Small Talk: Is Asia Energy too risky?

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The Independent Online

Investors in Asia Energy breathed a huge sigh of relief on Friday as the company returned from suspension and promptly rallied from a low of 82p to finish the session at 140p. It is still an awfully long way from the 900p the shares peaked at in March 2005, but at least it looks as though the company's Phulbari coal project in Bangladesh has not been completely shelved. The company confirmed on Friday that it had heard nothing from the Bangladeshi government.

Its shares were suspended after a weekend of violent clashes in late August that led to the death of at least six protesters. If the project goes ahead, Phulbari, thought to be one of the largest untapped coal deposits in the world, will displace up to 40,000 people over a 10-year period. So it is not surprising that not everyone is delighted about Asia Energy's business plan, but it is of huge importance to the Bangladeshi economy, and there are enough vested interests in the government to mean that there are powerful voices in support of Asia Energy.

If the project is cancelled, as one junior Bangladeshi minister claimed prior to the suspension, Asia Energy does not have much left. It has cash that is worth about 54p per share, but it is burning rapidly (although admittedly not as rapidly as its Phulbari office burned during the protests) and most of its staff have been evacuated from its Dhaka headquarters. To point out that the company remains a risky investment is a bit like saying Tiger Woods is a useful golfer.

Anyone holding the shares must be prepared to accept the fact that Phulbari could still be pulled completely. Even if it is not, completion of the project is still a long way off and there is every chance that the company might need to come back to investors for more funds. But if it does eventually get the green light, its shares could start to fly again.

Energetix powers ahead

A handful of alternative energy companies are quoted in London but not all are on the verge of bringing consumer products to the market. It looks as if the AIM-listed Energetix has not one but several such products in the pipeline.

The company will announce today it has made "significant technical progress" with its Pnu Power uninterruptable power technology, which automatically provides power during outages. Rather than using batteries, which are in most emergency power back-up systems, Energetix uses its patented scroll technology. The recent developments will mean a 50 per cent increase in power output without any cost rise. Unlike batteries, the new Energetix products have a significantly longer lifespan.

Energetix floated in August at 46p and its shares have done little since. But the new technology is a big step forward for the company. Expect its shares to make a decent move on the back of Energetix's announcement.

Wren set to fly higher on AIM

The retirement-home builder Wren Homesis moving ahead with plans to switch from Ofex to AIM, with the move expected to come in early November, meaning there will be at least one retirement-home builder listed in London, once McCarthy & Stone disappears from the public markets.

The group, which operates in the south-east of England, announced record pre-tax profits of £1.6m last Friday, a 60 per cent jump from 2005 figures.

The house broker, JM Finn, believes the group has "outstanding prospects in the rapidly expanding south-east retirement sector", and that the shares are trading at a decent discount to the rest of the house-building sector.

Demand for the shares after the switch is expected to be very good. Wren, led by chairman Peter West and managing director Paul Treadaway, is looking to raise £2m to £3m, but given the interest in the group, there is potential to raise much more. Given the discount the shares are trading at relative to the sector, and the valuation that McCarthy & Stone achieved, Wren should be one to look out for.