Beaten-Down Premier Oil PLC, Genel Energy PLC & Poundland Group PLC Deserve Another Look

Premier Oil (LSE: PMO), Genel Energy (LSE: GENL) and Poundland (LSE: PLND) have been some of the hardest-hit shares in the recent sell-off in global equity markets. Heavily sold off shares are not necessarily bargains, but with these three shares there may be a genuinepotential for long term success.

Oil Producers

Falling oil price hit mid-cap oil producers very hard, and so its of no surprise that shares in Premier Oil and Genel have been hammered lately. Shares in Premier Oil have fallen 27% since the start of the year, whilst those in Genel have fallen 32%. These falls far exceed recent declines in both the Brent benchmark price of crude oil and the share prices of larger peers.

There is some justification to Premier Oil and Genel suffering from steeper declines than their bigger rivals, especially because they have reduced financial flexibility, lack big downstream operations, and have far greater geographical concentration risks.

But there are also many aspects thatmake these companies more attractive than their larger peers. Specifically, Premier Oil has taken some very significant steps to reduce costs, strengthen its balance sheet, improve liquidity and boost cash flow generation.

Through recently announced deals, Premier Oil is looking to effectively swap its Norwegian North Sea assets for E.ONs UK North Sea assets. These series of transactions would boost production, near term cash flow and provide greater potential for synergies across its existing UK North Sea business.

On the other hand, though, Premier Oils financial flexibility is still worrying. Although, the company has secured sufficient funding until mid-2017, it still has some $2 billion in debt. And despite recent attempts to slash capex and operating costs, free cash flow will likely remain negative for quite some time.

Genel is financially stronger, with net debt of just $239 million at the end of 2015. The recently announced return to regular payments and repayment of some $400 million in arrears by the Kurdistan Regional Government would ease cash flow concerns and fund additional capex to boost production and profits. With production costs of less than $2 per barrel, Genel has a breakeven oil price of around $20, and this allows it to make significant profits even in a low price environment.

However, with these oil companies, investors will still need to keep a close eye on movements in the oil price as this appears to be the key determining factor of success moving forward.

Poundland

Following the troubled acquisition of 99p Stores, Poundlands share price has now fallen well below its IPO price of 300p. Trading conditions for the 99p Stores were much worse than originally expected, with sales having already begun to decline in 2014. Whats worse, Poundland is seeing a decline in like-for-like sales, too. Although total sales grew 6.2% in its recent first half results, like-for-like sales declined 2.8%.

Investors appear to be getting nervous aboutwhether Poundland is heading towards the end of its growth story. I dont think so. Growth is slowing, but there is still room for expansion. Integrating the two companies will initially be costly, but the deal should still be accretive to earnings, because of the effects of reduced competition and an enhanced competitive position.

City analysts seem to agree. The consensus estimate suggests underlying earnings per share will fall 20% in the year ending 31 March 2016, before rebounding 50% next year. As a result, I think the recent sell-off has been overdone and long term investors should view this as a potential buying opportunity.