Part 1: Harland & Wolff (LON:HARL) and (LON:BOIL) sport relatively depressed share prices that could offer decent entry points to would-be investors.
As we dive into Q2 2023, some of the most promising FTSE AIM shares remain seriously undervalued from a risk-reward perspective.
Of course, this is only a personal view, and not investing advice. These companies are AIM shares for a reason. They’re speculative and volatile, but come with the chance of exceptional returns for those prepared to buy, hold, and wait.
5 high-risk FTSE AIM shares to buy
1. Harland & Wolff (LON: HARL)
With an investor event coming on 17 April, HARL has plenty of developments to highlight to its shareholders. The meat is of course the £900 million backlog of already confirmed contracted revenues — £750 million of which is represented by the gigantic FSS contract.
HARL also has a £3.6 billion pipeline of new business over the next five years — representing a projected backlog of £1.24 billion at the current win rate. And it’s usually the case that contract wins beget contract wins.
The FTSE company is targeting revenues of between £100 million and £115 million in FY23, and this is expected to double to between £200 million to £230 million in FY24 — with a blended gross margin of 24-27% ‘over the medium term.’
While HARL only expected to start breaking even in FY24, it has upsized a debt facility with Riverstone to $100 million and is refinancing a further £200 million this quarter.
It also helps that President Joe Biden is visiting the country today.
Further, the company is awaiting formal hearings between 2-5 May concerning the Islandmagee Gas Storage Project, with the company ‘optimistic of a positive outcome’ for the full judicial review. It’s worth noting that while concerns over gas prices have subsided for now, the UK’s record low storage and concerns over next winter mean there is political pressure to get the project approved.
Of course, there are risks — HARL released a bombshell RNS late last year which tanked the share price, but the disconnect between the fundamentals and its £26 million market cap is vast.
2. Baron Oil (LON: BOIL)
BOIL shares rose to 0.25p apiece in mid-February, but the stock has fallen to 0.14p today, representing a great entry point — despite having doubled over the past year.
The explorer’s Competent Person’s Report for the Chuditch Project estimates that Chuditch-1 contains ‘1,084 Bscf gross mean contingent gas resources attributable to the licence,’ with various further resources across the prospect.
BOIL is, and always has been, about waiting for Chuditch to be sold to one of the titans in the region who already have an interest in building suitable infrastructure in East Timor. This will be an expensive endeavour given the logistics of building over the Timor Trench, but Woodside is engaging a concept study on the nearby Sunrise Project.
The buyer could be ENI, Santos, or Woodside — but one side of the equation that has not yet been highlighted is that Australia is becoming a harder place to drill for oil and gas.
Challenges to the £11 billion per annum subsidies, the safeguard legislation, and multiple blocked projects including lawsuits awarded against Santos’ $5.5 billion Barossa venture are all creating an atmosphere where the majors may start to look elsewhere.
