Small caps: Polo in possible GCM holding disposal

Polo Resources was in focus on Tuesday amid rumours the resource investment company could be about to dispose of its 29.82 per cent holding in GCM Resources, which is developing the Phulbari coal project in Bangladesh.

Earlier this month, Polo said it had instructed advisers to evaluate strategic options for the stake. The talk in the market on Tuesday was that Polo might sell the holding either to the government of Bangladesh or Malaysia’s sovereign wealth fund.

Polo’s average ‘’in-price’’ for its stake is 170p. As such, traders reasoned that Polo would want a decent premium to that price and some sort of option that would allow the company to share in the upside should GCM get regulatory approval for Phulbari. Shares in Polo firmed 2.4 per cent to 5.9p, while GCM rose 14.1 per cent to 113p.

Shares in Sirius Minerals, the company developing the York Potash project in North Yorkshire, climbed after a push from Liberum Capital. The broker reckons Sirius has an impressive management team with “big financing” experience and that it could become a large-scale producer of potash sulphate, a premium quality potash product.

“We see material upside to our base case Enterprise Valuation of $390m [£0.26/share, a 109 per cent premium to price] as management begin to wake a sleeping potash giant,” said the broker. Sirius shares rose 4.4 per cent to 11¾p.

Axis-Shield improved 0.8 per cent to 464p after hostile bidder Alere declared an increased holding of just over 11 per cent.

Elsewhere, there was heavy trading in Lookers, the car dealer that recently received a takeover approach from a consortium led by serial stakebuilder Jack Petchey. Over 9m shares changed hands after an institution sold a large chunk of stock via broker Peel Hunt. There was also talk that Lookers could receive another approach. Lookers rose 3.4 per cent to 53¾p. In the same sector Pendragon firmed 0.1 per cent to 9.96p. Traders reckon underwriters to its recent rights issue might have placed some of the stock they were forced to take up.

Stockbroker Xcap Securities dropped 29 per cent to 2¾p after an investor sold 250,000 shares at 3p each.

Gulf Keystone Petroleum dipped 6.2 per cent to 152½p after the Kurdish explorer priced its $200m equity issue at 140p a share. “The timing of the equity raise is surprising given the existing high cash component of $134m as well as being announced ahead of a potential move to the main list from AIM,” commented Investec Securities.

Porvair, the specialist filtration and environmental technology group, moved up 6.6 per cent to 88½p on the back of an impressive trading update. “Continuing revenue growth in Q3 and a good outlook for Q4 leads us to upgrade earnings again. The group strategy is delivering, there is greater downside protection than before and net debt is reducing even faster than expected,” said Peel Hunt, reiterating its “buy” recommendation and 100p target price.

Coolabi, the children’s media company that owns rights to characters including Bagpuss and Purple Ronnie, dropped 24.3 per cent to 6¾p on news the takeover bid from North Promotions would be pitched at just 7¾p a share.

Racecourse owner Arena Leisure climbed 16.9 per cent to 36¼p on reports the Reuben Brothers had made an offer for the company but that it had been blocked by Trevor Hemmings, who owns 41.1 per cent of the company and is said to want at least 60p a share for his holding.

On Monday, Arena was able to win a dispensation from new UK takeover rules that require suitors to be named. “We infer from this that substantive talks are indeed proceeding, even though the parties may not have been involved at the outset of the strategic review in June. That implies that substantial value is likely to be realised in the not too distant future,” said Peel Hunt.

After the market closed, Arena revealed that it had received a proposal from the Reubens who now have until October 18th to make a formal offer for the company.

Alexon, the women’s clothing retailer, dropped 36.8 per cent to 3½p in response to Monday’s after-hours statement that it had received a bid but at a significant discount to the share price. The company also warned of the need for additional funding ahead of its traditional winter peak in working capital.

PetroNeft Resources dipped 3 per cent to 28.1p even though the oil company reported a maiden profit. And there could be further good news on the way from the Lineynoye oilfield in western Siberia. The company’s latest wells are said to be pushing the field’s edge much further to the North.

Beacon Hill Resources shed 3.6 per cent to 9.95p on news its mystery suitor – rumoured to be India’s JSW Steel – had withdrawn its bid for the coking coal producer.

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