Shares in platinum producer Lonmin (LSE: LMI) are up by 13% today, following a period of intense declines in recent weeks. While there has been no significant news flow released today by the company, its shares could be having something of a ‘dead cat bounce’ following their fall of 45% over the last month.
As such, it would be of little surprise for them to come under further pressure in the short run from further negative news flow surrounding the Volkswagen diesel scandal. That’s because platinum is a key component in catalysts for diesel cars and, with it gradually emerging that more and more diesel cars are running software which may allow them to ‘fake’ emissions tests, the market is betting that demand for diesel vehicles could wane. As such, the price of platinum is falling and this is causing the outlook for Lonmin to deteriorate.
However, Lonmin could be a sound buy at the present time. Whilst further share price falls are a real threat, the reality is that diesel cars are here to stay. Perhaps some consumers may switch to petrol or even electric cars in the wake of the scandal, but diesels are likely to remain popular among taxi companies, haulage businesses and high mileage individuals over the coming years. So the recent fall in platinum and in Lonmin’s share price may present a buying opportunity – especially since Lonmin trades on a price to book value (P/B) ratio of just 0.05.
Similarly, shares in oil exploration company Falklands Oil & Gas (LSE: FOGL) have fallen by 15% in the last three months on fears surrounding the outlook for the oil price. Certainly, further falls could be just around the corner, but in the coming years it is more likely than not that the oil price will be at a higher level.
That’s because the world economy remains in a strong position and, while Chinese growth may level off to 6% or 7% per annum, that is still many times greater than the growth prospects for the developed world. As a consequence, demand for oil is likely to pick up and, with Falklands Oil & Gas having already enjoyed considerable success at two of the four wells which form part of its 2015 drilling programme, it appears to be in an excellent position to deliver upbeat news flow. With its shares trading on a P/B ratio of 0.6, they seem to be very cheap at the present time, too.
Meanwhile, shares in energy technology company Intelligent Energy (LSE: IEH) have soared by as much as 10% today after it announced an £85m deal to acquire the energy management business of GTL, which is a provider of energy to over 27,400 telecom towers in India. The deal is a positive step for the company, since it provides it with a managed customer base to which it can deploy its fuel cell technology.
Despite this, Intelligent Energy remains a loss-making business but, with the acquisition expected to generate £120m per year in additional revenue and EBITDA margins of around 15%, it could be a major step forward towards profitability for the business. While it remains a relatively risky investment, it would not be a major surprise for its shares to continue their upward trajectory.