www.hbmarkets.com
HB Markets is an award winning stockbroker and who offer share dealing services for private clients, experienced investors and companies. HB Markets specialise in the small cap sector.
These are flash views from HB Markets and are not investment advice. Please ensure that you have read and understood the risk warnings below or by clicking here.
HB Daily Smallcap Newsflash including Cohort, Mount Engineering, Renewable Energy Generation, Timestrip and others
You can receive this report by email in the morning by clicking here.
Cohort (CHRT, 83p, £33.85m) The group has updated on the over-statement of profits at its SCS subsidiary and has restated the year to April 2009 from sales of £31.2m and trading profit of £3.3m down to £29.3m and £1.5m respectively. The group has also restated the 6 months to October 2009 with sales of £12.8m and a trading loss of £0.9m rising to revenues of £14.1m and a trading profit of £0.3m. The group is recovering management bonuses paid. The group has confirmed a restructuring of SCS to protect margins, will achieve £2m of annualised savings and is expected to broadly be completed by April 2010. Similarly the group has highlighted poorer trading at SEA with a loss from legacy project in the Offshore division. MASS continues to trade well. Forecasts around £4.5m with 8.6p EPS put the group on an April 2010 PER of 9.7x. Appropriately rated - HOLD.
Cosalt (CSLT, 8.65p, £34.98m) Interim trading statement for the first 4 months reports revenues at £30m, slightly below the £31m of the previous year. However the group has taken actions to protect the bottom line – so we maintain the BUY recommendation with the same 11.7p price target.
F.W. Thorpe (TFW, 600p, £71.36m) Interim revenues rose to £28.25m (£27.56m), operating profits of £4.56m (£4.16m) but lower interest receivable led to PBT of £4.68m (£4.75m), EPS of 28.5p (29.1p), DPS held at 4.1p and net cash increased slightly to £7.37m (£7.13m at the end of June 2009. Within the group Thorlux grew sales and expanded into Sweden and Australia, while Mackwell still suffered from its $ based purchasing and other companies fell. With the group on track to be able to pay a 16.2p held full year dividend, a 2.7% yield, with an 11x prospective PER, we still see upside to 640p – but that is not sufficient to maintain the Buy - so dropped to a HOLD.
Gas Turbine Efficiency (GTE, 9.375p, £9.54m) has agreed a 3 year contract to supply gas and steam turbine major outage field services to Florida Entegra Power Group’s 4,400MW fleet of 7FA combined cycle units. The share price has tumbled from 20p in mid December as the outlook for airlines remains difficult. However looking to the June 2011 the shares potentially have upside and so we maintain our HOLD.
Mount Engineering (MOU, 64.5p, £15.13m) Prelims to 31 December 2009 report a 20% decline in revenues to £9.3m (2008: £11.8m), but an improvement in operating margins reduced PBT by 11% to £1.9m (2008: 2.2m) and EPS by 8% to 8.2p (2008: 8.9p), broadly in line with consensus. Net cash of £1.8m (2008: £0.5m) has encouraged the group to increase the DPS to 2.4p (2008: 2.3p). Management believe sales have stabilised. The order book provides short-term visibility. We continue to believe the current financial year will be challenging. However, the group is well placed to benefit from any upturn in 2010. The market forecasts 2010 PBT of £3.0m, EPS of 8.75p and DPS of 2.6p. We believe there is scope to slightly reduce the profit figure. The group trades on a 2009 historic PER of 7.9x with a yield of 3.7%. We believe the group is undervalued trading on a 2010 PER and yield of 7.4x and 4.0% respectively. We reiterate our BUY recommendation with a target price of 76p.
Plexus Holdings (POS, 38p, £30.74m) Interims to December 2009 saw sales of rental specialised well-head equipment & services of £6.47m (£6.70m) but an increased gross profit of £3.50m (£3.30m), operating profits of £0.19m (£0.14m) despite doubling the R&D spend to £0.36m, a PBT £0.09m (£0.03m), 0.11p (0.04p) EPS and a 0.33p uncovered dividend. The group ended the period with net debt of £2.65m (net debt £1.35m). The group has already announced a raft of orders and confirms signs of increased activity with the potential of a strengthened order book in H2 and beyond. It has announced a £0.5m in increased assembly and testing facilities at its Dyce Aberdeen facility. We maintain our BUY recommendation with a 45p price target.
Raymarine (RAY, 4p, £3.27m) has announced the extension of its banking facilities to September 2010. The group has previously mentioned an indicative offer around 3.6p - we maintain our SELL to that level at least.
Renewable Energy Generation (WIND, 59p, £60.92m) Interims to December 2009 saw revenues increase to £3.5m (£2.7m) with EBITDA turning positive with £0.4m (loss £0.6m) and a loss from continuing operations of £0.3m (loss £1.1m). The group has proposed 0.5p DPS. Following the sale of the Canadian wind business for Can$125m the group retained 7 UK operational wind farms with generation capacity of 21.3MW. During the period the group purchased the 4MW fully consented site at High Haswell and won its first commercial Biopower contract with the Port of Dover. The group has a development portfolio of some 350MW with 3 sites, Goonhilly Downs, Loscar & High Haswell, to be completed during 2010 and take capacity to some 100GWh per annum. Following the wind farm disposal in Canada the group has £25m in cash with another £15.5m deferred and still to be received. The group will be hosting a UK site visit in July. Funded and with a good portfolio we maintain a SPECULATIVE BUY.
