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.
Hoodless Brennan Daily Small Cap News Flash including Next Fifteen, Boomerang, Sarantel, Praesepe, Earthport and others
You can receive this report by email in the morning by clicking here.
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.
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.
