Midas Extra share tips: President Petroleum, YouGov

By Joanne Hart for The Mail on Sunday
Updated: 14:37 EDT, 13 January 2010

There are six weeks to go until Christmas but a hint of the festive spirit seems to have entered the market already.

Spurred on by better than expected news on unemployment and upbeat comments from Barclays and HSBC, brokers are in an optimistic frame of mind this week.

News from America has been relatively robust as well and takeover activity is increasing, including, for example the hostile approach for Cadbury's from US food giant Kraft. Bids, particularly unsolicited ones, are taken as a sign of growing corporate confidence, sending shares higher and encouraging investors to look at riskier stocks.

President Petroleum (formerly Meridian Petroleum)

Epic: MRP

President Petroleum fits firmly into that category. The company, formerly known as Meridian, joined Aim in 2004 as an oil and gas exploration and production business, operating primarily in Louisiana, USA and South Australia. For several years, it did relatively little, while managing to be publicly ticked off by the London Stock Exchange for misleading the market about its progress.

Now, however, change is afoot. The company has raised nearly £7 million from institutional shareholders and announced it intends to grow substantially by acquisition, evolving from a small, insignificant player in the oil and gas market to a mid-cap significant one. Talk is cheap but there is more reason to have faith in President's ambitions than in other small, pushy companies.

As part of its transformational strategy, the company has enlisted the support of Peter Levine, through his investment vehicle Levine Capital Management. Levine has an uncanny knack of making money for himself and investors in the oil and gas sector. His most recent triumph was the sale of Imperial Energy to the Indian conglomerate ONGC.

Midas recommended Imperial in July 2008, when the shares were 750p. Two weeks later, ONGC launched a 1250p a share bid for the company. At the time, crude oil was around $140 a barrel. By the time the deal was sealed, five months later, oil prices had fallen to less than $40 but ONGC stuck to the original terms and shareholders, including Midas readers, were handsomely rewarded.

Levine was chairman of Imperial, his chief executive was Christopher Hopkinson and finance director was John Hamilton. Both Hopkinson and Hamilton are joining the President board and another close colleague of Levine's Michael Cochran is becoming the new exploration director. Levine's investment vehicle is taking a 29.9 per cent stake in the company.

All four men have worked in oil and gas for years and have proven track records of finding good sites and buying them at reasonable prices. Competition for oil and gas fields is fierce but less so at the smaller end of the spectrum, where President will be focusing its efforts.

President chairman Stephen Gutteridge has an impressive track record too. Having spent more than 30 years in the energy sector, he took on his current position last year, following the Aim censure. Before that, he chaired Aim company Star Energy, until it was acquired by the Malaysian group, Petronas.

President has solid financial firepower as well. The sites in Louisiana are up and running so they generate cash for the business. The Australian fields are at an advanced stage and, importantly, Australian bank Macquarie has made just over £20 million available to President for acquisition purposes.

Midas verdict: President shares are still trading as Meridian but the name change will soon become effective. The stock is priced at 56p now but, if Gutteridge and the Levine quartet achieve their ambitions, these shares could go far. Not a stock for the nervous but for investors who fancy taking on a bit of risk, this is an intriguing investment.

YouGov

Epic: YOU

Everyone has heard of YouGov, the opinion polling organisation which finds out what the nation thinks about Government policies, Government ministers and the Opposition. The company is one of the best-known names in the market research industry and has a reputation for accuracy and innovation. Being well-known is not the same as being profitable and YouGov has suffered in the past from an involvement in work that was rewarding intellectually but not necessarily financially.

The market research industry is changing however and YouGov stands to benefit. Money is made in this business from corporate clients - companies that want to know more about their customers so they can make sure they are selling the right things to the right people in the right way. This information has traditionally been gleaned by armies of poorly-paid researchers, tapping on people's doors up and down the country or phoning them and persuading them to take part in long, tedious surveys.

Now, increasingly, research is done online. People fill out surveys on their computer and the questions are more probing, more fun and more interactive. YouGov is at the vanguard of this online trend and it is helped too by having hundreds of thousands of panellists who actively enjoy filling out surveys on numerous different subjects. YouGov used to operate exclusively from Britain but it has now branched out and has 266,000 panellists in the UK, 1.5 million in America, nearly 300,000 in Europe and 200,000 in the Middle East.

The management has been strengthened over the past year too. Chairman Roger Parry is a veteran of the media world, chief executive Nadhim Zahawi and group innovation officer Stephan Shakespeare co-founded the group and they have brought in a group financial officer, Alan Newman, created the role of group operations director for Swedish chief executive Lars Lund-Nielsen and made changes to regional management.

Last month, YouGov reported a more than halving in pre-tax profits to £3.5 million in the year to July 2009. The company had already warned the market about this, blaming the recession and the fact that it has been through a period of rapid expansion, which involved substantial investment in the business.

Looking forward, the picture is much brighter. Profits are forecast to rise steadily over the next two years and YouGov should benefit as economic conditions improve.

Midas verdict: YouGov shares are trading at 50.25p but they should gain ground. Market research is becoming more focused, more interesting and easier to access. Companies are likely to make increasing use of it and YouGov is at the forefront of the market. Buy.