In this article I’ll explain what’s driving today’s gains, and whether this news males any of these companies a buy.

Falkland Oil and Gas

Shares in Falkland Oil and Gas have risen by 23% to 26p today.

The company hasn’t issued an update to the stock market since 25 August. However, the results of the company’s Humpback exploration well in the South Falklands Basin are expected any day now.

Falkland Oil has a 52.5% interest in Humpback, which is targeting net prospective resources of 268m barrels of oil.

I suspect today’s surge could indicate an early move by traders betting that the firm has made its third oil discovery of the year.

While the earlier Isobel Deep and Zebedee discoveries lie close to the earlier Sea Lion discovery, a big find at Humpback could open up a whole new oil play in the region.

I’m not sure I’d buy after today’s surge, but the shares could be worth watching for further news and a better buying opportunity.

Victoria

Carpet manufacturer Victoria has surged 12% higher today, after announcing a major acquisition.

The £65m deal will see AIM-listed Victoria take control of Interfloor Group, a leading UK manufacturer of carpet underlay.

To fund the transaction, Victoria has also announced the placing of 3,617,891 new shares in the company. This will raise a total of £44.5m, but it will create significant dilution, increasing Victoria’s share count by around 25%.

The good news is that today’s acquisition should generate more than enough additional profit to offset this dilution. Today’s announcement says that Interfloor generated earnings before interest, tax, depreciation and amortisation (EBITDA) of £10m last year. Victoria says that this will provide a material earnings uplift.

I’d now expect broker forecasts for 2015 and 2016 earnings to rise significantly, perhaps by 10%. However, at today’s share price, even a 10% earnings hike would still leave Victoria shares on a 2016 forecast P/E of 21.

With a yield of less than 1%, that’s not cheap enough to tempt me.

APR Energy

Shares in temporary power firm APR Energy gained 10% on Friday morning, after the firm said it had managed to remove all of its equipment from Libya.

Good news, but the firm has already said that the Libya demobilization was “more expensive than anticipated”. That’s a problem, as APR can’t afford to overspend on anything at the moment.

In August’s interim results, the firm warned investors of “an expected covenant breach at the end of the third quarter”.

If APR breaches the terms of its loans, then the firm’s lenders may be able to force APR to raise some cash. This could mean a forced sale of assets, costly new loans or a heavily discounted rights issue. All of these would be likely to destroy APR’s share price.

To avoid this risk, APR needs to refinance its loans before 30 September. However, I suspect the firm’s lenders will wait until after then, to strengthen their negotiating position.

APR shares have recently risen from a low of around 60p to today’s price of 117p. In my opinion, now could be a good time to sell.

The post Why Are Falkland Oil and Gas Limited, Victoria PLC and APR Energy PLC Rising Today? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head 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.

As such, the likes of AFC Energy (LSE: AFC) and APR Energy (LSE: APR) appear to hold relative appeal for investors. The former is focused on low-cost alkaline fuel cell technology, while the latter provides temporary power solutions at relatively short notice. Their share price performance in 2015, though, reflects a major difference in investor sentiment, with AFC’s share price having soared by 323% since the turn of the year while APR’s valuation has slumped by 60% (although its shares are up by 15% today).

Looking ahead, AFC appears to be a company that is very much on the up. For example, it has signed multiple agreements to deploy its technology across the globe. A notable success on this front is a joint venture in South Korea (of which AFC holds a 40% stake) which is expected to generate $1bn of revenue in the next decade. Furthermore, AFC’s KORE system in Germany has been commissioned and has commenced operation, which is yet another indication that the company is moving from strength to strength. Evidence of this can be seen in the fact that AFC swung into a half-year profit for the first time earlier this year, which indicates that its business model has the potential to deliver real value for its investors.

APR, meanwhile, is undergoing a somewhat challenging period regarding its finances. It swung to a loss for the half-year in its results released a week ago, with it apparently expecting little improvement in the second half of the year. And, with the decision to pull out of Libya and Yemen contributing to a fall in revenue of around 52%, the company’s pretax profit of $54m from the previous year’s period declined to a loss of $58m in the most recent period.

This has caused APR to seek a renegotiation of its financial covenants and loan agreements, since it believes that it will fail to meet them for the current quarter. Clearly, this is likely to cause investor sentiment in the stock to remain somewhat subdued, with today’s double-digit rise bucking a trend that has seen its shares slump by 25% in the last month.

Of course, APR Energy continues to win lucrative new contracts such as a twelve month contract in Egypt to build three gas turbines, as well as a two year contract to provide 35 megawatts of power in Botswana. However, with such a great deal of uncertainty surrounding its financial position, it appears to be a stock worth watching, rather than buying, at the present time. Meanwhile, with improving financial performance, huge long term potential and the possibility of further contract wins, AFC Energy seems to me to be a strong buy right now.

