Directors Dealings
Directors Dealings Perhaps a sign that the recent declines in the market are coming to an end; in the last 2 weeks the ratio of Directors buying to selling (in the UK) has reverted back to a more normal pattern and there has not been such a plethora of sales by value. The alternate explanation, of course, for the volume of selling we saw in March and April is that this was related to a lot of end-of-tax-year planning by our collective corporate leaders, and not a signal as to where the UK economy was heading. One particular story stands out to us this month in the widely followed Oil & Gas exploration sector.
Gulfsands Petroleum Gulfsands Petroleum’s shares have been hit heavily in recent months primarily due to the spill over effects of the Arab uprising and in particular the civil strife in Syria — a region where the Company’s main exploration operations are based. Unfortunately for Gulfsands, the EU sanctions imposed on the Syrian Government resulted in the suspension of their Syrian activities — the main part of the company that was currently cash generative and profitable. That said, the company does have interests in Tunisia, other parts of the Middle East, North Africa & the Gulf of Mexico. From a high of over 400p in early 2011, the shares recently touched a low of 105 and, in looking at the chart below, one could surmise that they are mightily oversold.
62 | www.financial-spread-betting.com | June 2012
At the current price of 115p (time of writing), the market capitalisation is just a shade over £135m and the company sits with around £68m of net cash. General Petroleum Company (GPC), a Syrian Government owned corporation which is Gulfsands’ effective joint partner in the Syrian operations (known as Block 26), has continued to pump oil and, at the beginning of February, Gulfsands was owed approximately $25m from GPC. Interestingly, and before the Syrian issue flared up, the company was embarking upon a share buy-back exercise and was happily purchasing their own shares at prices in excess of 200p. This indicates that the Board believed the shares undervalued at this level. This type of situation where there has been forced and nervy selling resulting in a material undervaluation relative to its NAV is a classic ‘catalyst/re-appraisal’ purchase story. Should improvements in the political situation in Syria come to pass in the ensuing months, then there could be a sharp re-rating indeed. On the 11th May Mr Mahdi Sajjad purchased 30,000 shares at 111.75 on behalf of a Discretionary trust his children are beneficiaries of, taking his total beneficial holding up to 8.65m shares. Back in February, Chairman Andrew West also purchased 17,500 shares at 179p. What has really piqued my interest, however, relative to the frankly disgusting treatment of shareholders by great swathes of listed corporate UK these days, is the deferral of cash bonuses and also the suspension of share option awards until the Syrian situation is resolved. I applaud this approach and only wish the likes of Simon Fox at HMV would show similar morality and appropriate behaviour.