Investors eyeing up opportunities for future capital appreciation to make millions may be looking at Lamprell shares with interest. After all, it’s being greedy when others in the market are fearful that drives Warren Buffett’s investing strategy. To illustrate the validity of this method, if you’d bought and held 100 shares in International Business Machines (IBM) after their 50% drop in the early 1960s, you’d be a retired millionaire right now!

However, buying a stock for capital gains is risky and any enterprising investor needs to research carefully. On this basis, it’s worth digging deeper into the Lamprell share price to find out why some investors think now is the time to be greedy with Lamprell.

Lamprell shares surge on contract award

On 20 May, Sharjah National Oil Corporation (SNOC) awarded Lamprell a new contract, which caused the Lamprell share price to rise. However, investors have expected this for some time, as part of a $6.2bn bid pipeline. Indeed, the contract should reassure investors that Lamprell’s management is working towards promises made.

However, the timings of pipeline awards remain a challenge for long-term capital intensive industries like oil and gas. In addition, the double whammy of plunging oil prices and the Covid-19 pandemic is impacting Lamprell’s business by delaying project awards further. Costs have increased and productivity has dropped as redundancies and reduced working hours begin to bite.

This will not help Lamprell’s liquidity crisis. Declining revenues and net losses three years in a row are resulting in negative cash flows, eating into strategic reserves. Longer-term investments are being cut back to help with short-term cash needs. Consequently, I think Lamprell’s short-term strategy will be about cash conservation for survival. Funding to realise future pipeline activities will come later.

Lamprell looks to debt financing

Lamprell’s management is assuming the company will secure debt financing. However, the large depletion of assets gives the firm fewer assets to loan against. The coronavirus pandemic and the oil price crash means many firms are competing for funding. Lamprell may find securing financing a lot harder. 

However, with a reputation for quality engineering and good project management means, Lamprell is in a strong position to win future projects. Indeed, the firm is expecting a major contract win within the next 12 months.

According to management, the firm’s UAE base will help its prospects for winning bids in the Middle East. The location ensures transport costs and risks are lower for customers when compared with Asian competitors. And a history of business interests there means Lamprell is culturally aligned with client expectations.

Currently trading at around 19p, Lamprell shares are cheap when compared with the per-share net tangible asset value of 46p. So, if the business collapses shareholders could gain, assuming Lamprell doesn’t divest any more assets.

But for long-term investors, Lamprell is a long way from demonstrating a sustainable business model that can increase earnings over time. I won’t be buying.

The post Up 179% in a week, are Lamprell shares your route to making a million? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Rachael FitzGerald-Finch has no position in any of the shares mentioned. 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.

Of course, the wider energy sector remains extremely volatile, with risks being high. While the oil producer may be worth buying at the present time, one stock reporting results on Thursday could be one to avoid.

Uncertain future

The company in question is provider of fabrication, engineering and contracting services to the oil and gas industry, Lamprell (LSE: LAM). The company released interim results, with a net loss of $21.9m reflecting low activity levels during the period. It’s expected to record a loss for the full year, with a further loss set to be delivered in the next financial year.

At a time when a number of oil and gas related companies are enjoying improving financial performance, continued losses could lead to weak investor sentiment. The company, though, is making progress in advancing its strategic aspirations, while its bid pipeline of $4.1bn could benefit from increased activity in both of its end markets of renewables and oil and gas.

However, with a number of oil and gas stocks delivering high levels of profitability, Lamprell may not be an obvious choice when it comes to gaining exposure to the sector. Certainly, a turnaround is possible over the coming years, but the risk/reward ratio that the company currently offers appears to be relatively unappealing.

Improving outlook

The prospects for Premier Oil look set to improve over the next few years. The company’s bottom line is expected to move into the black in the current year, with growth of 74% forecast for the next financial year. Much of this growth is due to a higher oil price, with recent fears regarding supply declines due to Hurricane Florence causing the price of black gold to rise further. And with demand forecast to remain stable during the course of 2019, the outlook for the oil price could improve.

