Hoodless Brennan Daily Small Cap Newsflash including Chrysalis, Southern Bear, smartFOCUS, Kiotech, ILX Group, Clapham House and others


Chrysalis (CHS, 103p, £69.1m), the independent music publisher, reports prelims to 30 September 2009 exceeded the top end of guidance.  Revenue increased 16% to £62.9m (13m to FY2008: £54.1m) and a 23% reduction in overheads led the group to move into profitability with normalised PBT of £0.5m (13m to 2008: -£0.7m). Net debt rose to £15.8m (2008: £11.5m). Chrysalis Music will benefit from successful album releasing during the autumn and there is a solid release schedule for FY2010. Management believe NPS will increase in 2010. Lasgo Chrysalis is currently trading broadly in line with 2009 and the exceptional performance is H209 is unlikely to be replicated. The division is negatively exposed to the weak economic climate.  We believe there is scope for the market to upgrade 2010 estimates from PBT of £0.2-£0.4m and EPS of 0.12p-0.3p. We retain our HOLD recommendation.


Southern Bear (STBR, 2.125p, £15.31m) Last night Southern Bear reported the acquisition of Intumescent Protective Coatings (IPC) for up to £4.35m (£3.45m) in cash and the remainder in shares). IPC undertakes the application of fire-proofing chemicals to structures during their build. They have won a number of notable contracts but the key opportunity is to take its expertise and extend it throughout the group. The group has raised £0.32m via a placing of 25.6m shares at 1.25p and £3m of convertible loan notes. As a result the group will issue a total of 95.6m new shares. The acquisition represents an excellent opportunity for the group at a sensible price. We maintain our BUY recommendation.


Binkx (BLNX, 19.5p, £54.2m) The world's largest video search engine, announced that, as part of its existing partnership with ITN, Blinkx ‘powered’ advertising is appearing on the Express group's UK websites (Express, Daily Star, OK! Magazine, new! Magazine & Star Magazine). Not groundbreaking newsflow but a timely reminder of Blinkx’s growing acceptance and market position which could make it a major dotcom success story. Very much still in the growth phase the company continues to be at the speculative end of recommendations but we continue to see attraction. SPECULATIVE BUY


Neovia Financial (NEO, 47.5p, £56.9m) The global online payments provider announced 8 contract wins for its payment suite with luxury goods merchants. These span on-line art collection management, wines, watches beauty products, gadgets etc. Individually these are quite niche and unlikely to be material (hence the joint announcement) but are further evidence of traction for the payments solutions provider. The shares have slipped of late but we continue to like the stock which looks expensive presently but should be much better value next year as traction from large contracts begins to show. SPECULATIVE BUY


Clyde Process Solutions (CPSP, 57.5p, £23.22m) has won a £1.7m contract for ingredient handling system with a leading global supplier of cereals, snacks and process foods at one of its largest facilities in north-east USA. On a prospective PER of 9.9x to February 2010, falling to 9.8x the following year we maintain our Hold recommendation though we are nearing moving it back to a BUY as the share has fallen from 63.5p.


Powerfilm (PFLM, 25.5p, £9.36m) Trading update for the year ending December 2009 highlights it has now installed the first building integrated solar cell in a facility at Ames. However the group is warning that a commercial roll-out will require the lower costs offered by the 1 meter roll process – which is still not achieving the yields required. The group has received a $0.15m grant from the Iowa Demonstration Fund for the commercialisation of the group’s new building integrated products. The group has been awarded 2 contracts from the US Army, underlining the building interest from the military market. The group expects to report revenues of some $6.4m ($8.6m) with a loss around $2m (profit $0.13m).  The group ended the period with $17.6m (including $9.5m earmarked for property and equipment construction) – offset by $4.625m of gross debt. Despite the short term worries we maintain the shares as a SPECULATIVE BUY, last iterated at 22p on 30/03/09.


smartFOCUS Group (STF, 12.25p, £11.5m), the multi-channel marketing software business, has signed a partnership agreement with Initiatives and Developments (Group ID) to develop a loyalty management and CRM market. Group ID will integrate, operate, and resell the full smartFOCUS Intelligent Marketing software suite as part of its loyalty management solution to its European customers and prospects. This is excellent news – the agreement will increase smartFOCUS’s footprint across Europe. 


Imaginatik (IMTK, 7.25p, £11.5m) has extended a significant 5 year software and services contract with a global consumer products company. The value of the contract has not been disclosed. We retain our HOLD recommendation.



Kiotech (KIO, 3.5p, £14.2m) announced the sale of its Ultrabite sports/fishing pheromone attractant brand and the associated rights. Gross cash consideration is €900,000 (£818,182). This transaction looks sensible Ultrabite was a contributor to group sales and non core as the group pursues its strategy of supplying feed to the intensively farmed meat and fish industries. This transaction should shore up an already healthy balance sheet with net cash. Earnings still need to get moving in order for this to look value on P/E or EV/EBIT terms (we estimate around 12/-13x on this metric).The acquisition of Optivite Group, one of the UK’s largest independent animal nutrition businesses back in August should help drive progress. Share shave made good progress and neared our 4p price target and we reduce the recommendation to HOLD.



Baobab Resources (BAO, 5.25p, £8.34m) Three diamond drill holes have been completed in the South Zone area for an aggregate of 532.5m. Drilling operations which have been suspended due to the onset of the wet season are expected to resume in February / March 2010 and to be complete by 30 September 2010. Geological mapping of South Zone is helping clarifies geological parameters. Drilling this previously unexplored has underlined the potential of the prospect to host significant magnetite-ilmenite resources with indications of considerable tonnages that will improve overall concentrate. Next significant newsflow should be drill sample analytical results which are expected to be available in Jan/Feb 2010. The company looks forward to launching an aggressive exploration campaign in early 2010 to build on the success of the Tete project. The company remains a very attractive prospect. SPECULATIVE BUY.


