08_2009_sc_pro

smallcapshares

PROFESSIONAL









uncovering small cap stocks for capital growth 123 February 2008

issue 105 August 2009







THE MARKET newideas

SINCLAIR PHARMA BUY page 8









▲

9 June 6 July* DIGITAL MARKETING GROUP BUY page 10









▲

FTSE 100 4,404.8 4,194.9 -4.8% VISONIC BUY page 12









▲

FTSE All Share 2,251.8 2,144.3 -4.8%

FTSE Smallcap 2,315.8 2,209.2 -4.6%

*Record date for prices in this issue

bignews

The FTSE 100 hit its lowest level in nine weeks in early July as a RCG HOLDINGS page 2









▲

spate of miserable economic data suggested that we may not Another positive trading update

be out of the recession quite yet. Small cap indices have also lost

ground since our last issue. CRESTON page 3









▲

Amongst the blue chips retail giant Marks & Spencer was one of Earnings up 9% in year to March 2009

the best performers, its shares rising by 11% in the period as it

announced slightly better than expected sales for its quarter to ASIAN CITRUS page 5









▲

June. At the other end of the scale, shares in miner Fresnillo lost The man from Guangxi Province says “buy”

28% on fears of further metal prices falls.

Morse, the IT consultancy, was one of the best performing small CLARKSON page 16









▲

caps in the period, its shares gaining 67% as it announced that Positive trading and broker upgrades

results for the year to June 2009 would be at the upper end of mar-

ket expectations. The worst performer was Biotech firm Alizyme,

shares in which plunged 58% as it raised concerns over whether

it would be receiving milestone payments for bowel disease drug

COLAL-PRED.







updates

6,000

AVON RUBBER BUY page 2

5,000 KENTZ BUY page 2

FTSE100

4,000 D1 OILS HOLD page 3

COSTAIN BUY page 4

3,000

Smallcap HILL & SMITH BUY page 4

2,000 All Share GOALS SOCCER CENTRES BUY page 5

FIBERWEB STRONG HOLD page 6

Feb Aug Feb Aug Feb Aug Feb Aug Feb Aug Feb Aug Feb

03 03 04 04 05 05 06 06 07 07 08 08 09 AND MANY MORE…



rebased

SHARE DEALINGS PAGE 5

FASTEST MOVERS PAGE 6

140

THE RECKONING PAGE 7

NEWSFLOW PAGE 14

120

EDITOR’S MESSAGE PAGE 16

FTSE100

100



Smallcap

80









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smallcapshares August 2009







RCG HOLDINGS

COMMENT ▼

Avon has been making solid operational progress ever since it

RCG £147.1m 62p BUY overcame initial teething problems with the production of the M50

masks. Recent half year results, for the six months to 31st March

TRADING UPDATE & SALES ORDER AIM

2009, showed a bounce back into profitability and these new

RCG Holdings, the biometrics and radio frequency identification contacts give us further revenue visibility for this year and next. On

(RFID) security products provider, has confirmed that trading so the back of the recent good news the shares have performed very

far in the financial year (to 31st December 2009) is in line with well so far in 2009, rising from 28.5p on 2nd January to the current

management expectations. Recently the company has received 79p, a gain of 177%. Analysts see Avon posting earnings of 5.3p

its first order along with a 25% deposit from A-1 Development, for the full year to September 2009, rising to 8.8p in 2010. That

an information technology consultancy, for the sale and delivery puts the shares on a forward multiple of 9 times, a rating which

of 3.5 million licences of facial recognition software, FxGuard we believe looks reasonable value given the potential for additional

Windows Logon. The software will be distributed on the website orders across the business and the prospect of the dividend being

of China Information Broadcast Network, the firm which A-1 was reinstated in the next financial year. BUY.

established to provide its services to.

RCG, through its subsidiary Virtual Storage Centre, acquired a

15% stake in A-1 in return for a 6% stake in RCG in April this

year and as part of the deal A-1 has committed to purchase 21 KENTZ

million FxGuard Windows Logon licences and 21 million licences of KENZ £181m 155.5p BUY

remote online storage software, Virtual Storage and Workgroups, CONTRACT WINS & AGM STATEMENT AIM

from RCG over a period of three years. As a result of the initial

Engineering and construction group Kentz had a busy June,

order RCG's Consumer division is expected to show growth for the

announcing two new contract wins and, at its AGM, a posi-

first half of the current year.

tive trading update. The first of the deals is with Saudi Polymers

Elsewhere in the company, the Enterprise segment is expected to Company and related to the utilities and offsite works for its new

show growth for the half, having benefitted indirectly from the polymer production project in the Kingdom of Saudi Arabia. This

various governmental stimulus plans implemented to counter the contract, the value of which has not been disclosed, is the seventh

global financial crisis. The Solutions Projects segment is also said deal the company has signed in Saudi Arabia this year.

to have performed strongly so far in 2009, with significant orders

Secondly, in a joint venture with its Australian partners Decmil and

received from Chinese customers for both events ticketing and

Thiess, Kentz has been contracted to design and build a 3,300

hospital patient tagging products, as well as multiple contract

worker construction village on Barrow Island for Chevron Australia

wins, including from China Construction Bank, Bank of China,

as part of its Gorgon gas fields development project - one of the

China Science & Technology Museum and Wuhan Metro.

world's largest oil & gas development projects. Under the deal

COMMENT ▼ Kentz is providing the overall construction village engineering and

Yet again, in defiance of the global economic downturn, RCG design and the supply of all offshore procurement, with its share of

has announced a positive trading update. While the market the contract estimated to be worth around $130 million.

reacted positively to the news the shares have since slipped The upbeat mood was continued at the company's AGM where

back slightly since then to currently trade at 62p. At that price, Kentz revealed that trading so far in the first half of the current

given forecasts from the house broker for 25.4 p of earnings, financial year is in line with market forecasts. As at the end of April

they trade on a current year price earnings multiple of 2.4 times. the company's backlog of work stood at $993 million, down from

The multiple falls to 2.1 times in 2010 on the back of 29.2 p of just over $1 billion at the end of December last year, with total

forecast earnings. Considering RCG's excellent track record of orders in the first four months of the year amounting to more than

growth - earnings grew tenfold between 2004 and 2008 - and $200 million. Although no figures were given regarding the com-

expectations of further progress in the coming years, we do not pany's current financial position at the AGM Kentz did flag that

think those ratings are too demanding. The investment case is cash flow continues to be strong and that the company continues

also supported by the net cash position of £9.5 million as at 31st to have virtually no debt on the balance sheet. In addition, the

December 2008 and by its cash generative operations. BUY. pipeline of additional projects is said to be very strong.

COMMENT ▼



AVON RUBBER Kentz has continued to make excellent progress in 2009. We

note that the company's backlog of work has doubled in the past

AVON £23m 79p BUY two years - an impressive feat considering the deterioration in

CONTRACT WINS FULL LIST the worldwide economy seen since mid-2007. The new deal on

Barrow Island should have boosted the backlog up to around $1.1

There's been more good news from rubber products maker Avon

billion (a record level) and it should provide further opportunities

Rubber which, under a current spare parts contract with the United

for Kentz in the coming years. The whole project, work on which

States Department of Defense (sic) (DoD), has been awarded an

is expected to commence in the second half of 2009 following the

additional order worth $22.34 million. This includes over 700,000

M50 mask filters for delivery in the period to August 2010. These

Do you read our sister publication?

spares and filters will support the issue into service by the DoD of

the new M50 mask systems, of which over 200,000 have already





AIM&PLUS

been delivered by Avon under its 10 year sole source contract. In

addition, Avon has received orders worth $2.4 million under its

five year contract with the US Army for the supply of fuel storage

tanks, adding to an initial order worth $10 million which com-

menced in March 2009.

For more details visit www.aimnewsletter.co.uk







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smallcapshares August 2009





final investment decision by Chevron and its partners ExxonMobil earn out payment being made in respect of advertising agency

and Shell, is estimated to have a total capital expenditure budget DLKW, which was acquired by Creston in February 2005. Headline

of around $30 billion. net finance costs were covered 11 times by headline EBITDA.

Shares in Kentz have performed very well so far in 2009, rising by Encouragingly, the debt position as at 19th June 2009 had fallen to

56% since the beginning of the year on the back of a recovery in £13.7 million due to the continuing strong levels of operating cash

the oil price and the company's good operational progress. At the flow being enjoyed. In total, £23 million of deferred consideration

current price of 155.5p they trade on a multiple of 9.3 times for remains due and this is expected to be paid for via bank debt and

2009 given consensus forecasts for 27.2 cents (16.7p) of earnings operating cash flow. Creston added that the current financial year

for the full year. In 2010 the multiple falls to 8.4 on the back of has started with some high profile new business wins and the pipe-

forecasts of 30 cents (18.5p) of earnings. While the ratings have line is said to remain encouraging.

been negatively affected recently by the weakening of the dollar COMMENT ▼

against sterling we continue to think that the shares look good The new business wins during the year were very impressive, espe-

value, especially considering that Kentz had own cash - cash bal- cially considering the wider economic troubles and trend in the

ances less advances on projects - of around $115 million (£70.7 industry to focus on retaining existing clients. While the decision to

million), or 40% of its market capitalisation, as at 31st December cut the dividend is slightly irritating, given the good performance,

2008. We are currently 14% up on our 136p tip, which has signifi- we note that it will save Creston circa £1 million, which will go to

cantly outperformed the AIM-All Share Index since being made in the support the remaining deferred consideration payments, the major-

April 2008 newsletter, and continue to rate the shares as a BUY. ity of which (circa £19 million) are due in calendar 2010.

