April 11, 2014 8:44 pm

Small-cap Week, April 11

In a bad week for technology stocks, Quindell stood out among the small-cap risers. Shares in the insurance software consultancy jumped 7.1 per cent on news of a £1bn-valued telematics joint venture with RAC. With an initial target of 2.2m customers, the venture should turn net cash positive by 2016 and give Quindell a clear lead in the telematics market, said broker Canaccord Genuity.

Monitise led the tech sell-off, losing 19.3 per cent. Berenberg analysts called the mobile banking software maker “a concept stock” and cautioned that might not hit operating break-even until after 2018.

APR Energy’s shares slid 6.8 per cent to a one-year low after its biggest shareholder, SSP Energy, sold about half its 11.8 per cent stake. The sale damped recent speculation that the generator hire specialist might be a bid target for Aggreko, its main rival.

Shares in respiratory drug developer Vectura lost 15.7 per cent after Investec raised doubts about the company’s £108m purchase of German peer Activaero. Investec said the deal could make Vectura self reliant – no longer requiring others to promote its products, and came at a good price. However, the broker also warned that the risks were sizeable, given Activaero has nothing in late-stage trials and some of its assets are still five years from launch in major markets.

Tower Resources shares hit by £19m placing to fund drilling

A discounted placing of $32m (£19m) in shares by Tower Resources softened the stock price of the Aim-quoted oil and gas explorer this week, writes Michael Kavanagh.

But in the current poor climate of investor sentiment towards junior oil companies, some may argue any success in raising equity on reasonable terms to fund an active drilling programme as a success.

The placing at 3.5p a share will help pay for maintaining Tower Resources’ interest in a drilling campaign off Namibia that has so far disappointed.

But the funds are also being put to further use by taking a stake in an onshore exploration block in Kenya and buying Rift Petroleum, a privately held company with acreage off the coast of South Africa and in Zambia.

Shares in Tower, which had been trading at or around the 5p mark in the days prior to the announcement of the placing, slipped to trade at 3.82p on Friday, valuing the company’s equity at £100m.

Though down on the week, the discounted placing still left Tower shares at twice the value of a year ago – and well above their nadir of less than a penny struck last July.

Bond International bucks tech slide on deal for FMP

In a week when technology stocks took a pummelling, Bond International Software emerged as one of the few risers in its sector, writes Michael Pooler.

Shares in the Aim-quoted supplier of recruitment, HR and payroll IT services rose by 10 per cent to a five-year high.

Investors reacted favourably to news on Wednesday that Bond was acquiring FMP Europe, another provider of payroll services, for a minimum £8.5m. House broker Cenkos Securities said this would boost forward earnings per share from 6.4p to 8.6p. Although full-year results showed revenues down by 1 per cent at £35.1m, including a drop in the recurring sales that form the backbone of income, pre-tax profits nearly tripled to £1.6m.

Bond’s shares closed the week at 102.5p, putting them on a forward price/earnings ratio of 11.9, against 20 for its peers in the sector.

Sterling Energy shares plunge on Cameroon well setback

Disappointing drilling results sunk oil and gas explorer Sterling Energy’s share price to an all-time low, as it lost one-third of its value this week.

The Africa-oriented company said on Tuesday it was abandoning its Bamboo 1 well, offshore Cameroon, after no commercial hydrocarbons were found. It was the first exploration of the Ntem concession, Sterling’s most promising prospect, and had been believed to contain 450m barrels of oil equivalent.

One consolation was joint venture partner Murphy carrying Sterling’s share of drilling costs. But it didn’t stop shares plunging to 30p – giving a market capitalisation of £68.5m.

“It is a tightly-held stock [and] there’s no concern about the sustainability of the business,” said Westhouse Securities analysts, adding that their 35p target price reflected the $120m cash on Sterling’s debt-free balance sheet. Declining revenues from a production asset in Mauritania continue to cover the company’s costs.

Sterling will be hoping for better outcomes from prospects in Madagascar and Somaliland, though no new wells are planned in the next 12 months.

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