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Beaufort Securities Breakfast Alert including Tern PLC

Last updated: 19:04 24 Oct 2014 AEDT, First published: 18:04 24 Oct 2014 AEDT

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The Market

Market opening: The FTSE-100 is tipped to fall on the open this morning, according to financial websites, ahead of today’s UK GDP data and on news that ebola has hit New York, with the Asian markets apparently shrugging off the news as the Nikkei edges higher in early trading.

New York: On Wall Street last night, the Dow gained 217 points to 16,678, the Nasdaq rose 70 points to 4,453 and the S&P 500 traded up 24 points to 1,951.

Asia: In Asia today, the Nikkei was recently up 135 points at 15,275, while the Hang Seng had fallen around 33 points at 23,300.

Crude Oil: WTI crude oil traded at $81.65 a barrel and Brent at $86.41.

UK small caps: The FTSE AIM All-Share index closed 0.06% lower yesterday at 708.88. To read our latest research click here.

Today’s breakfast menu:

- Beaufort Securities on Tern – Speculative Buy

Today’s news

UK told to pay £1.7bn extra to EU

The UK has been told it must pay an extra £1.7bn (2.1bn euros) towards the European Union’s budget because the economy has performed better than expected in recent years. The payment follows new calculations by the EU, which determines how much each member state should contribute based on gross national incomes. It would add about a fifth to the UK’s annual net contribution of £8.6bn. It comes at a time of increased pressure on David Cameron over Europe. (Source: BBC)

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Company News

Tern (LON:TERN) – Speculative Buy

Tern PLC invests in technology companies, works to improve execution and seeks to sell them for a gain. The company has a hands-on investment approach where they partner with management teams to provide strategic resources that build and grow great global companies. Investment returns are anticipated within 12-36 months.

Value creation is at the core of the Company’s existence and yesterday Tern provided an update on its 95% owned investee company Cryptosoft Ltd, which specialises in encryption based data security.

Cryptosoft has signed an agreement for a pilot programme to provide a new security service for the SIM based Machine to Machine (M2M) market space. This integrated solution offers the ability to provide data level encryption for information flows between all SIM enabled devices on a mobile network. The agreement provides for revenues generated to be shared between the network operator and Cryptosoft.

Cryptosoft delivers the following capabilities:

End-to-End application level security for data moving from device to device

Network based security for all traffic within the network infrastructure.

Secure Authentication of devices within the network.

Al Sisto, Director of Tern and Cryptosoft Investment lead for the Company said:

“Since acquiring 95% of Cryptosoft we have been working with management to rapidly monetise security products into key markets. My experience is that rather than developing proprietary sales forces selling stand alone products, we should first be prioritising building partnerships with those who have established track records providing customers with software products to create a force multiplier.”

Our view: The Company has three other small investments in Flexiant, Push Technology and Seal Software.

Flexiant is a global supplier of cloud orchestration software, allowing service providers to develop, launch and manage cloud service businesses fast. With global customers-sales partners include Parallels, Arrows and Dell-and research partners including BT, SAP, Ericsson Nokia and Telefonica.

Push Technology is narrow band technology the delivers data securely to mobile devices fast. Customers include ICAP,HSBC, Lloyds Bank, Bet 365, WillHill and Betfair-speed of response and reply is critical. Partnerships include IBM, Vodafone, Telefonica.

Seal Software has an innovative search engine for proactive extraction and presentation of contextual data with recurring revenue growing strongly. Resellers include IBM, Apttus and Selecttica.

We anticipate a realisation of at least one of the investments within 12 months. We like the fact directors have invested £600,000 (and note its relevance to the company’s market cap) and they take no salary. We are confident that management will deliver and initiate with recommending a Speculative Buy

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