The post AFC Energy plc Vs APR Energy PLC: Which Is The Better Buy? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Peter Stephens owns shares of AFC Energy. 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.

Today, shares in Monitise (LSE: MONI) have soared by 12% to 5.08 pence. The value of the shares in the mobile payments company are still 88% lower than a year ago, as investors have become increasingly concerned over whether the company can deliver the revenue growth it has promised and slow the rate of its cash burn.

The company, which changed its strategy from creating tailored made licences to selling a unified subscription model, has yet to secure enough new contracts for its new system. Unless its management can show that it can cut its operating costs quickly enough or show that it can deliver on revenue growth, investors and lenders may not be willing to stump up additional cash to fund its continued investments.

The selling down of its shares by major shareholders is another cause for concern. Visa Europe and US hedge fund Omega Advisors, two of its cornerstone investors seemed to have given up on the company, by aggressively selling down their stakes regardless of the company’s plummeting share price.

Competition is rife in the sector, and Monitise may lack the scale needed to compete with the likes of Apple and Google. With this in mind, shares in Monitise could have much further to fall.

APR Energy

APR Energy (LSE: APR), the temporary power provider, has struggled to secure new contracts despite surging demand for temporary power solutions globally. The company is overly exposed to a single contract to provide power to 1 million homes in Libya, which accounts for about 60% of its underlying profits. But, costs for the contract have spiralled out of control, and the company’s level of indebtedness has been soaring.

With net debt of $557 million, the company is dangerously close to breaching its debt covenants. Unless the company can show that it can grow revenues and cut costs quickly enough, APR could find itself in serious financial trouble.

Nostrum Oil & Gas

Shares in Nostrum Oil & Gas (LSE: NOG) may have fallen by 32% over the past year, but it seems that its shares could fall much further. The oil price has fallen much further, with the price of Brent crude oil having dropped 52% to $50.50 per barrel over the same period.

There are bright spots for the Kazakhstan-focused oil producer though. Its GTU3 well development is fully funded, and the completion of this well should allow its production rate to more than double from currently less than 45,000 barrels of oil equivalent per day (boepd), to 100,000 boepd by the end of 2016. Nostrum’s pre-Caspian Basin oil fields also benefit from very low production costs, with an average cost of production of just $4.3 per barrel of oil equivalent.

However, shares in Nostrum seem very pricey on its forward-looking valuations. Analysts expect underlying EPS will fall by 68% this year to 17.3 pence. With its shares currently trading at 515 pence, this implies a forward P/E ratio of 29.8. By 2016, underlying EPS is expected to bounce back by 44% to 25.0 pence, and this should mean its forward P/E on its 2016 earnings will still be a whopping 20.6.

The post How Much Further Can Shares In Monitise Plc, Apr Energy plc and Nostrum Oil & Gas plc Fall? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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

What’s happened, and why are these shares rising?

Dixons Carphone

Dixons Carphone surprised investors this morning by announcing plans for a 500-store joint venture with US mobile operator Sprint.

Dixons will supply “mobile phone retail expertise and proprietary knowledge” to Sprint. The US firm will initially open 20 Sprint-branded stores in the US. If these are a success, the two companies plan to expand the venture to create a chain of 500 stores.

Dixons’ investment is limited to $32m for a 50% stake in the joint venture, so if things don’t go well, shareholders’ exposure seems limited. I reckon this could prove a success for the firm, assuming the Carphone Warehouse retail system translates to the US market successfully.

Shares in Dixons Carphone currently trade on a forecast P/E of 19, so they’re not cheap. However, I reckon shareholders should hang on, as there could be more to come.

Incidentally, Tesco investors may want to remember that the successful combination of Dixons and Carphone Warehouse happened under the watch of former chairman John Allan. Mr Allan has a track record of transforming companies, and is now chairman of Tesco.

BATM Advanced Communications

This small cap technology company makes specialised computer networking and medical equipment.

It’s been struggling to deliver on the promise of a few years ago, but this morning announced a new cyber security contract with “a government defense ministry”. The firm’s shares are currently up by 9%.

The initial value of the contract is only $3.7m, but BATM expects this to increase to $10m by 2017 and to $20m by 2020.

BATM is expected to return to profit this year. Broker forecasts for earnings of 0.2 cents per share put the company on a forecast P/E of 126, falling to 29 in 2016. It’s not a buy for the faint-hearted, but BATM is well funded and could yet prove to be a strong growth story.

APR Energy

Shares in temporary power provider APR spiked higher this morning after the firm announced a new $30m contract in Egypt.

The shares have slipped back somewhat since then, but have seen heavy buying in early trade. In reality, however, this deal isn’t anywhere near big enough to solve APR’s problems.

