Shifting Shares (7 April 2019) – Parklife! #PMG
ReNeuron (RENE) had another good RNS this week, after a a strong buyer came in and pushed the price up – RENE was highlighted a few weeks back as one to watch due to large volume. It’s always worth keeping an eye on large volume stocks as they can often indicate a change in trend.
D4T4 Solutions (D4T4) had a major upgrade of its software platform Cerebrus, and the price rallied after selling off due to the CFO unexpectedly leaving. If the company now brings in a heavyweight for the type of growth expected, this will give investors confidence.
Brave Bison’s (BBCN) CEO Claire Hungate unexpectedly left the day after, and the share price dived. Given the CFO unloading half of his holding the week before, it didn’t look great. She had been on a podcast on a paid-for promotion platform a few days earlier and so her departure seemed very sudden. She told me to speak to the Chairman – which tells me there was a disagreement of some sort, that resulted in her departure. That’s not ideal for shareholders as under her tenure the company managed to turn itself around and deliver its first ever year of positive EBITDA and cash build. It remains to be seen whether her successor will be able to build open the company’s progress.
Parkmead Group (PMG)
Parkmead is an old friend of mine and a favourite of Simon Thompson too – and for good reason. At the beginning of 2018, the company was ludicrously undervalued but the market only seemed to notice when good ol’ ST tipped them. It’s funny how that happens, isn’t it? Anyway, I’m glad he did, because I was trading in and out from under 40p up into the 60s, when I decided to leave some for the other guy.
The stock now appears to be coming into play again. The recent results ending 31 December 2018 were nothing short of transformational; the business is now cash generative, rather than cash burning. It should now be self-sustainable and is poised for growth – perhaps it can use the cash flow from its gas producing assets in the Netherlands to begin unlocking value in the 30 blocks it owns in the North Sea.
Parkmead also had a stake (3.9 million shares according to its website) in Faroe Petroleum, which was bought out by DNO for 160 pence per share in February. This should boost Parkmead’s coffers by another £6.2 million. This means that net cash on Parkmead’s balance sheet now stands at just under £30 million (not assuming further cash build). Given the current market cap of £66.3 million at 67p and no debt (though there is £6.5 million of decommissioning provisions) the company has an attractive EV – especially as the gas assets are performing better than expected. Revenues have more than doubled and four gas fields have an average operating cost of $12.3 (US) per barrel of oil equivalent.
Though the fundamentals are strong, this matters not a jot to me if the share price is going down. I want to buy shares that are going up, because that way my net worth is increasing!
(All charts used in the article are taken from SharePad)
PMG had a great rise in 2018, and has spent the last ten months or so consolidating. After the results we began to see volumes ramp up and an increase in block buying. Let’s take a closer look:
Those are significant volumes – well in excess of the daily average. It’s pleasing to see the stock rise on large volume and drop back on low volume. We can see the hammer three trading days ago as the dip was lapped up – another sign of strength.
I believe the yellow areas will be resistance zones. Around 69p is the next resistance level, as any trapped buyers who want “breakeven” may be selling there. If this is the start of a new trend, then that dip should get bought and the stock keeps moving.
Fundamentally, Parkmead is operationally robust with a strong balance sheet, so I’m inclined to hold on a bit longer for an extended move. I’m looking forward to seeing what the next move is.
Central Asia Metals (CAML)
CAML moves slowly, but is now looking hot to trot. It’s broken the key area at 265p:
Volumes over the last few days are large, so this could be the start of a move. I’ll be keeping an eye on it this week. If we put this move in full context we can see the rounded bottom – or bowl – that signifies buyers slowly gaining the upper hand. Whether that momentum will continue we will have to see!
Intercede Group (IGP)
I’ve been long of Intercede in the past, because it broke out of a downtrend, though not for long!
I’ve been aware of the company’s improving fundamentals for a while, and kept it on the watchlist. The recent Trading Update was a surprise to the market, and with gross margins of something ridiculous like 99.6% – the additional revenue is almost pure gross profit. That now pushes the company into profitability at the after tax level and the balance sheet has plenty of cash. There are some convertibles, but these are at much higher prices than the current equity value.
Here’s how the price responded to the update:
The surprise news was met with a gap up to the upside and a continued move. The dip has been snapped up, so I’d like to see it break 30p on good volume. Fundamentally, I think it’s a good company, but contracts are lumpy and never guaranteed. Had this contract been just a few days later, missing the recent financial year end, the company might have been looking at a profit warning!
I also feel that Intercede could get taken out at some point, but I am in no way patient enough to hold for that and would only ever trade the stock.
At the time of publication, the author has financial interests in securities discussed in this article.