Interactive Investor's most-traded small-cap stocks
21st July 2015 09:39
by Lee Wild from interactive investor
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It was a cracking start to 2015 for most major stockmarkets, and equities remained the only show in town until the spring when the FTSE 100 made a record high at 7,122. From there, however, it was all downhill. Greece, US rate hike speculation and China conspired to increase volatility and cause a sharp sell-off back toward January lows. Over the six months, the UK blue chip index was flat, but the dynamic small-cap index was up over 10%.
Following our review of Interactive Investor's most-traded large cap stocks, we now bring you up to speed with developments at our most-active small cap shares during the first six months of 2015.
This is not a personal recommendation to deal and the decision to invest is yours alone. If you are in any doubt whether these investments are suitable for you then you should consult your financial adviser.
Afren (AFR)
Following last year's plunge in oil prices and sacking of its CEO and COO for receiving unauthorised payments, might have thought 2015 could not get any worse. Well, it did. Amid further weakness in crude prices, a hugely expensive recapitalisation process and bond defaults, the Africa-focused oil explorer is proposing a debt-for-equity swap and £49 million rights issue. If shareholders don’t back it, Afren will be saddled with $1.8 billion of expensive debt and could go bust.
Afren shares had fallen an incredible 97% in 2015 alone to less than 1.5p. This time last year they were worth almost 150p. And there really is no value here for holders of equity - they'll own no more than 15% of the company if the swap goes through. There's a vote on 24 July. But ahead of the extraordinary general meeting, five board members, including executive chairman and co-founder Egbert Imomoh, jumped ship. Now, the company says production has slumped and the shares have been suspended because it is "unable to assess accurately its financial position". It looks like "game over" for ordinary shareholders.
Quindell (QPP)
Following one of the most incredible and controversial share price collapses of modern times, is now a very different beast. The professional services division (PSD) is sold to Australian law firm Slater and Gordon for £637 million in cash, plus extras from noise induced hearing loss (NIHL) cases, and the shares have tripled in 2015.
Much of that cash will be returned to shareholders. An initial £500 million tranche worth "at least" 100p per share will be made by the end of November. Quindell is now a collection of insurance-related technology businesses - Himex and iter8 connected car and telematics businesses, insurance broker Ingenie, and insurance claims management systems. There's also an air of respectability these days with former Tory leader Michael (now Lord) Howard as senior non-executive director.
There could, however, be sleepless nights for those involved in compiling Quindell's financial accounts during 2013 and 2014 after the Financial Conduct Authority (FCA) recently launched an investigation.
Gulf Keystone Petroleum (GKP)
In rapid decline since the beginning of 2014, shares have shown little sign of recovering so far this year. The Kurdistan oil explorer has lost both half its value and the services of highly-respected chief executive John Gerstenlauer after less than a year in the job. Production had built up to 40,000 barrels of oil per day (bopd) at the end of 2014 under Gerstenlauer, but Gulf lost $248 million last year amid plunging oil prices, irregular payments from regional governments, fundraisings, and a deal with bondholders. New man Jón Ferrier is tasked with selling assets including its 20% stake in the Akri Bijeel field, or possibly the entire business.
He's already overseen a daily record of 44,600 barrels of oil pumped from Gulf's flagship Shaikan field last month. A new contract with a domestic buyer has been penned, too. That's certainly good news, but not the regular payment cycle with the Kurdistan government investors are demanding.
UK Oil & Gas (UKOG)
is one of the stockmarket's best-performing stocks of 2015. Trading at less than 0.5p on New Year's Eve, it surged as much as 1000% by April. Much of that rally happened over a few days after the company revealed that its Horse Hill-1 oil discovery near Gatwick Airport held an estimated 158 million barrels per square mile. Even now, at 2p, the shares are up fourfold in 2015.
Of course, there's been controversy, and chairman David Lenigas was rebuked for suggesting there might be as much as 100 billion barrels in the Weald Basin, which runs across southern England. He's since stepped down from the firm he helped set up in 2013 as he has done with previous project companies.
UKOG has a net attributable interest of 20.358% in Horse Hill licences PEDL137 and PEDL246. Estimates now put oil in place at over 9 billion barrels. Getting it out of the ground, however, is another matter. Heavy investment and relevant approvals are still needed here.
New World Oil & Gas (NEW)
If "Carry On" made a film about the City, would be in it. The struggling Belize oil explorer tried to raise £1.5 million through a share placing in April, but shareholders voted it down. Then it announced an open offer for shareholders at the same prices - 0.055p - a few weeks later. It eventually settled on raising £3.5 million through a placing and open offer at 0.09p.
Its shares have been suspended at various points, first ahead of its EGM, then as a result of controversy around settlement of trades. They have been suspended now since mid-May. All this caused confusion for one trader. Chris Williams thought he'd bought 10% of the firm in his mother's name, but he got his sums wrong. He based the purchase on 10% on the post-placing share count, rather than the existing share count. Bed & breakfast-owner Judith Williams ended up buying 49% of the company and would, under normal circumstances, have been forced to launch a full bid for New World. Thankfully common sense prevailed.
Sirius Minerals (SXX)
executives ended the first half of 2015 sat in a 19th century castle in Whitby, just miles from the site where they hope to begin building a vast potash mine next year. In a close vote, the firm's application for two mile-deep shafts and a 23-mile tunnel was approved. That's a major hurdle cleared, but as boss Chris Fraser says, "This is really just the beginning".
It is, but Sirius shareholders have learned to be patient. That persistence has been rewarded in 2015 with a 50% surge in the share price, but the euphoria of winning approval has not lasted. Having failed once again to break above 30p - stubborn resistance since late 2011 - the shares are now trading at pre-decision prices near 17p.
That's because Sirius still has much to do. Planning conditions still need agreeing and production will not begin until 2019. Both revenue and full production will take much longer and bosses must find $3 billion to fund the project. There's construction risk and the probability of cost overrun, too. Further patience required.
All performance data is correct as at 1 July 2015 and year to date references represent the first six months of 2015