Friday, March 05, 2010
Welsh Shares Barrel On
There is one star performer in the index of Welsh shares and it operates in an unlikely sector, Rhys David notes
The Welsh share index which we started last November reached its highest point to date at the beginning of March, mirroring a stronger performance by shares as a whole since the post Christmas dip in January. The nominal £1,200 which we committed to Welsh shares four months ago would now be worth £1,253 compared with £1,214 a month earlier, a rise of 3.2 per cent.
The good news is limited, however, the overall performance of the 12 shares representing the Welsh economy concealing some very wide variations in performance. Indeed, in a month when the FTSE 100 rose by 3.9 per cent, the FTSE All share by 7.4 per cent and the Aim small share market, on which most of our 12 selections are represented by a much more modest 0.3 per cent, only five of our Welsh shares actually ended the period higher than they started, with one marking time and the other six falling.
The real star, as indeed in earlier months, was Wales’s little-known oil and gas exploration company, Amerisur Resources, which rose 19.3 per cent over the month from 14.17p to 16.91p to complete a 120 per cent increase since the beginning of November. £100 worth of shares purchased then would now be worth £218.
The St. Mellons-based company has oil and gas interests in South America and its rise in February was fuelled by the news that the Colombian government had authorized exploitation of the company’s Plantanillo field.
It was also a good month for Welsh media company, Boomerang Plus, which rose 16 per cent largely on the basis of positive news during the month about its revenue pipeline of £50m, followed within the last few days by an announcement that it had won a £4m. contract to provide programme content for S4C’s pre-school service, Cyw. Shares in the company rose from 75p to 87p, though this remained below the figure at the start of November when the shares were worth 95p. In the last few days, however, the shares have recorded a further advance.
The other risers during the period were Admiral, which is a healthy 8.2 per cent ahead of its value one month ago and 16.5 per cent ahead of its November valuation. The company reported a rise in pre-tax profits to £216m in 2009 and now insures 1 in 16 of all cars on UK roads. It is also continuing a programme of expansion overseas where it hopes to replicate its success in the UK market.
Pure Wafer, the Swansea chip-maker rose a more modest 2.8 per cent over the month but has made a more substantial gain of roughly 37 per cent in the four month period taking the value of £100 invested up to £137. Wynnstay, the mid-Wales agricultural supplier and retailer has also continued its progress, rising 8.6 per cent over the month to 264p and recording a rise of 17 per cent over four months.
The big casualty of the index has proved to be Enfis, the Swansea University lighting specialist spin–off which has continued its share price decline. The sum of £100 invested in Enfis in November would now be worth only £24.70, last month recording a further 24.6 per cent fall in value. The company experienced a big drop in revenue in 2009 compared with a year earlier but is predicting a strong recovery this year.
Finsbury Food, the Cardiff-based Memory Lane Cakes maker, also fell further in February and its shares at 20.5p are now 21 per cent down on the figure of 26p at the start of November. Decorations and stationery group International Greetings slowed the decline in its share price but their value at 58p is 20 per cent down on the figure when the index was constructed. Technology company IQE also declined during the month by 6 per cent and housebuilder, Redrow, by 3.9 per cent. The £100 invested in the latter’s shares is now worth only £92 but it was able to report during the month a significant reduction in losses from £46.2m to £8.7m for the last six months of 2009, compared with a year earlier and revenue was up from £149.5m to £187.2m as a result of an increase in completions and a rise in house prices. Shares in Welsh Industrial Investment Trust, which some of its major shareholders, have asked to be wound up, were unchanged.
Wales’s other big quoted financial services business, Moneysupermarket..com, saw a decline in its share price of 2.8 per cent in February and at 71.76 it remains 6p down on four months earlier. It managed, however, to announce a return to profit during the period, despite a decline in revenue. As one of Britain’s leading price comparison websites it may be wishing – like Admiral the owner of comparison site Confused.com – that Rural Affairs minister Elin Jones could add a meerkat cull to her badger cull. Both companies have suffered from the success of Alexander the Meerkat, rival site Comparethemarket.com’s annoyingly successful promoter.
So what lessons if any can be learnt this month from the performance of this selection of Welsh shares? The market is clearly excited by Amerisur Resources’ prospects and the opportunities the oil sector will offer with a sustained return to growth in the world economy. Other companies with good news to announce, such as Boomerang Plus and Admiral, have also done well. Other Welsh companies close to the consumer, such as Finsbury Foods and Redrow are clearly still being viewed with a degree of caution as the prospect of a post-election tightening of purse-strings comes closer.
Broadly speaking, the Welsh index is tracking the main UK indices, outperforming Aim as a whole over the month but not quite matching the two main indexes. Without Amerisur Resources, however, the picture would look a lot bleaker.
The full list of companies in the index is: Amerisur Resources, Admiral Insurance, Boomerang Plus, Enfis, Finsbury Food, International Greetings, IQE, Moneysupermarket.com, Pure Wafer, Redrow, Wynnstay, and Welsh Industrial Investment Trust.
A note of clarification. The observations above are personal opinion, they do not represent the views of the IWA and are not a recommendation to deal in any of the shares mentioned. Any reader interested in buying any of these share would be well advised to consult a financial adviser.