As well as a higher oil price, Premier Oil’s financial prospects have been boosted by a disciplined approach to costs and capital expenditure. The company’s production is increasing, while its costs have fallen in recent years. This combination is expected to yield stronger cash flow, which could be used to reduce its balance sheet leverage over the medium term.

Even with lower debt, the company remains a relatively risky stock to buy. It is largely dependent upon the oil price when it comes to its financial performance. And while the oil price may move higher, it always has the potential to fall rapidly. With a forward price-to-earnings (P/E) ratio of 6, however, the stock appears to offer a wide margin of safety. As such, now could be the right time to buy it – even though it has doubled in price in the last year.

The post Here’s why the Premier Oil share price could be set to double… again appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens has no position in any of the shares mentioned. 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.

The first of these is Alaskan oil explorer 88 Energy (LSE: 88E). Delays in flow testing the Icewine #2 well have caused this £91m firm to lose more than 50% of its value since peaking in June 2017. But the shares have doubled since October, suggesting strong buying ahead of the 2018 season.

88 Energy recently raised $8.1m from option investors and started work on a new 3D seismic survey. Working on the Western Margin of the North Slope of Alaska, the company hopes to gather data for prospective drilling opportunities.

The survey started on 7 February and will cover around 460 square kilometres. It was expected to take 45 days, so should be completed very soon.

Buy ahead of news?

Along with the 3D seismic results, investors will be looking forward to flow testing results from Icewine #2. Testing of this well began last July, but was suspended to allow pressure to build. When testing resumed on 31 August, the rapid approach of the Arctic winter soon caused the company to suspend testing again, until April or May 2018.

The results which were reported last year showed Icewine #2 producing only fracking fluid and “minor hydrocarbon indications”, including a small amount of gas. Oil may flow when testing is resumed later this year, but the results so far don’t seem very encouraging to me.

With no revenue and limited cash, the high-risk nature of this business means that I would rate the shares as a sell.

A contrarian opportunity?

Dubai-based offshore jackup rig-builder Lamprell (LSE: LAM) has had a difficult time since the oil market slump started in mid-2014. Today’s full-year results make it clear that as expected, it’s likely to be at least 2019 before improved market conditions translate into higher revenue.

Luckily, Lamprell went into the energy market downturn with a full order book. As these rigs have been completed, this order book has been converted into cash. Today’s figures show that while revenue fell by almost 50% to $370.4m last year, Lamprell ended the year with a net cash balance of $257m.

Indeed, it would have been a fairly good year if the company hadn’t run into problems on its first major renewables project, the East Anglia ONE offshore windfarm. This resulted in the group reporting an overall loss for the year, thanks to “significant additional costs” for staffing, equipment and shipping.

It seems clear that this project wasn’t properly understood or priced. But I’m fairly sure lessons have been learned. Future renewables work should be more profitable.

This could be a turning point

In the meantime, the group’s order pipeline has risen from $2.5bn to $3.6bn over the last year. Chief executive Christopher McDonald expects some of these orders to be awarded later this year. If Lamprell can rebuild its order book for 2019 onwards, the shares could be a contrarian buy at under 70p.

However, this situation isn’t without risk. Net cash will fall by more than $100m this year, due to existing commitments. Failure to secure some decent orders for 2019 could leave the firm in a much more vulnerable position. With very little visibility on progress for outside shareholders, I’d avoid this stock for now.

The post Should you pile into 88 Energy Ltd, down 50% in 9 months? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Roland Head has no position in any of the shares mentioned. 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.

Mitie has its own debt issues too, and there are still fears in some quarters of further costs set to show up as the company’s new management continues with its balance sheet cleanup operation. My Foolish colleague G A Chester was rather prescient when he tipped the shares to fall further in November when they were priced at 202p, and since then they’ve dropped to 155p as I write. But that includes a recent uptick, and I see signs that Mitie is past the worst.

An update Friday told us that debt is “comfortably” within banking covenants, though I want to see its actual level when full-year results are out in June. At the interim stage at 30 September, the figure stood at £172.6m, and I hope it’s come down since then.

