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Summary
- Helium One stocks suffered sharp sell-off, losing over 50% in the last session on announcing the recent drilling update.
- RTC Group’s subsidiary company has signed an agreement with Network Rail to provide labour service for the next five years.
London Stock Exchange has different segments and different categories of stock listed, trading at a premium or at a discounted price. There are several factors that affect the stock price movement and investors should be looking for stocks that can be bought below the nominal value. The sudden slump in share prices offer this opportunity, but investors should be cautious before taking advantage of such opportunities and should invest only after analysing the scenario and its impact.
Let us look at two FTSE AIM listed stocks that suffered sharp decline in the past session and can be considered to be trading at a discount:
Helium One Global Ltd (LON:HE1)
The company engages in the exploration and production of helium gas. It has three main projects across Tanzania: The Rukwa, Balangida, and Eyasi projects expected to have a helium concentration of 10.6%.
Helium One Global and its advantage
Helium One Global Ltd enables investors to participate in the helium market as it is the only listed company in the UK that operates in Helium exploration. In addition, Helium elements cannot be manufactured artificially; they can only be extracted by drilling, just like natural gas. Hence it makes Helium One Global very unique business to own for the investors.
Historically, the US was the largest producer of Helium with over 40% global supply as it had the largest helium reserve in Texas, but Texas reserve is now exhausted as it was in use since 1960 and helium shortage is forecasted, which could lead to price rise and benefit the company with higher revenue and margins.
What led to the sudden fall in HE1 stock prices?
In its recent drilling update on 11 August, the company announced the successful drilling at 100% owned Rukwa Project. Although the company successfully drilled a hole to the depth of 1121 meters, the petrophysical analysis indicated there was no free gas in the uppermost thinly bedded Karoo sands, which is generally associated with helium shows. After the announcement, the stock was down by over 50%.
Also, the company is in the growth stage with no proven reserves and no revenue with limited funding.
Helium One Global Ltd was trading at GBX 12.25, down by 2% as of 11:28 AM on 12 August 2021. Its current market cap stands at £66.72 million, and the stock has given 54.74% year to date return to its shareholders.
RTC Group Plc (LON:RTC)
The company provides recruitment services to a broad range of industries in the domestic and international markets.
The company’s subsidiary Ganymede Solutions Limited has signed a labour service contract with Network Rail. This contract win has benefited the company to establish itself as one of the leading suppliers of frontline labour to the rail industry. The estimated value of the contract is between £100m and £150m over the term, and it will run for a period of five year starting from 1 October 2021.
Covid-19 restrictions have impacted the company’s growth, and the same is reflected in its half-yearly results. The group showed a flat revenue increase at £40.5 million, and its basic earnings per share fell to 0.76p per share (2020: 1.20p). The company did not declare any dividends during the period.
Post-lifting of lockdown restrictions, the UK is facing a huge shortage of staff, which could benefit the RTC Group Plc in short to medium term as it supplies both temporary and permanent labour to UK-based businesses.
The stock is a constituent of the FTSE AIM index and holds a small market cap (£7.23 million as of 12 August 2021); hence its price swing can be highly volatile. Though, the stock has given 19.25% year to date returns to its shareholders.
Conclusion
The sudden fall in stock prices may entice investors for stock at a discount, but at the same time, one needs to thoroughly analyse the long- and short-term impact of any news driven stock price volatility and then only opt for a stock to buy.