And that is the main issue for Creston in the short-term. Due to the

deferred consideration payments debt is forecast to peak in 2010

CRESTON at £30 million, a level which may worry some investors, especially if

the economic troubles negatively affect the company's strong cash

CRE £35.9m 64.5p BUY flow. Nevertheless, with £40 million of available banking facilities

FINAL RESULTS FULL LIST as at 19th June this year we can take some comfort from the fact

Results for the year to 31st March 2009 from marketing and media that Creston has headroom. Assuming Creston successfully meets

firm Creston were ahead of market expectations. On the back of its deferred consideration payments, from then on the debt will be

a raft of new business wins, up from £9 million in the previous able to be reduced at pace.

year to £15 million, revenues for the period rose by 4% to £83.8 For the current year Creston's house broker is looking for earnings

million, with headline pre-tax profits up by 5% to £14.2 million of 16.6p, putting the shares on a price earnings multiple of just

and diluted earnings per share up by 9% to 18.6p. There was also under 4 times. The low rating reflects the difficult macro-environ-

a good performance from the digital side of the business, which ment and debt issues but with scope for both of these to improve

grew its revenues by 56% - it generated 28% of group sales. considerably in the next few years we believe that Creston shares

Despite the good performance the final dividend for the year was offer good opportunities for long-term gains. BUY.

scrapped so Creston can continue to invest in the digital business

and to pay down debt, leaving investors with just the 0.73p interim

payment.

Across the two divisions Communications put in the best perform- D1 OILS

ance in the year, it seeing revenues rise by 7% to £67.1 million DOO £7.3m 5.75p HOLD

and headline pre-tax profits rise by 9% to £14.3 million. The FINAL RESULTS AIM

performance was helped by digital and direct marketing agency,

Beleaguered biofuels business D1 Oils has posted a pre-tax loss

TMW, which won over half of all the pitches it was involved in and

of £33.6 million for the year to 31st December 2008. The results

by advertising agency, DLKW, which won more than two thirds of

came on the back of a £7.6 million trading loss, £8.7 million of

its pitches.

losses from its joint-venture planting business with oil giant BP

In the Insight division revenues fell from £17.9 million to £16.7 mil- - D1-BP Fuel Crops, £11.8 million of losses being recorded from

lion and headline pre-tax profits were down by £0.8 million to £4.5 discontinued operations, as well as £6.7 million worth of invest-

million. This was partly due to a weak performance from qualita- ment impairments.

tive and sensory/concept testing research businesses CML and

There is life in the old dog (an Evil Knievil joke) yet however.

MSTS, both of which have now had their operations integrated

Following a £14.9 million placing, which was completed in May

into the larger ICM and MSL agencies.

2008, D1 ended May the year with £8.7 million of net cash, with

Due to a focus on working capital management Creston also made an additional £7.1 million in the joint-venture business as at that

excellent progress in improving operating cash flow in the period. date. These funds are expected to be enough to keep the company

At £20.8 million the figure for the year was up by 17% and repre- going until the end of 2010, following which additional funds will

sented cash conversion against headline EBITDA of 116%, well above be sought to fund the business.

management's long-term target of 95%. Free cash flow of £14.5 mil-

The firm, which claims to now have interests in 25% of the

lion, up 37%, along with the company's revolving credit facility was

world's global planting of biofuel crop jatropha, has had a tough

used to settle earn out liabilities, dividends and bank repayments.

18 months in many respects. On the back of competition from

At the period end Creston had net debt of £18.6 million, up £0.7 subsidised US biofuel imports the company decided to close its

million during the twelve months largely due to a £13.9 million UK refining operations in Middlesbrough and Bromborough last

April, and these are now up for sale. In the planting business, at

the end of May this year 221,769 hectares of jatropha had been

Institutional shareholdings planted across the company's farming arrangements, up from

We do our best to report significant changes in institutional sharehold- 192,016 hectares in March 2008 but well short of the 1 million

ings. However, this is a complex area and we do not guarantee we always originally planned to be planted by 2011. Following the year end

present the most meaningful aspects of this information, nor that it is D1 announced that the joint-venture had hit funding troubles. Its

always accurate. carrying value was reduced to nil in the accounts and now talks are





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smallcapshares August 2009





The company further impressed the market at the end of the

under way between the two parties for D1 to acquire BP's stake

month by revealing that, as part of the 4D consortium, it has won

and subsequently for D1 to merge the planting and plant science

a new capital delivery contract with Southern Water to manage

operations under its control.

the design and build of a new waste water treatment works in the

Despite all the doom and gloom D1 has made some encouraging Brighton and Hove area. The £225 million contract has begin with

progress. During 2008 the joint-venture successfully produced immediate effect, with the construction phase expected to take

its first quantities of crude jatropha oil, making its first sales for approximately three years, followed by the potential for a two year

in-country use in Africa at $1,800 a tonne. Volumes of oil are contract to operate and maintain the plant.

expected to increase in 2009 as existing trees mature and younger

Just before our editorial deadline Costain further added to its order

trees become productive. In addition, D1 has developed a potential

book by, in joint-venture with Galliford Try and Atkins, securing a 5

new future revenue stream in the form of jatropha animal feed.

year extension of its AMP4 framework contract with United Utilities

The first commercial operation of the company's patented process

up to March 2015. Under the deal the majority of projects are

to turn jatropha meal into feed is expected in 2011.

likely to be improvements to both clean and waste water process-

The short-term focus for D1 will now be to improve yields on its ing plants. The total value of the framework contract to Costain is

existing plantations, to generate revenue through sales of products estimated at around £180 million.

and services to the jatropha industry and to invest in plant science

Ahead of entering its interim closed period Costain has also

and technology - as opposed to ramping up the planting pro-

announced a trading update, which on the whole is upbeat. Since

gramme as was the previous focus. This is being done in order to

7th May, the date of its last interim management statement, the

gear the company up for its planned fundraising at the end of next

company is said to have traded in line with expectations. The for-

year and so that D1 can continue to work towards its long-term

ward order book currently stands at £2.4 billion, a 20% increase in

goal of developing jatropha as a new energy crop.

12 months, with £900 million of work secured for 2009. In addi-

COMMENT ▼ tion, Costain has preferred bidder positions of over £800 million

Any definition of the term 'value destruction' should include D1 and net cash remains significantly in excess of £100 million.

Oils as a case in point. Since the company listed on AIM in October COMMENT ▼

2004 it has tapped investors for over £100 million - at prices rang-

Numbers from the Office of National Statistics show that construc-

ing from 25p to 165p - but gone on to deliver substantial losses

tion output in the UK declined by 6.9% in the first quarter of 2009.

year-on-year. In addition, since peaking at 517.5p in March 2005

In that context Costain has performed incredibly well so far this

the shares have lost almost 99% of their value. Despite the shares

year, its focus on large, long-term infrastructure projects helping it

now being at near their all time lows, and trading at a discount to

to beat the downturn.

net cash, we believe that it would be a brave move to buy them

at this moment in time. With the company putting its planting Since the beginning of April the Costain share price has been

expansion strategy on hold we see few drivers for the shares in the highly volatile. Hitting a high of 26.75p on a number of occasions

short-term. Also, the exit of BP from the joint-venture is a major the shares fell to lows of 22.5p during the period on the back of

blow and adds to the already negative sentiment dogging the concerns over the threat of government spending cuts. However,

stock. HOLD. with the order book currently at its highest level ever and almost all

of market consensus revenues for the 2009 financial year now on

the books we expect that forecasts for the full year should be met.

Those expectations are for earnings of around 2.2p, putting the



COSTAIN

shares on a multiple of 11.1 times. We believe that this represents

good value considering the company's excellent earnings visibility

COST £155.3m 24.5p BUY and exceptionally strong cash position, which currently covers circa

two-thirds of its market capitalisation. BUY.

CONTRACT WINS & TRADING UPDATE FULL LIST

Engineering and construction group Costain has continued to see

the contracts rolling in since our last issue. In early June the com-

pany announced that it had been appointed (in joint venture with HILL & SMITH

building materials group Lafarge) by the UK's Highways Agency, as HILS £178.3m 235.5p BUY

one of five contractors on a new managed works framework con-

TRADING UPDATE & DISPOSAL FULL LIST

tract covering the East and South East of England. The deal, which

is for maintenance and improvement works, is for two years, can Construction services group Hill & Smith has revealed that, as a

be extended to up to four years based on performance and has a result of cash generated from operations, tight working capital and

maximum advertised value of £400 million over those four years, exchange rate movements, net debt fell by £31.2 million to £115

with each project potentially valued up to £10million. million in the six months to 30th June 2008. The reduction in bor-

rowings was also helped by proceeds of €5.8 million which have

been raised following the sale of the company's minority invest-

ment in Dutch galvanising firm Neholl BV. Results for the six months

to 30th June 2008 will be released in mid-August and these are

Do you read our sister publication? expected to be in line with expectations.

COMMENT ▼







AIM&PLUS

We note that in its last trading update Hill & Smith said that debt

had been reduced by £5.4 million in the first quarter of the year,

which implies that the company made much more significant

progress in the second quarter. If the £115 million net debt level at

the end of June is confirmed in the interim results then Hill & Smith

will have beaten market expectations for debt reduction by around

For more details visit www.aimnewsletter.co.uk

6 months - in a note released just 1 week before the trading update

broker Numis said it was looking for net debt of £120 million by





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smallcapshares August 2009





the end of December this year. At 235.5p we are 19.2% up on our COMMENT ▼

tip at 197.5p made in the December 2008 newsletter. However, This is welcome update from Asian Citrus which justifies our

with the company's earnings being driven by recession resilient maintained positive stance on the stock. In the coming years the

infrastructure project work we remain supportive of the investment maturation of 400,000 orange trees at the company's Xinfeng

case. For the current year to 31st December 2009 the market is Plantation in winter this year and 400,000 additional trees in

looking for earnings of around 34.5p, rising to 37p in 2010. On a winter 2010 should continue to boost production volumes. An

forward price earnings multiple of 6.4 times the shares look cheap increasing focus on supplying to supermarkets will help to increase

and with an 11p dividend expected for this year the yield of 4.7% margins, as will the recently negotiated increases in selling prices

provides another reason to own the shares. BUY. for the summer crops of approximately 3.7%, which, in part, were

achieved due to the company's 'Organic Product' accreditation.