The worst over?

Sales growth is modest, and operating profit is in line with expectations. Cash generation has suffered as, among other things, Mitie gets back to a more conservative approach to invoice discounting and ‘normalisation’ of the balance sheet.

Chief executive Phil Bentley said: “We are one year into our transformation programme and we are making progress.” But is it too soon to be confident?

There’s risk, but with forecasts of EPS growth returning for the 2018/19 year, which would drop the P/E to around nine, I think the fear is largely in the share price. Yet I want to see those full-year figures first.

Energy woes

Lamprell (LSE: LAM) shares have been sliding for the past few years as the oil price crisis has hit, and were further hammered by a profit warning in September which went on to suggest that the outlook for 2018 was poor too. But with the price all the way down to 78p at the time of writing, are we now looking at a profitable recovery candidate?

We heard Friday that the firm’s joint venture in Saudi Arabia has cleared all initial hurdles and is set to formally commence business. Lamprell is expected to contribute up to $140m to the project’s construction, with the expectation of an order for 20 jackup rigs over the next 10 years.

Results for 2017, due on 22 March, are set to show a “significant loss” from the firm’s East Anglia One wind farm project, and analysts are expecting a fairly hefty loss per share of nearly 16p. Losses are forecast to continue until 2019, though the predicted loss of only 1.3p per share that year suggests Lamprell could be back to profit by 2020.

Buy?

Will Lamprell make it? I see reasons for optimism. It seems to have plenty of cash to see it through this tough period, and expects to have year-end net cash of $255m on the books. And though revenue for 2017 is expected to be around the $370m level, at least the year will fully account for the East Anglia project loss.

Assuming the company can beef up its order book, which is a key focus right now, I’m cautiously optimistic — and I see the Saudi project as evidence of a better long-term outlook.

The post Buying these 2 turnaround stocks today could make you a millionaire retiree appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Alan Oscroft has no position in any of the shares mentioned. 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.

The last cut was in 2010 when the group had to slash both capital spending and income distributions, freeing up cash to pay liabilities stemming from the Gulf of Mexico oil spill. Since then, BP has tried to keep its payout stable, despite falling oil prices. 

Oil pays dividends

After three quarters without dividends in 2010, the company resumed distributions in 2011, paying out approximately 17.4p to investors. This year it is on track to pay out 31p per share, having grown its payout 9.9% per annum since 2011. The shares currently yield around 6%.

The income from BP’s shares has been a significant contributor to returns for the company’s investors. Over the past five years, shares in the oil major have produced a total return of around 7.8% per annum, which is impressive considering the headwinds the business is facing. 

BP’s shares might be a great income buy, but the one thing they have lacked over the past few years is capital growth. Indeed, over the past five years, the shares have only returned 14% excluding dividends, underperforming the FTSE 100 by 12% over the same period. 

With this being the case, I believe Lamprell (LSE: LAM) could be the perfect stock to buy to sit next to BP in your portfolio. 

Capital growth and income 

Lamprell is a traditional value stock. Today its shares have plunged to a low not seen since this time last year after the firm issued a profit warning. However, after today’s declines, the shares are trading at a deep discount to tangible book value of around 63%. 

Shares in the oil services company are sinking after it warned its 2017 earnings would be “materially below” (usually more than 20% or more below estimates) market expectations because its East Anglia One windfarm project is expected to make a “significant loss” that will be booked in 2017. While this news is disappointing, the firm is well funded with $306m of cash at the end of June, and it has an order backlog equal to around one year of revenue (as at the end of June). 

Put simply, even though Lamprell will now miss expectations for this year, the group is well placed to return to growth as the oil industry starts to perk up. And considering how cheap the shares currently are, investors could be in line for a return of 170% if the stock returns to book value. 

That said, as a small-cap Lamprell isn’t risk-free. You could make a return of nearly 200%, but this opportunity isn’t for everyone. That’s why I believe BP is a perfect partner for Lamprell in your portfolio. 

