Should You Buy Or Sell Ultra Electronics Holdings plc, Xtract Resources PLC & Circle Oil Plc Right Now?

Ultra Electronics (LSE: ULE), Xtract Resources (LSE: XTR) and Circle Oil (LSE: COP) are three names you should keep on the radar. Here’s why. 

Confidence Builds Up At Ultra

Ultra stock is flat over the last 12 months, and has been looking for direction since the end of 2010 — but is the tide turning?

Not only has Ultra recorded a strong performance since 9 April (+11%) but its latest acquisition, announced on Monday, reinforces the view that this A&D firm could be on the right path of value creation.

It’s spending $265m in cash to bulk up its electronic warfare offering by acquiring the electronic products business of US-based Kratos: deal-making has been core to its strategy ever since inception, and is unlikely to play a minor role in its capital allocation strategy in the next few quarters. 

Ultra has a solid balance sheet, and it loos like its stock offers upside based on fundamentals and trading multiples, although Ultra may appear to be more of a dividend play (forward yield 2.4%) than a growth play at present.  

Xtract Is On A Roll 

Xtract has been on its way up for a few weeks now, so the obvious question is whether it’s all gold that glitters for this miner!

I remain moderately bullish on this casino stock, which is up 5% today, and has recorded a +37% performance since mid-May, when it emerged that it had found a significant “concentration of gold on the intersection of two major geological structures at the Salvadori prospect at the Chepica Gold and Copper Mine in Chile.“

It announced today the main characteristics of the ore zone (“approximately 8,000oz of gold is available,” it said), which made for an encouraging reading. 

As I pointed out in mid-May, its rally may well continue (the stock is up 227% this year), and that could be backed by willing shareholders and new discoveries. It remains a risky bet, of course, but one that my be worth taking at 0.45p a share as part of a diversified portfolio. 

Circle Oil: Short-Term Pain For Long-Term Gain? 

Circle Oil was hammered on Monday: I didn’t expect that, but it was never meant to be an easy ride for its shareholders, as I recently pointed out.

Still, there are reasons to be optimistic, and its awful trading update on Monday may not be such bad news after all.

Impairment and write-offs of assets in Egypt and Oman were to blame for its annual pre-tax losses. Falling oil prices were behind these non-cash losses, but as Circle Oil cleans up its balance sheet, the biggest risk remains its commitment to capital expenditures. 

The oil industry backdrop “combined with the cost overruns on both the Mahdia Block and on Block 49 in Oman, have resulted in Circle undertaking a thorough review of its cost base and capital expenditure commitments,” the group said yesterday, adding that “in the current cash constrained environment, the board will continue to evaluate its commitments in Tunisia.”

Its new boss, Mitchell Robert Flegg — whose appointment was announced on Friday — has lots of work to do, not least because at the end of the year available cash totalled $34.5m (2013: $26.1m), while net debt stood at $38.69m.

At the end of May, net debt had increased to $59.1m, which implies a manageable forward net leverage above 2x.