Today I am looking at four of the FTSE’s major movers of the past month.
Petra Diamonds
Shares in precious stones play Petra Diamonds (LSE: PDL) have enjoyed a stellar run of late and have charged 7% higher during the past four weeks alone. Although the supply/demand imbalance affecting the diamond sector is not as pronounced as that of other commodities markets, I reckon Petra Diamond’s recent strength will prove short-lived as stone prices keep on falling — the miner’s latest trading update showed revenues dip 10% during the 12 months to June 2015, to $425m.
The City expects Petra Diamonds to have booked a 33% earnings decline once full year numbers are released for 2015, although the bottom line is predicted to rebound 46% in the current year. But with the business also suffering from low grades and smaller diamonds from its Finsch and Cullinan projects, I believe Petra Diamonds is overpriced at a prospective P/E multiple of 17.6 times, sailing above the benchmark of 10 times that I feel would fairly reflect the problems facing the firm.
Tate & Lyle
Like the diamond digger, sugar producer Tate & Lyle (LSE: TATE) has also enjoyed a stellar run of late and was recently dealing 6% higher from levels seen during mid July. The London business announced during the period that trading was in line with expectations during April-June, and that it expected sales at its Speciality Food Ingredients to take off during the second half.
The abacus bashers expect Tate & Lyle to endure a third successive earnings slide for the year ending March 2016, and a 9% anticipated decline leaves the business dealing on a P/E multiple of 15.8 times. And with the business still in the early stages of massive restructuring — it is scaling back its Splenda sucralose operations due to intense competition from China, and selling off its European bulk businesses — and performance at its Bulk Ingredients arm remaining fragile, I believe shares are in danger of sagging again.
Xcite Energy
Shares in oil explorer Xcite Energy (LSE: XEL) haven’t exactly exploded in recent times, although a 6% dip during the past four weeks has seen it outperform many of its industry peers. But with oil prices tanking once again — Brent was recently precariously-placed just above $48.50 per barrel — I reckon investors should cut the firm adrift before shares rattle lower.
Undoubtedly Xcite Energy’s Bentley project is one of the North Sea’s most promising assets, and latest testing revealed reserves of more than 265 million barrels of oil. And while the firm secured re-financing last year, cash reserves stood at just $32.5m as of December. On top of this, Xcite Energy is still to draw up strategic and commercial agreements before a field development plan (FDP) is signed off. Given the murky oil price outlook, and subsequent capex scalebacks across the fossil fuel industry, the explorer may find it difficult to find willing partners any time soon, making it an exceptionally high-risk stock in my opinion.
Balfour Beatty
Construction specialist Balfour Beatty (LSE: BBY) has seen its share price bounce 12% during the past four weeks thanks to positive contract news — the firm’s joint venture with NG Bailey was granted ‘preferred bidder’ status for infrastructure work at the £460m Hinkley Point C nuclear plant, while another venture with VINCI secured a Highways England contract worth up to £607.4m.
Such news has naturally given Balfour Beatty’s long-term outlook a shot in the arm, but the huge cost of various legacy contracts continue to weigh and the business saw pre-tax losses widen to £150m during January-July from £58m in the same 2014 period. But even though the firm is not predicted to swing back into the black until 2016, I believe the worst of Balfour Beatty’s troubles could be behind it as the improving UK economy boosts the top line, and new chief executive Leo Quinn’s ‘Build to Last’ transformation programme kicks in. I believe Balfour Beatty may be one to hang onto for the time being.
