WFCA (WFCA, 3.25p, £8.6m) will lose a major account at the end of February 2009, which will result in the group significantly missing current market PBT and EPS estimates of £0.82m and 0.25p respectively. The group may find it difficult to replace the revenue in 2011, which may lead to the market to downgrade 2011 PBT and EPS estimates of £1.12m and 0.34p respectively. The group trades at a premium to the media sector, which we believe is unwarranted. We downgrade our hold recommendation to a SELL.
Redhall Group (RHL, 138p, £40.8m) prelims to 30 September 2009 came in line with our expectations. Revenues up 49% to £129.0m (2008: £86.7m), adjusted PBT up 39% to £6.5m (2008: £4.6m) and adjusted EPS up 3.5% to 16p (2008: 15.4p). The group proposes a 10% increase in DPS to 4.4p, which demonstrates the group’s strong cash generation (net cash £6.3m) and confidence in the business (order book of £115m). The group is well positioned in the Energy, Defence and Process markets, which offer prospects of long-term growth. Redhall continue to seek acquisitions and broaden its services by entering new areas of expertise in waste to energy and carbon fibre, a growing market. The market forecasts 2010 PBT of £7.1m, EPS of 16.9p and DPS of 4.8p, which puts the group on 8.2x and a yield of 3.5%. We upgrade our recommendation from a Hold to a BUY.
Stanelco (SEO, 0.32p, £9.85m) The company has stated that it knows of no reason for the drop in share price from 0.42p or so 10 days ago. Our recommendation remains HOLD due to the £6.8m loan notes that are repayable on demand, there may be a modest technical bounce.
Newmark Security (NWT, 1.475p, £6.64m) has completed safety tests for its bullet proof glass which is lighter and cheaper than older alternatives. With forecasts around £1.6m PBT and 0.3p EPS the shares offer reasonable value and we return the shares to a BUY with a 1.625p price target.