Penny Shares Guide

Oil and Africa, Worth a Pun–in the Shape of Afren? Natural resources and Africa continue to be the two themes for investors of the new decade for me. Oil, the black gold and Africa, the dark continent are an interesting pun to some.  But for a company called Afren, an African independent oil and gas company, founded in 2004 with £1m from family and friends and currently listed on the Main Board of the LSE, it’s all about its big ambition to be the world premier African oil producer and explorer. Afren is not just living for the present; it’s looking years ahead.

Afren lost $37 million after tax in the first half of 2008, but rich in cash, it repaid $26 million of debt and bought into a few very intriguing oil fields. The company has 16 oil assets in Nigeria, Cabon, Congo, Cote d’Ivoire, and Ghana. They suck out 27,000 barrels of oil a day. Afren’s share price has gone up 6 times since March last year. With shares trading at 103.75p as of 22/1/2010 and 889.07m shares in circulation, the company has a market cap of £922.40m. Its current EPS is -9.68 and P/E ratio -10.71. But analysts predict revenue to be £441m for the coming year.

Afren’s biggest share value is probably in the Gulf of Guinea, the top oil hot spot. But such an investment is not without risks. Also, as Afren has already gone up, is it a bit late to the game for investors? Still, oil will be in big demand, when the recession is a history. And the young Afren could eventually realize its mission as Africa’s top oil company, because of all the untapped bonanza of black gold. Remember, Oil’s Well That Ends Well.

I have a habit of watching the oil AIM shares, for two reasons.  The first is I have friends in the industry, as my wife trained as a Geologist, and I got to know many of them at Aston University.

I spotted this in the news and it hit a spot.

uk.reuters article

This company, 4 months or so ago, were dropping like a stone as they were not achiving the drill speed they had expected.  The suspicious investor could think that it was a sign they were up against the wall, and were unlikely to hit gas at any time in the future.  (Or at least while their funds were still available).

It seems (and I can only say in retrospect) that they have hit gas, and so the business can grow some more.  There are some interesting comments on the LSE board if you use it.

If anyone has any other companies like this, it would be good to hear.

IBall on ASOS-A Dot-com That Works ASOS PLC is a UK based online clothing store; they’re the largest purely on-line clothing store in the UK. A quick view of their web site finds a very user-friendly and eye-catching layout designed to attract the teenage and young adult target market; the company name is an acronym of As Seen on Screen, as much of their fashion is modeled on what UK celebrities are currently wearing. They service both the UK and the US, noting a flat $6 shipping rate to the US in a banner ad on the site and guaranteed shipment for Christmas if orders come in by December 7th.

However, it is better to be good than to look good, and the financials, if I can borrow from Fernando, look mavelous.

They nearly doubled their net income in FY 2009; going from 37 million pounds to 72 million pounds. They have no long term debt and a very healthy market to book ratio of 12.5.

The Price-to-earnings ratio of 34.5 is a bit high, but in a shopping universe that is increasingly going on-line, ASOS has a very good chance of doubling that net income again before leveling out into a mature company. If a normal market PE is in the high teens, ASOS will need to double its earnings per share before hitting maturity to be a good long-term buy, and the growth ASOS is showing should make it a good buy.

It would fit into the growth-stock bucket, but ASOS would be a good ad to the portfolio of either a UK or US investors; ASOS shares are traded over the counter in the US.

As an aside, and as an etailer myself, I find it remarkable that a website can be worth so much. The value is only in the customers, how many come back, how many new ones are coming in etc.  There will be little stock, or Real Estate.

When Maynard Paton provides insight on stocks to look out for, people take notice and listen. In this case, Paton is discussing two potential buys that people need to jump on before the rest of the public has a chance to do that. What are these things?

The first of these two buys is Daejan, a commercial property operator. It is thought to be a good buy for a number of reasons, most of which have to do with the people who run it. One of the things that Paton likes to focus on is the leadership of a company. It is a good indicator of a company’s chance at future success because the people who make decisions need to be smart, experienced, and savvy in order to give the company a chance at prolonged success. For the Daejan, the company’s leadership is top notch.

Another thing that Paton likes to take a look at is the public perception of a company. In order to find value, a company needs not only good leadership and a solid business plan, but they need to be flying under the radar a little bit, too. As it stands, the company is one of the least known big companies in the world, and this is a positive for its value at this point in time.

What we see in Paton’s opinion is that he likes companies who provide both a necessary and specialized service. In this case, it’s an insurance company that works with small businesses of all types. The company is Abbey Protection, and they provide small business owners with insurance against unexpected legal expenses. Again, this company provides solid leadership backbone to guide it in difficult financial times. The real kicker here is the service that Abbey Protection offers, though. Paton is right on the ball in terms of analysis on this company, as it should be a good bet to grow in the near future.