Unfortunately, no further information on the company's planned



GOALS SOCCER listing on the Hong Kong Stock Exchange was given in the update.

In its interim results, which were released in March, Asian Citrus



CENTRES said that it was looking to complete a Hong Kong listing, by way

of an introduction, within 12 months. We continue to believe that

GOAL £95.8m 197.25p STRONG this would be an advantageous move as not only will it provide

HOLD the company with access to new investors it should also increase

FIRST HALF TRADING UPDATE AIM liquidity in the stock. We note that technology firm RC Group,

another AIM listed company we cover in the newsletter, recently

Five a-side football centre operator Goals Soccer Centres has fol-

listed in Hong Kong and subsequently saw its shares double in

lowed up its recent £11 million placing by announcing that trading

value in less than a week!

in the six months to 30th June 2009 was in line with management

expectations. This was achieved despite the severe snow which was The most recent forecasts from the house broker see Asian Citrus

seen around the country in February this year affecting both sales posting earnings of RMB 3.2 (29p), for the year to June 2009.

and profits by around £0.3 million. In 2010 the target is for RMB 4 (36p) of earnings. That puts the

shares on a forward multiple of 5.6 times and assuming that the

As has been the case throughout the current recession the com-

company continues to pay out 15% of its earnings as a dividend,

pany's core football offering remained resilient during the first half

as it did in the last financial year, then the implied yield is 2.7%.

of the financial year. Encouragingly, Goals has flagged that bar

For a growing company we believe that those figures look attrac-

income has shown some signs of improvement following a decline

tive, with the net cash position as at 31st December 2008 of RMB

at the tail end of 2008. However, ancillary income -from childrens'

323.6 million (£29 million) adding weight to the investment case.

parties, corporate events and the like - as well as growth at new

In addition, we note that net assets at the interim period end of

centres has continued to be hit by the downturn. One new centre,

RMB 2.61 billion (£234 million), which mostly consisted of biologi-

in Coventry, was added to Goals' portfolio during the half. A further

two are currently under construction, in Liverpool and Reading,

with another in Portsmouth about to commence construction. The

company continues to believe that a minimum of six centres will be INTERESTING SHARE DEALINGS

added to the portfolio during 2010 (up from pre-placing expecta-

tions of four) two of which (Eltham, London and Gillette Corner, Company name Deal size Deal size % Deal value Role

London) will begin construction in the third quarter.

COMMENT ▼ PURCHASES



Shares in Goals have continued to perform well since our last

update. They have doubled in value since mid-February this year, KCOM 40,000 0.0077 £10,800 Non-exec

but as we write are slightly down on their 9 month high of 220p KCOM 222,000 0.043 £60,000 Senior management

which was seen in June. Market consensus forecasts are unchanged

KCOM 51,900 0.01 £14,000 cfo

on the back of this update, with expectations for the current year

Huntsworth 25,000 0.012 £13,900 Non-exec

being for around 14p of earnings, rising to 15.2p in 2010. Beyond

then we believe earnings should continue should increase at pace SOCO International 68,500 0.091 £795,000 cfo



as the company benefits from contributions from its newly opened Fiberweb 70,000 0.057 £49,500 cfo

centres and as it continues its aggressive expansion strategy. Now on a Huntsworth 19,600 0.0093 £10,700 Non-exec

forward price earnings multiple of 13 we rate the shares as a STRONG Huntsworth 16,700 0.0079 £9,080 Non-exec

HOLD.

Northern Petroleum 42,300 0.054 £50,700 FD





ASIAN CITRUS Northern Petroleum



Northern Petroleum

41,700



42,000

0.053



0.053

£50,000



£50,400

MD



Senior management

ACHL £156m 202.5p BUY Northern Petroleum 12,500 0.016 £15,000 Chairman



TRADING UPDATE AIM Ambrian Capital 10,900 0.01 £3,220 Chairman



In its first update to the market for just over three months the China Intelek 46,700 0.054 £7,010 CEO

based orange plantation operator, Asian Citrus, has given details of Intelek 32,300 0.037 £4,840 Senior management

its latest orange yields. At the 1.2 million tree Hepu Plantation in Intelek 37,800 0.043 £5,670 FD

Guangxi Province the summer crop this year was 71,252 tonnes,

slightly up on last year's 71,027 tonne yield and in line with man-

SALES

agement expectations. In the group as a whole the annual yield

in the year to 30th June 2009 increased by 16.7% to 152,059

tonnes. We are expecting results for the year to be released in SOCO International 68,500 0.091 £795,000 CFO



mid-September. Clarkson 20,000 0.11 £126,000 Senior management









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smallcapshares August 2009





cal assets (orange trees) and property, plant and equipment, are COMMENT ▼

currently worth around 40% more than the company's market Fiberweb's high level of debt was one of the main concerns that we

capitalisation. BUY. raised at the time of our tip in the April newsletter. However, the

company has made excellent progress in reducing its borrowings in

recent months, them falling by £14 million in the second quarter



FIBERWEB of 2009 and by almost £20 million since the end of 2008. While

trading across the two divisions of Hygiene and Industrial remains

FWEB £85.1m 69.5p STRONG challenging we believe that at this stage of the year the company is

HOLD on track to meet market forecasts.

TRADING STATEMENT & JOINT VENTURE UPDATE FULL LIST Shares in Fiberweb have been amongst the best performing on the

The non-woven fabrics supplier Fiberweb has pleased the market whole market in recent months. At the current 69.5p we are stand-

by announcing that it has continued to trade in line with expecta- ing on a gain of 114% on our tip at 32.5p. Not bad for 4 months

tions since 30th April this year - the date of its last interim man- work! For the full year the company is expected to post earnings

agement statement. While overall volumes in the business have of 8.8p, putting the shares on a price earnings multiple of 8 times.

continued to decline compared to last year underlying margins The yield, if the dividend is maintained in 2009 (it was in 2008 and

have improved due to the benefits of a number of cost cutting should be this year), will be a decent 6%. These figures look less

initiatives which have been implemented in the past few years, attractive than when we first tipped the company (the multiple for

operating efficiencies and lower raw material costs. However, 2009 being 3.5 times and the yield just under 13% at that time) and

while Fiberweb benefited from weak polymer prices in the first as such we think that selling part of your holding to realise some

half the recent rise in the oil price may have some impact in the gains would not be a bad idea. However, with growth expected to

second half of the year. continue this year and next there is certainly a case for continuing

On the balance sheet, strong cash generation in the first half, to hold at least half of your stake. TOP SLICE & HOLD.

combined with improvements in working capital and exchange

rate benefits, reduced net debt to less than £130 million by the

end of June.

In other news Fiberweb's proposed 50/50 joint venture with

Brazilian spunbond producer Fitesa - the third largest producer

of spunbond non-wovens in South America - is expected to

complete on 31st July, subject to shareholder approval. Under the

deal, the Fitesa business, which is owned by packaging and non-

wovens business Petropar, will be merged with Fiberweb's plants

in Washougal, US and Queretaro, Mexico and land and buildings

at Fiberweb's Simpsonville site in the US. This move will initially

increase Fiberweb's net debt, although it will remain within expec-

tations. The joint-venture, which will be called FitesaFiberweb and

will focus on supplying the market for hygiene fabrics for use in

nappies and feminine care products in the Americas, is expected

to be modestly earnings enhancing in 2010 and to be materially

enhancing in 2011.









1 month risers 1 month fallers

Alexander Mining 100.0% Management Consulting -40.6%

Eros International 35.2% D1 Oils -33.4%

Microgen 22.5% Cosalt -33.0%

Aero Inventory 21.1% SkyePharma -27.4%

NEOVIA Financial 16.5% Sthree -26.0%





6 month risers 6 month fallers

Pendragon 1160.0% Panceltica -85.0%

Alexander Mining 233.3% Summit -81.7%

Kalahari Minerals 173.8% e2v Technologies -70.0%

Fiberweb 155.1% Cosalt -65.4%

Avon Rubber 146.9% D1 Oils -58.2%









6 Have your details changed? Call 020 7562 3370 or email violet.kazandzhieva@t1ps.com

smallcapshares August 2009



May 09 Biocompatibles International 122 181.5 Gain 49%

Jun 09 Clarkson 557 616 Gain 11%



THE RECKONING Jun 09

Jul 09

Jul 09

Jul 09

GB Group

Hamworthy

VT Group

Dart Group

21

264.75

475

57.25

23.5

233

437.5

58.25

Gain 12%

Loss -12%

Loss

Gain

-8%

2%

CURRENT PORTFOLIO * Corporate clients of RSH

** Owned by the t1ps Smaller Companies Growth Fund

Tip Tip Current † Adjusted for share restructuring

Date Company Price Price Status

Jan 02 Trafficmaster 53 30.25 Loss -43%

Nov 02

May 03

KCOM

Cardiff Property

47

513

26.75

615

Loss

Gain

-43%

20% RECENT EXITED BUYS

Aug 03 Celsis 135 186.5 Gain 38%

Oct 03 ACAL 578 109.5 Loss -81% Exit Tip Exit

Mar 04 Spring 135 39 Loss -71% Date Company Price Price Status

Mar 04 Porvair 141 69 Loss -51%

Sep 04 Microgen 56 68 Gain 21% Jan 07 Isotron 435 839.5 Gain 93%

Mar 05 Goals Soccer Centres 108 197.25 Gain 83% Jan 07 RHM 271.5 378.25 Gain 40%

Apr 05 Management Consulting 62 19 Loss -69% Feb 07 UNITE 162 546 Gain 237%

May 05 TT Electronics 201 31 Loss -85% Feb 07 Teesland 70 159.5 Gain 128%

Jul 05 Kewill Systems 73 74 Gain 1% Mar 07 VITEC 355 557.5 Gain 57%

Oct 05 Brammer 204 126.5 Loss -38% Mar 07 Ted Baker 244 629 Gain 158%

Feb 06 SOCO 784 1105 Gain 41% Mar 07 Brown N 122 314.5 Gain 158%

Mar 06 S&U 545 385 Loss -29% Mar 07 Renishaw 417 708 Gain 70%

Apr 06 Intelek 12.5 14 Gain 12% Mar 07 Hornby 170 284.5 Gain 67%

Sep 06 Kenmare Resources* 40 19.5 Loss -51% Apr 07 Jessops 108 53.5 Loss -51%

Oct 06 Powerleague 68 37.5 Loss -45% Apr 07 Keller 242 879.5 Gain 263%

Oct 06 Platinum Australia 36.25 46 Gain 27% Apr 07 Wilmington 122 250 Gain 105%

Nov 06 Telspec 7.5 3.5 Loss -53% Apr 07 Devro 79 141 Gain 78%

Nov 06 Cropper, James 149.5 98.5 Loss -34% Apr 07 Genetix 47 76.5 Gain 63%

Jan 07 Ambrian Capital* 55 25.5 Loss -54% Apr 07 Hill & Smith 217 325.75 Gain 50%

