Investment Column: The changes at Cairn need time to settle

Spectris; Promethean World


Our view: Hold

Share price: 445.5p (-18.9p)

It's been a busy time for Cairn Energy. Yesterday's half-year financial results reported revenues booming by more than 300 per cent to $333m (£216m), thanks to its Rajasthan oilfields coming on stream, swinging the group to a $58.4m profit compared with last year's $118m loss. Production also saw a significant increase, up by 27 per cent to more than 87,500 barrels of oil equivalent per day.

The results came barely more than a week after the FTSE 100-listed oil and gas company announced the proposed sale of 51 per cent of its Indian operations to Vedanta for $8.5bn.

Now the focus is Greenland, the chief executive, Sir Bill Gammell, stressed yesterday. "In line with Cairn's long-held strategy of adding and realising value, the transaction with Vedanta will result in a substantial return of cash to shareholders whilst ensuring the company has the financial flexibility to pursue its multi-basin exploration strategy in Greenland," he said. Despite Cairn's confidence, the strike is far from the major find that some had hoped for. There are also difficulties arrayed against drilling in the region. Environmental groups have long fought against prospecting in the pristine Arctic, and regulatory conditions may also be trickier in the aftermath of BP's Deepwater Horizon oil spill in the Gulf of Mexico.

The good news is that each new well gives Cairn buckets of new data. The bad news is that it could take more time than the market can bear before any major strike. Analysts at Finncap said yesterday: "These results should hit home that it will take a long time to fully understand the [Greenland] basin and could take many years to make a commercial discovery if at all." Hold.

Spectris

Our view: Hold

Share price: 869.5p (-41p)

The fact that Spectris's share price fell back, shedding more than 5 per cent of its value, after the electrical engineer issued half-year results yesterday, might suggest there was something ugly lurking in the release, but intra-day moves can be deceptive. To begin with, the figures were decidedly upbeat. Adjusted pre-tax profits were strong and the interim dividend was raised by a healthy 11 per cent to 7.1p per share.

Second, the shares are up strongly since the start of July, suggesting that the market was anticipating the good news and that confirmation simply sparked a round of profit-taking.

So, Spectris seems to have done well – so much so that we cannot justify a sell stance. The problem is that, looking ahead, economic prospects are getting grimmer by the day and, while part of Spectris's strength can be attributed to self-help measures instituted last year, it is clear that it benefited from improving cyclical trends in the first half of the year.

This suggests that the market may remain cautious about the company's shares until there is more clarity on the economic front. The valuation doesn't help either, with Spectris trading on a multiple of 12.1 times forecast earnings for 2011, against a sector weighted average of about 11.7 times, according to analysts at Jefferies. Hold.

Promethean World

Our view: Buy

Share price: 119p (-29.5p)

Since time immemorial, sleepy schoolchildren have doodled on dusty old textbooks, while their teachers scratched away drawing complicated hieroglyphics on the chalkboard.

Promethean World is a company that aims to bring the classroom into step with the iPad generation, offering technology such as tablets for students and electronic whiteboards for the tutors.

The company listed in London in March and has endured a somewhat torrid time on the market since then. Its shares were priced at 198p and peaked at 213.5p before sinking. The stock came under huge pressure again yesterday, falling 19.9 per cent despite a generally well-received half-year trading statement. Revenues in the six months to the 30 June were up 35 per cent at £122.4m, with pro-forma net profits up by half to £9.6m. Jean-Yves Charlier, the chief executive, said Promethean was growing in "all of its key segments".

Investec said the stock trades at the low end of the sector, and put it on a price of 12 times estimated full-year earnings.

After yesterday's weakness, the longer-term trends and the company's solid fundamentals mean buying now could well pay off, so buy.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

MBDA UK Ltd: Indirect Procurement Category Manager

Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore