The UK economy looks fragile at the moment. With the energy crisis driving inflation to historic highs and the pound falling, analysts expect the recovery to be sluggish and difficult. UK shares have been widely affected too, putting investors on high alert. 

Conversely, few sectors are currently witnessing a boom. But those companies that have continued to show strong growth are now receiving investor interest. I think this is the perfect time for me to diversify and pick up quality stocks on the way up. 

Shares that are defying trends

While the FTSE 100 is down over 6% this year, two overlooked gems on my watchlist have risen over 40% in three months. But looking at the fundamentals, they still look cheap. Let’s dive in. 

The energy sector is red hot right now. Despite the renewable energy push, oil is expected to power a majority of our industries for the foreseeable future. 

UK’s largest independent oil and gas business is Harbour Energy (LSE:HBR) and it has benefited greatly from this. Its shares are up over 41% in the last three months thanks to surging profits. 

In the first half (H1) of 2022, the company saw a 12-fold increase in pre-tax profits to US$1.49bn compared to $120m in H1 2021. The company cut down its net debt by 50% to $1.1bn and increased its 2022 shareholder payouts to $500m. 

Harbour Energy shares are trading at 448p with a price-to-earnings (P/E) ratio of 4.5 times. Given the current yield of 2.13%, which is expected to increase moving forward, this looks to me like a bargain. 

The next UK share on my list has jumped 47% over the last three months. 4imprint Group (LSE: FOUR) is a merchandise manufacturer that operates primarily in the US and controls 4% of the $23.6bn promotional products market.

The firm specialises in designing and manufacturing products that are functional adverts for large companies. 

In H1 2022, operating revenue was $515.54m, up 58% from H1 2021. Operating profits jumped a whopping 1124% to $43.98m primarily because of streamlined marketing and better pricing. 

4imprint doubled its new customer acquisitions and its order book grew 44% to 886,000 in 2022. The board is confident that the revenue target of $1bn will be achieved in 2022.

Its shares are currently trading at 3,645p at a P/E ratio of 20.9 times. Although this is not cheap on paper, I think its revenue growth in 2022 makes it a bargain. Many blue-chip businesses have struggled over the last few months, but 4imprint has shown considerable growth in a highly contested US market. 

Concerns and verdict

Tax cuts will plague oil companies moving forward. The world’s five biggest oil companies saw profits increasing by £50bn between April and June. This prompted a 25% energy profits levy in the UK that will bring the total tax on oil companies to 65%. 

Also, many US businesses are freezing hiring to improve margins. This is indicative of a slowing economy that could affect marketing spend. 

However, both businesses discussed here have reinvested smartly and have stronger balance sheets heading towards 2023. While there could be a slowdown, I think these shares have a lot of growth potential right now. I’ll probably make a lump sum investment in both shares when signs of market recovery become stronger. 

The post Up 40%+ in 3 months! These 2 fast-growing UK shares still look cheap appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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 UKOG subsidiary and operator at the Weald Basin project, Horse Hill Developments (HHDL), had earlier released short-term flow test results, which had disappointed investors and added to the share price volatility. The shares have swung between less than 1p and more than 2.5p over the past six months, and that’s not my idea of a nerve-calming investment.

Early tests were followed by an extended well test (EWT) programme, which concluded this month. And the latest update on Thursday, speaking of the Portland and Kimmeridge targets, tells us that HHDL “now considers the Portland oil field to be commercially viable.” The company aims to begin long-term production during 2019.

The project could see the development of up to three production wells, and up to two pressure support wells, but what production volumes should we expect?

Flow rates

Being understandably cautious, HHDL says its HH-2 horizontal well “has a targeted sustainable daily Portland production rate of 720 to 1,080 bopd“, which is two-to-three times the “calculated sustainable vertical well rate of 362 bopd derived from the EWT programme.”

The company (wisely, I think, considering the ebullience that followed the initial news of its discoveries), adds a caution: “There can be no absolute guarantee that forecast, targeted or calculated rates of production will be achieved.”

The share price responded with a 3.7% rise by mid-morning, but that needs to be tempered by its penny share nature and the high spread. At the time of writing, we’re looking at a spread of 2.5% between buying and selling prices, which is what you effectively lose the moment you buy the shares.