Jan 07 CybIT 46.5 34.5 Loss -26% May 07 Chaucer 53 98.75 Gain 86%

Feb 07 Research Now 477.5 322.5 Loss -32% May 07 ICM Computer 412 505 Gain 23%

Feb 07 Spice† 101.4 75 Loss -26% May 07 Computer Software 114 150 Gain 32%

Feb 07 Northern Petroleum* 88.5 112 Gain 27% May 07 Gyrus 318 444 Gain 40%

Mar 07 Anite 83 29 Loss -65% May 07 Hardy Underwriting 205 282.5 Gain 38%

Mar 07 SThree 418 161.25 Loss -61% May 07 Thorpe F W 340 637.5 Gain 88%

Apr 07 MinorPlanet 54.5 3.5 Loss -94% May 07 Severfield-Rowen 298 1,995 Gain 569%

May 07 Alexander Mining 21.75 6.25 Loss -71% May 07 Sondex 245 355 Gain 45%

May 07 Chemring 2020 2165 Gain 7% May 07 Clarkson 516 1,005 Gain 95%

Jun 07 Summit 124 5.25 Loss -96% May 07 Air Partner 663 1,010 Gain 52%

Jun 07 GoIndustry-DoveBid 22.5 2 Loss -91% Jun 07 Zetex 48 101.5 Gain 111%

Jul 07 K3 Business Technologies** 154.5 82.5 Loss -47% Jun 07 SDL Intl 38 378.5 Gain 896%

Jul 07 IQE 15 9.25 Loss -38% Jun 07 Headlam 415 586 Gain 41%

Aug 07 Kalahari Minerals 28.75 128 Gain 345% Jun 07 Games Workshop 759 260 Loss -66%

Sep 07 Speymill 89.25 15.5 Loss -83% Jul 07 Imagination Tech 75 119.75 Gain 60%

Sep 07 Creston 136 64.5 Loss -53% Jul 07 MITIE 154 263.25 Gain 71%

Oct 07 Harvey Hash 71.5 39 Loss -45% Jul 07 Holidaybreak 459 854 Gain 86%

Oct 07 RC Group 100 62 Loss -38% Jul 07 Redstone 63 88 Gain 40%

Nov 07 E2V Technologies 285 65.5 Loss -77% Jul 07 Abacus 215 115 Loss -47%

Nov 07 Aero Inventory 576.5 230 Loss -60% Aug 07 Clinphone 190 162.5 Loss -14%

Nov 07 Healthcare Locums 103 185 Gain 80% Aug 07 SpaceandPeople 54 145.5 Gain 169%

Dec 07 Skyepharma† 1625 113.25 Loss -93% Aug-07 IX Europe 45 125 Gain 178%

Dec 07 Quadnetics 337.5 142.5 Loss -58% Aug 07 Glotel 68 70 Gain 3%

Dec 07 Avon Rubber 171.5 79 Loss -54% Aug 07 Accys Technologies 123 418 Gain 240%

Jan 08 D1 Oils 129.25 5.75 Loss -96% Sept 07 Mothercare 217 405.25 Gain 87%

Jan 08 Parity 65 12.5 Loss -81% Sept 07 Vislink 52 82.5 Gain 59%

Jan 08 Carclo 95.5 97.5 Gain 2% Sept 07 VT Group 264 624 Gain 136%

Feb 08 Eros International 392.5 142 Loss -64% Sept 07 Millbrook Scientific 6 2.125 Loss -65%

Mar 08 Safestore 152 89.25 Loss -41% Sept 07 Claimar Care 81.5 148.5 Gain 82%

Mar 08 Wolfson Microelectronics 139.25 94.25 Loss -32% Sept 07 WSP Group 350 756 Gain 116%

Mar 08 Phoenix IT 245.75 209 Loss -15% Nov 07 Independent Media Distribution 28 46 Gain 64%

Apr 08 Fisher, James 598 409.25 Loss -32% Nov 07 Sportech 15 13.25 Loss -15%

Apr 08 Kier 1304 895.5 Loss -31% Nov 07 Ricardo 215 319 Gain 48%

Apr 08 Kentz 136 155.5 Gain 14% Nov 07 Amstrad 143 150 Gain 5%

May 08 Anglesey Mining 18.75 4.75 Loss -75% Dec 07 Revenue Assurance 104 200 Gain 92%

May 08 Plant Health Care 331 187.75 Loss -43% Jan 08 Homeserve 484 1741 Gain 260%

Jun 08 Panceltica 102.75 2.25 Loss -98% Jan 08 Smart J Contractors 665 887.5 Gain 33%

Jun 08 Hampson Industries 162 72 Loss -56% Feb 08 Accident Exchange 240 83.75 Loss -65%

Jul 08 Huntsworth 64.75 57.5 Loss -11% Feb 08 Instore 55 6.075 Loss -89%

Jul 08 Domino's Pizza** 211.25 206.5 Loss -2% Apr 08 RDF Media 206 127.5 Loss -38%

Jul 08 Pendragon 28.5 31.5 Gain 11% Apr 08 VEGA 193 280 Gain 45%

Aug 08 eaga 101 125 Gain 24% May 08 Wagon 37.75 17.25 Loss -54%

Sep 08 Cosalt 245.5 37.5 Loss -85% May 08 Forth Ports 1356 1991 Gain 47%

Sep 08 Coal of Africa 130 78.5 Loss -40% May 08 Kofax 203 208 Gain 2%

Sep 08 Costain 25 24.5 Loss -2% Jul 08 Flying Brands 230 71 Loss -69%

Oct 08 MDM Engineering 152.5 101 Loss -34% Jul 08 Hilton Food 172.5 223 Gain 29%

Oct 08 XP Power 235 204 Loss -13% Aug 08 Tanfield 90.75 8.7 Loss -90%

Nov 08 Platmin 132.5 46.5 Loss -65% Sep 08 Begbies Traynor 156 160.75 Gain 3%

Nov 08 Lamprell 198 108.25 Loss -45% Sep 08 Jarvis 89 21.75 Loss -76%

Nov 08 International Ferro Metals 36 39.5 Gain 10% Sep 08 Horizon Technology 63.75 92.5 Gain 45%

Dec 08 NEOVIA Financial 48.5 53 Gain 9% Oct 08 Financial Objects 61 60 Loss -2%

Dec 08 Hill & Smith 195.75 235.5 Gain 20% Nov 08 Trifast 65 37 Loss -43%

Dec 08 H&T 157.5 221 Gain 40% Nov 08 Clapham House 314 95 Loss -70%

Jan 09 Telecom Plus 357 298 Loss -17% Nov 08 Journey Group 156 4.375 Loss -97%

Jan 09 Hargreaves Services 475 495 Gain 4% Nov 08 Entertainment Rights 31 3 Loss -90%

Feb 09 London Capital Group 283 167.75 Loss -41% Mar 09 OCZ 166.5 8 Loss -95%

Feb 09 RM Group 169.75 165 Loss -3% Mar 08 ServicePower 33 3.75 Loss -89%

Feb 09 Asian Citrus 154 202.5 Gain 31% Apr 09 BSS Group 237.5 300 Gain 26%

Mar 09 Chime Communications 54 120.75 Gain 124% Apr 09 GTL Resources 162.5 15 Loss -91%

Mar 09 Kalahari Minerals 44.25 128 Gain 189% Apr 09 New Britain Palm Oil 315 250 Loss -21%

Apr 09 Genus 542 480.25 Loss -11% Apr 09 Imperial Energy 756 1253 Gain 66%

Apr 09 Fiberweb 32.5 69.5 Gain 114% June 09 Dmatek 118 210 Gain 78%

May 09 PV Crystalox Solar 90 79.75 Loss -11% June 09 Dunelm 154 241.75 Gain 57%

May 09 BATM Advanced Communications 28.5 35 Gain 23% Jul 09 Eleco 55 36.5 Loss -34%







Get your next issue three days early! Send your email address to violet.kazandzhieva@t1ps.com 7

smallcapshares August 2009







KEY DATES ▼

1971 Founded

Aug 2000 Bought by management team headed up



SINCLAIR PHARMA 2000 – 2006

by current CEO Dr. Michael Flynn and

CFO Jerry Randall

Goes on acquisition spree, building up a

portfolio of products mainly for the

European market

SPH Dec 2003 Lists on AIM raising £8.9 million

25p April 2007 Moves to Main Market of the LSE

FY 2008 Posts first full year profit since IPO

BUY H1 2009 Posts first half profit since IPO









THE BUSINESS ▼

Listed on the Main Market of the London Stock Exchange, as well

as Euronext, Paris, Sinclair Pharma is an international speciality

pharmaceutical company which is focused on dermatology and

SECTOR Pharmaceutical & Biotechnology oral health. Since the company was bought by its current manage-

MARKET Full List ment team at the beginning of the decade it has rapidly expanded

INDEX FTSE Fledgling its portfolio by focusing on a low risk strategy of acquiring late

MARKET CAPITALISATION £25.83 million stage and already marketed products.

