A little something for contrarian investors. Creon Corporation, whose shares start trading on AIM on Thursday, is braving the wobbly housing market and planning to invest in local housing developments.
It reckons it has spotted a gap in the market for providing funding to the local developers who may have only one or two projects on the go at a time. Banks typically lend up to three-quarters of the funds for a development, leaving the developer to raise the rest on an ad hoc basis from friends, family and regular investors.
Creon has raised £1.5m and expects to lend it out in parcels of about £400,000, tiding the developer over for about a year until the homes are sold. The company is floating at 50p per share, valuing it at £3.1m. It has agreement from investors for a further £1.6m when it needs the money in six months' time.
Jonathan Freeman, a former corporate financier at Beeson Gregory, who is Creon's executive director, professes himself unworried by the survey data on the housing market. Creon will deal only with developers who have a strong track record and a sound business plan which would generate profits even if there is a modest slide in house prices.
But what if the housing market simply stagnates, with people holding off on purchases and leaving developers with unsold homes and unpayable liabilities? Creon is focusing its lending on low-cost developments, typically for first-time buyers, for whom there is an acknowledged shortage of affordable homes, Mr Freeman says. Creon shares are going to be ones for the brave.
Chance for Telspec
From the ashes, a chance to resurrect profits at Telspec. The telecoms equipment maker has had a few tough years, finding that customers using its ISDN products are instead concentrating their investments in broadband. And then in October, its manufacturing plant in Perth, Scotland, suffered a fire.
The insurance payout, which came through last week, has given the loss-making company a bit of breathing space as it seeks to establish its broadband products in China. But it has also created an opportunity to improve efficiency at the factory, a key task.
Cobra goes Dutch
Cobra Capital is a Guernsey-based investment company that acts a bit like a hedge fund, making short-term punts on companies based in the UK or the Netherlands. In fact, it is the Dutch investments which have performed most strongly, we hear, and a trading update later this week should be positive. Of its UK investments, it made a quick turn on Idox, a software company which raised cash at 10p per share for an acquisition in May and where Cobra has been able to sell most of its shareholding at around 12p. Word is the trading update will be accompanied by news of a fund raising to bring in another £1m-£3m and widen the shareholder list. The shares are now held by fewer than 50 people.
Well good news
Texas Oil & Gas, at the centre of a bizarre smear campaign in September, will confirm this morning that oil is about to flow from 26 of the 104 wells it bought in July. Progress clearing the sites, laying pipes and getting power to the wells is on schedule. With the oil price high, it has also been able to renegotiate some of its supply deals. The company claimed that someone was trying to undermine the share price by trying to have the share quote removed from the Financial Times.Reuse content