Boomerang Plus (BOOM, 94p, £8.38m), the independent television production group, reports delays in projects will prevent the group from achieving market expectations of PBT of £1.4m and EPS of 10.9p for the year ending 31 May 2010. We are clearly disappointed by this morning’s announcement. The delayed revenues will benefit FY 2011. The group has a strong revenue pipeline, in excess of £57m, providing revenue visibility. Increasing network commissions, a growing AFP department supplemented by Freeze and Method and the Indus acquisition are providing a good platform for increased growth and diversification. The group is debt free with net cash of £2.5m at the end of November 2009. Assuming earnings of 14.2p in 2011, the stock trades on 6.6x. We expect the share price to fall today, which will believe will provide investors with a buying opportunity. The strong pipeline encourages us to reiterate our SPECULATIVE BUY recommendation.
British Polythene Industries (BPI, 236.75p, £62.73m) Trading update for the start of the year from the 1st January confirms tough trading conditions but volumes are still up 5%, though a margin squeeze means this has not “fully translated into an increase in the bottom line”, despite an easing in raw material costs and material supply constraints easing. Overall the group expects a flat performance for the first half. The shares have fallen already to reflect the difficult start to the year, combined with the news yesterday that BPI is aiding OFT officials into enquiries into the agricultural films market. A flat outcome against last year with 38.6p EPS, well below existing forecasts of 39 to 42p, would put the group on 6x PER, low enough and we thus maintain the BUY recommendation.
Clinton Cards (CC., 39.25p, £81.22m) Trading statement covering the start of the second half from 1st February to 13th May saw a like for like decline of 1.7% - resulting in a year to date like for like increase of 1.6%. The board has confirmed no change to its year end expectations. Forecasts of some £16m PBT with 5.5p EPS put the group on an attractive 7.1x PER, BUY.
Protonex Technology Corporation (PTX, 36.5p, £10.21m) has announced proposals to delist from AIM - triggering an automatic SELL recommendation due to liquidity concerns.
ReThink Group (RTG, 5.75p, £5.25m), the recruitment and technology services group, reports prelims to 31 December 2009. A 15% increase in revenues to £49.7m (2008: £43.4m) was driven by an increase in demand for contractors. The shift in the sales mix from permanent to contractor staffing drove gross margins to decline by 22% (2008: 29%). Higher revenues and tighter cost controls led the group to increase pre-tax profits by 58% to £0.3m and EPS by 1.8x to 0.22p (2008: £0.08p). Tighter working capital helped reduce net debt to £4.2m (200: £5.8m). Going forward, the group have seen signs of improved demand for permanent recruitment. We believe 2010 will continue to remain challenging. The group is heavily exposed to the UK market. Any downturn in the UK economy will negatively impact the group. We believe there is scope for the market to downgrade current 2010 estimates of PBT of £1.0m and EPS of 0.66p. We reiterate our HOLD recommendation.
Sportech (SPO, 45.4p, £72.38m) AGM trading statement highlights a range of new games to be launched ahead of the football world cup which will then go forward into this year’s football season. We maintain our BUY recommendation.
Torotrak (TRK, 22.5p, £36.19m) has acquired 15% of Rotrex, the Danish supercharger company, and formed a UK JV to be called Rotrak. The group has paid £0.5m for 15% in Rotrex, with £0.147m in the form of a loan to Rotrex. This is a very significant move as the move towards engine downsizing continues with the accepted norm of turbocharging. Superchargers are not favoured as they are typically fixed geared to the engine speed so firstly give little boost at initial acceleration and have to geared so they do not aerodynamically stall at higher engine speed. The combination with a variable ratio Torotrak gearbox would enable the boost curve to be tailored to throttle demands. We view this very positively, though of course noting the extended adoption cycles for mainstream auto manufacturing, and maintain our SPECULATIVE BUY.