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HB Markets Daily Smallcap Newsflash including 1PM, Avesco Group, DQ Entertainment, Luminar and others

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1PM (OPM, 0.105p, £1.59m) Trading update has confirmed stronger second half trading and the lending portfolio value is now recovering. With increased funding opportunities for the group it has raised an additional £1.15m gross by the issue of 0.07p to expand its business.  At the time of the interims the group reported the start to H2 had gone well with October & November ahead of management expectations and it now confirms that trend continued into January and February with March starting well. Although the group is trading better in H2 it will still report a loss for the year. We maintain the HOLD recommendation.

AGA Rangemaster Group (AGA, 120p, £83.1m) designs, develops, manufactures, sells and services premium brand cookers, kitchen and household products. Prelims to 31 December 2009, report 12% decline in sales to £245m (2008: £279.4m), but PBT and EPS plummeted by 97% and 83% to £0.5m (2008: £14.4m) and 2.5p (2008: 14.4p) respectively. However, tighter capital management and strong business processes drove net cash up to £28.0m (2008: £5.8m). The decision not to pay a dividend due to the drop in profits and uncertainty surrounding the outlook sends a negative signal to investors. The recession has encourages the group to review their strategy by focussing on 1) growing and developing new markets by creating a range of energy efficient cookers and boilers, 2) broaden the position of range cookers, 3) become a significant force in the North American appliance market under the AGA Marvel brand, 4) increase overall sales and 5) cost cutting. For Rangemaster, the increase in VAT has led to slow start to the year, but the trend lines continue to be positive. For Fired Earth and Grange improvement plans covering both broadening of markets and cost reductions are well underway. Headed into the Spring the Group expects revenues to run ahead of the prior year. 2010 UK economy will be weak and fragile. AGA is a cyclical business. The strong cash generation will ensure the business survives the downturn and assuming there are no significant increases in VAT post election, the group is well positioned to take advantage of the recovery. The current market 2010 estimates range from PBT of £3.5m - £8.0m and EPS from 4.0p to 9.2p. Assuming earnings of 4p, the group trades on 30x, which is expensive, but fails to take into consideration the strong balance sheet with tangible net assets of £61.8m. We initiate with a HOLD recommendation.

Avesco Group (AVS, 43.5p, £10.89m) reports in trading update to 30 September it expects to trade profitably for the year end and expects to be strongly cash generative. The group had a successful Winter Olympics at Vancouver and, has contracts in place over the summer for the FIFA World Cup and the World Expo in Shanghai. Avesco continues to be an asset play stock with tangible NAV of £37.8m in excess of the current market capitalisation of £10.9m. We upgrade our hold recommendation to a BUY.

DQ Entertainment (DQE, 122.5p, £44.06m) has confirmed the IPO of its Indian subsidiary was 86 times over subscribed. With the Indian subsidiary valued above the group as a whole we maintain the BUY recommendation.

Independent Media Distribution (IMD, 52.5p, £17.93m) Europe’s leading 'media logistics' specialist and 'industry level' advertising campaign management business, reports excellent prelims to 31 December 2009 exceed consensus. The addition of 5 new services and growth in international markets drove revenues up 9% to £8.1m (2008: £7.4m). Normalised PBT increased by 50% to £1.7m (2008: £1.1m) and adjusted EPS by 60% to 3.8p (2008: 2.5p). Strong cash generation has eliminated borrowing and the group ended the year with net cash of £0.9m. The strong balance sheet combined with the increase in profitability and cash has encouraged the group to increase DPS by 14% to 1.20p (2008: 1.05p) - an encouraging signal regarding the future. The outlook statement is positive, with revenues for the first 2 months trading in line with management expectations and up 21% from the previous year. The group will focus on building new and existing revenue stream and is seeking to make an acquisition to complement the recent Irish acquisitions. We believe the migration to online digital logistics from traditional methods such as tapes and faxes growth, will continue to drive growth. The market forecasts 2010n PBT of £1.8m, EPS of 4.08p and DPS of 1.4p – we believe there is scope to upgrade earnings. On the current estimates, the group trades on 12.9x with a yield of 2.7%. The scope to upgrade estimates encourages us to retain our BUY recommendation.

Luminar (LMR, 35p, £35.15m) Trading update for the year ending February 2010 is that results will be in-line with expectations (£4.0m PBT, 3.5p EPS). Trading was hit hard by the poor weather and even for the year same outlet sales were down 9.9% due to lower customer numbers. The group is trading within its debt covenants and reduced debt to £93m (£49m). The new year will surely also have seen a difficult start with the continued cold weather, even if the snow eased in many parts of the country. We were sellers at 47.25p on 14/01/10 with a price target of 35p, although we suspect there will be further weakness to around 32p it’s not sufficient to maintain the sell, moved to a HOLD.