The post Why BP plc is set to be a millionaire-maker stock appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share menionted. The Motley Fool UK has recommended BP. 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.

The oilfield services mammoth was last dealing 11% lower on the day, although bouncing off intra-day highs — it had fallen below the 80p per share barrier for the first time since last November earlier in the session.

Lamprell announced revenues of $159.2m between January and June, a shocking 65% decline from the corresponding 2016 period when turnover rang in at $451.3m.

And the Dubai-based business took the hatchet to its full-year sales guidance too. It now anticipates turnover of £370m to £390m “due primarily to the continuing low levels of walk-in work reflecting market conditions.” This is a meaty reduction from the firm’s prior forecast of $400m to $500m.

If this wasn’t disappointing enough, Lamprell suggested that things are not about to improve any time soon. It added that the outlook for 2018 “remains challenging with revenue currently expected to be around 10% lower than 2017 levels, contingent on the timing of potential contract awards.”

Chief executive Christopher McDonald said: “Top-line performance will remain subdued as a result of the slow pace of the new major contract awards that we have seen over the past 24 months.” He added: “We do not expect to see the potential improvement in market conditions impacting our business in 2018 due to the lag between improved market conditions and project awards in our business streams.”

McDonald said that while levels of bidding activity have increased, Lamprell does not expect to see turnover grow until 2019.

Losses predicted

On the plus side, Lamprell advised that it had flipped back into the black during the first six months of 2017. It recorded net profit of $1.1m versus the $4.4m loss printed 12 months earlier, reflecting the efforts it has made to strip costs out of the system.

Still, the City was not expecting these measures to prevent Lamprell reporting losses for this year and next, with losses of 2.8 US cents and 0.1 cents per share forecast for 2017 and 2018 respectively. And these figures are likely to be downgraded on the back of today’s release.

Given that the enduring market imbalance is likely to keep crude prices on the defensive, and with it the exploration budgets of oil explorers across the globe, I believe Lamprell’s top line could remain under pressure for a long time to come.

Another one to avoid

I also reckon share pickers should give metals and energy giant Vedanta Resources (LSE: VED) a wide berth right now.

Like Lamprell, Vedanta is also at the mercy of the worrying supply and demand outlook washing over the crude sector, but this is not the only worry as supply concerns in its other key markets of zinc, iron ore and copper also hang heavy.

The City expects earnings at the FTSE 250 business to surge from 1.1 US cents per share to 87.5 cents in the year to March 2018, on the back of surging metal values, and again to 164.2 cents in fiscal 2019.

I believe these estimates of sustained profits growth could be subject to severe downgrades in the months ahead, however. So despite its forward P/E ratio of 12.6 times, I reckon Vedanta is still too risky right now.

The post Why I think investors should avoid this oil stock like the plague appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Royston Wild has no position in any of the shares mentioned. 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.

Turnaround potential

Reporting on Friday was oil and gas support services company Lamprell (LSE: LAM). Its financial performance in 2016 was hugely disappointing, with sales and profitability falling. The latter was negatively affected by a writedown, while the outlook for the industry is hugely challenging. The company expects more difficulties in the remainder of 2017. With the oil price not expected to surge, it could be another difficult year.

However, Lamprell offers significant turnaround potential. A key reason for this is its sensible strategy. It is seeking to reduce costs in order to become more sustainable in an era when the oil price may remain at below $100 per barrel for some time. It is also seeking to move into new projects, such as the potential participation in the Maritime Complex in Saudi Arabia.

While its strategy may improve its performance, a rising oil price could have an even bigger effect. In the coming months, the supply surplus is forecast to narrow and this may have a positive effect on the price of black gold. A rising oil price could mean higher profitability across the industry, which may improve investor sentiment in Lamprell. Trading on a price-to-book (P/B) ratio of just 0.75, there seems to be considerable upside potential on offer in the long run.

Dirt-cheap opportunity

Of course, Lamprell is not the only support services company which has been negatively affected by the falling oil price. Sector peer Cape (LSE: CIU) has lost 52% of its value in the last five years, while it recorded a pre-tax loss last year of £44m.

