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Simply because a share sells for pennies doesn’t imply it’s good worth. Many penny shares find yourself destroying way more shareholder worth than they create.
However not all do and I personal some in my portfolio. Listed below are two I’m watching this month, for various causes.
Topps Tiles
I already personal some shares in Topps Tiles (LSE: TPT) and to this point they’ve been a crashing disappointment.
But when the share value strikes down sufficient this month, I will probably be completely happy so as to add some extra to my portfolio. It was briefly beneath 30p throughout March and at that stage, I’d see the share as a possible cut price, albeit a dangerous one.
The dangers are linked to a lot of elements, however a key one is buyer demand. If the housing market is weak, demand for tiles and flooring coverings may fall. On prime of that, Topps’ formidable development plans may distract administration from maintaining the fundamentals operating easily.
The opposite aspect of that coin, although, is that if these development plans succeed, Topps may generate a lot extra income and revenue than it does now. Over the medium time period, administration goals to develop turnover by round 47%.
The penny share pays a dividend and expects this yr’s full-year payout to be not less than as excessive as final yr’s.
Topps ended the primary half of its monetary yr with simply £1.2m of internet debt. To date this yr, gross sales have been rising. I feel the corporate’s robust market place, and wide selection of gross sales platforms each on-line and offline, mixed with deep trade experience may all probably assist it unlock extra worth in future.
AFC Power
I proceed to suppose that there might be robust alternatives for some renewable vitality shares. The problem, as all the time, stays determining which of them and at what value!
AFC Power (LSE: AFC) has been on my radar for some time. The share sells for pennies and jumped round 30% final week after it introduced an settlement to collectively develop a spread of small-to-large-scale, extremely environment friendly, ammonia crackers for hydrogen manufacturing with an unnamed “main international industrial S&P 500 firm”.
Not solely may that probably unlock giant future income streams for AFC Power, however it might additionally find yourself performing as an essential proof of idea that helps appeal to extra shoppers.
However whereas I will probably be eyeing AFC in coming months to see whether or not there’s additional information that may remodel the corporate’s prospects, for now I’ve no plans to purchase the share.
Income surged final yr however stays small, at £4m. The corporate proceed to bleed pink ink. Final yr noticed AFC Power put up a post-tax lack of £17.4m, after dropping roughly the identical quantity the prior yr too.
That’s not a sustainable enterprise mannequin for the long run. So whereas I see AFC’s know-how as probably a powerful asset – and suppose this week’s information helps help such a view – I wish to see way more proof that it’s on a transparent path to profitability earlier than I’d take into account including the share to my portfolio. I will probably be watching to see if that’s delivered.
