Shares in oil exploration company Roxi Petroleum (LSE: RXP) and payment processing company, Optimal Payments (LSE: OPAY) are making gains thus far today after the two companies released positive pieces of news flow.
In the case of Optimal Payments, it announced that it has entered into an amended agreement regarding its acquisition of Meritus, with the number of Optimal Payments shares to be issued to the sellers and other parties set to increase from 9m to 12.8m. This has been decided as a result of the dilutive impact on the value of the shares following Optimal Payments’ three for five rights issue earlier this year.
Furthermore, Optimal Payments has also changed the dates for the issuance of the tranches of shares and amended the reference price of the shares for determining if recipients are to be paid additional consideration. This has been reduced to £2.75 from £3.93 and means that additional consideration would be payable in either cash or shares if the share price of Optimal Payments declined to less than £2.20 (representing 80% of the new reference price).
Clearly, market sentiment has picked up following the news, with Optimal Payments’ share price being up 3.5%. And, looking ahead, there is scope for further gains over the medium term since Optimal Payments is forecast to increase its bottom line by as much as 17% next year. This could cause investor sentiment to be positively catalysed and, with Optimal Payments trading on a price to earnings growth (PEG) ratio of just 0.9, there is considerable scope for an upward rerating over the medium to long term.
Meanwhile, Roxi Petroleum’s share price is up by over 6% today after the company announced that it has reached a deal to cancel royalty payments from its main BNG asset in Kazakhstan. In return for issuing shares in the company which make up around 5% of its enlarged share capital to specific parties, including Canamens and Sector Spesit, Roxi Petroleum will no longer be required to make royalty payments to those entities. This is viewed as a good deal by the company’s management, with it removing a future uncapped liability that may have limited its ability to access debt financing.
As a result, Roxi Petroleum’s share price could begin to reverse the recent weakness that has seen it fall from 18p in June to its current level of 11p. Certainly, as a smaller oil company it remains exposed to a falling oil price and, in the short run, this could act as a brake on the company’s share price performance. However, with Roxi Petroleum’s flagship asset, BNG, being relatively high quality, it appears to have the potential to post encouraging share price gains over the medium to long term. And, with it having a price to book ratio of 1.5, there seems to be sufficient scope for an upward rerating to merit purchase at its current price level.