Tag: Serica Energy

IC Articles and Satisfying the Urge for Action

I have been reading the latest edition of the Investors Chronicle magazine. John Rosier’s article was particularly interesting as he discussed several of my current and past holdings.

For example he mentioned the merits of Paypoint (PAY) which was up 15.8% in June. He says “On 13 June, results for the year ended 31 March were in line with expectations. The good news, however, was the boards commitment to building shareholder value. It announced the start of a £20mn share buyback, representing about 4.5 per cent of the current market capitalisation”. Other positive comments followed. John suggests the market is materially undervaluing the company. Valued at around nine times earnings and on a dividend yield of 7 per cent, he suggests there is more to come. As I have held the share for some years, I hope so even if I don’t like share buy-backs.

John also mentions Serica Energy (SQZ) positively. I bought this at 390p in 2022 on the recommendation of one of my stockbrokers but sold at 255p at the end of that year. It’s now 136p so at least I made the right decision to sell. Is it worth revisiting? I don’t think so. It’s usually a mistake to revisit old errors in the hope of some recovery. The moral is perhaps not to follow share tips from brokers.

John also covers Polar Capital Holdings (POLR), a fund manager. Dividend was maintained giving a yield of 7.8 per cent and assets under management are increasing. So that’s another one I like also.

He also says he has invested in a fund called VanEck Crypto and Blockchain Innovators ETF (DAGB) because he wants some exposure to bitcoin. He admits this is a highly speculative position but as he has limited it to 1.5% of the portfolio it can’t do a lot of damage. This looks like an urge for some excitement in the quiet summer period on stock markets. I certainly won’t be following that urge. Such a small holding is not showing much confidence that this bet will work out. But if it satisfies the urge for action it may be pacifying.

If I want more excitement I will buy more Bango (BGO) or Verici Dx (VRCI) who both made positive announcements this morning. Interesting companies if difficult to understand and certainly speculative.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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Adjustments, Adjustments and Adjustments at Abcam, Oil+Gas Companies and FCA Decision on Woodford/Link.

Abcam (ABC) published their interim results yesterday (on 12/9/2022). I have commented negatively on this company and its Chairman before despite still holding the shares.

The same game continues – revenue up but reported operating profit down and cash flow from operations down. But adjusted operating profit up. What are the adjustments? These include:

£2.6 million relating to the Oracle Cloud ERP project (H1 2021: £2.0m); £6.0 million from acquisition, integration, and reorganisation charges (H1 2021: £3.5m); £9.0 million relating to the amortisation of acquired intangibles (H1 2021: £4.0m); and £13.0 million in charges for share-based payments (H1 2021: £6.7m).

The ERP project costs continue and I very much doubt that they are getting a justifiable return on the investment in that project now or in the future. Together with the acquisition, integration and reorganisation charges it just looks like a whole ragbag of costs are being capitalised when they should not be.

The company also announced there would be a webinar for investors on the day and a recording of it available on their web site later. Neither was available on their web site on the day or at the time of writing this. More simple incompetence!

The share price of Abcam has been rising of late which just tells you that most investors are unable to look through the headline figures and the sophistry of the directors.

As a change from investing in technology companies such as Abcam who of late are massaging their accounts, and not paying dividends, my focus has turned to commodity businesses. I have even been buying oil/gas companies such as Shell, BP, Woodside Energy and Serica Energy plus several alternative energy companies. There is clearly going to be a shortage of energy worldwide for some time while institutional investors have been reducing their holdings in some oil/gas companies simply from concerns about the negative environmental impacts and long-term prospects as Governments aim to reduce carbon emissions. But in reality the progress on carbon reduction is slow and I feel oil/gas companies will be making good profits for a least a few more years. Energy has to come from somewhere and these companies should do well and can adapt to the new environment easily. In the meantime, they will be paying high dividends and/or doing large share buy-backs.

I am generally not a big holder of commodity businesses as their profits can be volatile and unpredictable as they depend on commodity prices. These can be moved by Government actions or political disruptions such as the war in Ukraine. Will the war end soon? I have no idea. But even if it does there is likely to be a new “cold war” if Putin or other hard line Russian leaders remain in charge. I never try to predict geopolitical changes but just follow the trends in the stock market.  

The partially good news for Woodford investors is that the FCA has formed a provisional view that Link Fund Solutions may be liable for £306 million in redress payments to investors for misconduct rather than losses caused by fluctuations in the market value or price of investments. In other words, it may be nowhere near covering investors losses in the Woodford Equity Income Fund. They have announced this simply because Link is currently subject to a takeover bid which they have approved subject to a condition to commit to make funds available to meet any shortfall in the amount available to cover any redress payments. I suspect this is going to make gaining a full recover for investors somewhat problematic.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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