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HB Markets Daily Smallcap Newsflash including Blinkx, IndigoVision, NWF Group, Trifast and others
Blinkx (BLNX, 67.0p, £206.71m) announces a partnership with Source Interlink Media, the premier source of special interest media in the US. The partnership will add thousands of videos from MOTOR TREND and DIRT to the advanced video search engine, www.blinkx.com. Blinkx will also place contextually relevant advertising against the videos and share resulting advertising revenue with Source Interlink Media. The share price is now stratospheric, but we believe it reflects a successfully internet story with the potential to be an acquisition target. We believe further partnerships will at least support the current share price. We believe it is a good opportunity for investors to take profit. Difficult to support in conventional valuation terms, but hard to bet against even at these levels. We retain our SPECULATIVE BUY recommendation. (Amisha Chohan)
Forbidden Technologies (FBT, 20.5p, £16.64m) Princess Productions, part of Shine Group, UK's largest independent production company, is using FORscene for the production of 'Must be the Music', which will be aired on Sky1 HD. We remind investors the growth in reality television and the use of handicams out in the field remains an excellent driver for Forbidden’s editing technology. We reiterate our SPECULATIVE BUY recommendation. (Amisha Chohan)
Gresham Computing (GHT, 18.75p, £10.90m), the provider of real-time financial solutions, reports interims results to 30 June 2010 are ahead of the Board’s expectations and a material improvement on the prior year. The benefits of the restructuring are reflected in H1 2010 with the group delivering adjusted PBT of £0.05m (H109: -£0.9m) despite a 23% decline in revenues to £4.3m (H109: £5.6m) due to the disposal of a non-core business. Tighter working capital improved the net cash position to £1.9m (FY09: £0.7m). The outlook statement is positive. A strong service order book coupled with annuity income pipeline provides us with some confidence the group may remain profitable in the second half. However, if there is a double-dip in the market, banks and financial institutions may delay the procurement phase, which could negatively impact trading in H2 2010. Assuming trading will weaken in H2, especially in Q4, we believe there is still an opportunity for the group to deliver a FY profit. We expect the market to upgrade 2010 earnings estimates from 0.1p to at least 0.3p. The uncertainty surrounding the macroeconomics encourages us to retain our HOLD recommendation. (Amisha Chohan)
IndigoVision (IND, 365.0p, £26.90m) Trading update for the year ended 31 July 2010 is disappointing. Although revenues increased by 6% to £28m, lower gross margins due to the shift in sales mix, led to lower operating profits against the previous year’s of £3.26m. The statement does not provide any indication as to the magnitude of decline in profits. The market anticipated PBT of £3.46m and we believe this will not be achieved. We would expect PBT to be lower than £3.3m. Sales growth was strong in Latin America, and there was good sales performance in the UK, Northern Europe and Asia Pacific. In North America, Southern Europe and the Middle East sales were down on last year due to lower activity in casinos and hotels. The stock trades on a historic PER of 10.7x with a yield of 1.4%. We believe the uncertainty surrounding the outlook combined with high valuation encourages u to reduce our recommendation to a SELL with a target price of 306p. (Amisha Chohan)
NWF Group (NWF, 105.5p, £49.51m), Prelims to 31 May 2010, for the distribution business, are slightly ahead of market consensus. Pre-tax profits increased by 15% to £7.1m (2009: £6.2m) on relatively flat revenues of £379.8m. Net debt reduced by 28% to £13.9m and new banking facilities of £51m to October 2013 provides plenty of headroom. A 5% increase in DPS to 4.3p (2009: 4.1p). The current financial year has been satisfactory across all divisions. The markets for the group’s products remain resilient; however the market forecasts PBT and EPS to decline in 2011 to £6.7m and 9.8p respectively. The share price has risen by 21% since our BUY recommendation and has surpassed our 101p target price. We now believe the stock is gully valued and therefore adjust our recommendation to a HOLD. (Amisha Chohan)
Trifast (TRI, 31.0p, £26.43m), the manufacturer and distributor of industrial fastenings and category C components reports excellent trading in the current financial year, reflecting a strong recovery. The Board expect FY 2011 results will exceed market expectations. Sales in Q1 2011 are 28% ahead of the previous year and gross margins have remained at a similar level to H2 2010. TR Asia remains buoyant in terms of both manufacturing and distribution. The ROW is witnessing demand and enquiries increasing across both its transactional and global sales. However, the weak macroeconomic outlook, especially for the UK, suggests the current strength of recovery the group are currently experiencing will not be sustainable. We believe significant increases in freight and raw material costs may adversely impact margins. We expect the market to upgrade current FY estimates from PBT of £2.4m to ££2.6m and EPS of 2.1p to 2.3p. The stock is rated at 13.5x 2010 earnings and 10.3x 2011 earnings, a premium to the industrial engineering sector (7.7x). We are impressed by the group’s current performance, but are slightly cautious about the remainder of the year. We believe the group is fairly valued and reiterate our HOLD recommendation. (Amisha Chohan)