Still positive?

When I last looked at UKOG, shortly after the earlier flow test results were in (but before the EWT programme), my conclusion was that “the signs are indeed turning positive for UKOG.” So what’s my take now?

This positive move on the commercial viability of the project comes after several updates in the EWT programme progress over the past couple of months, and anything the reduces the uncertainty has to be a good thing. And after a year or so of frustration, I can see how sentiment towards UKOG really could start shifting. And if we do see commercial pumping in 2019, the share price could spike back up again.

But for me, UKOG is still very highly speculative and a lot could still go wrong, so I’m really not keen on shares with this level of risk.

Lower risk

If you want to go for an oil explorer, I think there are lower risk options out there. My personal pick is Premier Oil, which itself has been a ride to whiten my knuckles a bit.

For smaller companies, I’d prefer Enquest, which is already expected to turn a profit in 2018 and which my colleague Roland Head likes the look of. Or perhaps Cairn Energy, which is forecast to make a loss this year, but bounce back to profit in 2019.

The post Is the UKOG share price on the brink of a new surge? appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Premier Oil. 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.

One problem that’s been solved for now is UKOG’s cash shortage. The firm’s half-year results showed a net debt position of £0.7m at the end of March. But over the last month, it’s raised £12.5m through share placings. This is expected to provide enough cash for “core projects over the next 18 months”.

Good news on the horizon?

At the top of the list of core projects is appraising and developing the Horse Hill-1 well in the south of England. UKOG has a 32.4% beneficial interest in the PEDL137 licence area containing this oil discovery.

Operations have recently begun on an extended well test programme. This is designed to establish the well’s potential for commercial production and provide information for a potential second well, HH-2.

This testing is expected to last 150 days, suggesting that we could see results during the final quarter of this year. Management hopes that HH-1 will be converted into a production well following the tests, providing a much-needed source of revenue.

Cheap at this level?

The well test is expected to provide the data needed to produce estimated oil reserve figures for Horse Hill. This could be a major step forward in terms of cementing a valuation for the company.

However, we still don’t know very much about the flow rates achievable from HH-1. In my view the stock’s valuation reflects this risk. This situation is too speculative for me, but I think it’s looking more promising than it did a few weeks ago.

A 140% profit in 18 months

One growth stock that has impressed me greatly is IT infrastructure provider Softcat (LSE: SCT). This FTSE 250 firm has risen by around 140% over the last 18 months.

Softcat stock rose by 7% today, after the company said that profits for the year to 31 July would be “materially ahead of its prior expectations”. Market conditions during the latter part of the year have “been very favourable” and growth versus the previous year “has accelerated”.

It’s the second such upgrade in less than two months. Although no financial figures were provided, such rapid growth suggests to me that Softcat might be taking market share from rivals in this sector.

Is there more to come?

I estimate that today’s gains are likely to leave the stock trading at about 28 times forecast profits for the current year.

That’s not cheap, but the firm’s capital-light business model has allowed it to generate an exceptional 50%+ return on capital employed in recent years. My impression is that this is at least partly down to the firm being able to resell expensive IT equipment to its customers and collect payment before it has to pay its own suppliers.

This model means that despite a modest operating margin of around 6%, cash generation is very strong. The stock offers an attractive forecast dividend yield of 2.6%.

With further profit growth expected next year, I share my colleague Edward Sheldon’s view that shareholders should sit tight.

The post Is the UKOG share price heading for 7p again? appeared first on The Twelfth Magpie.

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• 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?

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.

Movements like that have the potential to win or lose investors a fortune, and depending on individual buy and sell decisions, I’m sure that fortunes have been won or lost on this volatile stock. There’s oil in the ground, but the big question is, can the company get it out?

A long and winding road ahead

In last month’s interim report covering the trading period to 31 March, chairman Stephen Sanderson said he is “very confident” that the firm’s comprehensive long-term testing campaign will “provide the necessary data to fully assess Horse Hill’s Portland and Kimmeridge commerciality and help move the project towards timely production in 2019.”