HISTORIC RATING 35.7 Currently, Sinclair has around 40 products which have been

launched in 82 countries around the world. They are sold via

PROSPECTIVE RATING 8.9 Sinclair’s own sales force - with the company having offices located

PRICE TO SALES – 2008 0.85 in the UK, Portugal, France, Italy and Spain - as well as through a

OPERATING MARGIN – H1 2009 25.3% number of commercial partners around the world including the

INTEREST COVER – H1 2009 4.6 likes of Johnson & Johnson and Intendis. Products are typically sold

over the counter, as dermo-cosmetics or on prescription, with the

SHARE PRICE 12M 13.25p/65p company also earning income via royalties and product licensing

SPREAD 24.5p/25.5p deals.

SHARES IN ISSUE 103.33 million Dermatology is a branch of medicine which deals with diseases of

NORMAL MARKET SIZE 10,000 the skin. In this area Sinclair has a number of anti-wrinkle creams

along with those designed for the treatment of conditions includ-

NEXT NEWS Pre-close statement - July

ing skin dryness, acne, dermatitis (skin rashes), eczema and nail

BROKER Singer Capital Markets fungus, amongst others. Sinclair’s top selling product in this divi-

HEAD OFFICE Surrey sion - and the whole group - in the six months to 31st December

01483 410600 2008 was Fazol, an anti-fungal brand, which made up 14.8% of

group revenues. The second largest seller in the group and the divi-

WEBSITE www.sinclairpharma.com

sion was Atopiclair, an eczema and dermatitis cream, which made

up 10.9% of group sales.

In Oral Care Sinclair provides a number of products which focus on

mouth and gum related diseases. Its flagship brands are Decapinol,

a mouthwash which helps to reduce plaque and treat gingivitis

and periodontitis, two inflammatory gum diseases; and Aloclair,

a range of mouth washes, gels and sprays which provides pain

relief from mouth ulcers. Aloclair was Sinclair’s third top selling

product in the first half of 2009, it making up 9.7% of sales, with

Decapinol generating 2.3% of sales. Decapinol sales are expected

to rise significantly in the coming years if a planned US launch of

BALANCE SHEET AS AT 31/12/2008

the product in 2010 goes to plan.

net assets £77.6 million

Sinclair also has several other products which it classifies under

goodwill & intangibles £78.1 million the “non-core” moniker and these include Herpclair, a treat-

cash £2.4 million ment for cold sores and Sinlice, a suffocation based head lice

net debt £6.8 million and nits treatment.







FINANCIAL RECORD & FORECASTS

Years to June 2008A 2009E 2010E 2011E

MANAGEMENT ▼

Dr. Michael Flynn became Chief Executive Officer in August 2000

Turnover £30.3m £30.7m £33.6m £37.6m

following the management buy-in of Sinclair Pharmaceuticals

Pre-tax Profits £0.7m £0.4m £3m £4.1m Limited, which he led. He has spent over 30 years in the pharma-

Earnings* 2.5 0.7p 2.8p 3.8p

ceutical industry and has served as a director of approximately 30

private companies involved in the healthcare sector. In the year to

PE Ratio 10 35.7 8.9 6.6 June 2008 he took a salary cut of 15% to take home £284,000. Dr.

Source: Company accounts & Edison Investment Research Flynn is currently the largest shareholder in the company, owning

11.42% of the share capital.

*excluding goodwill and exceptional items









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smallcapshares August 2009





BUSINESS RATING 58 will see GEM purchasing shares at the request of the company in

SECTOR ■■■■■ order to raise cash. The funds will be used as a further source of

working capital if needed or to fund continued growth and devel-

MANAGEMENT ■■■■■■■ opment of the product portfolio.

PROFITABILITY ■■■■

TRACK RECORD ■■■■■

PROSPECTS

BALANCE SHEET

■■■■■

■■■ OPPORTUNITIES & RISKS ▼

MARKET SHARE ■■■ In the past few years Sinclair’s main driver of revenues has been con-

tributions from acquisitions. However, with no major deals having

SIMPLICITY ■■■■ been completed since 2006 growth is set to be more subdued in the

EXECUTION RISK (LACK OF) ■■■ coming years. The main drivers this year and next will be contributions

SHAREHOLDER FOCUS ■■■■■■■ from the launch of new products and new licensing and commercial

PRODUCT UNIQUENESS ■■■■■■ agreements

INVESTOR EXCITEMENT (LACK OF) ■■■■■■ As we flagged before, the US launch of Decapinol provides a significant

opportunity for the company. In its May interim management statement

Sinclair announced that a revised formulation of Decapinol for the US

remains on track and partners Orapharma (part of Johnson & Johnson)

have identified the target launch date, which will be during the current

Chief Financial Officer, Jerry Randall, joined the company in August financial year. Sebclair is also expected to be launched in the US this year.

2000 when he completed the management buy-in with Dr. Flynn. These two products saw sales growth of more than 100% in Europe

Before joining Sinclair Pharma, he worked in corporate finance, in the first half of 2009 and with the US market estimated at double

setting up and running the Bristol office of Gambit Corporate that of Europe they provide good opportunities for growing product

Finance. Randall also took a 15% pay cut in the 2008 financial revenues. The agreement with Hurray Biotech announced in the IMS,

year, earning £232,000. which will see the launch of Sinclair's Atopiclair, Sebclair and Xclair in

The company recently announced the appointment of Christopher the Chinese market for the first time, also provides good opportunities

Foucher as Chief Operating Officer. He is now responsible for all for growth, as do a number of new products which are currently under

of Sinclair's commercial and supply chain activities as well for its development or preparing to be filed for approval.

future strategic direction. Foucher, who was previously General Another opportunity for Sinclair to grow revenues in the current year

Manager for Sinclair Pharma France, has 16 years experience in the comes via a collaboration agreement with AIM listed York Pharma

pharmaceutical industry. which will see the two companies co-promote each others dermatology

products in the UK. Sinclair Pharma's sales force will co-promote certain

York Pharma products including the anti-acne product Zindaclin and

York Pharma's sales force will co-market Sinclair's Atopiclair. This agree-

CURRENT TRADING ▼ ment effectively doubles the number of specialist salespersons promot-

ing the two companies' dermatology product in the UK.

Boosted by significant growth in sales of Aloclair, up 199%, and

Fazol, up 27%, total group revenues grew by 56% to £16.2 mil- The main issue for us in terms of future growth is that Sinclair has yet to

lion in the six months to 31st December 2008. Revenues earned gain critical mass in terms of product sales. Researcher Edison calculates

through marketing partners, at £10.2 million, generated the that, excluding licence and royalty income and presuming admin costs

majority of sales, with £6 million coming in from Sinclair’s own and gross margins remain static, the company needs to make £26.6

sales force. The company enjoyed a £2.1 million sale via the licens- million of product sales on an annual basis in order to break even at the

ing of the US rights for Atopiclair to partner Graceway during the operating level. The forecast for 2009 is for just £21.7 million of product

period, with the licensing of its gynaecology technology to BMG sales however the substantial increase of higher margin licence seen in

Pharma bringing in £3.3 million. In total, £5.8 million was made the first half means that a profit for the year is forecast. Nevertheless,

from licence sales in the period, up from £1.5 million in the first with licensing income, due to its nature, being difficult to forecast the

half of the previous year. timing of, we would welcome news from the company regarding

progress in increasing product sales.

After enjoying a net exceptional gain of £4.4 million, mainly due

to foreign exchange gains, operating profits of £4.1 million were While the debt position is also a concern, especially considering that

posted for the half, compared to losses of £0.9 million in the working capital should continue to rise as the business grows, the recent

£10 million equity line provides the business with a significant source

comparative period. Pre-tax profits were £3.2 million from a loss

of funds if needed. Interest cover for 2010, ignoring exceptionals, is

of £0.9 million and earnings per share were 4p from a loss of 1.1p.

expected to be a comfortable 17 times.

Excluding the exceptional gains earnings were 0.4p per share.

At the period end there was cash of £2.4 million on the balance

sheet (up from £1.05 million six months earlier), with total borrow-

ings standing at £9.2 million. The cash position was boosted by a

£1.55 million net cash inflow from operations and the proceeds of

VALUATION ▼

On current market forecasts Sinclair Pharma shares trade on a 2010

a £1.6 million share issue. price earnings multiple of 6.6. Considering the significant opportu-

Sinclair’s most recent update to the market was an interim man- nities available for increasing both product and licensing revenues

agement statement which was released in May. In it the company in the coming years we think that rating represents good value.

flagged an expansion into the BRIC countries through agreements Ahead of a pre-close statement for the 2009 financial year, which

with oral care firm Sunstar Americas for Aloclair covering Latin is expected to be released in the week commencing 20th July, we

America and an agreement with Hurray Biotech covering the recommend a BUY ■

Chinese market. Sinclair has also continued to expand its sales net-

work through further agreements in 27 countries. In addition, two

products, Sebclair Cream for dermatitis and Jonctum for stretch

marks, have recently been launched in Spain and France respec-

tively, with seven products having been launched in six markets by

Sinclair's partners, including Aloclair in Scandanavia, acne cream

Papulex in Algeria and Sebclair shampoo in Turkey.

In terms of the finances Sinclair said that destocking by wholesalers

has had an impact on product sales but increased licensing rev-

enues and a stronger euro have reduced this impact. The company

added that it expects to be profitable for the full year to June 2009

but did not provide any specific figures.

