Are Watchstone Group PLC, Tungsten Corp PLC And IGAS Energy PLC Ticking Time-Bombs?

Should you steer clear of Watchstone Group PLC (LON:WTG), Tungsten Corp PLC (LON:TUNG) and IGAS Energy PLC (LON:IGAS)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Telematics company Watchstone (LSE: WTG), e-invoicing specialist Tungsten (LSE: TUNG) and UK onshore firm IGAS Energy (LSE: IGAS) have been through turbulent times. Are their futures now brighter, or are investors sitting on ticking time-bombs?

Watchstone

Watchstone — formerly called Quindell — was left with a rag-bag of loss-making businesses after selling most of its assets to Australian firm Slater & Gordon last year. The deal saved Watchstone from blowing up for lack of cash, but has been disastrous for the Aussie group whose share price has collapse from $8.00 to just $0.28.

Watchstone has already offloaded some of its retained businesses — an insulation business in January and a telecoms software business in February — and an announcement today of a management incentive scheme appears to envisage the remainder of the businesses ultimately being disposed of in one way or another. Cash bonuses for directors “will only be triggered upon value-crystallising events (including, inter alia, a takeover of the Group or disposals of individual divisions) in excess of base values”.

Watchstone is still the subject of a Serious Fraud Office (SFO) investigation into events of the Quindell era and faces potential legal action from disgruntled shareholders. However, with a cash balance of £95m at the last reckoning (equivalent to its current market capitalisation), former directors likely to bear the brunt of any penalties arising from the SFO investigation, and with a letter of claim from disgruntled shareholders only currently standing at up to £9.4m, Watchstone no longer appears to be the ticking time-bomb it once was.

Tungsten

Troubled e-invoicing firm Tungsten today announced the departure from the board of founder Edi Truell. Although Tungsten “serves 56% of the Fortune 500 and 67% of the FTSE 100”, and processed transactions worth over $187bn last year, it’s not making any profit.

Add-ons are where the profit is in e-invoicing. However, the company said in December that while its analytics product had been demonstrated or trialled by more than 50% of its customers, and while feedback had been generally positive, “at the initial pricing levels quoted none agreed to purchase the product”.

Alongside today’s announcement of the departure of Edi Truell, the company said it had received various proposals from him to combine Tungsten with other assets in which he has an interest. The board found these various proposals to be “universally without merit for shareholders”.

Whether Tungsten has a business that will ever be profitable remains to be seen. There are no immediate cash concerns, so there’s a long fuse on this ticking time-bomb, but many ifs and buts as to whether it can be defused.

Igas

Igas’s results for the nine months ended 31 December, released last week, showed that the company was only able to deliver net cash from operations of £1m. That was at an average price of $58.9 a barrel, but the current oil price is now around $40.

Moreover, Igas is weighed down with debt, the results showing cash of £29m, but £85m of secured bonds maturing March 2018, and £18m of unsecured bonds maturing December 2018. The company said that based on its current forecasts it is projected to breach certain of its bond covenants in the second half of 2016.

Asset sales, a dilutive equity raising or persuading bondholders to modify or temporarily waive the covenants are options the board could pursue. However, the secured bonds are trading at just 46 cents in the dollar, which tells you that equity holders are in the extremely precarious position of sitting on a ticking time-bomb.

In my view, there is limited upside for Watchstone, while the downside risk is so substantial at Tungsten and Igas that I believe selling would be the most prudent move.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

Does a 9.7% yield and a P/E under 10 make the Legal & General share price a no-brainer?

With a very high dividend yield and a falling P/E forecast, could the Legal & General share price really be…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

This growth stock is up 2,564% over 6 months! Is this FOMO?

This growth stock has experienced an incredible appreciation in its share price. It’s not a meme stock, but investors might…

Read more »

Investing Articles

This bank’s dividend yield will grow to 6.9% in 2026! And analysts say its undervalued

Analysts say this FTSE 100 stock’s dividend yield will continue to rise over the medium term. With the stock also…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Can we justify the red-hot Tesla share price?

It might just be FOMO, but the Tesla share price is going from strength to strength. Dr James Fox takes…

Read more »

Investing Articles

UK stocks are 52% discounted, says Goldman Sachs

With UK stocks staggeringly cheap right now, this Fool took the chance to add one unloved FTSE 100 share to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 107% in 2024, can this FTSE 250 star keep soaring?

Christopher Ruane looks at a FTSE 250 share that has more than doubled in price so far in 2024 and…

Read more »

Investing Articles

Could 2025 be a great year for the stock market?

2024 has been a record-breaking year in the stock market on both sides of the pond. Our writer explains the…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

An investor buying £10,000 of IAG shares at the start of 2024 would now have this much!

Anyone who had the courage to buy IAG shares at the beginning of the year will be sitting pretty right…

Read more »