Maybe the company’s oil finds will prove to be commercially viable, but the directors’ language sounds to me like they are bedding down for a long and grinding process in order to establish that. Meanwhile, the firm has no earned-income and during the period raised £10m in a convertible loan note, of which £1.75m is outstanding. On top of that, a further £5.5m came in from institutional investors via a share placing after the period ended. Let’s hope that UKOG can commercialise its assets and get them earning cash inflow before existing investors are diluted into oblivion. However, I’m avoiding the stock and would rather take my chances with Zoo Digital Group (LSE: ZOO).

The company is generating fast-growing revenue by providing technology and services to producers of TV series and feature films so that their content can be subtitled and dubbed in any language and prepared for sale with online platforms such as Amazon, iTunes, Google and Hulu. The company claims that “this allows Zoo’s clients to leverage their original content to reach audiences worldwide.”

Building a competitive advantage

That may sound like a commodity-style business with little to differentiate Zoo’s services from those provided by other firms, but it reckons its strategy is to develop and employ “innovative,” proprietary cloud computing systems that “deliver significant competitive advantage and clearly differentiate the company from other providers of similar services.”

Today’s full-year results show good progress. Revenue increased 78% compared to the year before to $28.6m, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose 35% to $2.4m and adjusted profit before tax shot up 400% to $0.5m. There’s clear evidence in the figures that Zoo is edging towards meaningful profits from its escalating revenue.

Chief executive Stuart Green said in the report that Zoo is becoming a “significant player in the media localisation market,” and with the recent introduction of dubbing services the company has achieved a “key milestone on our journey towards becoming a one-stop shop for all media localisation and digital packaging services across all languages.” I think Zoo Digital is one to watch closely with a view to buying some of the company’s shares.

The post Why I’d ignore the UKOG share price and focus on this small-cap growth company appeared first on The Twelfth Magpie.

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• 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?

Kevin Godbold 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.

One theory is as good as another

The recent full-year report is packed of optimistic and rallying language. But words are as effective as snake oil when it comes to overcoming operational difficulties, so I think it’s worth discounting them. I rather like the theory I heard that the larger oil companies all knew decades ago that the oil under the Weald Basin was too hard to access because of the geology, so they ignored it. That may or may not be true, but one theory is as good as another before the case is proven either way. It’s as good as the theory that UKOG will be a good investment because it will increase its assets by discovering commercially viable oil, for example.

During the past year, the company lost another £2.27m and raised gross proceeds of £7.46m — via the issue of equity — which it used to fund £8.72m of investments made into further exploration and evaluation. The story grinds on…

The share price is lower than it once was, but I think there’s massive potential for it to go much lower from here, so I’m avoiding the stock. I could be wrong, but upside risk is a risk, so I’m prepared to talk in favour of other investments.

One interesting situation exists in Sportech (LSE: SPO), former owner of the Football Pools, which delivered its full-year results today. After a busy year of restructuring, the company posted revenue from continuing operations up 2.3% to just over £66m and adjusted profit from continuing operations 114% higher than the previous year, at £1.5m.

A new focus and emerging growth

New chief executive Andrew Gaughan described 2017 as a year of “material change” for the firm and said 2018 is shaping up “to be one of significant opportunity.”  He pointed to the positives of recurring revenue in the firm’s Racing and Digital business and additional sales opportunities and growth in the 50-50 business. He expects the firm to benefit from “a liberalisation of sports wagering in the US.”

Following the sale of the Football Pools business in June 2017, 80% of Sportech’s earnings are in US dollars and the firm has become a US-focused firm with UK-based directors resigning. We could be about to see a new growth phase emerge from the ashes of the old business. The firm is in good financial shape, with no debt and around £12m cash in the bank. There’s also a further €3.25m on the way following today’s announcement of the sale of the company’s business in the Netherlands.

Points of major change in a firm’s business, like we are seeing with Sportech today, can be opportune moments to consider the stock for investment. I think your research time could be well spent on this one.

The post Is the UKOG share price ridiculously low, or should you pile into this stock instead? appeared first on The Twelfth Magpie.

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• 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?

Kevin Godbold 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.

