We have two columns today from Simon Thompson, including his assessment of the latest operational results from Trinity Exploration & Production, an independent oil and gas exploration and production company focused solely on Trinidad and Tobago. They make for a good read and are supportive of the debt free company reporting an operating profit of around $12m in 2019. To put the valuation into perspective, Trinity’s enterprise valuation is only £28m so effectively the shares are priced on only four times net profits even though management indicates that output is set to rise strongly this year, driven by a low risk and low cost onshore drilling programme. The company is also one of the lowest rated players in its Latin American peer group. That’s worth considering given that Amerisur Resources, the oil and gas exploration and development company operating in Paraguay and Colombia, received a bid approach yesterday, further highlighting Trinity’s chronic undervaluation.
In his second column, Simon has been number crunching his way through the pre-close trading update from STM, the miserly rated pensions administrator that is expanding both its UK and international self-invested personal pensions (Sipps) operations. In fact, even though analysts pushed through earnings upgrades for this year and next, once you strip out net cash of £15.6m from STM’s market capitalisation of £26.2m then effectively a business that should make a clean pre-tax profit of £4.7m in 2020 when the benefits of this year’s acquisition will be seen is being valued at little over £10m. That’s not just anomalous, but a buying opportunity in Simon’s eyes.
And over on Alpha, Simon has just published an 8,000-word report on a small-cap London-based company that is well under the radar of most investors, but it is highly regarded by major players in the pharmaceutical and biotechnology industries. The business has developed artificial intelligence (AI) software algorithms that have become highly valued by huge corporations looking to develop cures for serious neurological ailments. The company has won a load of contracts, booking £20m of new orders since the start of last year, and this revenue stream is underpinning a move to operating profitability. Simon's report can be read here.
Meanwhile, Chris Dillow says that even the mightiest companies can be destroyed by technical change, and this often can't be foreseen by managers or investors. Click here to find out who he's talking about.
