The Investment Column: With oil price stable, it's time to buy into Soco International

RC Group; Celtic
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The Independent Online

Our view: Buy

Share price: 1,263p (+46p)

Shareholders in oil company Soco International have had a rather uninspiring 12 months. A year ago, investors were enjoying an exponential climb in the shares, which jumped more than 400 per cent between the beginning of 2005 and the spring of 2006. Since then, however, as the oil price has drifted down, and news about progress in its key Vietnam oil fields has been thin on the ground, the share price has moved sideways.

Although movements in the oil price may be beyond Soco's control, the company began to address the other major concern yesterday, explaining to investors that while bad weather had delayed the start of drilling in one of its Vietnam fields, progress was now imminent. As a result, the company is about to enter its most active drilling period in its history.

Vietnam is proving to be an increasingly important region for the company, and the group has several other exploration projects either underway or in the pipeline. Given its success so far - having already made two major discoveries in the area over the past two years - there remains every chance that it will find yet more drillable sites, which would be sure to reheat the lacklustre share price.

Although finding new fields is investors' best chance of making big money, there also remains a chance that the company may become a potential target for predators in the oil industry.

Last time we looked at this stock, eight months ago, we advised investors to wait for a better buying opportunity due to the falling oil price. With oil prices having now stabilised, and the company entering a new exciting period in Vietnam, now is that time. Buy.

RC Group

Our view: Buy

Share price: 113.75p (+2.75p)

Small cap companies with real earnings, profits and growth potential are few and far between. RC Group, the Hong Kong-based biometric identification group, looks like it fits the bill despite its stellar performance over the last two years.

The company floated on the AIM in July 2004 at 10p per share and currently trades at almost 114p, giving anyone lucky enough to have taken a punt on the shares at the placing a return of over 1,000 per cent on their money. Yesterday, the company announced a further contract win in the Middle East, taking the value of secured new orders in the region up to $3.8m (£1.95m) for the current year.

One of the contracts, with a Dubai-based private bank, is to provide fingerprint identification technology to 50 of its branches. The global market for biometrics, including facial scanning, electronic tagging and fingerprint technology is growing rapidly and is expected to double to more than $5.7bn per year by 2010. The market is full of small players and RC Group has become a serious contender in a very short space of time despite having only a very small proportion of the market.

According to broker Killik & Co, the company should make a pre-tax profit of HK$287m (£18.8m) in the current year. If it hits those forecasts, the shares are trading at a very attractive forward price to earnings ratio of 13.1 times, and with more contract wins expected, that number is likely to fall further. For investors with an appetite for risk, this is one small cap growth stock worth tucking into. Buy.


Our view: Buy

Share price: 45p (+1.75p)

Celtic Football Club has been enjoying one of its best ever seasons. At just past the half way stage, the club is some 19 points clear at the top of the Scottish Premier League, into the last eight of the Tennants' Scottish Cup and, most importantly, through to the knock-out stages of the Champions League for the first ever time.

For shareholders, success on the pitch has not always converted into success for their investment.

Although the club has dominated the Scottish Premier League for the last decade, its share price was literally decimated between 2001 and 2003, and after staging something of a recovery over the following year, the shares hit a new all-time low in August last year.

However, the last six months have finally seen shareholders rewarded, with its strong results on the field, combined with more disciplined cost control, helping profits to grow exponentially and the share price to double.

The stock added another 4 per cent as the company announced a strong set of interim results yesterday, and continued progress in the Champions League would be sure to push the shares higher.

In spite of its recent recovery, Celtic still looks incredibly cheap on any measure. Its pre-tax profits for the first half alone are less than three times its market value. Furthermore, there remains every chance that the club may get caught up in the recent takeover fever that has gripped the UK football industry over the past few months.

Either way, it looks unlikely that shareholders can lose at these levels. One of the City's best kept secrets. Buy.