plans to grow the firm’s pipeline network and move into new products such as Compressed Natural Gas.

Again there are no profits yet, and no forecasts, but again the timing could be nice for those with steady nerves.

The post Are Xcite Energy Limited, AFC Energy plc And Victoria Oil & Gas plc Set For Stunning Recoveries? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Alan Oscroft 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.