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Tuesday tips round-up: Homeserve, San Leon Energy, Mitchells and Butlers

Date: Tuesday 01 Oct 2013

Tuesday tips round-up: Homeserve, San Leon Energy, Mitchells and Butlers

Boiler repair company Homeserve´s share price is looking decidedly shaky heading into a critical six-month time span during which customers will decide whether to renew their contracts or not. That comes amid a Financial Conduct Authority (FCA) investigation into its marketing practices which saw all of the firm´s telesales and marketing activities suspended in October 2011. Homeserve has now overhauled its practices and the regulator has allowed the company to make calls to existing customers but, crucially, outbound or “cold calls” are still off limits. Hence, the company still finds itself with one hand tied behind its back.

With 70% of its profitability coming from operations in the UK in the last financial year, the risk of this UK investigation to the business model is clear. Looking for bargains where others fear to tread may be entertaining, but investors have to know when to walk on by to protect capital as well. There is way too much risk in this situation so the shares remain a 'sell', says The Daily Telegraph´s Questor column.

San Leon Energy, the AIM-listed oil and gas explorer, has announced a major round of fund raising in order to provide cash to try and realise some of its extensive portfolio of exploration licenses. Some of the fresh funds have been used to acquire a collection of gas fields and conventional oil and gas licences in Turkey. Meanwhile, the group successfully merged with Aurelian Oil & Gas plc at the beginning of the year, contributing net assets of €62m (£52m) to San Leon and further increasing acreage in Poland. San Leon was highlighted as one of Questor’s most high-risk forays into the Aim-listed oil and gas exploration world when it was named as one of the tips of 2013. It has proven as much with shares now down more than 40% from the beginning of the year.

The Turkish acquisition provides San Leon with even more exploration licences, including acreage in Albania, Ireland, Morocco, Poland, Romania, Spain, Germany, Italy and France. However, the disappointing returns from drilling have hurt the shares, shareholders have had an unhappy time and the dilution this equity raise has caused will hurt even more. While the on-paper potential remains there is precious little gas or oil to show for the growing portfolio of licenses, time to take losses and 'sell', Questor says.

Last week’s pre-close update from Mitchells & Butlers, showing a sharp slowdown in trading last month, has excited plenty of comment. Some see it as a sign that newish Chief Executive Alistair Darby needs to step up to the plate, while others point to evidence suggesting that the September slowdown may have been industry-wide. After the exuberance of the summer heatwave, the chill winds of winter may have come early for the pub trade, The Times´ Tempus writes.


Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.

AB

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