Ideal Shopping (IDS, 102p, £30.28m) Trading update for the 47 weeks to 22 November has highlighted that the important final period has improved and consequently the group will report results ahead of market expectations. The group believes that “positive progress is being made towards profitability at the full year”. We maintain our HOLD recommendation as optimistic forecasts currently are looking for 5.4p EPS which put the group on 18.8x Yr2 PER.


ILX Group (ILX, 28.5p, £5.56m) The group has won 3 new Government and Inter-Governmental organisations worth a total of £0.27m over there life. We maintain our BUY recommendation with a 44p price target that would equate to a prospective PER of 11.6x.


Clapham House (CPH, 57.5p, £22.32m) Interims from the owner of Gourmet Burger Kitchen and The Real Greek saw revenues up 13% to £22.5m (£22.0m) with underlying PBT of £1.6m (£2.0m) with EPS of 2.2p (2.8p) and net debt reduced to £11.4m (net debt £12.1m). The improvement in revenues does reflect the 2 new GBK restaurants in the UK and 3 overseas. Q3 trading is in-line with expectations and profitable. This is a cash positive, profitable group, with long banking facilities trading below its £25m NAV. With forecasts of up to £3.7m PBT with 6.7p EPS the group offers short term upside and we start the group at a BUY with a short term target of 64p.


Supercart (SC., 16.5p, £10.48m) The group has extended its initial business with US based Target Corporation to encompass the supply of a range of shopping trolleys, hand baskets and related repair and replacement parts for a period of 4 years to December 2013. While the short term has seen an upturn in activity and market outlook, it has occurred too late to benefit Q4 of this year. The US market has reacted well to the US re-launch of the Rehrig range and the group will enter 2010 with a strong pipeline. South Africa has continued ahead of budget and will report a strong performance. In addition the group announced its first order in Australia. European sales have been disappointing but a reorganisation in H2 has led to the first order with one of the largest French retailing groups, won jointly with French distributor Caddie. We continue to believe the Rehrig acquisition was a positive move by the group and the group is well place to take advantage of the retail markets as and when they recover. Investors should look through the slightly disappointing short term trading update and recognise the long term contract with one of the US’ largest retailers is more important to the share price. We maintain the group as a SPECULATIVE BUY.


Advanced Medical Solutions (AMS, 28p, £40.40m) Trading update for the year ending December 2009 is encouraging with the group reporting a “strong second half” so enabling the group to report figures in-line with market expectations. Budgets for the LiquiBrand skin adhesive are covered by existing approvals while the group awaits FDA approval for its use in specific applications in operating rooms. The integration of the October Corpora acquisition is progressing well and the group believes its products will be a key growth driver for the future. The new facility build at Winsford is progressing well, on-time and within budget. We repeat our BUY recommendation, last iterated at 27p 09/12/09, with a 35p price target.


Gaming VC (GVC, 220p, £68.50m) Trading update for the year ending December 2009 is very encouraging, In Q4 gaming revenues have been averaging €0.124m (€0.107m) while sports revenues have averaged €0.042m (€0.021m) with sports margins 29.5% (11.1% in the comparable quarter last year). Excluding the Italian operations that will be sold soon the Net Gross Revenues for the 350 days covered by this trading update are some €50m (€48m) plus the BetBloo acquisition which has contributed an average of €0.12m per month since it joined the group at he start of July. The group has some €18.3m cash. The group is going ahead with the move to redomiciliation from Luxembourg to the Isle of Man. This move may give rise to tax implications for certain private shareholder and they should seek advice. The move would have a number of positive benefits including removing the Luxembour 15% withholding tax on dividends – so could enable additional cash repayments to shareholders. We repeat our BUY recommendation with a 253p price target, last iterated on 28/09/09 at 202.5p.


Uniq (UNIQ, 26.5p, £30.4m) has reached an agreement to sell the Netherlands Business Unit to Gulde Equity Management (GEM) Benelux, for a total enterprise value of €20.0m (£18.0m).The proposed transaction requires prior consultation with the Works Councils of the Netherlands Business Units. The disposal is in line with the Group’s strategy. The net proceeds (c. £15.1m) from the sale will be used to eliminate net debt and strengthen the balance sheet for the future. The Netherlands Business Unit reported operating losses of €0.5m (£0.4m), gross assets of €29.1m (£27.9m) and net assets of €5.2m (£5.0m) in FY08. Uniq is a turnaround story. We retain our SPECULATIVE BUY recommendation.


Optare (OPE, 6.12p, £14.2m), the bus and coach specialist, reports trading in Q4 has been better than Q3 and the order book has risen to £11.7m from £8.8m at the interim stage. Following a successful tender under the Government’s Green Bus Fund are expected to deliver in excess of £12m of new orders for zero emission and hybrid buses – management believe a majority of these will be placed in 2010. Nevertheless market conditions remain extremely tough and there is a lack of visibility for the medium term. The key drivers for this weakness are: 1) the impact of rail franchises on the major groups and the lack of availability of finance for smaller operators, 2) competition for the reduced volume of bus orders for major operators. Optare is focussing on reducing costs in line with the decline in revenues to achieve a break-even point.  Net debt currently stands at £8.2m. The sale of the Rotherham site, which is currently on sale in the market, will help reduce the level of debt. The group is in discussion with potential strategic partners, which could allow the business to benefit from joint sales activity, new distribution channels, low cost sourcing and potential technology sharing. We believe the market will downgrade 2010e from PBT of £3.5m and EPS of 1.1p. We believe the group is more likely to break-even. We retain our HOLD recommendation.

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