Over the last seven months, the share price of UK Oil & Gas Investments plc (LSE: UKOG) has fallen from 9p to around 1.5p. This is a decline of over 80% at the same time as a number of its industry peers have experienced relatively positive performance.

Looking ahead, further volatility seems to be on the cards. However, with the oil price set to offer an improved outlook than it has in the past, could the stock be a successful turnaround? Or is it now set to continue its recent downward trend?

Uncertain outlook

News released by UKOG in recent months is a key reason for its share price decline. The company has disappointed investors on multiple occasions in recent months, with test results calling into question the economic viability of its Broadford Bridge-1 well. Certainly, there is the potential for improving news flow, and there may be a blockage which can be worked though, but in the near term there seem to be significant risks ahead.

Turnaround potential

Of course, as with any smaller oil and gas exploration company there are challenges surrounding financing. The terms of its current financing arrangements have been called into question, and could cause investor sentiment to remain weak over the short run.

However, with the company fully funded until the end of 2018 and it having significant exploration potential, it could prove to be a highly-rewarding stock in the long run. Investor sentiment may be more buoyant than it has been in the past due to a stronger outlook for the wider oil and gas sector. And while there may be less risky options available elsewhere within the industry, UKOG could be of interest to less risk-averse investors.

Low valuation

Also offering upside potential within the oil and gas industry is Nostrum (LSE: NOG). The oil and gas producer, developer and explorer has experienced a difficult recent past, with its financial performance being highly disappointing. This has weighed on investor sentiment to some degree, with its share price fall of 36% in the last year being evidence of this.

The company’s future performance, though, may be a surprise to generally downbeat investors. Nostrum is expected to deliver a black bottom line over the next two years, with its earnings forecast to generate growth of 145% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of just 0.1, which suggests that it may be undervalued at the present time.

While Nostrum is heavily dependent upon the oil price over the medium term, its risk/reward ratio seems to be favourable. Although there could be downgrades to its forecasts as well as a high degree of volatility in its share price, a wide margin of safety suggests that now could be the right time to buy it for the long term.

The post Is UK Oil & Gas Investments a bargain after recent share price fall? appeared first on The Twelfth Magpie.

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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.

In particular, I think long-suffering investors in Pantheon Resources (LSE: PANR) could be in for a bit of respite in 2018, with their shares having slumped from 2016’s peak. Years of low oil prices combined with no profits from Pantheon have taken their toll, but that could be about to change with a turn to profitability on the cards for the 12 months to June 2018.

There’s been a problem with the company’s Polk County production, but an update on Friday offered encouraging news.

Chief executive Jay Cheatham said: “I very much look forward to the frac of VOBM#1 which aims to remediate the known blockages in that well and to ramp up production into the Polk County gas plant. A good result will have very positive ramifications for our play.“

Profits almost here

In addition, the VOBM#5 well is “proceeding well and without issue“, and a frac plan is in place to minimise the chances of the kind of damage that impacted operations at VOBM#1. If it’s successful, work to bring it online would commence immediately.

The only downer is news that work is suspended at VOBM#4 as the site is under water from heavy rain.

Analysts are expecting a very big ramp-up for 2019 which would see EPS soaring to bring the prospective P/E down to 10. And I reckon further evidence to support that rosy outlook could easily see a re-rating of Pantheon shares this year.

Substantial resources

The early excitement over UK Oil & Gas Investments (LSE: UKOG) has died down a bit, but that was pretty much inevitable as it always takes time to progress from a hydrocarbon find to actual profitable production.

I was upbeat in December after the partners in the Horse Hill development north of Gatwick released their latest progress update, and further developments look good.

The latest is February’s update from the Broadford Bridge-1 find at the Weald Basin which, in the words of executive chairman Stephen Sanderson, revealed “positive and encouraging initial oil flows from the first-ever Kimmeridge Limestone 5 test.“

The well produced 96 hours of oil flow via near-continuous rod-pumping, with fluid return rates of between around 10 and 72 barrels per day. At this stage, with the fluid containing spent acid from an acid-wash programme, something over 30% was oil (with periods of over 50%). No obvious natural water was found in the mix.

