The Insider: Soco International, Synthomer

New Synthomer boss opens account in style

New company board members often buy shares in the company as a signal of intent, a show of confidence. It would odd if they didn't. But Calum MacLean is betting big on success at speciality chemicals firm Synthomer (SYNT), the company he joined in January.

The co-founder of Swiss chemicals giant INEOS Group and currently executive chairman of INEOS Olefins and Polymers Europe, took over from well-respected, long-standing CEO Adrian Whitfield. Two months later, MacLean had spent almost £600,000 on 202,539 shares at between 292p and 296p.

Clearly, MacLean is bullish on prospects. And he may have reason to be. MacLean helped set up INEOS - which took its name from INspec Ethylene OxideSpecialities, its first purchase - in 1998 when it made sales of £300 million. Now, after a string of acquisitions from industry giants like BASF, BP, ICI and Solvay, it's $54 billion.

Numis Securities concludes that MacLean is "definitely a man to back in our view". The broker caught up with him recently to discuss his acquisition plans, which could potentially double the size of Synthomer over the next two to three years.

"Calum MacLean likes such opportunities as targets in these instances have well-invested assets, good in-situ management, a strong health & safety record and usually some scope exists to rapidly cut costs and upgrade working capital ratios," explains Numis. "Calum MacLean has the extensive industry contacts and he also has his track record of close to 17 years at INEOS on his side. He is also still aged only 50, and is keen to develop his own team and make his mark via a PLC."

Stakebuilding at struggling Soco

Soco International shares plunged over 46% last week and have just hit a 10-year low, just days after the Africa and Far East-focused explorer published poor full-year results. Investors were left to digest a big dividend cut and significant reserves write-down.

"Soco enjoyed a niche within the European E&P sector as a low-cost, debt-free producer offering material shareholder returns - traits that created a perception that it represented relatively low-risk exposure to the sector," said James Hosie, an analyst at Barclays.

"The unexpected 69% downgrade in 2P reserves removes that perception and, in our view, places the company in an identity crisis with investors."

Hosie reckons the risk profile of future Vietnamese production growth has been increased and the sustainability of the dividend looks to be in doubt. And that reserve revision means his estimate of Tangible Net Asset Value (TNAV) falls 42% to 185p a share, which is where the price target is, down from 325p previously.

But a round of director share buying post results has spilled over into this week. After spending £1.5 million on 957,847 Soco shares last Friday - one third at 174p and the rest at 146p - non-executive director Ettore Contini is at it again.

Contini, a former asset manager in the private banking division of Swiss bank Banca del Gottardo, and a director at Soco since 2001, has snapped up a further 377,609 shares at 142.6p, taking his spending in recent days to over £2 million. The shares, acquired by Liquid Business Limited, a company registered in the Bahamas and wholly owned by Contini, lift his stake to 29 million shares, or 8.74% of the business.

"The company remains well financed, the balance sheet has $166 million of cash and first hydrocarbons from TGT H5 [offshore Vietnam] are expected in late 2015 so all is not lost," says oil industry expert Malcolm Graham-Wood. Clearly, Contini is of a similar opinion.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.