drilling commencing, page-5

I see NEC got a rap over the knuckles from the ASX for misleading statements in their quarterly activities report. Hopefully NEC’s announcements will not fall into a puffery style bucket like so many other small-cap speculative stocks resort to, especially close to capital raising time.

Better to stick to clear, accurate and meaningful reporting. The SP may not do so well in the early stages, but if NEC the can deliver the goods, the SP will benefit in due course.

NEC’s SP has fallen over the past few weeks from its “irrational exuberance” high of around 42c (refer my SS NEC post 14/03/05 6.52am) to much lower levels of around 25c. However there may still be further weakness in the SP for a few reasons as follows.

1) The market may feel uncomfortable with NEC’s style of announcement reporting (ref ASX letter to NEC dated 4/5/05 regarding concerning statements in the quarterly activities report) and give the stock a wide berth until the risks improve.
2) The stock may be treated like RSN due to (1) above. For example RSN’s SP has fallen over 30% in the last few weeks, and this is a stock that hopes to pour gold in a few months. The market doesn’t appreciate continual delays or misleading announcements.
3) The energy sector is weak at present and this could still exert further downwards pressure on the NEC SP. Many coal stocks look very toppy and/or are already in downtrend.

NEC may base around the 24/26c level but I think it’s more likely to drift further down towards the 21/22c level due to items 1 to 3 above. Other comments would be appreciated.

Mensa.