APR’s shares have fallen by 69% over the last month, after it warned that this year’s full-year loss would be worse than expected. APR has net debt of $547m and in June the firm warned that it might breach its financial covenants later this year.

APR faces a variety of headwinds, but the risk of debt problems should be the biggest concern for shareholders. These could result in the firm being forced to raise new funds through a discounted rights issue or placing.

While APR looks cheap based on its historical performance and its price-to-book ratio of just 0.3, I think the risks are too high. I intend to steer clear until the picture improves.

The post Why Are Dixons Carphone PLC, BATM Advanced Communications Ltd & APR Energy PLC Rising Today? appeared first on The Twelfth Magpie.

More reading

• Up 3.5% this month, is it time for UK investors to cycle back into the more domestically-focused FTSE 250 index?

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.

What’s gone wrong at each of these firms and what does it mean for shareholders?

Sound Oil

Shares in Italy-focused Sound Oil fell by as much as 20% when markets opened this morning, after the firm said that it has decided to abandon the second appraisal well drilled at its Nervesa discovery.

Sound said that, despite stimulation and reperforation operations on the lower section of the target reservoir, it had “been unable to secure a stabilised flow rate”. With “no material gas shows in the upper section of the target reservoir”, Sound had decided to abandon the well.

This is bad news but not a total surprise, in my view. Last week, Sound warned that the lower section of the well appeared to be “of relatively low permeability”.

The good news is that the first appraisal well drilled at the Nervesa discovery is expected to become a producer. The company plans to start the construction of production facilities shortly.

Sound is also progressing towards drilling an exploration well on the potentially exciting Badile prospect, which has a mid-case prospective resource of 178 billion cubic feet of gas.

However, today’s news was significant enough to persuade the company to delay the acceptance deadline for its current open offer, through which it is trying to raise €5m from shareholders.

APR Energy

Shares in temporary power provider APR Energy fell to a low of 146p in January, but have recovered strongly since then, rising by 170% to a high of 400p in March.

It now seems that investors priced in a recovery far too quickly. APR shares fell by around 30% this morning, after the firm said that 2015 profits would be “significantly below market expectations”.

The firm also warned that it could breach its financial covenants later this year and said its chief operating officer, Brian Rich, had left the business with immediate effect for “personal reasons”.

APR says that today’s profit warning is the result of new contract negotiations being delayed and higher-than-expected demobilisation costs in Libya.

It was the Libya fiasco that caused APR shares to start sliding last year, after the firm’s contracts were not renewed, following months of delays and unpaid bills.

What’s the outlook now?

Even before today’s announcement, analysts were forecasting a full-year loss of about 23p per share for APR in 2015. The firm was also expected to report 38% drop in revenue, highlighting the impact of the loss of its Libya business.

In my view, todays’ profit warning suggests that a return to profitability will be a big challenge for APR. I suspect the firm’s net debt of $546m could become a costly headache. Ultimately, it’s very difficult to value shares in a business with possible debt problems and loss-making operations.

If you want exposure to this sector, I believe Aggreko is a more attractive alternative. I’d avoid APR until the firm’s outlook becomes clearer.

The post Why Are Sound Oil plc and APR Energy PLC Falling Today? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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

In this article, I’ll explain what’s happened at each firm.

APR Energy

Shares in temporary power specialist APR fell by 20% when markets opened this morning, after the firm admitted that the loss of its Libya contract is likely to lead to a number of bad debts, which will result in full-year profits “significantly below current market expectations”.

However, this is a one-off problem. News that the firm is still in discussions with its lenders should perhaps be more of a concern for shareholders: APR warned in February that it could soon breach its banking covenants, and needed to negotiate amended lending terms.

I’m sure APR will succeed in these negotiations, but the revised terms are likely to reduce shareholder returns, in the medium term.

The problem is that Libya was by far the firm’s biggest project. Although APR has made good progress with renewals elsewhere in recent weeks, there has been very little new work announced to replace that lost in Libya.

This suggests that APR has a big chunk of equipment that’s not generating revenue — even though its debt payments remain unchanged.

Until we see APR’s full-year numbers, which are expected towards the end of March, I reckon it’s hard to put a value on APR shares, as visibility of 2015/16 earnings is very poor.

Thomas Cook Group

Shares in Thomas Cook Group rose by 14% during the first hour of trading this morning, after investors welcomed news that Chinese firm Fosun International Limited has agreed to invest £91.8m in the firm, through a placing of 73,135,777 new shares.

This equates to a share price of about 125p, which was the market price for Thomas Cook shares earlier this week — suggesting that Fosun is confident enough not to have demanded a discount on its investment.

