Stocks to watch in August
This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Aquarius Platinum is now on the road to recovery after a difficult time in the recession when motor industry demand tailed off and the price of platinum more than halved. In 2009 the group - now the world's fourth-largest producer of the metal - plunged into losses and had to stop paying dividends.
But the latest half-year figures in February showed profits bouncing back sharply and brokers now expect pre-tax figures to top £150 million for 2010/11 and to reach £180 million in the current year, accompanied by further dividend recovery.
Platinum prices are much more sensitive to industrial demand than gold, but the value of the metal has steadily risen from a December 2008 low of $800 (£488) an ounce to around $1,800 today.
The current problem for the group, however, is the strength of the South African currency and the consequent weak rand price (exchanged from US dollars) for platinum is making some of Aquarius's mining projects temporarily unviable. This uncertainty has seen the shares dribble back from a peak of 419p to current levels. Many brokers see this as a buying opportunity.
Longer-term prospects for the metal, which is largely found in southern Africa, look favourable. Aquarius has shown its commitment to growth through continued high investment in exploration in South Africa's Bushveld region.
Greenko Group is one of India's fastest growing power producers, focusing on developing clean energy assets through seven hydro schemes and six biomass projects. The prospects appear excellent given the background of fast-growing demand for new energy supplies in the country's huge and rapidly developing economy.
Greenko was listed on the Alternative Investment Market (AIM) in November 2007 and since then the shares have performed very well - rising from a low of 50p in 2009 to a recent peak of 245p.
A spectacular rise in profits is on the cards for the year to the end of March, when the pre-tax returns are expected to show a rise from £4.3 million to just over £14 million.
Bullish broker forecasts suggest profits might top £21 million this year and £31 million next year. That could produce 21p of earnings per share, reducing the price/earnings multiple to 11.2.
ECO ANIMAL HEALTH GROUP
Among smaller companies, Eco Animal Health Group chairman Peter Lawrence is expected to announce buoyant results on 10 August, with analysts predicting profits for the full year more than trebled at £6.3 million compared with only £2 million in 2009/10.
Its lead product, Aivlosin (an antibiotic for pigs and poultry), is taking off. At the half-year sales were 55% up on a year earlier and this is all ahead of pending approval for the product in the key US market. The shares should take off if that approval is granted.
Up from a low of 114p a year ago, the shares hit a peak of 280p before slipping back to current levels. With profits of £8.4 million forecast for the year to next March the shares currently trade on 21.2 times earnings.
If you want a really exotic play on gold, look no further than Allied Gold. This Australian developer of mines in Papua New Guinea and the Solomon Islands has seen gold production rising rapidly with output currently running at 200,000 ounces a year and management holding out the prospect of "in excess of" 300,000 ounces in the foreseeable future.
The market thinks profits could hit £28 million for the year to June and has pencilled in £80 million for 2011/12, assuming the gold price stays high. The shares are volatile - gyrating between 20p and 47p in the past year. Of the four brokers who follow it, three have rated it a "strong buy".
Spotlight on Allocate Software
The ill wind of austerity is forcing big government employers such as the NHS and the MoD to look hard at how best to deploy their workforces. This is where Allocate Software - a modest AIM-listed company with a market value of just £44.6 million - comes in.
The company has a global reach and for 20 years has been helping companies reorganise staff to meet changing circumstances.
Acquisition of Dynamic Change just over a year ago has widened its operations. This was reflected in January's half-year bulletin which showed profits up from £674,000 to £1.18 million after a big boost in revenues. Chief executive Ian Bowles reported "a fantastic level of activity" in its healthcare division.
Broker Numis forecast profits for the full year to reach £5.1 million (£1.3 million last time) and further earnings growth over the next couple of years. There is no sign of any dividends as yet but the forecast for earnings this year and next suggest the shares, at 70.75p, sell on around 10 times earnings.
Performance review: How companies featured last July performed
Eaga shares were highlighted a year ago on bid hopes and the prospect of a 40% rise in earnings.
The bid duly came, but government spending cuts blitzed Eaga's earnings. Carillion, the support services giant, bought the company for £306 million in April for a modest 120p a share compared to our highlighted price of 133.4p. Eaga reported a half-year loss of £5 million in January, giving Carillion the opportunity to snap up the company.
The strong gold price has meant shares in Medusa Mining have more than doubled since we picked them. Tipped at 265.5p they recently changed hands at 560p. Seven brokers rate them a strong buy, with a 45% rise in earnings per share forecast for the year just ended and a 23% rise this year.
As yet Ceramic Fuel Cells has notably failed to break out of its "penny stock" category. Tipped last year at 9.4p this Australian maker of low emission domestic power generators hit 12.39p last autumn but has lately come back sharply.
Losses more than halved to £8.6 million in 2010, but are expected to be similar for the year just ended. Current year hopes are for losses of just £2 million. Meanwhile, German utility giant EWE has given the company an order and more orders have come from Australia's national grid.
BowLeven shares have been the star performer among our recommendations. Striking oil riches offshore in Cameroon saw the shares rise from 110.5p to as high as 398p in February. They have lately been trading at around the 300p mark on some disappointment with latest drilling. Broker enthusiasm remains high. No date has yet been given for the next set of results.
Monitise, an AIM-listed maker of software that lets you do your banking and pay your bills on a mobile phone, has yet to display its stockmarket potential. The shares were highlighted at 23.8p and then climbed to a peak of 29.5p.
While revenues are growing rapidly - they more than doubled in the year just ended and are expected to double again this year - there is still no sign of profitability. The two brokers who follow the company remain enthusiastic.
McBride, supplier of own-label cleaning products to supermarkets, warned in April that trading profits could be down £5 million because of rising raw material costs. Tipped at 188.6p the shares have recently been trading at 152.25p. There are hopes profits will bounce back this year to £32.6 million. There is an attractive 4.7% yield.
This article was taken from the July 2011 issue of Money Observer.
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