Shares to Rocket15 May 2015 17:24
Shares of AFC Energy (LSE: AFC), Quindell (LSE: QPP) and Tiziana Life Sciences (LSE: TILS) have rocketed since the start of the year. Are the fireworks over, or can these three stocks continue to soar?
AFC Energy
AFC Energy, which listed on the AIM Market in 2007, describes itself as “the world’s leading developer of low-cost alkaline fuel cell technology”. The company is focused on large-scale industrial applications.
AFC’s POWER-UP project aims to demonstrate the world’s largest alkaline fuel cell system at an industrial gas plant in Stade, Germany. The project represents the final phase of pre-commercialisation development, and, if successful, will create a platform for global commercial deployment. The schedule is ambitious, but newsflow has been good, and the shares — which had been languishing at under 10p — are currently trading at 39p, valuing the company at £120m.
Further news that the project is on track — including initial power production at Stade in July — could see the shares rise further. The outcome of full testing targeted for December is the biggie. Given the size of the commercial opportunity, a validation of AFC’s technology on an industrial scale could see the valuation of the company rise steeply.
Quindell
Quindell was one of the most heavily-shorted shares in 2014, but anyone buying in at sub-40p lows at the back-end of the year has seen a spectacular increase in 2015. The shares are currently trading at 125p, valuing the company at £545m.
Quindell is set to sell its problematic professional services division to Australian law firm Slater & Gordon (S&G) for an initial cash consideration of £637m. The deal — which is subject only to approval by the Financial Conduct Authority (FCA) — digs Quindell out of a hole, caused by aggressive accounting and lower than anticipated cash flows. Quindell’s new management expects to be able to pay down debt, retain enough cash for investment in the retained business, and return up to £500m to shareholders.
So, assuming a £500m return, the market is currently valuing what remains of Quindell at just £45m. This consists of a core of telematics-related businesses (for which the company is rumoured to have rejected a £50-£60m offer), some non-core operations that are up for sale, and an entitlement to a share of future settlement fees from a portfolio of hearing-loss claims that passed to S&G.
Quindell is set to publish re-stated accounts by the end of June. If management can demonstrate that “new” Quindell is worth more than the £45m the market is currently valuing it at, the shares could rise accordingly. This could potentially come from one or more of the following: the performance of the telematics businesses (or an offer for them), cash realised from the sale of non-core businesses, and news on hearing-loss fees. Confirma
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