LAM (Lamprell) provides services to the Oil & Gas and renewables industry.
I had bought some on 11 Oct at 80.58p.
If I could summarise the key points behind the decision:
- The current order book is $1.5b, compared with $1.1b at 31-Dec-2011. So sales are actually doing OK
- Convenant concerns are likely to be overstated given the low debt in relation to sales, and interest cover
- company has a good reputation
- it has some high-quality assets, which should be supportive of raising additional finance, and might be interesting to a potential acquirer
- I view changes in senior management as a positive
- market sentiment is shot to pieces, and has driven down valuation; there have been delays in turnover generation, and so on
This is one of those companies where I feel “if I’m wrong, I will lose a lot of money”, yet there seem to be analogies to companies like PIC (Pace) and SGP (Supergroup). It’s an uncomfortable share to own. Everyone is punch drunk, but the basic business looks OK.
Having thought about it, I am of the opinion that LAM is a better opportunity than EMG. My principal misgivings are that their hedge fund returns, and client in/out- flows are inherently unpredictable, although net outflows are expected. The EMG share price has been showing momentum lately, but my feeling is that unless you can form a view about why revenues should be positive from here, it’s tricky to see what the reward is.
We shall see.