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HB Markets Daily Smallcap Newsflash including:Intercede, Matchtec, MDM Engineering, Norcros and others

HB Markets Daily Smallcap Newsflash including:Intercede, Matchtec, MDM Engineering, Norcros  and others

@UK (ATUK, 4.625p, £3m) has announced Findel Education, the UK’s largest educational supplier, has become the first customer to sign up to the group’s Green Marketplace – in effect an online marketing tool reducing the use of catalogues – thus green. The contract is worth some £0.05m. We still remain cautious on funding and maintain the SELL. (Julian Tolley)

Intercede (IGP, 44p, £21.20m) Trading update for H1 to September 2010 reports sales up 20% against 2009 with improved profitability. Contract wins in the USA now makes it the largest region for the group. Cash has been held at £4.47m (£4.64m at the year end) which reflects a £0.5m or so generation given exceptional relating to last year were paid in H1. On just over 10x PER with a positive momentum confirmed we return the group to a BUY with a 13x PER target  - or 53p. (Julian Tolley)

KBC Advanced Technologies (KBC, 45p, £24.92m) has won a $42m contract to improve six refineries over a 3o month programme. The service agreement with Permex Refinacion will lead to work falling in to this year so ensuring the improvement in capacity utilisation occurs and increasing the order book for the next few years.  Forecasts of £5.2m PBT with 5.5p EPS puts the group on a modest 8.2x Per and we maintain our BUY to the 62p level. (Julian Tolley)

Matchtec (MTEC, 192.5p, £44.96m) Final results to July 2010, saw revenues recover in H2 but overall they were down 2% to £264.43m (£269.58m) with gross profits of £26.16m (£30.27m), margins of 9.9% (11.3%), with lower admin costs of £17.34m (£18.62m) leaving op profits down £8.82m (£11.65m) and PBT at £8.58m (£11.28m), tax at 28.4% (29.2%) leaving EPS at 26.35p (34.37p) – slightly ahead of expectations.  Still implies H2 PBT was weaker - a worrying trend given the good performance from other quoted recruiters. Importantly for investors the group maintained the 10.6p final (a yield of 5.5% on that alone) taking the full year to a held 15.6p - or a yield of 8.1%. The group ended the period with net debt of £4.51m (net debt £1.16m) reflecting operating cashflow generation offset by £5.36m of adverse working cap movement and £3.63m dividends. While Engineering recruitment increased revenues (£161.14m VS £153.17m) its PBT contribution fell to £6.03m V.S. £6.57m, while Built Environment revs fell to £58.93m (£68.71m) with PBT of £1.95m (£2.92m), Professional Services revs fell to £44.36m (£47.71m) with PBT of £0.6m (£1.71m).  Period end saw a record number of contractors on assignment at 5,100 (4,500). With costs incurred as the group opens new offices we expect only modest PBT growth this year (circa 3%) the group is sitting on a prospective PER of 7.1x with the potential still to hold the DPS – so a yield of 8.1%. We maintain the BUY with a 230p 1 year price target. (Julian Tolley)

MDM Engineering (MDM, 125p, £46.57m) MDM has won a bankable feasibility study for Metorex Limited’s Kinsenda project in the Congo.  We remain uncertain as to the value of the contracts recently announced, they are not large enough for their value to be declared as significant) and thus maintain our SELL recommendation.  (Julian Tolley)

Mulberry (MUL, 411.5p, £242.25m) An incredible trading statement covering the 10 weeks to 2 October 2010 with sales from own UK shops up 57%, l-f-l sales on full price stores up 79% and off price sales flat reflecting a shortage in merchandise. A stronger performance in full retail price goods has had a favourable impact on margins and reduced the level of stock at the end of the season. The wholesale order intake fro Autumn 2010 is up c.100% on last year and the Board expect a similar pattern for Spring 2011. The outlook statement is extremely positive, but we remind investors Christmas is a critical period for the group. The Board expect FY results to be ahead of current market expectations of PBT of £9.5m and EPS of 9.85p. We expect market consensus to increase substantially. The strong performance, the buoyancy in the luxury market combined with the group’s strong product portfolio encourages us to upgrade our recommendation to a BUY.  (Amisha Chohan)

Norcros (NXR, 10.75p, £62.06m) Trading momentum for the home consumer product group has continued into H1 for the 27 weeks ended 3 October. Sales in the period are expected to have increased by 16.5% to £96.7m (H109: £83.0m), with l-f-l sales up 12.3% to c.£93.2m (6.4% up on constant currency). The strong performance reflects a 5.8% growth in UK operations, 6.6% in South Africa and 9.1% in the ROW. Despite tough market conditions, the group has performed excellently, driven by new product introductions and excellent customer services. The improvement in operational efficiencies is reflected in the adjusted PBT figure of £3.4m (2009: -£1.7m). An exceptional gain of £2.7m from the sale of the trade investment in Australia, the £27.7m (net) capital raising and ongoing cash management has reduced net debt to £15.0m (2009: £48.9m). We are encouraged by the prospect of the progressive dividend policy to be reinstated. Trading remains resilient. The market previously forecasted 2011 PBT of £3.7m and EPS of 0.5p, which we now believe are too conservative given the strong performance. We expect growth to slow for the remainder of the year. Assuming PBT of £5.0m and EPS of 0.67p, the stock trades on 16x 2011 earnings.  Uncertainty surrounding UK consumer spending patterns, especially on showers and tiles, and the South African economy encourages us to reiterate our HOLD recommendation.  (Amisha Chohan)

Pinnacle Telecom Group (PINN, 0.40p, £7.38m) has completed two high profile contracts with the BBC covering the Labour and Conservative Party. The group provide the connectivity circuits used to broadcast sound for BBC TV and BBC Radio coverage. Furthermore, the group has secured a contract to provide the data connectivity to control 2011 London New Year Fireworks display. The contract highlights the group’s bespoke capabilities. We maintain our HOLD recommendation. (Amisha Chohan)



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