It has been a bad year for Tungsten shares – it was all looking much more positive over the winter when the shares shot from 58.40 up to a plateau of 69.50 in mid-January, but sadly that was where they remained, until finally coming off again with a huge drop in March followed by sub-par performance for the last three months or so.
As Tungsten shares approach the 50 mark and with Tungsten Corp (LSE: TUNG) due to report its final results on Monday, we ask what went wrong and whether there is any scope for a turnaround.
Tungsten shares – what went wrong?
Founded in 2000, Tungsten Corp is a global supply chain enabler. Part of its core business is supporting supply chains, for example via trade finance. It aims to facilitate the connectivity between buyers and sellers, for example through tax-compliant invoice financing.
Tungsten Corp re-launched its trade finance business at the beginning of 2017, seeking to help companies in the UK and US. It has accessed other markets like Ireland and the Netherlands, and its total trade finance figure has topped £300 million. It is also working with a number of partner firms, like Orban and Funding Circle, to help it to achieve further growth.
Trade finance is a key part of the day to day financing activities for companies – it is a role now being increasingly occupied by non-bank entities like Tungsten Corp, as banks are exiting this field, largely because regulators are forcing them to hold more capital on their balance sheets. That means many companies are having to turn to businesses like Tungsten Corp to provide them with essential bridging finance. It is fair to say that many UK companies would go to the wall without this.
So given that companies like Tungsten Corp and its competitors have such an important role to play, why all the negative sentiment around the Tungsten share price this year?
Tungsten has full year revenues of £31.27 million for 2017 which was 19.88% over the previous year’s results. The only analyst covering the company is pretty bullish about it and is forecasting some good results on Monday and a target share price of 92, which is well above where it is now.
Hedge funds want to see CEO Hurwitz out
Note, however, that Odey Assey Management, the hedge fund managed by Crispin Odey, is pushing for senior management changes at Tungsten, and is being backed up by a number of other hedge funds, among them Disruptive Capital Investments and Hadron Capital. Among the executives Odey would like to say goodbye to are chairman Nicholas Parker and chief executive Richard Hurwitz.
Tungsten Corp is defending itself, claiming that it has reached an ‘inflection point’, narrowing EBITDA losses to less than £5 million and projecting FY 2018 revenues at £33.7 million. The company’s board says it is planning to engage with shareholders on this issue.
Fundamentally Tungsten is in an interesting and dynamic sector of the economy. If the company is managed well, its share price should be a lot higher than it is. We agree with the analyst that it should be much higher than 50. However, if Monday’s results disappoint, then expect impatient shareholders to vote for some changes at the top. If they are successful, this could still be beneficial for the Tungsten share price.