Maiden figures from Nighthawk Energy, the most recent addition to the No Pain, No Gain portfolio, may, at first glance appear rather depressing.
But they are deceptive. Although the US-focused oil and gas group is deep in the red, it is progressing as planned, and could even be profitable in a year or so.
I am, as I have said many times, not a fan of small exploration companies. Too many of them merely jog along, offering little, except an excruciating ability to tap shareholders for cash.
I decided to make an exception with Nighthawk, and although the shares are a little below the portfolio's buying price, I am far from disheartened. The year's loss, including flotation costs, was £1.1m. Turnover was infinitesimal – at just £66,000.
But there should soon be something of a sales explosion: more gas is becoming available, and the group is in the process of improving distribution by tapping into a pipeline system that should allow a dramatic increase in sales.
With oil and gas prices continuing to advance, Nighthawk seems well placed to enjoy the American dream. It now has interests in five properties in the US, mainly in Utah and Kansas, but also stretching into Colorado and Illinois.
The group has expanded rapidly, gobbling up land that it thinks conceals rewarding deposits. Its biggest asset is an 18,000-acre site in Utah known as Cisco Springs in which it has a 37.5 per cent interest.
Running Foxes, led by an established American oil man, Steven Tedesco, has the rest of the equity, and acts as operator of the field which is already in production. Running Foxes is also involved in other Nighthawk ventures.
Oil and gas is known to exist under other Nighthawk territory. Many wells were abandoned in the years following the Second World War because difficult terrain and low fuel prices made them unprofitable. But in these days of high-octane prices – with modern technology making extraction much easier – old drillings can have rich futures.
The company's stockbroker, HansonWesthouse, says the explorer is worth 75.9p a share "with substantial upside potential".
Growth Equities & Company Research suggests a sum-of-the-parts valuation of 96p. I have also seen an estimate of more than 100p. So, at 41.5p, Nighthawk, with a £10m cash pile, seems undervalued. GE&CR, which provides paid-for research, has a 96p share target.
Two weeks ago, I suggested that portfolio member Wyatt, an on-line support services group, had held its 22p price because its shares had not been traded during the stock market turmoil. They were suspended as reverse takeover talks with an unidentified party took place.
Well, the shares are back in the firing line and the price is 14p, and to add insult to injury, the proposed acquisition was aborted.
Still, the group has put through a consolation deal – and has acquired a company called Health & Safety Department for up to £2m. Wyatt is merging H&S with its PES employment consultancy, and more acquisitions could be near. Chairman Bob Holt also sugars the pill by describing trading in the first half year as "buoyant".
Another constituent, Lennox, supplying British food and drink to ex-pats and holidaymakers in Spain, has, despite higher finance charges, trimmed its losses at the interim stage to £856,000 from just over £1m. Considering the company's unhappy history, the interim trading statement is moderately encouraging.
Blue chip constituent Scottish & Newcastle will soon have a new chief executive, John Dunsmore, a former stockbroker analyst, who is due to replace Australian Tony Froggatt. Some think the change reduces the chance of take-over action. I am not so sure. Any deal – and Scottish still looks ripe for a bid – would be governed by price. The board of Britain's biggest brewer could have difficulty convincing shareholders to reject an offer, say, in the 700p-800p range. Besides a hostile bid, some form of friendly get-together with Carlsberg of Denmark is a growing possibility. However, merger terms could disappoint.
The Dunsmore elevation means that two ex-drink analysts run leading drink companies. Tim Clarke, once at Panmure Gordon, has been chief executive of pubs chain Mitchells & Butlers since it was drawn off from former constituent, Six Continents. And don't forget Alan Millar, who also made his name as a stockbroker analyst. He is finance director at another constituent, Prezzo, a restaurant chain.