Also in the IMS Sinclair revealed that it had entered into a £10

million, three year equity line of credit with alternative investment

fund GEM Global Yield Fund. This is essentially an agreement that









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smallcapshares August 2009





KEY DATES ▼



Oct 2006 Founded to acquire digital direct marketing

companies, joins AIM via merger with cash shell



DIGITAL MARKETING Seashell II, raised £7.8 million and acquired HSM

and Scope Creative Marketing





GROUP

Jan 2007 Acquires Cheeze and Alphanumeric for £24 mil-

lion

April 2007 Raises an additional £10 million

DIGI July 2007 Acquires Graphico for £8.6 million and

Hyperlaunch for £3.5 million

39p Aug 2007 Launches Noize, an online PR division

Oct 2008 Acquisition of Gasbox for maximum of £10 mil-

BUY lion, Cybercom for £6 million and Prodant for up

to £915,000

July 2009 Posts record results









SECTOR Media

MARKET AIM

INDEX FTSE AIM All-Share THE BUSINESS ▼

MARKET CAPITALISATION £26.28 million Within less than three years Digital Marketing Group has, via an

HISTORIC RATING 5 aggressive buy and build strategy, built itself up to be the UK’s larg-

est digital marketing business. Its origins lie in the AIM listed cash

PROSPECTIVE RATING 6.2

shell Seashell II with which it merged in October 2006, making

PRICE TO SALES - 2009 0.51 its maiden acquisitions and completing a £7.8 million fundraising

OPERATING MARGIN - 2009 16.4% at the same time. Since then the company has made excellent

INTEREST COVER - 2009 15.3 progress in its strategy to build a one stop digital marketing serv-

ices company. As it stands today the group operates through eight

DIVIDEND YIELD N/A businesses across three divisions which between them offer a com-

SHARE PRICE 12M 38p/78p plete range of digital marketing services such as website design,

SPREAD 38p/40p search engine optimisation, viral marketing and many others.

SHARES IN ISSUE 67.38 million Five companies make up the company’s largest division, Online

NORMAL MARKET SIZE 1,000 Media and Marketing. Founded in 2001 and based in Bristol,

Hyperlaunch is a digital creative marketing agency. The company

NEXT NEWS Trading update – Sept/Oct operates under three divisions: Creative/development, Online PR &

BROKER Cenkos Securities Promotions and Buzz Marketing, with clients including Channel 4,

HEAD OFFICE Oxfordshire Warner Bros and Samsung.

01491 615 306 Graphico is a full service digital agency which amongst other things

WEBSITE www.digitalmarketinggroup. creates digital ad campaigns, builds websites and executes mobile

campaigns. It is based in Berkshire and clients include Pepsi, the

co.uk BBC and Britvic.

Inbox creates and manages digital marketing campaigns for its

clients, providing services such as online advertising, e-mail market-

ing, viral advertising and website design. The Swindon based com-

pany counts the likes of Vodafone and Panasonic as its clients.

Acquired in January 2007 Ipswich based Cheeze specialises in

search engine marketing. The company is the UK’s fifth largest

search marketing specialist, planning, buying and managing online

campaigns for its UK, European and North American clients.

BALANCE SHEET AS AT 31/03/2009 Cybercom, bought by DMG last October, is an IT systems con-

net assets £47.78 million sultancy and systems integrator, specialising in e-commerce and

net current liabilities £5.17 million electronic trading and providing services required for the delivery of

a complete IT project. Cybercom’s clients include IBM, John Lewis

net debt £5.9 million

and Waitrose.

The oldest business within the group, and one of the two con-

stituents of the Direct Marketing Services division, is DigForFire

(the trading name of the company’s first acquisition – Scope),

FINANCIAL RECORD & FORECASTS which was founded in Sheffield in 1979 and is currently the largest

Years to March 31st 2007A 2008A 2009A 2010E direct marketing agency in the UK outside of London. As well as

Turnover £13.1m £51m £56.7m - all the usual agency services the company also offers clients "Dig

Research", a stand-alone research service in the area of direct

Pre-tax Profits £1.7m £6.3m £8m £7.4m

marketing strategy.

Earnings 1.44p 6.43p 7.82p 6.3p

Also acquired in October 2008 was Gasbox, which has since been

PE Ratio 27.1 6.1 5 6.2

merged with the company’s maiden acquisition, HSM. The division

offers clients telemarketing services and direct voice marketing

Source: Company accounts & Cenkos campaigns.









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smallcapshares August 2009





built up in the past two and a half years to pay for acquisitions.

BUSINESS RATING: 66 Net liabilities of £5.17 million do cause some concern but our

SECTOR ■■■■■■ feared are eased somewhat by the company’s undrawn banking

MANAGEMENT ■■■■■■■ facilities, which at the year end stood at £7.1 million and strongly

PROFITABILITY ■■■■■ cash generative operations which saw an inflow of £5.7 million

TRACK RECORD ■■■■■■■ during the year.

PROSPECTS ■■■■ In two separate statements alongside the results DGM announced

BALANCE SHEET ■■■■■■■ the launch of two new products. Digital Brain:Search is a pay per

click search engine marketing product which helps marketers

MARKET SHARE ■■■■■■ to target customers at their first click rather than their last and

SIMPLICITY ■■■■ Demograph, a new agency aimed at providing digital research.

EXECUTION RISK (LACK OF) ■■■■

SHAREHOLDER FOCUS ■■■■■

■■■■■

PRODUCT UNIQUENESS

INVESTOR EXCITEMENT (LACK OF) ■■■■■■■ OPPORTUNITIES & RISKS ▼

Results for the last financial year were not bad at all considering

the period was one of the worst for advertising/marketing firms in

Finally, in the Data Services division, Jaywing, which was founded decades and that DMG revenues are highly exposed to the mar-

in 1999, provides both online and offline data and information keting budgets of its clients. Unsurprisingly however, in its results

services primarily in marketing, credit and fraud, mainly across the company flagged that in the last few months of the year and

the financial services, utilities, telecoms and retail industries. The into the first quarter of this year delays and cancellations in client

West Yorkshire based company’s clients are mostly large blue-chip projects, along with a slow down in client decision making, have

organisations. reduced earnings visibility. Businesses with financial services clients

were said to have been hit particularly badly. As such 2010 is likely

to be a whole lot more difficult, with the company bugetting for

MANAGEMENT ▼ the year on the basis that the recent problems may continue,

although it expects that client confidence may recover in the sec-

Chairman, Stephen Davidson, is Chairman of Enteraction TV ond half.

and ICT group Datatec. He is also a non-executive director of Despite the macroeconomic troubles we are encouraged about

satellite group Inmarsat and various other public companies. His DMG’s prospects due to its focus on the rapidly growing digital

background is in investment banking, most recently at WestLB marketing industry. While the market consensus is that the adver-

Panmure where he was Global Head of Media and Telecoms, tising market as a whole will fall by around 10% in the UK in

Investment Banking, then Vice Chairman of Investment Banking. 2009, online media is in fact expected to show substantial growth.

In the 2008 financial year he was paid £40,000. According to the Internet Advertising Bureau, online spending on

Ben Langdon, Chief Executive, was previously Chairman of advertising reached £3.35 billion in 2008, with the online share

Euro RSCG UK, one of the country's largest marketing service of the market now being almost 20%. Recent numbers from

groups. From 1996 to 2003 he worked at advertising giant researchers Neilsen Online showed that the number of online

McCann-Erickson where he was promoted from Chief Executive advertising campaigns rose by 21% in the first four months of

of the London business to UK Group Chairman. He was later 2009 as advertisers continued to shift from other traditional medi-

promoted to European Regional Director of Universal McCann ums such as print, television and posters. As the UK's largest dig-

the media planning and buying business, and then to Regional ital marketing agency we believe that DMG looks very well placed

Director for McCann- Erickson WorldGroup, Europe, Middle to benefit from these trends.

East and Africa. Langdon enjoyed a salary of £175,000 in the

2008 financial year along with a £145,250 bonus.

Keith Sadler is the company’s Finance Director having taken on

the position at the end of June this year. He has over 17 years’

VALUATION ▼

experience at board level for both AIM and fully listed media Despite the excellent operational and strategic progress made over

companies, most recently as Group Finance Director and Chief the past year shares in DMG have halved in value. At the current

Executive of SPG Media Group. Following the death of Robert price of 39p they trade on a historic price earnings multiple of

Maxwell he became Head of The Internal Audit and Operational just 5 times. In the current year, to March 2010, the expectation

Review at Mirror Group Newspapers. from the company’s house broker is that pre-tax profits will fall to

£7.4 million and earnings to 6.3p. Despite the current downturn

we think that these forecasts could potentially be beaten given

the growth in the digital marketing industry and new product

launches. BUY ■

CURRENT TRADING ▼

Results for the year to 31st March 2009 showed just how much

progress the company had made since its IPO. Revenues for the

period were up 11% year on year to £56.65 million, with gross

profits up 26% to £41.55 million. Income from new business

contributed an impressive £13 million to gross profits, with cross

referrals between group companies bringing in another £3.9 mil-

lion and delivering higher margins than new business from new

clients.

At the EBITDA level (before share option charges) profits rose by

25% to £9.29 million, with profits after tax before share option

charges and amortisation up 27% to £8 million. Diluted earnings

per share on the same basis were up by 22% to 7.82p.

On the balance sheet DMG had net debt of £5.9 million at the

period end. Gross cash was £12.2 million, with total overdrafts,

loans and borrowings of £18.1 million – the position having been









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smallcapshares August 2009





KEY DATES ▼

1973 Founded



VISONIC 1984

April 2004

Opens US subsidiary

Lists on LSE

VSC April 2006 Lists on the Tel-Aviv Stock

Exchange

47p

BUY



THE BUSINESS ▼

Israel based technology companies have done us well before. We

recommended shares in the tracking technology provider Dmatek

in July 2006 at 118p and exited with a gain of 78% this year as

the company was taken over by a private equity firm. We believe

that we could potentially do just as well with our latest offering,

SECTOR Technology Hardware & the Tel-Aviv based security systems provider, Visonic.

Equipment

MARKET Full List The company, which was founded in the early 1970s by its cur-

INDEX techMARK rent Chairman Yaacov Kotlicki, is an international developer and

manufacturer of electronic security systems and components. Its

MARKET CAPITALISATION £19.5 million products are produced in a 10,000 square metre plant in Kiryat

HISTORIC RATING 8.6 Gat, Israel, and are sold throughout the world, not directly to

PROSPECTIVE RATING 8.7 customers but via a network of subsidiaries, distributors, and sales

representatives in more than 70 countries.