Even better is news that Fosun intends to purchase more Thomas Cook shares from the market, in order to take its stake to 10%. This is good news for shareholders, as it’s the equivalent of a big share buyback, funded by a new investor.

Fosun recently purchased French resort firm Club Med. The investment in Thomas Cook is expected to drive new partnerships and help open up the Chinese market to Thomas Cook, as well as reduce the firm’s £1.1bn net debt.

The post Why Are APR Energy PLC & Thomas Cook Group plc On The Move Today? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head 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.

In this article I’ll explain what’s happened, and why the shares are up.

Rio Tinto gives back

Iron ore giant Rio has some of the largest, lowest-cost iron ore mines in the world, so profits are holding up well, despite the current weak market for iron ore.

In its 2014 results today, Rio reported post-tax profits of $6.5bn, a 78% increase from 2013. The firm said that capital expenditure had been cut from $13bn to $8bn in 2014, but net cash from operating activities had fallen by just 5% to $14.3bn, despite the weaker iron ore market.

Rio’s net debt fell by 31% to $12.5bn last year, reducing the firm’s net gearing to an undemanding 22%.

As a result, Rio announced a $2.0bn share buyback today, alongside a 12% dividend hike that gives Rio shares a yield of 4.6% at today’s 3,060p share price.

Lancashire returns cash

Specialist insurer Lancashire Holdings offers protection for ships, aeroplanes, oil platforms and terrorism and natural disaster risks — and overall, it’s been a fairly quiet couple of years for the firm, with no major catastrophes to pay out on.

As a result, Lancashire has been returning some of its surplus capital to shareholders, resulting in eye-popping yields.

Today’s final results revealed that the total dividend for 2014, including one-off special dividends, will be $1.85, or around 122p. That’s 32% higher than City forecasts for $1.40, and gives the shares a stonking trailing yield of 19%!

Lancashire’s earnings and dividends vary widely from year to year — the latest consensus forecasts for 2015 suggest the dividend payout will be much lower this year, at $0.90 — although this still gives a prospective yield of 9.3%.

APR Energy recovery?

Shares in temporary power supplier APR Energy are up by 19% as I write, after the firm confirmed that a major new project in Australia has successfully been commissioned, and is due to run until 2017.

This isn’t a new project, but seems to have ignited interest in the stock, which has fallen by 68% over the last year, mainly because the firm failed to renew a major contract in Libya.

However, APR now trades on a 2015 forecast P/E of 18.7, suggesting to me that until we know more about the financial implications of APR’s Libya withdrawal, the shares are a risky buy.

The post Why Are Rio Tinto plc, Lancashire Holdings Limited & APR Energy PLC Up Today? appeared first on The Twelfth Magpie.

More reading

• The only FTSE 100 stock I own right now

Roland Head owns shares in Rio Tinto and Lancashire Holdings. 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.

Unfortunately, Libya was a key customer for APR — Reuters has previously estimated that APR’s sales from Libya were worth around $200m per year, or 40% of 2014 forecast revenue.

Practical problems

APR now needs to demobilise and export a substantial amount of generating equipment from Libya. This will require the assistance of local contractors and government department. The costs and time involved could be substantial, and some of these assets may have to be abandoned.

APR said today that its Libyan assets will be deployed elsewhere, but investors need to ask where: at the half-year point, APR’s fleet utilisation was only 77%. If the Libyan assets also become available again, does the firm have enough new business to absorb this extra capacity?

Value credentials?

Uncertainty over the future of APR’s Libyan assets is one of the main reasons APR shares currently trade at just 0.2 times the firm’s tangible book value of 806p per share. Clearly, investors don’t believe this value is realistic.

Similarly, after today’s falls, APR trades on a 2014 forecast P/E of 3.3. We won’t find out APR’s 2014 full-year earnings per share until March, but investors are clearly betting on earnings being much lower than even the latest forecasts.

Dividend and debt

APR’s prospective yield of 7.0% is based on the firm’s $0.17 per share dividend payout remaining unchanged this year.

I’d hazard a guess that this payout could be cut, given the probable impact of the loss of APR’s Libya contract, and the firm’s ongoing interest costs, which I estimate at around $20m for 2014. After all, APR’s operating profit was just $69m in 2013.

We still don’t know

Part of the problem is that APR has been reluctant to provide any precise numbers about its Libyan operations: we don’t know the full-extent of the impact on sales, profits or asset value.

We should know more in March, when APR is expected to report its full-year earnings. Until then, the firm’s shares remain a very risky recovery buy, in my view.

235% profit?

Investing in special situations like APR Energy can be very profitable: if the firm’s shares recovered to just two-thirds of their current tangible book value, investors at today’s 160p share price would see a 235% profit!

The post APR Energy PLC Falls On Libya Exit: Is Now The Time To Buy? appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head 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.