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Hoodless Brennan Daily Small Cap News Flash including Synchronica, Media Corp, Iomart, Watermark, Rheochem and more
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Media Corporation (MDC, 1.125p, £2.99m) Trading update for the second half confirms an improvement in trading combined with lower costs. Eyeconomy has seen a strong Q3 with sales up 18% on Q2 and a healthy start to Q4 with a good order pipeline. Publishing is seeing good growth in its leading sites of spert.co.uk, onthebox.com and gambling.com, the latter could benefit from any relaxation of the US gaming laws. With the group still expected to report a loss for the year, with cash being consumed the shares rate a HOLD.
Watermark (WET, 0.75p, £5.09m) Interims to June 2009 confirms the Definitive Feasibility Study for its acid mine draining scheme will be completed by the end of September, a few weeks later than planned. The Environmental Impact Assessment will also be completed by the end of September. With a range of milestones over the next 4 months that could drive the price higher, the shares remain a SPECULATIVE BUY.
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White Young Green (WHY, 12p, £6.36m) Has announced a deferral of its covenant test till the end of September, ahead of its finals which are to be released in mid October. HOLD till the outcome of the talks with the danger of a share issue is known.
Iomart (IOM, 45p, £43.63m) Has partnered with Cimex, a digital marketing agency, to provide a disaster recovery solution for a number of high profile Government related sites, such as the Department of Children, Schools & Families, Department of Health, Department for Culture, Media and Sports, The Learning Council, the Gambling commission, the National Lottery and the COI, the UK’s largest advertiser. Forecasts to March 2010 are for £1.3m pre-tax profits with 1.3p EPS followed by £3m with 2.9p EPS, putting the group on prospective PER’s of 34.6x followed by 15.5x. Well up with events. HOLD.
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Pursuit Dynamics (PDX, 141.75p, £87m) The appointment of a CEO, Joel Pieper, who appears to have no relevant experience, his background is in software, does not bode well for PDX. We last recommended the group as a Speculative Buy at 79p on 30 June 2009, take the profits, SELL.
Synchronica (SYNC, 3.375p, £19.49m) Has won a contract with a Pakistani mobile operator for an initial 50,000 user license worth US$ 121,500 together with professional services worth $29,750. The scope for growth with the operator is significant as it has more than 20m subscribers in its network.
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Rheochem (RHEP, 6.375p, £13.84m) Interims to June 2009 saw oilfield revenues rise from Aus$23.8m to a record Aus$34.4m with an underlying pre-tax profit of Aus$6.6m (Aus$8.4m). However the figures were heavily distorted by one-offs, such as a downward valuation of Aus$23.4m on its venture capital, leading to a distorted revenue reported at Aus$10.9m, a Aus$29.6m write-off on its oil & gas assets and Aus$6.6m goodwill impairment write-off-leading to a reported pre-tax loss of Aus$48.2m (profit Aus$5.8m). However the drilling fluids operation did well with a number of new clients signed, including the majors, and a number of coal-bed methane operations that typically drill significantly more holes than oil & gas exploration businesses. The outlook is strong with the recovery in the oil price for the year lows underlining exploration activity and increased contributions expected from Rheochem’s Australasian and Indian operations. The heavy write-offs in the oil & gas trading and venture capital investments reflect a major review and change of its major interest from an investment into a 50% subsidiary following a default by the key shareholder in the assets. In a major change the investment operation, Zeus, will relinquish a number of properties, but will still retain assets of 2.97mm of 2P reserves in the Athena field, North Sea block 14/11 with a potential of 93m barrels in which it is seeking farm-in partners and 90% in Block 14.26b including the Thunderball discovery. The group has warned of a claim for some £8m from a drilling company that has been lodged with Zeus –though it hasn’t gone to court yet. The impact of the write-downs has been to reduce the NAV to some Aus$32.6m (£16.75m). The group consumed cash (as we would expect with an exploration business and growth operation) and so feel the rating is appropriate given the discount to NAV. The share is above our year price target so investors should now regard the share as a HOLD.
Scott Wilson (SWG, 88.75p, £64.79m) AGM statement has highlighted continued strong demand in some sectors, such as road and rail (UK and overseas) with a number of major projects secured. Elsewhere the private commercial sector remains depressed with little signs of a recovery in the short-term. The overseas success, including gaining contracts on the Hong Kong MTR and road/rail projects in Poland, Serbia & Mozambique, lead the board to confidence in meeting the expectations for the current year. Forecasts around £17m pre-tax profits with 15p EPS to May 2010 put the group on a 5.9x prospective PER and so we repeat our BUY recommendation last iterated on 29/06/09 at 65.75p, with a maintained 100p price target.
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MDM Engineering (MDM, 167p, £62.22m) Has won a scoping study for Rand Uranium to examine the potential from reprocessing gold and uranium tailings. Forecasts to March 2010 are for pre-tax profits of £4.4m with 8.6p EPS followed by £8.8m with 16.64p EPS, putting the group on prospective PERs of 19.4x down to 10x the following year. Well up with events, HOLD.
Pilat Media Global (PGB, 25.25p, £14.95m), the supplier of business management software to the media industry globally, released interims results to the end of June 2009. Sales were up 1.8% to £8.3m (H108: £8.18m) and the group reduced operating losses to £0.104m from £0.888m. Weak sterling has had a negative impact on the group’s overall losses for the year.
Hoodless Brennan view: Pilat’s management team believe they will report a profit at the end of 2009. With high level of seasonality in H2, especially in the final quarter, we are sceptical as to whether this will be achieved or not. There is a risk that certain contracts may not fall in the current financial year. The group is debt free and cash generative. HOLD
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