Premier Oil worth exploring on bid hopes

For three years now Premier Oil has suffered from blocked pipe as far as shareholder value is concerned. But after yesterday's restructuring, investors will be hoping they have finally struck oil.

Yesterday's deal saw the unbundling of the 1999 agreement which saw Petronas of Malaysia and Amerada Hess take 25 per cent each of Premier's equity. Though the deal was vital at the time as it shored up Premier's stretched balance sheet, the shares have gone nowhere ever since as the arrangement, in effect, made the company takeover proof. Now it becomes a potentially attractive bid target for the likes of Shell and ENI.

The fundamental part of the restructuring see both Petronas and Amerada Hess give up their holdings in return for taking various Premier assets. Petronas receives the group's interest in Myanmar, the old Burma, as well as stakes in Indonesian interests. Amerada receives a 23 per cent stake in a key Natuna oil field in Indonesia. Premier also receives a total cash payment of £232m from the two companies.

The shake-up transforms Premier's balance sheet, cutting debts to £111m with gearing cut from 98 to 39 per cent. It also takes the group out of the controversial Myanmar market where the company has been lambasted by human rights activists for its involvement with the country's military regime.

Premier's average daily production is cut as a result from 50,000 barrels per day to about 35,000 with interests focused on the UK, Pakistan and Indonesia.

The most obvious reason to buy Premier shares is in the hope of a bid. But there is also the prospect of operational progress as the improved cashflow would enable Premier to expand its exploration interests.

Another reason is the prospect of some return of funds to shareholders as the company says it may sell out of some oil projects to crystallise their value. Who knows, then, Premier might even pay a dividend again one day.

Yesterday's full-year results were something of a sideshow with pre-tax profits up 46 per cent to £36m for the six months to June. The shares – up 1.5p at 25.75p – trade at a substantial discount to their 40p net asset value and are worth drilling into.

Black cab maker Manganese Bronze is not worth hailing

Black cab maker Manganese Bronze has had a tough time of late. Last year its engine stalled due to a combination of rail crash effects, foot-and-mouth and a dive in fortunes at the major investment banks which now need fewer taxis outside with their meters running.

This year has not been much better. The launch of its Zingo mobile taxi hailing system was delayed and a trial with 200 cabs has only just started. A full launch will come next year if the trial is successful but at least costs have been capped at £8m.

The other setback came overseas where Manganese's licensing deal with China Brilliance, the Chinese car manufacturer, has swerved off the road. The chairman who signed the deal with Manganese to make the cabs under licence in China has been replaced and the company has yet to start making the vehicles.

The result is that a £600,000 licensing payment that was due in August has not been paid. Manganese is contracted to receive £2.7m of payments over the next 18 months whether the Chinese start making the cars or not but the company admits it may need to seek another partner.

In the meantime the UK economy has not picked up and the continued downturn in investment banking means cabbies are less likely to shell out for a new motor if they are not going to be able to make a decent return.

The poor conditions resulted in a £2.9m loss in the year to July, down slightly from the previous year's deficit of £3m. The number of cabs sold was unchanged at 2,602 for the year and the parts division made a £1.1m loss.

The better news was the successful launch of the new TX11 cab which comes with a Ford engine rather than the old Nissan version, which was less environmentally friendly.

But with the company seeing no improvement in market conditions the shares – down 5p at 66.5p yesterday – are best left at the traffic lights for now.

Punters better off avoiding Sportech

Sportech may be betting that the strength of the Littlewoods gaming brand will be enough to make the company's fortunes, but its investors have proved less keen to back that particular punt. Since it acquired the Littlewoods leisure business in September 2000, the shares have plunged by two-thirds from a peak of 28.25p to 11.25p yesterday.

The company is hoping to leverage the Littlewoods name and history across the full gaming spectrum, from traditional football pools and sports betting to interactive gaming.

Sportech's managing director, Colin McGill, is full of big plans but so far, progress has been slow. In March, the company signed an agreement with ITV to develop a slew of interactive betting games to tie in with television shows such as Coronation Street and Pop Idols. The idea – not expected to launch until early 2003 – is to build on the success of public phone-ins on shows such asBig Brother. The problem is the market remains untested, as does the technology.

This leaves the company mainly reliant on the dwindling pools business, which it boosted recently with the acquisition of rival Zetters. Strategies such as persuading pools devotees to switch from weekly coupons to a subscription system should help tie customers in and ensure the pools side remains a handy cash cow for its newer ventures.

Interim figures yesterday showed that the group had bounced into the black with a pre-tax profit of £400,000 to the six months to end-June, up from a £400,000 loss a year earlier. Turnover rose 6 per cent to £96.7m. The shares may look cheap, but punters may find better joy from one of the group's Littlewoods scratch cards until it has something to show for the ITV deal. Avoid.