PRICE TO SALES – 2008 0.37

OPERATING MARGIN - 2008 5.6%

The majority of the company’s sales (58%) were made to mainland

INTEREST COVER - 2008 31.5 Europe in the last financial year, with North America, at 16.3%,

DIVIDEND YIELD - 2008 2.1% being the second largest geography by revenues. Other impor-

tant areas included the UK at 11.6% of sales and Israel at 5.8%.

SHARE PRICE 12M 38.5p/59.5p

Visonic’s customers are primarily European and American based

SPREAD 47p/49p blue chip multi-nationals, including the likes of Chubb, Honeywell

SHARES IN ISSUE 40.5 million and Siemens.

NORMAL MARKET SIZE 1,000

NEXT NEWS Interims - August Visonic currently operates through two main business segments.

The core business, Security and Home Management, which

BROKER Arbuthnot encompasses Telemedicine and Home Healthcare solutions, made

HEAD OFFICE Israel up 90% of sales in the last financial year. Its focus is on the provi-

972-3-645-6718 sion of security products to the residential sector. PowerMax Pro,

WEBSITE www.visonic.com the division’s flagship product, is a web based residential security

system which uses hardware such as motion detectors, alarms,

WiFi cameras, smoke detectors and the like, along with a soft-

ware element, which allows users to monitor their homes via the

internet or even by mobile phone. Other products sold within the

division include a range of wireless and wired detectors, control

panels, cameras, speech diallers and many more.



The second “non-core” division is Visonic Technologies, which

provides location tracking and access control systems and con-

centrates solely on the non-residential technology market. Brands

BALANCE SHEET AS AT 31/12/2008 include Elpas visibility devices, which provide asset and people

tracking data, SpiderAlert wireless sensors, VisAccess door access

net assets $44.5 million

systems and EIRIS software, a real time security management

net current assets $31.4 million application. In this area Visonic’s customers include commercial

cash $15.5 million and institutional bodies including hospitals, prisons, care homes,

net cash $7 million

mental health institutions and museums.







MANAGEMENT ▼

FINANCIAL RECORD & FORECASTS Chairman Yaacov Kotlicki is one of the founders of Visonic. He has

Years to December 2007A 2008A 2009E 2010E managed the company for 28 years and has been instrumental in

Turnover $74.4m $84.9m $85.1m $89.4 developing many of the technologies used in Visonic's products

and building its international marketing network. He was paid

Pre-tax Profits $0.2m $4.6m $4.3m $6.4m

£119,000 in 2008 and a bonus of £114,000.

Earnings 1c 8.9c 8.8c 13.1c

PE Ratio* 77 8.6 8.7 5.9

President & CEO, Dr. Avigdor Shachrai, was appointed to his cur-

*£1:$1.63

rent roles in July 2002 after serving as Vice President of Sales and

Source: Company accounts & Arbuthnot Marketing at the company. Dr. Shachrai has 33 years of experience

in management, marketing and development of high technology

companies. He has been a faculty member at the Technion - Israel

Institute of Technology (Faculty of Mechanical Engineering), as well





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smallcapshares August 2009







BUSINESS RATING: 61

SECTOR ■■■■■

MANAGEMENT ■■■■■■ OPPORTUNITIES & RISKS ▼

PROFITABILITY ■■■

TRACK RECORD ■■■■■ Despite the current economic downturn a number of factors bode

PROSPECTS ■■■■■ well for medium to long-term growth at Visonic. In the past few

BALANCE SHEET ■■■■■ years the residential security market has been driven by a number

of trends including increasing worldwide crime rates, rising fear

MARKET SHARE ■■■■ of crime, falling product costs and higher broadband penetration.

SIMPLICITY ■■■■■ Researchers Frost & Sullivan estimate that the European residential

EXECUTION RISK (LACK OF) ■■■■■■ security market was worth €1.6 billion in 2005 and expects it to

SHAREHOLDER FOCUS ■■■■■■ reach a value of €2 billion by 2012. That is not an exceptional level

PRODUCT UNIQUENESS ■■■■■ of growth but with its long track record and current market posi-

tion we believe that Visonic looks well placed to do well. In fact,

INVESTOR EXCITEMENT (LACK OF) ■■■■■ the company has already demonstrated that it can grow ahead of

market rates, in the last financial year it growing sales in mainland

Europe by 19% to $49.2 million.





as Vice President of Research and Development at Photon Sources In the Visonic Technologies division the company flagged in its

in the US. Shachrai was paid a salary of £277,000 in the last finan- results that the demand for homecare and personal emergency

cial year and enjoyed a £90,000 bonus. response systems for the elderly has accelerated as the world's pop-

ulation gets older. An expected continuation in this demographic

trend in the coming years bodes well for Visonic as people look for

Chief Financial Officer, Yair Naaman, was appointed to his cur- cost effective homecare services. In a recent report the US Census

rent position in October 2006. He has over 30 years experience Bureau said that it expects the world’s 65 and older population to

in financial roles in international companies including as CFO of triple from 516 million in 2009 to 1.53 billion in 2050. In the US the

American-Israeli Paper Mills and Head of the Finance Department forecast is for the over 65 population to more than double by 2050

of Koor Industries, then the largest conglomerate in Israel. In 2008 to 89 million and in the UK, according to the Office for National

he was paid £188,000 and a bonus of £61,000. Statistics, the proportion of people aged 65 and over is projected

to increase from 16% in 2006 to 22% by 2031.





CURRENT TRADING ▼

Results for the year to 31st December 2008 showed revenues up

14% to $84.9 million and pre-tax profits up from $0.2 million to VALUATION ▼

$4.6 million. At the pre-tax level the company benefitted from a In the current financial year Visonic’s numbers are expected to slip

$1.2 million write back as a dispute with Credit Suisse was set- slightly as the worldwide market turbulence continues to affect

tled during the year. Earnings were up from 1 cent to 8.9 cents trading. The company’s house broker expects pre-tax profits to

per share and as a result of the strong performance the annual slip $0.3 million to $4.3 million and earnings to fall by 0.1 cents

dividend was maintained at 1p per share. On the balance sheet to 8.8 cents. There is expected to be a recovery in 2010 however,

Visonic ended the period with $15.5 million in cash and cash with pre-tax profits forecast at $6.4 million and earnings at 13.1

deposits, with the net cash position standing at $7 million. cents. We note the main threats to these forecasts come from a

protracted downturn in the company’s markets as well as exchange

During the period the core residential business performed strongly, rate risks.

growing revenues by 13% to $76.7 million. Visonic put this

performance down to providing new products and services to

existing customers, winning new key customers and a focus on At the current price of 47p and the current exchange rate of

large global monitoring companies. There was a particularly good £1:$1.63 the shares trade on a 2009 price earnings multiple of 8.7

performance from Latin America during the year, with sales grow- times, which falls to 5.9 times in 2010. If we strip out the net cash

ing by 150%, as well as from the Nordic countries, up 44%, and of 8.6p per share the multiples fall to 6.8 and 4.6 times respectively.

Iberia, up 32%. Sales in Russia declined however as two large We believe that those figures look cheap for the growth expected

customers in the region were affected by the economic downturn and are also attracted by the fact that at the current price the

and the company was also affected by a reduction in construction shares are trading at a near 30% discount to net assets as at 31st

activity in the UK and Spanish markets. In the telemedicine and December 2008. In addition, the 2.6% dividend yield provides a

home healthcare sector, which supplies homecare and personal welcome bonus. BUY ■

emergency response systems to the elderly, an increase in market-

ing efforts saw sales rise by 68%.



Visonic Technologies posted sales of $8.2 million for the period, up

31%, and an operating profit of $0.2 million, from losses of $0.2

million in the previous year. The improved performance was put

down to strong demand for the division’s newly introduced active

Radio Frequency Identification (RFID) tags and badges in its key

markets. In addition, the successful completion of a technology

development agreement with a major customer helped to push

up sales in Europe.



In a more recent update on trading Visonic revealed that sales in the

six months to June this year were $42.7 million, down slightly on

the $44.6 million posted in the first half of 2008. Operating profits

for the half are expected to be higher due to the benefits of certain

efficiency programmes being enjoyed, along with a strengthening

of the Israeli Sheqel against the US dollar. The weakness of euro

and sterling had a negative effect however. Nevertheless, cash flow

continued to be strong and Visonic ended the half with cash and

cash equivalents of $20 million on the balance sheet.









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smallcapshares August 2009









NEWSFLOW Cropper, James CRPR Nov 06 June 09 Hold -11.3%

Paper & Packaging. Speciality paper maker and materials group. Full List.

23 June - Final Results

This table covers all stocks we have profiled and have not sold CybIT CYH Aug 04 Feb 09 Buy 9.5%

 – price has moved by 15% or more in the month. Industrial Transportation. Provider of telematics services. AIM.

D1 Oils DOO Jan 08 Aug 09 Hold -33.4% 

tip tip last update recent month Biofuels. Biofuels company focusing on the non-food product, Jatropha.

epic date price date / stance price / change Has the rights to over 200,000 hectares of land in Africa, India and South

East Asia. AIM.

ACAL ACL Oct 03 Mar 09 Hold -0.5% Dart Group DTG July 09 July 09 Buy 1.8%

Electronic & Electrical Equipment. European distributor of electronic

components which emphasises value-added and custom designs. Full list. Domino's Pizza** DOM July 09 June 09 Buy 1.6%

Travel & Leisure. Pizza franchisee operating throughout the UK & Ireland.

