The post Bwin.party Digital Entertainment Plc, AGA Rangemaster Group Plc & Latchways plc: Can The Merger Mania Continue? appeared first on The Twelfth Magpie.

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

Elsewhere, the shares of Latchways (LSE: LTC) and Exillon Energy (LSE: EXI) have also caught my attention today. They are up 48% and 7.7%, respectively, in a plunging market, with the FTSE 100 down 2.6% at the time of writing. 

Aga Rangemaster On The Up

This is great news for shareholders, but how much risk does the trade carry now? 

When initial takeover news emerged in mid-June, AGA stock surged over 30%; back then, it announced that it was holding discussions with US-based Middleby, which offered 185p in cash for each AGA share soon after, valuing the equity of the target at about £129m. 

Whirlpool may or may not make a formal offer, yet the stock of AGA currently trades at 203p and could seriously offer more value to shareholders. Whirlpool is expanding abroad, and AGA would be just a bolt-on deal, so its suitor could well overpay for it. 

Frankly, these situations are ideal for opportunistic traders, but I am after long-term value so I’d likely give it a pass, although more upside is possible. 

Goodbye Latchways

Latchways, a maker of protection systems, said today that it had agreed to be bought by US-based MSA Safety for an enterprise value of £114m.

Under the terms of the acquisition, Latchways shareholders will receive 1,100p in cash for each share they own, which implies a 53% premium over Latchways’ share price on Friday.

Its share price’s 52-week range is between 705p and 1,068p, and it appears clear that its shareholders are being offered a fair deal. The group has never recovered from the plunge in its valuation at the end of 2014, which came in the wake of a profit warning last autumn.

I’d say that this is the best outcome for shareholders, given that the outlook for many of its end markets is still problematic. 

Exillon Energy: Too Risky?

A risky bet (as its price to book value indicates), the stock of Exillon Energy is perhaps the most appealing investment of the three, having risen 7.7% today following the release of a trading update today that showed:

• Net profit down by 45% to $13.2m ($23.8m in H1 2014);

• Earnings before interests, taxes, depreciation and amortisation down by 40% to $30.4m ($50.7m in H1 2014);

• Production down by 7%, with the average production for H1 2015 equivalent to 16,643 bpd.

Operating costs have fallen, but negative working capital should be closely monitored, although capex requirements are covered by its cash balances over the short term. 

“As at 30 June 2015, the outstanding debt had reduced to $54m, as a result of scheduled repayments of principal. Our net cash position was $5.2m,” Exillon also pointed out. 

In short, it could have been much worse: its stock now trades at 108p, or some 20% above the 52-week low of 90p of last week. I am tempted!

Oil prices had risen almost 20% in less than a week but they are down over 3% today on the back of weak factory data from China, which testifies to a highly volatile market environment. I am still convinced that Brent crude oil will trade around $80 per barrel by the end of the year following a less aggressive production policy by the OPEC — well, to me at least, this will be what it takes to invest in Exillon and other similar oil players!

The post Why AGA Rangemaster Group Plc, Exillon Energy Plc & Latchways plc Are Surging Today 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?

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

Tomorrow’s big winners often come from the stocks that nobody is interested in buying today. Of course, it’s harder to go against the crowd, particularly as unloved stocks often remain unloved for some time, but the long-term rewards can be handsome.

BP (LSE: BP), Glencore (LSE: GLEN) and Latchways (LSE: LTC) are three stocks the market is currently shunning, but which could be great contrarian picks.

BP

The collapse of the oil price over the last year has naturally sent the shares of oil companies plunging. A brief bounce in the oil price in the spring hasn’t lasted, and it’s back to doom and gloom.

Good news earlier this month that BP has reached agreement to settle all US federal and state claims arising from the Gulf of Mexico oil spill of 2010 hasn’t stop the company’s shares from falling back to flirt with the 400p level, through which they dropped for a spell or two in January.

Industry insiders and analysts expect the oil price to remain depressed for some time. However, BP’s dividend yield in excess of 6% appears good compensation for holding the shares, and a current-year forecast P/E of 16, falling to 13 next year, promises great scope for a substantial re-rating if, as the consensus appears to be, the oil price recovers over three to five years.

Glencore

Mining is another depressed sector where the supply-demand equation is out of kilter and where world prices — metals, in this case — are depressed. The contrarian case for looking at miners is much the same as for looking at oil companies.

Glencore isn’t a ‘common-or-garden’ miner, but is a producer, marketer and trader across the commodities spectrum: metals and minerals, coal and oil, and agricultural products. I’ve never fully understood the finer details of the business model, but it’s a comfort that Glencore’s veteran industry executives describe themselves as “an owner-oriented management team wholly aligned with external shareholders”.

Glencore’s shares are trading at multi-year lows, and have the potential to make spectacular gains further into the future. In fact, analysts expect a decent bounce-back in earnings as early as 2016, putting the company on an attractive P/E of 13 with a 5% yield.

Latchways

Latchways is a much smaller company than BP and Glencore, but is the world number one in its niche of fall protection equipment for people working at height. The company isn’t as exposed to the kind of great macro winds that pull or push oil companies and miners, but it has suffered from cyclical weakness in some of its markets over the last two years (for example, in commercial construction in parts of Europe).

Nevertheless, Latchways has continued to invest in its business for the future, where there are strong drivers for long-term growth: increasing safety legislation around the world, and employers’ willingness to pay up for top products from a trusted source.

Latchways shares have almost halved from their record high of late 2014, despite analysts’ forecasts that earnings growth will start motoring again this year. A P/E of 14.4, falling to 13 next year, looks attractive, alongside a dividend yield of over 5%. Latchways appears another great contrarian pick that could deliver a superior long-term return for patient investors.

The post 3 Great Contrarian Picks: BP plc, Glencore PLC And Latchways plc appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
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• BP shares are falling. But is the oil market actually tighter than investors think?
• How much is needed in a Stocks and Shares ISA for £357 of weekly passive income?

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