Other prospects

That comes after January’s Isle of Wight update which told us the firm has let its offshore P1916 licence lapse due to “low geological prospectivity, high environmental sensitivity and consequential high associated drilling costs.” The focus will now be on the onshore PEDL331 Arreton oil discovery, in which UK Oil & Gas has a 65% interest.

UK Oil & Gas is still in its cash-burn phase and there are no profits forecast yet, and that makes it a very difficult investment to quantify. 

The share price has receded too, dropping from September’s excitement-led peak of 10p to less than 2p as I write. That, sadly, is a common phenomenon with growth stocks.

But again, I see potential for an uprating during 2018 if the positive news continues.

The post UK Oil & Gas Investments plc isn’t the only stock that could double in 2018 appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• 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?

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.

Looking ahead, it would be unsurprising for the company to continue its share price growth. However, alongside one of its smaller sector peers, could there be the opportunity for new investors to triple their money?

Improving performance

The smaller company in question is Trinity Exploration & Production (LSE: TRIN). The oil and gas exploration company that focuses on Trinidad and Tobago released an operational update on Monday which showed it continues to make progress with its strategy. In fact, it delivered a quarter-on-quarter increase in its average production volumes of 11%. This was achieved through the continued results of its low-cost high-return work programme of recompletions, workovers, reactivations and swabbing.

Looking ahead, there seems to be scope for a sustained production rate which is higher than the current level. Although a production rate above 3,000 bopd (barrels of oil per day) is not expected until later in 2018, there is nevertheless a clear upward trend when it comes to production levels. This could help to boost the company’s financial performance and aid investor sentiment.

Oil price potential

Clearly, the rising oil price is good news for explorers and producers across the oil and gas industry. It has now reached a four-year high of over $70 per barrel, and there could be scope for a higher oil price over the medium term.

While the prospects for the oil price are notoriously difficult to accurately predict and volatility may be high, the supply surplus which kept prices low in recent years now seems to have been eradicated. Cuts to supply from OPEC and non-OPEC nations may have helped, while continued growing demand could aid the price of black gold in future. This may cause investor sentiment towards oil and gas companies to improve in future years.

Growth potential

In addition, UK Oil & Gas could deliver positive news regarding its Horse Hill project. Although there has been some uncertainty regarding the potential production from its assets in the Weald Basin and West Sussex, they could provide the company with sustainably high production in the long run. And with it having interests in a number of different licenses across the UK, there is the potential for drilling success over the medium term.

However, the prospect of a trebling of its share price or that of Trinity may depend largely on the prospects for the oil price. If it remains buoyant and news flow from the two companies is positive, then investors in the two stocks could generate high returns over a sustained period. As such, they could be worth a closer look for less risk-averse investors for the long term.

The post Can you triple your money with UK Oil & Gas Investments plc and this small-cap peer? appeared first on The Twelfth Magpie.

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• 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?

Peter Stephens has no position in any 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.

On that front, things appear to be falling into place for UK Oil & Gas (which owns a 32.4% stake in Horse Hill), after a joint update from all the partners in the project was released Tuesday.

Production flow testing and drilling was approved by Surrey County Council in October, and “key contracts and the requisite funding commitments from all participants are in place” to go ahead with that now — with a 150-day production flow test expected to commence towards the end of the winter.

The programme aims to confirm the commercial viability of the Portland and Kimmeridge oil finds, with “first permanent oil production targeted for early 2019“. It is still dependent on the discharge of some planning conditions, but that’s expected to happen in time for the current schedule — and the application for permanent production consent should be submitted in the spring.

Should you buy?

You might have thought you’d missed the boat when the share price spiked to 10p after September’s update, but big ups and downs are typical with such stocks (as we’ve also seen with Sirius), and I wasn’t surprised when the price fell back to today’s 3.55p once investors realised that first profits were still some time away.

This year the company has faced a few technical hitches, and it’s still far from certain that the company’s Broadford Bridge exploration well is fully linked to the so-called Gatwick Gusher. But last time I examined UK Oil & Gas I wasn’t too worried, and I saw the share price dip as a buying opportunity.