While disappointing, a turnaround could be on the cards. Cape is forecast to return to profitability in the current year, which could improve investor sentiment in the stock. Although no growth is forecast for next year, the company’s valuation appears to be difficult to justify. Using the current year’s earnings forecast, Cape has a price-to-earnings (P/E) ratio of just 6.8. This indicates that a significant upward re-rating could take place.

Certainly, there is scope for more disappointment regarding the oil price. However, Cape’s valuation appears to fully factor-in the risks it faces. Buying a slice of it now may be viewed as risky by many investors. Its share price could become increasingly volatile. However, given its wide margin of safety and a logical strategy which is due to turn its performance around, now could be the perfect time to buy it for the long run.

The post 2 bargain turnaround stocks to bring you a step closer to retirement appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens 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.

A difficult year

Oil & Gas support services company Hunting (LSE: HTG) saw its revenue decline from $810.5m in 2015 to just $455.8m in 2016. That’s a fall of 44% and this caused it to swing into an underlying EBITDA (earnings before interest, tax, depreciation and amortisation) loss of $48.9m. This was mostly caused by a lower oil price, which meant oil producers have less appetite for investment.

Despite the improved outlook for the oil price following OPEC’s decision to cut production, Hunting’s financial performance is set to remain disappointing. It is expected to report a loss in the current year, which means that investor sentiment could come under pressure. However, it continues to develop new product lines and has been able to help its customers to lower their operational costs and increase project efficiencies. This should help to strengthen the company’s competitive position in what is becoming an increasingly concentrated industry.

Growth potential

Due to the strategy it has adopted and the prospect of a higher oil price, Hunting is forecast to return to profitability in 2018. Clearly, there is scope for a downgrade to its outlook due to its dependence on the price of oil. However, since the company’s shares trade on a price-to-book (P/B) ratio of just 0.9, they seem to offer a wide margin of safety.

In fact, if Hunting is able to return to profit in 2018, its shares are likely to rise significantly. That’s due to a reduction in the prospects of asset writedowns, while it could also be argued an element of goodwill will be deserved since its assets are able to produce a profit. As such, a P/B ratio of 1.5 could easily be deserved, which would equate to a share price gain of over 50%.

Industry outlook

Of course, an improving industry outlook means that other Oil & Gas support services companies could also be attractive places to invest. For example, Lamprell (LSE: LAM) is also expected to move from being a loss-making business to a profitable entity in 2018. This has the potential to improve investor sentiment – especially since it also trades at a discount to net asset value.

Lamprell’s P/B ratio is just 0.6, which is a third lower than that of Hunting. This suggests there is even greater upside potential on offer, which could make Lamprell an even more attractive investment. Like Hunting, it seems to have a sound strategy to not only cope with a lower oil price, but to also position itself for future growth through becoming a more resilient business. Therefore, while both companies could be star buys, Lamprell appears to have the most enticing risk/reward ratio.

The post Why this dirt-cheap oil stock could gain 50% by 2019 appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Peter Stephens 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.

They’re generally considered to be the market’s cheapest stocks, shares that have been dumped by investors who have given up or believe the companies in question have no future. 

However, there’s plenty of research out there that shows buying value stocks can help you beat the market if you’re willing to run against the herd. 

With that in mind, here are three value stocks that could help boost your portfolio’s performance. 

Trying to take off

Shares in Flybe (LSE: FLYB) have been under pressure for some time. The group has struggled to turn around its flagging operations despite numerous CEO changes cost-cutting and a capital raise. 

After years of zero growth, most investors have given up on the company, and the shares now trade at a deeply discounted price-to-tangible book value of 0.6. This low valuation indicates the market believes Flybe is on the verge of collapse and the shares are worth less than the value of the company’s assets. But it looks as if the market is wrong. 

City analysts expect it to report a net profit of £1.3m this year and £8.2m for 2018. Earnings per share of 3.00p are pencilled-in for 2018. Based on these figures, the shares seem severely undervalued. 

