Directors’ bids: the director of a gas company cashes in as the value swells
Gas producers were already trading strongly when Energean announced a new sale and discovery deal this month, sending its shares even higher. Meanwhile, forecasts of high gas prices for the rest of the year mean producers have seen some of the biggest gains this year of any UK-listed company as investors sold aggressively most other sectors.
The price of gas has remained high even with warmer weather hitting Europe and the EU, allowing Russian gas exports to continue.
Although somewhat separated from this volatile market by locked-in forward sale agreements, Energean’s share price is up 59% year-to-date at 1,360 pa.
Its second individual shareholder, Stathis Topouzoglou, crystallized some of those gains with a £1.35m share sale last week at 1,306 shares a year. Energean declined to comment on the transaction. Topouzoglou, a founding partner of Energean and a member of the board of directors, owns 9.49% of the company, according to FactSet – behind only chief executive Mathios Rigas (who owns 11.15%) in the ranking of individual shareholders.
Energean is in the prime position of being highly valued on future sales, but also already has cash flow from its Egyptian and Italian assets, purchased when gas prices were extremely low in 2019. While its price to earnings is 20 times high for the energy sector, using consensus 2022 said earnings per share, this comes down to just four times when 2023 earnings are plugged in. While any company bringing a major mining project into production will face challenges, Energean seems like a solid buy.
Falling share price creates opening for Knights move
After two years of post-pandemic boom, many companies were trading at valuations where the slightest bit of bad news can lead to painful selling.
Take Knights Group, for example. The acquiring law firm had continued to trade well throughout the pandemic and its shares opened this year at £4.10 – 182% higher than its IPO price of 145p in June 2018.
However, it only took a profit warning on March 22 to change that dramatically. The company’s share price more than halved in a single trading day after it said weaker macro conditions and staff illnesses meant underlying earnings for the year to 30 April would be slightly lower than the previous year. It also said growth for next year is expected to be more moderate at around 5%, compared to 9% in the first half of its fiscal year 2022.
The selling continued until May 16, when the share price hit an all-time low of 91p. A recovery began three days later, however, when the company confirmed that its underlying annual profit would not be less than £18.1m and that its net debt would be £2m ahead of forecasts. analysts forecast £29m.
On the same day, he announced the £11.5million acquisition of 130-year-old law firm Coffin Mew, and revealed major share purchases from directors. Chief executive David Beech bought almost £1million worth of shares, while dispute resolution partner Lisa Shacklock bought for almost £50,000 and finance director Kate Lewis just under £40,000 £. These helped push Nights Group’s share price up to 140p on May 20.
The stock price hammering means Knights is trading at 7x FactSet consensus earnings, well below its five-year average of nearly 18x.
However, the money spent on Coffin Mew, which has four offices on the south coast where Knights currently does not have a presence, will boost its net debt to EBITDA ratio to 1.5x. This will limit the scope for further trades, broker Peel Hunt said as it cut its price target on Knights shares to 230p from 270p previously.