I still do, and one thing I’ll stress is that UK Oil & Gas is the only member of the consortium I’d buy — essentially because the other firms involved have very small market caps and low penny share prices. For example, Solo Oil is valued at under £16m and the spread on its 4p shares stands at 13% at the time of writing — so that’s the rise you’d need to just break even.

By comparison, UK Oil & Gas has a £125m valuation, and though its shares are priced at 3.55p, the current spread is a much smaller 3%.

Risk vs reward

Though you might be discouraged by the share price fall since September (especially if you bought near the peak), don’t forget that UK Oil & Gas shares have actually done very well over the whole year — they’re up 140% over 12 months, and that’s a real market-beater.

It’s not a safe investment, especially with no profit on the horizon just yet — and with any speculative oil or mineral resource investment, you need to understand the risks you’re facing. And I do expect plenty more share price volatility.

But I do think 2018 could be a great year for UK Oil & Gas shareholders — with estimates of around 17bn barrels of oil within the Weald Basin licence, it would really only need a relatively small proportion of that to be commercially viable for shareholders to end up smiling.

The post Is 2018 the year UK Oil & Gas Investments plc will take off? appeared first on The Twelfth Magpie.

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• Why Barclays shares could have a huge second half of 2026
• 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?

Alan Oscroft owns shares in Sirius Minerals. 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 market likes today’s full-year results from Hollywood Bowl Group (LSE: BOWL) and the shares are up almost 8% as I write. The numbers are good. Revenue rose almost 9% compared to a year ago with like-for-like sales up an encouraging 3.5%, suggesting the firm’s offering is hitting the spot for customers.

The firm is making money and earnings are rising. Net cash from operations increased more than 16% and adjusted underlying earnings after tax rose 30%, but adjusted diluted earnings per share eased by 8% due to an increased share count. The directors underlined the progress by declaring the first-time appearance of a meaningful full-year dividend that produces a yield a little over 1.9%, and a special dividend taking the yield up to more than 3.5% at today’s share price around 205p.

Strong growth

One of the things I like about the company is its narrow focus operating as the UK’s largest ten-pin bowling provider with 58 bowling centres across the UK under the Hollywood Bowl, AMF and Bowlplex brands. I reckon firms that specialise stand a better chance of doing things well than those that try to diversify their operations.

As well as rolling out its refurbishment and rebranding programme, the company opened three new centres during the period, which it says are performing “strongly.” Since the end of the trading year a fourth centre opened, suggesting that 2018 will be another good year for growth. Chief executive Stephen Burns reckons the rebrands and refurbishments “have delivered significant returns,” and he says new centres opened in the year “have performed ahead of expectations.” 

There’s a “healthy” pipeline of new sites to feed ongoing expansion and the firm has plans to grow with “selective new openings and acquisitions.” One of the great things about the business is its healthy cash inflow. Customers pay before using the service so the firm gets to reinvest this flow of cash straight away. To me, the growth proposition with Hollywood Bowl looks robust and I’m more likely to buy some of the firm’s shares than I am those of UK Oil & Gas Investments (LSE: UKOG), for example.

Big potential

The oil and gas exploration firm is onshore UK-focused and raised £16.5m during 2017 to fund its four-well drilling and testing programme for 2018. With key regulatory permits already in place, the aim is to further appraise “the wider Kimmeridge continuous oil deposit plus the Horse Hill Portland oil discovery.” The directors’ lofty ambition is to provide stable commercial production and cash flow by early 2019. They reckon a positive outcome would give the company a solid base for further drilling and development of the “significant untapped Kimmeridge resource-base,” which underlies the firm’s extensive licence interests.

But as with all oil exploration, nothing is certain and there’s no guarantee that significant cash inflows will result. That’s one reason why investors have endured such a wild ride. The share price went as high as 9p in September but is near 3.5p today, and falling. Speculation drives these wild swings, but I reckon we’ll see less of that with Hollywood Bowl due to its strong and consistent cash flow, so I’d rather take my chances there than with UKOG’s make-or-break outcomes.

The post Why I’d shun falling knife UK Oil & Gas Investments plc for this growth star appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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.