Hacking issues 

Investors have been wary of Trinity Mirror (LSE: TNI) ever since the phone hacking scandal broke a few years ago. After years of neglect, shares in the company now look undervalued despite the group’s problems. 

Even though Trinity continues to experience sales declines in its legacy print business, analysts expect net profit to remain steady at around £100m over the next two years. Cash flow is robust and as well as paying down debt, Trinity is also repurchasing its shares. 

Based on City forecasts Trinity’s shares trade at a forward P/E of 3.1, support a dividend yield of 5.6% and trade at a price-to-book value of 0.5. At this low valuation, it looks as if all of Trinity’s problems are baked into the share price, and any good news could drive a sudden re-rating. 

Falling oil price

The falling oil price has weighed heavily on shares of Lamprell (LSE: LAM) during the past two years, but the cash-rich company has what it take to ride out oil’s cyclical downturn. 

Indeed, within Lamprell’s latest trading update management reported that group cash at the end of 2016 is expected to be up year-on-year, despite falling revenue. At the end of 2015, the company reported a cash balance of $200m or about £160m at current exchange rates. For some comparison, at the time of writing Lamprell has a market capitalisation of £325m, so around 50% of the group’s market cap. is cash. Overall, shares in Lamprell are trading at a price-to-book value of 0.6. 

The post 3 cheap value stocks to buy today appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Rupert Hargreaves owns shares of Flybe Group. 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.

The first company under the microscope is Dubai-based rig builder Lamprell (LSE: LAM). Shares in this FTSE-listed group fell by about 9% this morning after Lamprell warned that 2017 would be a tough year, with little in the way of new projects. The company said that 2016 revenue would be about $700m, with 2017 sales falling to $400m-$500m.

For anyone who has been following the stock, today’s statement contained no real surprises. I’m not sure why the shares have fallen this far. One explanation may simply be that at more than 100p, the shares had run ahead of themselves recently. I think the current price of about 90p is probably fair, given the near-term outlook.

Here’s the real story

I believe Lamprell has two key attractions. The first is that it has a very strong balance sheet. Debt levels are low and today’s year-end trading update indicated that net cash should be ahead of “the previous year”. My reading of this is that net cash should be above the 2015 year-end level of $210m.

If that’s right, then the firm’s net cash now covers more than half of its market cap. Cash generation is expected to remain positive in 2017, as older projects are completed. The problem is that as things stand, there isn’t much new work to refill the group’s emptying yards.

Lamprell’s executive chairman John Kennedy said today that he expects market conditions to improve in 2017. However, the group’s customers have already fixed their spending plans for the year ahead, limiting near-term opportunities.

This fits with my view that it’s likely to be 2018 before trading improves at Lamprell. I don’t see this as a big concern. If the firm starts winning orders during the second half of this year, investors will soon stop worrying about 2017.

For me, Lamprell remains a buy at current levels. I continue to hold.

I’m less sure about this one

FTSE 250 oil producer Tullow Oil (LSE: TLW) deserves credit for having navigated its way through the oil market downturn without having to raise cash from shareholders.

But Tullow still has net debt of $4.8bn, an amount that’s very significant when compared to 2017 forecast revenue of $1.7bn and profits of $155m.

Until recently, investors were concerned that Tullow might not be able to raise the cash needed to fund new projects. A $900m farm-out deal to Total in Uganda has reduced that risk, but this will only deliver $200m of cash. The remaining $700m will be paid in kind, through Total funding some of Tullow’s costs on this project.

In my opinion, Tullow’s cash flow is likely to remain stretched by debt repayments over the next couple of years. Although I don’t expect the group to have any problems managing this, I don’t see much upside for shareholders.

Dividends payments seem unlikely until Tullow’s debt falls to a more reasonable level. Meanwhile, the group’s shares already trade on a 2017 P/E multiple of 24. That seems enough to me, so I won’t be buying at current levels.

The post Does $200m+ cash pile make Lamprell plc a recovery buy for 2017? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Lamprell. 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.