SciSys (SSY, 46p, £13.34m), the supplier of bespoke software systems, IT based solutions and support services to the Media Broadcast, Space, Government & Defence, has secured a four year framework contract with the Environmental Protection Agency (EPA) in Ireland. SciSys will provide design, development and reporting services in the areas of Regulatory Systems and GIS. The new contract expands the groups’ exposure to the Environment and Climate sector. We reiterate our BUY recommendation.
ServicePower Technologies (SVR, 4.5p, £8.53m) Finals to December 2009 saw revenues £18.11m (£15.64m), gross profits of £6.30m (£5.40m), GP margin of 34.8% (34.5%) with growth in both Service Scheduling (£7.79m V.S. £6.54m) and Service Operations (£10.32m V.S. £9.10m). Underlying expenses fell to £7.2m £7.89m) leading to reduced losses before tax of £1.10m (£2.50m) and the group ended the period with £2.31m net cash. Both divisions showed better performances on increased revenues with Service Scheduling where segment profits rose to £2.974m (£2.54m) while Service operations turned from losses of £0.04m to profits £0.28m. Although we see the group just making over breakeven this year, it will achieve growth in difficult markets and the entry into the US offers the potential of positive surprises. Moved from a Hold to a SPECULATIVE BUY.
Stilo International (STL, 1.38p, £1.51m), the software and services company, reports prelims to 31 December 2009. As a consequence of delays and cancellations of projects, revenues to fall by 33% to £2.0m (2008: £3.0m), but improvements in gross margins and cutbacks in overheads reduced adjusted pre-tax losses to £0.22m (2008: £0.36m). The group ended the year with net cash of £0.44m, which is sufficient. Stilo continues to invest in product development. The economic outlook remains uncertain, but the group anticipate modest sales growth in 2010 and an improvement in profitability. There are no forecasts in the market. We reduce our recommendation to a HOLD.
Timestrip (TIME, 1.2p, £5.96m) has been unable to raise new funds for working capital for new contracts wins. Therefore, the group has to consider all other strategic options open to it which includes a possible sale of the business. The lack of visibility for the future of the group encourages us to reduce our recommendation to a SELL.
Torotrak (TRK, 26.5p, £42.63m) has now received the £3.75m from Allison Transmissions which has secured non-exclusive rights for the medium sized commercial vehicle market. It has the option to secure global manufacturing and sales exclusivity for the same arena plus the ability to extend to the larger commercial vehicles. Additional potential payments could range from £6.75m to £17.37m). We returned the shares to a SPECULATIVE BUY at 24.5p and maintain the recommendation.
HB MARKETS DISCLOSURES
- The analyst may have a personal holding of the securities issued by the company, or of derivatives related to such securities.
- HB Markets or an affiliate may own more than 5% of the issued capital of the company.
- HB Markets or an affiliate may be party to an agreement with the company relating to the provision of corporate broking services, or has been party to such an agreement within the last 12 months. Our corporate broking agreements include a provision that we will prepare and publish research at such times as we consider appropriate.
- HB Markets or an affiliate may have been a lead manager or co-lead manager of a publicly disclosed offer of securities for the company within the last 12 months
- HB Markets may be a market maker or liquidity provider in the securities issued by the company
Please check with our advisers 020 7382 8300 if you are concened with the above material interests prior to acting upon this information.
RISK WARNING NOTICE
All investments are speculative and prices may change quickly and go down as well as up. Past performance will not necessarily be repeated and is no guarantee of future s uccess. There is an extra risk of losing money when shares are bought in some smaller companies including “penny shares”. There can be a big difference between the buying price and the sel ling price of these shares and if they have to be sold immediately, you may get back much less than you paid for them or in some circumstances, it may be difficult to sell at any price. It may also be difficult for you to obtain reliable information about the value of this investment or the extent of the risks to which it is exposed. Where a company has chosen to borrow money (gearing) as part of its business strategy its share price may become more volatile and subject to sudden and large falls. This investment may not be suitable for all investors, and clients should carefully consider their own personal financial circumstances before dealing in the stock market, particularly those on fixed incomes or approaching retirement age. If you have any doubts you should seek advice from your investment adviser or your broker at this firm.
AIM: The Alternative Investment Market (AIM) is market designed primarily for emerging or smaller companies. The rules of this market are less demanding than those of the official List of the London Stock Exchange and therefore companies quoted on AIM carry a greater risk than a company with a full listing.
MATERIAL INTEREST
We endeavour at all times to ensure that our research is clear, fair and not misleading, however, we do not hold our research out as being impartial and it should not be v iewed as wholly objective since HB Markets (including its parent company and its subsidiaries, their directors, officers or employees) may have or previously held a material intere st in the company which is the main subject matter of the research note, or any other company mentioned, and may be providing or have provided within the previous 12 months significant advice or investment services in relation to any company or a related company referred to in this document, or any other associated document. This document has been prepared and issued by HB Markets on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst all reasonable care is taken to ensure that the facts stated are accurate and the opinions given are fair and reasonable, neither HB Markets nor any director, officer or employee shall in any way be responsible for its contents. This document is intended to provide clients with information and should not be construed as an offer or solicitation to buy or sell securities.
