Adili (ADIL, 4p, £4.7m), the online retailer, reported results for the 12 months ended 30 April 2009. Sales rose by 56% from a low base of £0.35m to £0.55m. Lower gross margins because of stock clearance and the acceleration of investment in the business, led to losses before tax widening to £1.9m (2008: £1.6m). Adili raised £0.94m through a placing at 1.5p in August, therefore we expect net cash to stand at c.£1.1m. With the new funding, reduced overheads, clean stock base and rebranding to Ascension, the group believe they are in a better position than a year ago. Revenues for the first 5 months of the current financial year have seen growth by over 29%. Assuming the latter continues, we would expect revenues for the FY10 of c.£0.7m. We expect gross margins to improve from 2.7% and the benefits of the cost reductions to come through the current financial year. Despite all the latter, we believe the group will continue to deliver a loss for FY10. On prospective 2010 revenue multiple of 5.1x – the group is overvalued. SELL
Amino Technologies (AMO, 45.5p, £26.3m), the leading independent IPTV specialist, has won a significant order from Pioneer Telephone Cooperative for HD set-top boxes. We retain our HOLD recommendation.
Asia Digital Holdings (ADH.L, 1.62p, £7.4m), the independent online marketing group reported results for the 6 months ended 30 June 2009. Revenues were up 28% to £8.6m (H108: £6.7m), driven by new Asian businesses, but gross margins fell by 5.8% to 24.9% as a result of a shift in the sales mix. Operating costs grew as part of the Asian investment strategy. This led to an increase in losses before tax of £1.1m (H108: £0.7m). Net cash stood at £0.67m. The group recently signed two strategic alliances with agencies that have clients, which are potential clients for Asia Digital. At this stage, the alliances have yet to deliver benefits – we look forward to seeing the benefits come through in the future. There are currently no market expectations. We believe the group can benefit from increases in online spend. Assuming H2 is slightly stronger than H1, we expect revenues of c.£18.5m. If gross margins and the cost base remain stable in H2, we expect the group to deliver a loss before tax of around £1.95m. On 28/04/09, we recommended this stock as a spec. buy. Since then, the share price has risen by 1.4x from 0.675p to 1.62p. On 2009 prospective revenue multiple of 0.4x – we reduce our recommendation to a HOLD.
Bglobal (BGBL, 34.5p, £25.57m) has won a contract with the UK retail arm of Gazprom to supply smart metering services. A continued HOLD, forecasts for 2011 are for £4.5m pre-tax profits with 6.07p EPS, putting the group on a Yr2 PER of 5.7x, high enough.
Boomerang (BOOM, 79p, £7.04m) Its newly created Boom Extreme Publishing has acquired Method, a multimedia publisher offering snow boarding news across print, audio and interactive platforms. Still a SPECULATIVE BUY.
Clean Air Power (CAP, 18.5p, £10.22m) has won a contract for a demonstrator for VSE, set up by Brazilian mining company Vale to investigate greener power solutions. The group will create a dual-fuel 8x4 axle tipper truck at a cost of some $0.355m. This could become meaningful as natural gas is established as a vehicle fuel in Brazil We maintain our SPECULATIVE BUY recommendation.
DM (DMP.L, 10.75p, £17.9m), the direct marketing group specialising in customer recruitment and database management, announced results for the 6 months ended 30 June 2009. Sales were up 55% to £11.6m (H108: £7.5m) driven by the addition of the 2 acquisitions. Gross margin were maintained at a consistently high level due to strategically planned reductions in volumes and a focus on margins. PBT fell by 15% to £2.3m (H108: £2.7m) and EPS down by 16% to 1.1p (H108: 1.4p). Net debt grew to £6.3m (2008: £0.1m) following a substantial interim dividend in 2008, the acquisitions of DLG and PDV and the net placing of £1.0m in April 2009. The restructuring of the group is in line with management expectations. The acquisitions of DLG and PDV are integrated into the business and are profitable at a pre-tax level. DM is now diversified into influential online direct marketing and customer lifestyle sector. The new areas offer an integrated service to a wide range of customers. Gamecard activities have been significantly hit by the pressure of consumer spending and competitor activity. The management team are confident that the Group is well placed to benefit from any upturn in marketing. There are currently no forecasts in the market. On 28/04/09, we retained our speculative buy at 7.75p. The shares have risen 39% since then. Under the assumption H1=H2, we anticipate FY09 pre-tax profit of £4.6m and EPS of 2.2p – this puts it on a prospective 2009 PER of 4.9x. Considering the stock is trading in line with the media sector median on 4.6x, we reduce our recommendation to a HOLD.
Intelligent Environments (IEN, 10.75p, £17.93m) has won a 3-year rolling contract to provide an e-statement solution to the Home Retail Group, holders of Argos and Homebase. We repeat our BUY recommendation, last iterated at 9.75p on 20/07/09, with a 14p price target.
IS Solutions (ISL, 21p, £5.20m) Interim results to June 2009 saw revenues rise 40% to £5.12m (£3.64m) with underlying pre-tax profits of £0.21m (£0.20m) with EPS of 0.71p (0.71p) and 0.33p (0.33p) DPS and net cash of £1.81m (£1.86m). Broadly half of the improvement in revenues arose from last year’s acquisition. Forecasts this year of around £0.5m would imply a 1.69p EPS, putting the group on a 12.4x prospective PER, BUY to the 25p level.
