HB Markets Daily Smallcap Newsflash including:Allocate Software, Eckoh,Focus Solutions,Intercede Group and others


Allocate Software (ALL, 70.5p, £43.62m) has announced 14 Q1 contract wins with 7 new NHS contracts for Healthroster - taking the total users to 126 Trusts, a contract for BSMS Trinity – the groups bank management application, 3 contracts for its clinical governance application and 2 for TimeCare and post Q1 a contract for Healthroster in the USA. We maintain the BUY recommendation with an 88.5p price target. (Julian Tolley)

Eckoh (ECK, 5.12p, £10.23m) The group has started the new financial year with strong trading. New contracts wins towards the end of last year and this year provides the group with confidence it will report double-digit margin growth for H1 2011. The benefits of the contracts signed this financial year will bear fruit in H2. We are impressed by the group’s performance. The Redstone debt is now resolved resulting in a strong cash position and a healthy balance sheet. We believe further contract wins will act as a catalyst to increase the share price. We reiterate our BUY recommendation. (Amisha Chohan)

Focus Solutions (FSG, 51.5p, £15.32m) has won two contracts, worth a total in excess of £0.5m for a 4 year enterprise license for focus:progress1. We maintain our BUY recommendation with the 59p price target. (Julian Tolley)

Intercede Group (IGP, 36.5p, £17.58m) has won a contract to supply its My Identity and Credential Management System to a large US Federal Agency. With an initial target installed base of some 7,500 with the potential to expand this contract widens the applicable marketplace. We do see some upside based on existing forecasts of £2m PBT with 4.1p EPS to around 41p - just sufficient to maintain the BUY. (Julian Tolley)

Parseq (PSQ, 6.625p, £28.97m) Interims to June 2010 saw revenues decline to £2.75m (£3.16m), gross profits of £2.22m (£2.72m), gross margins of 80.7% (86.2%) reflecting a one off step change due to investment in a hosting centre, op expenses of £2.44m (£2.30m) leaving underlying op losses of £0.21m (op profit £0.46m) and lower investment income led to a pre-tax loss of £0.46m (PBT £0.46m). Net cash ended at £0.69m (£1.08m at the year-end). H1 was hit by the cancellation of the Chelsea Building Society contract post its merger and deferral of 2 existing customer’s consultancy projects into H2. However the H2 reverse takeover by Documetric should prove transformational as it traded profitably in its H1, before acquisition, making a PBT of £0.7m on £5.2m of revenues. Combined with the acquisition of Avance’s fixed assets, contracts and IPR we see these figures as a passing aberration and maintain the BUY recommendation with a 9p price, though based on the outlook for next year. (Julian Tolley)

Petards (PEG, 0.575p, £3.67m), the developer of advanced security and surveillance systems, reports disappointing interims to 30 June 2010 are below market expectations. UK Government spending restrictions had an adverse impact on revenues in defence and emergency services, with total sales down 20% to £5.3m (H109: £6.6m), PBT down 52% to £0.11m (H109: £0.24m) and EPS halved to 0.02p (H109: 0.04p). Net debt remained broadly flat at £1.9m (H109: £1.8m). The board forecast higher revenues but lower margins in H2, which will lead to a weaker performance than H1. The pipeline of opportunities for rail business is strong. We expect further delays and cancellation of orders in the UK market, but expect revenue growth to be generated from overseas, which now represents 26% of total revenues. We expect the market to materially reduce current PBT and EPS forecasts of £0.8m and EPS of 0.1p. We expect PBT will be closer to £0.2m and EPS of 0.035p. Based on the latter, the stock trades on a prospective PER of 16.4x. The high valuation combined with the weak outlook statement encourages us to reduce our recommendation to a SELL. (Amisha Chohan)

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