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HB Markets Daily Smallcap Newsflash including Aminex, IdaTech, Neovia Financial, TEG Group and others
Aminex (AEX, 14.75p, £60.1m) announced a positive results form its well at the Shoats Creek property, Louisiana. The OM-1 reached total depth of 9.5k feet and wireline logs identified several potential oil and gas bearing intervals in Cockfield sands (between 8.2k and 9.3k feet) closely mirroring the expectations derived from 3D seismic interoperation. Testing will commence shortly following which it is anticipated that the well will be placed on commercial production from one or more zones. This is good news which potentially adds a useful revenue stream (too early to predict how much) or farm out possibility. We maintain our HOLD in light of impending results from Likonde-1, Tanzania.
ClearStream Technologies (CTN, 27.5p, £12.67m), has secured a new contract for the distribution of its peripheral angioplasty catheters to a significant number of Latin American and Caribbean territories with US based medical sales and marketing company Boston Medical Device International. The group is broadening its geographical spread. The market forecasts 2010 pre-tax profit of £0.5m and EPS of 1p – which puts the shares on 28x, which seems expensive. However, on a revenue multiple, the group trades on a historic revenue multiple of 1x. On this basis, we reiterate our SPECULATIVE BUY recommendation.
Cryptologic (CRP, 245p, £31.43m) has signed a further contract extension with William Hill, this time for at least 10 slot games. The agreement gives CRP a recurring income related to the wagers placed on the games. Still a HOLD.
IdaTech (IDA, 69p, £35.47m) Finals to December 2009 saw revenues of $6.55m ($5.93m) but an increased gross loss ($4.99m V.S. $3.30m) and raised R&D spend ($17.71m V.S. $7.84m) saw the loss before tax increase to $35.09m (loss $21.95m). During the year the group shipped 445 systems, times that in 2008, and increased the number of channel partners from 4 to 35. The group has reported an order backlog of 108 systems with a positive margin for delivery in Q1. The group took on some $22m of borrowings and is totally reliant on Investec currently for the funding of the group; the existing funding is repayable in March 2011. However we must now be concerned that the group has to chase very significant volume on lower power and thus priced products to offset is continued heady R&D spend. As a result we drop the shares to a HOLD.
Manganese Bronze (MNGS, 87.25p, £26.59m) Final results to December 20009 saw revenues of £73.1m (£77.2m) and an underlying loss before tax of £8.11m (£6.16m). The group sold a total of 1,933 vehicles or some 726 in the last 4 months – a higher run rate. The group achieved the Chinese manufacture of its TX4 and is pursuing European homologation. During the year the group achieved cost savings of £1,200 per vehicle and is targeting a further £800 within 6 months – which would boost profits by some £1.2m in a full year. The group is planning to sell over 1,000 vehicles in the international markets from SLTI, its Chinese joint venture with Geely, helping to offset pressure within the London market. A decision by a paint supplier has led to the planned closure of the UK shell manufacture and from August 2010 the group will import shells from the JV for completion in the UK. The group is already pursuing a saloon based car for the lower price markets, to be called the TXn, and announced the potential of a placing with Geely at 70p to fund the manufacture. The group is planning to drop to AIM. We see further trouble ahead, not least from AIM quoted Ecocity’s Vito taxi that has taken a 23% market share. The group is trading at asset value but is still loss making and consuming cash. We maintain a SELL recommendation.
Neovia Financial (NEO, 59.5p, £71.35m) reported a disappointing set of FY results. Revenue of $64.5m was down 15% ($75.9m); gross margin at 54.6% (61.8%); EBITDA of $8m against ($16m). LBT was $1.7m (profit $6.4m) and reversing out the goodwill charge PBT of around $2.4m suggests earnings of around 1.2p, surprisingly divergent from the markets expectations of 3-4p. The group had reported a raft of contract wins in H2 last year and traction should be improving this year. The company is not cheap on existing estimates and clearly these disappointing results put guidance for 2010 under pressure. In light of this we SELL to 53p which suggests around 11x current 2010 earnings estimates.
TEG Group (TEG, 44p, £22.3m) reported strong FY trading that matched expectations. FY revenue increased by 21% to £15,4m (£12.7m) and while the group reported headline profits reversing out the one off negative goodwill gain for the Banham Compost acquisition (i.e. the company paid £956k less than the fair carrying value of the assets) underlying LBT was -£801k (-£1.6m) - this was bang in line with market expectations. Owing to tax credits PAT faired slightly better at £713k (£1.47m). Positive traction combined with the strong pipeline suggests the company is on course for profitability this year. The balance sheet looks health with around £1.5m net cash. The group is well placed with statutory obligations to divert organic waste from landfill increasing, landfill tax continuing to rise (by £8 per tonne in April 2009 and expected to rise again by a similar amount this April to £48 per tonne). We maintain our BUY with a target price of 75p.
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