Just Car Clinics (JCR, 55.5p, £8.1m), the independent collision repair chain, announced results for the six months ended 30 June 2009. Revenues up 1.9%, but LFL revenues fell 4% because of the tough economic climate. The group reported PBT of £0.56m (H108: £0.65m) and net debt stood at £1.3m (2008: £1.8m). Interim dividend is retained at 0.53p. Vehicle insurance means the accident repair market is broadly insulated against the economic climate. However, reduced road usage has resulted in fewer car collisions and reluctance by retail customers to incur insurance excess payments, has adversely affected volumes. Gross margins continue to be negatively impacted by variability in weekly repair volumes resulting in reduced efficiency and the difficulty of passing cost increases on to customers in the prevailing economic climate. Just Cars have reduced their cost base. The group are seeking acquisition opportunities. 2009 market pre-tax profit estimates of £1.4m, EPS of 6.6p and DPS of 1.8p seem optimistic. We estimate the 2009 pre-tax profit to be £1.1m, EPS of 5.4p and DPS of 1.53p. This puts it on a 2009 prospective PER of 10.2x and yield of 2.8% - in line with the sector. We initiate with a HOLD recommendation.
NetServices (NSV, 2.75p, £0.81m) The group has taken time to gain work as a Cisco Managed Service Channel Partner. As a result the group now expects to report a net loss around £0.2m and gross cash of £0.6m to August 2009. Negotiations are continuing with Fibernet UK (part of Global Crossing) in an attempt to reduce the contractual obligations, though has yet to gain any satisfaction. We recommended the share as a Sell at 6p on 12/05/09 and, although the news is far from good, the valuation has fallen far enough to justify an upgrade to a HOLD.
Publishing Technology (PTO, 78.5p, £6.60m) Interims to June 2009 saw revenues of £7.68m (£7.31m) with 65% of revenues arising from recurring revenues and underlying pre-tax profits of £0.15m (£0.11m) and net debt reduced to £2.82m (£3.90m). Our last recommendation, Speculative Buy at 50p on 23/03/09, has performed well, but the shares appear well up with events and so we drop to a HOLD.
ROK (ROK, 50.5p, £90.55m) has been appointed a partner in 8 new frameworks agreements which could generate £140m over the next 5 years. Customers include Scottish Water, Devon country Council, City West Homes, Firebird JVC (a consortium of registered social landlords), the National Ambulance Service, Teign Housing, Sanctuary Housing and Cardiff County Council. We maintain our BUY recommendation with a 61p price target.
Scientific Digital Imaging (SDI, 21p, £3.50m) Final results to April 2009 saw revenues of £6.75m (£5.73m) with an underlying pre-tax profit of £0.22m (£0.18m) with EPS of 1.07p (0.97p) with net cash of £0.34m (£0.31m). The group has warned that “significant investments may affect short-term profits”, specifically in R&D and the sales-channel. With the warning a cautious flat outlook would put the group on a 19.6x PER. At 14.5p we were holders, and we move the recommendation to a SELL with a price target of 15p.
Timestrip (TIME, 1.7p, £8.54m) The group has appointed Vygon UK as the main distributor for its TimeStripPlus to hospital pharmacies in the UK and Ireland. The group has received its first order and announces its products will shortly be available through the NHS Supply Chain Catalogue with a full launch later this year. With 1 hospital pharmacy reporting a saving of 34,000 on protecting a high value drug there is every expectation of a significant adoption profile. We repeat our SPECULATIVE BUY recommendation.
ValiRX (VAL, 2p, £3.06m) has established a trading subsidiary, ValiMedix, which will be the distributor of the group’s diagnostics products, extending the group’s reach beyond the existing UK sales. SPECULATIVE BUY
Velti (VEL, 166p, £59.28m) Interim results from mobile marketing and advertising solutions company saw revenues of €21.65m (€15.92m) with pre-tax profits of €2.26m (€1.24m) and .€0.08 (€0.055) EPS. The group has seen strong growth on the back of its performance based solutions and its position as the sole end-to end mobile marketing solution provided as a Software as a Service (SaaS). The group believes its exposure to China, India, the US and other major economies will see increasing benefits in the second half of 2009 and into 2010. The group has a major product developed and ready for launch in October. Following the acquisition of Ad Infuse in May 2009 the group ended the period with net debt of €7.6m, well within the existing facilities, and a NAV of €42m. With no publicly available forecasts, the confident statement draws a cautious forecast towards €0.18 EPS - putting the group on a prospective PER of just 10.5x, too low given the exposure to mobile marketing and some of the “Tiger” economies for the post recession period. BUY to the 15x PER – a target price of 237p.
Westminster Group (WSG, 44.5p, £6.64m) has been awarded a contract to protect a family that is worth some £540,000 annually. Our recommendation remains a BUY with a price target of 50p.
Zenergy Power (ZEN, 124.5p, £65.04m) Interims to June saw revenues of £0.2m (£1.0m) with a pre-tax loss of £4.99m (£2.59m) with £11.71m (£12.58m) of net cash, though that is after cash usage of £5.34m, including one-off spend on properties/leases of £1.3m. The group reports good results from its first industrial scale induction heater installation, though the general market conditions are limiting expenditure in the foundries. The fault-current limiting device installed in California is installed and being monitored. Unless the outlook improves dramatically there is an increasing danger of another cash raise, though for the time being our recommendation remains a HOLD.
Zoo Digital (ZOO, 33p, £7.04m) has launched its Translation Management System that enables users to enter translations and legal information into an on-line data-base. We last recommended the shares a Buy on the back of forecasts around 2p-2.66p EPS for the year, a 15x PER gives a target price of 30p-40p, so the recommendation is reduced to HOLD.