27-Apr-2012
SUNDANCE ENERGY, DWS ADV BUS SOL & LOGICAMMS
Sundance stocks are high, even after recent fall
ASX Code SEA, DWS, LCM
SHARES in shale gas play Sundance Energy have fallen just over 24 per cent in the past month, perhaps helped along as investors watch managing director Jayme McCoy and two fellow directors sell, netting them more than $4.3 million.

This month, McCoy and exploration chief Paul Franks each sold 2.5 million shares for $1.9 million, while in March, independent director Damien Hannes sold about $572,000 worth of shares.

It's understandable that they've sold. At 80¢, even after the fall, Sundance's stock has increased more than fivefold in the past 12 months.


Sundance has about 50 producing wells located in what analysts in the sector describe as the ''hotspot for shale gas production'' - the Bakken region located primarily in North Dakota. The US Geological Survey estimates the region contains 3.65 billion barrels of oil alone, which doesn't include its reserves of natural gas.

Investors have fallen in love with the shale gas story, which has only really emerged in the past 15 years, after the technology first became commercially viable. This is because it takes a lot of the exploration risk out of finding oil.

Basically you are ''engineering a reservoir'', as one analyst put it, by injecting water into the shale rock at high pressure, which ''fractures'' the rock. Sand, called proppant, is then pumped in to keep the fractures open and the oil or gas is sucked out.

This replaces the traditional method of hunting for oil and gas by drilling into ''traps'' in sandstone or limestone reservoirs. These reservoirs may or may not contain black gold or gas.

It is ironic that one of the other reasons for the fall in Sundance Energy's price was its reserve report released in late March informing of an increase in its oil reserves, which was less than the market had anticipated.

Yet the company is still undervalued, according to the broker Euroz. Sundance is now producing about 1200 barrels of oil a day and this is predicted to grow to 4000 to 5000 barrels in the next two years. This, its $30 million in cash and its other big prospect, ''Niobrara'' in Colorado and Wyoming, underpin its price target of $1.34.

 
DWS in recovery mode

SOME fund managers are running their rulers over Danny Wallis Solutions, more commonly known as DWS Advanced Business Solutions, given its current dividend yield of about 8 per cent, well above the small cap average of just over 4 per cent.

The company provides its clients, which include telcos, finance companies and casinos, with ''IT solutions''. For a telco, it might provide a Yellow Pages application or an app on an iPhone. It also does data conversion work for banks, converting archaic cobalt code used in computers in the 1970s into a one-stop shop platform such as enterprise resource planning.

At $1.40, DWS shares are in recovery mode, having fallen more than 20 per cent in a couple of days in early December to as low as $1.17. What prompted the fall was that Telstra had ''reduced need'' for DWS's services over the Christmas period.

This caused a profit downgrade because it meant that about 90 or so of DWS's 500 plus consultants had a longer holiday than they had anticipated. This was crucial, because the company makes money from the billable hours charged by these consultants.

Wallis tells us that Telstra, which had represented 23 per cent of revenues, sank to 18 per cent. He quickly adds that the problem has been solved, and says that ''after a period of negotiation, the Telstra work is building back up''.

To emphasise his point, he says that his company is experiencing a ''solid finish to the year'' and that he is confident the dividend will ''at least match last year or even be increased''.

In contrast, broker Ord Minnett predicts a drop in dividend from 11.3¢ last year to 10.9¢ for fiscal 2011.

No doubt the broker's $1.65 valuation does reflect some Telstra risk, but if it can keep holding on to the Telstra wagon, the ride could well be worth it.

 
Logicamms trading halt

MINING services company Logicamms has just gone into a trading halt as the company scrambles to raise $16 million through Perth-based broker Blackswan Equities.

At $1.55, its price prior to the halt, its shares have climbed more than 50 per cent in the past 12 months and the company has a market cap of $94 million. Logicamms is understood to be raising the equity at between $1.25 and $1.30.

It's not surprising that it is raising capital because of the burgeoning pipelines of activity these companies have on their books, associated with the mining boom. Logicamms is in the centre of this, designing mines and processing plants and providing engineering consulting services.

The company has had a couple of heavyweights recently join its board - as chairman Peter Watson, who was head honcho for a number of years at logistics specialist Transfield Services, and Giles Everist, who comes from the engineering company Monodelphous.

On another note, it was interesting to see Watson's predecessor, David Humann, selling about $115,000 worth of shares in mid-March when Logicamms' stock price hovered around $1.45. No doubt he will have a good holiday in retirement.

SOURCE: FAIRFAX

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