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HB Markets Daily Smallcap Newsflash including Alterian, Digital Barriers, Ebiquity, Velti and others
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Alterian (ALN, 147.75p, £86.53m),the leader in customer engagement technology and solutions reports an IMS from 1 April 2010 to 22 July 2010. Q1 traditionally represents a small proportion of FY revenues and this year is no different. Q1 2011’s performance is in line with management expectations. The group continue to broaden their geographical distribution and their product development, especially in digital marketing. We reiterate our BUY recommendation. (Amisha Chohan)
Digital Barriers (DGB, 135.0p, £33.46m) has acquired the business and assets of the Solutions division of Overtis Group Ltd, for a total cash consideration of £3.2m through its own cash resources. Overtis Solutions is a UK-based specialist provider of integrated security solutions used in the protection of high value physical, human and information assets on a global basis held by high risk government departments, public sector bodies and major corporations. In the year ended 31 October 2009, Overtis Solutions' reported revenues of £2.64m, with EBITDA of £0.07m and net assets of £1.30m. On the basis of the reported figures and assuming the business is cash neutral and paying a corporate tax rate of 21%, the group is paying a historic revenue multiple of 1.2x, EV/EBITDA of 45.7x, PER of 57.9x. On a profitability basis, the group is expensive, but seems relatively sensible on revenue multiples supported by balance sheet. The addition of Overtis Solutions’ complements the Security Application acquisition purchased in March 2010. We reiterate our HOLD recommendation. (Amisha Chohan)
Ebiquity (EBQ, 59.5p, £33.24m) Finals to April 2010 saw revenues of £21.2m (£18.5m), gross profits of £11.60m (£9.85m), gross margins of 54.7% (53.5%) with underlying op profit of £2.6m (£2.4m) and pre-tax profits of £2.5m (£2.1m) and underlying EPS of 6.03p (5.46p). The group ended the period with net debt of £2.04m (£2.19m) post a £2.42m cash generated by operations, a £0.75m share issue and two acquisitions. Excluding the benefit of acquisition the underlying sales grew 10% to £20.2m (£18.4m), driven by the analytic operation that saw 18% growth to £15.2m (£12.9m), so representing 75%. Within analytics the international assignments grew 32%. The platform business saw renewals at 80%. The April 2010 acquisition of Xtreme information added materially to the group’s geographic reach and rebalanced the group, reducing the analytics operation weighting. With a major move by the group in the last 17 days of the financial year the past is little guide to this year’s outlook. Forecasts are set to increase from the £4.2m towards £4.6m with EPS rising from 5.4p to 5.9p, putting the group on a 10x prospective PER. We see this as too cheap for a group offering media analytics and set a price target of 88.5p, or 15x. BUY (Julian Tolley)
Scisys (SSY, 49.5p, £14.36m) Trading update for the six months to June 2010 confirms it is on target for the year expectations, noting some caution regarding UK public spending cuts, and has been cash generative in the first half of the year. With a price target of 50p we maintain a HOLD recommendation. (Julian Tolley)
Velti (VEL, 403p, £151.25m) has announced H1 will show revenues of some $40m for the first half. While we suspect the group will struggle to report profits given the leap in H2 in admin costs we see significant upside for investors, even after the substantial run. Velti’s exposure to mobile marketing and the recently announced intention to list on the US NASDAQ exchange will support a substantially higher price. We believe the group is sitting on 2x forecast revenues and suggest that 3x is achievable given the potential for arbitrage between the US and UK markets. With a very speculative target price around 585p, we move the group down from a buy to a SPECULATIVE BUY. (Julian Tolley)
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