Aero Inventory AI. Nov 07 Apr 09 Buy 21.1%  Has over 500 stores and plans to open 50 more per annum. Full List

Aerospace & Defence. Aerospace parts service provider. Recently won 2 July - Acquisition

huge deal with Quantas worth $1.6 billion. AIM

E2V Technologies E2V Nov 07 May 09 Hold -3.7%

Alexander Mining AXM May 07 June 09 Speculative Buy 100.0%  Electronic & Electrical Equipment. A designer, developer and manufac-

Mining. Owner of a major Argentinean copper mine along with explora- turer of specialised components and subsystems. Full List

tion projects. Focus now on technology exploitation. AIM.

eaga EAGA Aug 08 June 09 Buy -0.6%

Ambrian Capital* AMBR Jan 07 Nov 08 Strong Hold -8.1% Support Services. The UK's leading provider of residential energy efficient

Equity Investment. Highly successful asset management team plus invest- services. Full List. 25 June - Pre-close Trading Update

ment banking arm. AIM.

Eros International EROS Feb 08 May 09 Buy 35.2% 

Anglesey Mining AYM May 08 Dec 08 Buy 15.0% Media. World leading producer and distributor of Bollywood film con-

Mining. Owns Parys Mountain zinc-copper-lead project in Anglesey and tent. AIM. 2 July - Final Results

a 50% holding in the Labrador Iron Mines, located in Labrador Canada.

Full List Fiberweb FWEB April 09 Aug 09 Strong Hold6.1%

Support Services. One of the world's largest suppliers of high perform-

Anite AIE Mar 07 Apr 09 Buy -24.7%  ance, speciality non-woven fabrics. Full List. 3 July - Trading Update

Software & Services. Software provider geared to wireless telecoms mar-

ket and travel sector. Full list. 1 July - Final Results Fisher, James FSJ Apr 08 June 09 Buy -12.4%

Marine Support Services. Provider of specialist marine support services

Asian Citrus ACHL Feb 09 Aug 09 Buy -18.2%  i.e.. ship management & nuclear decommissioning. Full List.

Food Producers & Processors. The largest orange plantation owner in

China. AIM 1 July - Trading Update GB Group GBG June 09 July 09 Buy 2.2%

Software & Computer Services. Leading provider of electronic identity

Avon Rubber AVON Dec 07 Aug 09 Buy 0.6% verification offerings. Full List.

Electronics & Electrical Equipment. Manufacturer of technologically

advanced rubber products. Full List 18 June - Contract Win Genus GNS Apr 09 June 09 Buy -6.6%

Pharmaceuticals & Biotechnology. One of the world's leading animal

BATM Advanced genetics companies. Full List.

Communications BVC May 09 May 09 Buy -1.4%

Technology Hardware & Equipment. Provider of ethernet Goals Soccer CentresGOAL Mar 05 Aug 09 Buy -0.3%

technology for the operation of next generation networks. Full List. Travel & Leisure. Chain of five-a-side football centres run by proven man-

agement team. AIM. 3 July - Trading Update

Biocompatibles

International BII May 09 June 09 Buy -6.9% GoIndustry-DoveBid GOI Jun 07 June 09 Hold -6.1%

Health Care Equipment & Services. Medical technology company operat- Support Services. Global leader in the valuation and sale of surplus indus-

ing in the field of drug-device combination products. Full List. trial machinery, with strong network and growing internet sales. AIM.18

June - Full Year Results

Brammer BRAM Oct 05 Apr 09 Buy 6.3%

Support Services. European distributor of industrial consumables to H&T HAT Dec 08 July 09 Buy 6.3%

manufacturing plants. Full List. General retailers. By pledge book the largest pawnbroker in the UK

ahead of Albermarle & Bond. AIM

Carclo CAR Jan 08 Apr 09 Buy 8.9%

Chemicals. Supplier of technical plastics components. Full List. Hampson Industries HAMP Jun 08 May 09 Buy -15.8%

9 June - Final Results Aerospace & Defence. Components and structures provider with a fast

growing Aerospace division. Full list.

Cardiff Property CDFF May 03/May 08 June 09 Buy 2.5%

Real Estate. Tiny founder-driven property developer and investor in the Hamworthy HMY July 09 July 09 Buy -12.0%

Thames Valley. Full List. General industrials. Specialises in the design and manufacture of marine

fluid handling systems. AIM. 1 July - Collaboration with AIT

Celsis CEL Aug 03 Apr 09 Buy -1.1%

Healthcare Equipment & Services. Technically advanced microbial testing Hargreaves Services HSP Jan 09 Apr 09 Buy 0.0%

products for food and pharma-manufacturers. Full List. 24 June - Final Support Services. Minerals and support services firm. Owns the Maltby

Results Colliery in South Yorkshire. AIM 30 June - Pre-close Trading Update

Chemring CHG May 07 May 09 Buy 9.8% Harvey Nash HVN Oct 07 Apr 09 Buy -1.3%

Aerospace & Defence. Niche defence business with 50% share of coun- Support Services. Professional recruitment consultancy and IT outsourcing

termeasures market. Full List. 23 June - Interim Results provider. Full list. 19 June - Interim Management Statement

Chime Healthcare Locums HLO Nov 07 June 09 Buy 0.1%

Communications CHW Mar 09 June 09 Buy 3.9% Support Services. Highly acquisitive specialist healthcare agency. AIM

Media. One of the UK's largest listed marketing services providers. Full Hill & Smith HILS Dec 08 Aug 09 Buy 6.3%

List. Industrial Engineering. Infrastructure focused engineering firm oper-

Clarkson CKN June 09 Aug 09 Buy -1.4% ates through the three divisions of Infrastructure Products, Galvanising

Industrial Transportation. One of the world's largest shipping services Services and Building & Construction product. Full List.30 June - Disposal

groups. Has broking, financial, support and research divisions. Full List.30 & Pre-close Trading Update

June - Pre-close Trading Update Huntsworth HNT July 09 May 09 Buy 6.0%

Coal of Africa CZA Sept 08 Oct 08 Buy -3.1% Media. International public relations and healthcare communications

Mining. Has portfolio of South African coal assets. AIM business. Full list

Cosalt CSLT Sept 08 July 09 Buy -33.0%  Intelek ITK Apr 06/Jan09 Feb 09Buy -9.7%

General Industrials. Provides marine safety equipment and protective Technology Hardware & Equipment. Supplier of products and services for

clothing, as well as the maintenance, provision and testing of related electronic communications, with an emphasis on broadband applications.

safety equipment. Full List. Also suppliers components, sub-assemblies and kits of parts in metals or

composite materials to the aerospace and transport sectors. AIM.

Costain COST Sept 08 Aug 09 Buy -2.0% 9 June - Full Year Results

Construction & Materials. International engineering and construction

contractor. Full List. 10 June - Contract Win International

25 June - Trading Update 30 June - Contract Win Ferro Metals IFL Nov 08 Apr 09 Hold -10.2%

6 July - Contract Win Industrial Metals. Ferrochrome producer which owns the Buffelsfontein

project in South Africa. Full List

Creston CRE Sep 07 Aug 09 Buy 9.3%

Media. Undertakes a range of marketing services. Full List23 June - Final IQE IQE July 09 Oct 08 Buy -2.6%

Results Technology Hardware & Equipment. The world's largest wafer manufac-

turer, for use in wireless communication devices. AIM.







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smallcapshares August 2009



K3 Business Powerleague PWR Oct 06 May 09 Buy 3.5%

Technologies** KBT July 09 Oct 08 Buy 3.8% Travel & Leisure. Leading operator of five-a-side football centres. AIM.

Software. Largest UK distributor of business management software, PV Crystalox Solar PVCS May 09 May 09 Buy 3.6%

Microsoft Dynamics. AIM. 1 July - Trading Update Electronics & Electrical Equipment. One of the world’s largest manufactur-

Kalahari Minerals KAH Aug 07 May 09 Strong Hold -4.1% ers of multicrystalline ingots and silicon wafers, the key components used

Mining. Kalahari has a varied portfolio of exploration projects in in solar power systems. Full List

Namibia at various levels of development which include copper zinc Quadnetics QDG Dec 07 Apr 09 Buy 7.1%

and uranium prospects. AIM 2 July - Rossing South Update Electronics & Electrical Equipment. Provider of CCTV surveillance equip-

KCOM KCOM Nov 02 Nov 08 Hold -1.8% ment and systems across the world. AIM.

Fixed Line Telecoms. Fixed line phones in Hull plus semi-national new RC Group RCG Oct 07 Aug 09 Buy -20.5% 

generation trunk network seeking small business customers. Full list. Software & Computer Services. Hong Kong based technology group pro-

Kenmare Resources*KMR Sep 06 Jun 08 Strong Hold -6.0% viding biometric security products mainly to the south-east Asian markets.

Mining. Owns a massive titanium mine in Mozambique. Full list. AIM. 22 June - Sales Order & Trading Update

Kentz KENZ Apr 08 Aug 09 Buy 2.0% Research Now RNOW Feb 07 June 09 Buy -4.4%

Construction & Materials. Engineering contractor joined Aim in Media. Rapidly growing online market research business. AIM.

February 2008. AIM. 11 June - AGM Statement RM Group RM. Feb 09 May 09 Buy 0.0%

18 June - Contract Win Software & Technology. Leading supplier of educational technology to

Kewill Systems KWL July 09 June 09 Buy -6.3% schools and colleges in the UK. Full List. 15 June - Building Schools for

Software & Computer Services. Logistics control software for retailers the Future Contracts

and distributors in US and Europe. Full list. 22 June - Final Results S&U SUS Mar 06 Nov 08 Buy -4.9%

Kier KIE Apr 08 June 09 Buy -10.5% General Financial. Consumer credit and car finance provider, including

Construction & Materials. Construction, development and service com- financial services, hire purchase and sales of electrical and household mer-

pany, specialising in building and civil engineering, support services, chandise in the UK. Full list.

private house building and property development. Full list. Safestore SAFE Mar 08 Apr 09 Buy 16.3% 

11 June - £150 million Contract Win Real Estate. By number of stores the UK's largest provider of self storage

Lamprell LAM Nov 08 Nov 08 Buy -11.6% space. