Investment Column: Nighthawk will emerge from the pack

United Drug; Shepherd Neame


Our view: Buy

Share price: 37.25p (+1.75p)

Nighthawk Energy could turn out to be a great punt for investors.

Unlike most Aim-listed oil and gas exploration groups, Nighthawk is a producer of the black stuff, giving it revenues it can then plough back into the company to develop new sites.

Another advantage the company can claim over many of its rivals is its operations in the United States, which clearly gives it the benefit of operating somewhere that is not going to remove its licence at a whim or descend into civil war without warning. The company's most promising asset, its 50 per cent stake in the so-called Jolly Ranch project in Colorado could produce as much as 1.5 billion barrels, according independent consultants.

That is the good news, but as any investor worth his salt knows, oil and gas exploration companies are always a risky punt at best, and a hopeless shot in the dark at worst. Nighthawk is at the better end of that analysis, but those investors wanting to back big, blue-chip and stable, should probably give the group a wide berth.

Nighthawk's full year numbers, published yesterday, detailed an operating loss of $2m (£1.25m), which follows a drop of nearly 30 per cent in the share price over of the past 12 months. As with the majority of similar companies, the prospect of a dividend lies buried deep beneath the Colorado desert.

However, the numbers were actually pretty good. The group's operating loss narrowed by 42 per cent on this time last year, while revenues of a nudge shy of $500,000 were well up on 12 months ago. The group even managed to raise $37m in a placing in August and is rightly using the money to drill more wells and drive all important production. According to watchers at Hanson Westhouse, the shares are "significantly undervalued by the market as demonstrated by our valuation of Nighthawk at 225p per fully diluted share". Buy.

United Drug

Our view: Hold

Share price: 228c (-4c)

We would not be overly concerned about yesterday's full year profit warning from Irish healthcare group United Drug.

The company said that because of the falls in the valuations of sterling, its overall annual profits would be below expectations, although on a constant currency basis, they would be ahead of forecasts.

The fact that buoyant trading in some areas of the business is offsetting those parts of United that are struggling also doesn't worry us, and nor does the fact that the shares traded down yesterday, by 1.7 per cent.

In fact we are rather encouraged by Davy Stockbrokers' argument that, trading on a price earnings ratio of 12.7 times, and with a dividend yield of 3.5 per cent, the stock looks undervalued: "Now that United Drug has broken out of the 190-220c trading range of early summer, further re-rating can be achieved as a return to growth is realised in 2010-11. The current rating and yield are attractive in this context."

What worries us more is that during the great financial mess of 2008 and 2009, the pharma companies generally outperformed the market, with share prices remaining steadier than other more cyclical stocks. This has not been the case with United Drug, which has seen its share price rise by 40 per cent in the past six months, but trade down by 40 per cent over the past year. As such, those liking pharma should back some of the bigger, more stable groups like GlaxoSmithKline or Astrazeneca.

However, for the general investor, we reckon that, even despite sterling rather ruining the numbers, United Drug's share price should continue to grow and we would hold on until the stock shows signs that it is beginning to falter. Hold.

Shepherd Neame

Our view: Buy

Share price: 822.5p (unchanged)

Given it was founded in 1698 in Faversham, Kent, the pub company and brewer Shepherd Neame has come through the odd recession or two.

And yesterday, Shepherd Neame showed it will emerge from the latest downturn in a sound condition. Granted, its pre-tax profits for the year to 27 June fell by 21 per cent to £6.9m, largely resulting from a spike in raw materials, costs from outsourcing bottling work and a weak performance in the bottom 10 per cent of its tenanted pubs. But there was still much to toast in the numbers.

Sheps grew total sales by 7.6 per cent over the year, driven by a 29 per cent surge in total bottled sales, such as its Spitfire and Bishops Finger premium ales. The company's total beer volumes were up by 10.1 per cent in the first quarter to 26 September.

Shepherd Neame operates in a tough sector facing long-term challenges, particularly in the on-trade industry, but the company looks well-placed to benefit from any sustained recovery in consumer spend. It will be around for a long time yet. Buy.

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution