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Hoodless Brennan Daily Small Cap News Flash including Next Fifteen, Boomerang, Sarantel, Praesepe, Earthport and others
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Next Fifteen (NFC, 51p, £27.6m), the global PR consultancy group, reported prelims to 31 July 2009, broadly in line with market expectations. Revenues up 4% to £65.4m (2008: £63.1m), but normalised pre-tax fell by 21% to £5.2m (2008: £6.6m) and normalised EPS fell by 25% to 6.48p (2008: 8.62p). Net cash fell to £1.8m (2008: £3.4m) after making £4.5m of acquisition-related payments. The group maintained a total DPS of 1.7p. Management are increasingly confident about the recovery and believe they are well placed to benefit from the increasingly global client base. The Group has had an eventful year, following the acquisition of M Booth, the intention to acquire Asia PR assets and the intention to acquire a further 30% stake in 463 Communications, bringing the total to 70%. The 30% stake is valued at $2.1m with $1.4m to be paid in cash and the remainder in shares. The business will open a digital communications agency in the next three months. We believe the market will retain 2010 estimates at around pre-tax profit of £6.02m-£6.1m, EPS of 7.3p-7.5p and DPS of 1.7p-1.8p. Assuming EPS of 7.3p and DPS of 1.7p, the group stands on a prospective PER of 7x with a yield of 3.3%. We retain our BUY recommendation from 22/05/09 (share price of 44p) and our target price of 57p.
Boomerang (BOOM, 80p, £7.13m) Has announced the acquisition of Indus Films, a Welsh based production company, for an initial consideration of £0.88m followed by £0.22m 1 year later. A deferred consideration of up to £1.295m in cash or shares is payable dependent on achieving profit targets over the next 3 years. To June 2009 Indus had revenues of £5.32m, EBITDA of £0.263m and pre-tax profits of £0.209m with a £0.122m NAV. The group expects the acquisition to be EPS accretive in the year to May 2010. The group remains a SPECULATIVE BUY.
Sarantel (SLG, 2.5p, £4.75m) Has won its first order for its innovative antenna for 2-way satellite communications with Iridium. The contract has the potential to materially benefit revenues from 2010 onwards. The group remains a SPECULATIVE BUY.
Plexus Holdings (POS, 41p, £32.88m) Final result to June 2009 saw revenues rise 14% to £15.1m (£13.3m) with profit before tax of £1.8m (£1.9m), EPS of 1.27p (1.61p) and a final dividend of 0.38p making the year total DPS of 0.6918p (nil). The profits were modestly ahead of expectations. We remain impressed by the group’s mud-line technology for wells.
Praesepe (PRA, 8.75p, £19.26m) Has completed the previously announced acquisition of 13 gaming centres. Still a HOLD.
BlueStar SecuTech Inc (BSST, 25.5p, £18.6m), the provider of digital video surveillance solutions in China, reports a trading update for the half year ended 30 September 2009. Revenues are expected to be around RMB 67m (£6.1m), with Net Profit of RMB 6.7m (£0.6m) and cash balances at 30 September 2009 of approximately RMB 50m (£4.6m). The business continues to win new business, which to date totals in excess of RMB95m (£8.7m). Approximately RMB 80m (£7.3m) will be recognised in the current financial year. The Board expect to generate RMB 21,750 from monthly recurring fees from 94 financial outlets, which use the surveillance command centre BlueStar established. The Board expect to add a further 420 outlets by the end of December 2009, potentially generating an additional RMB 97,000 per month in recurring revenue. Management estimate the Beijing command centre will be fully utilised by the end of 2010 and will provide BlueStar with annualised recurring revenue in the region of RMB 15m (£1.4m). We believe the market will downgrade current pre-tax profit estimates of £2.4m, EPS of 3.7p. However, we believe new contract wins will help maintain the share price. HOLD.
OMG (OMG, 26p, £17.8m) reports a trading update for the year ended 30 September 2009. The second half trading was similar to the first half in terms of revenue mix and market conditions. Turnover is expected to be in the region of £26m and pre-tax profits are expected to be broadly in line with market expectations of £0.8m and EPS of 0.9p. The strengthening of the sterling in the period drive the group to end the year with cash balances of £2.8m. The pipeline for the group remains encouraging. The market forecasts 2010 pre-tax profits of £1m and EPS of 1.2p – the stock trades on 22x, a premium to the software and computer services sector median, which trades on 8.7x. We retain our SELL recommendation with a target price of 21p.
Earthport (EPO, 30p, £26.55m) Finals to June 2009 saw revenues decline to £1.57m (£1.92m) with an increase in reported losses to £7.3m (loss £3.38m), though excluding one-offs the loss reported was £4.52m (£3.03m). The losses were worse than market expectations. The group ended the year with net cash of £0.18m (£2.55m) and raised £2.88m during the year, thus consuming £5.26m cash. More worrying is the H1:H2 splits with revenues falling £1.12m:£0.45m and losses increasing loss £1.72m:£2.8m. Surprisingly the board now states that “the Company has sufficient resources to continue to develop the business to its full potential”, not apparent from the outside. Given the scale of the opportunity and the financial weakness of the group it is understandable that the company has been executing a “strategic review” for some time. Underlying transaction volumes grew 50%. A number of relationships should help this year, such as IBM and Lloyds/TSB, but we believe the shares are fundamentally overvalued and, with a negative NAV of £0.13m (+ve NAV £1.80m) there is every likelihood of an equity funding. Move from Hold to a SELL with a 20p price target.
Millbrook Scientific (MBK, 0.75p, £0.55m) Has announced its intention to seek permission to delist – triggering an automatic SELL recommendation.
Idatech (IDA, 80p, £41.12m) Idatetch’s German partner b+w Electronic Systems has delivered 22 fuel-cell systems to the US Army as part of its infrastructure modernisation programme. The first 10 units were installed on 14 September 2009 as part of the back-up power system for military communications with the remaining 12 to be installed in US Army sites throughout Germany by the end of 2009.
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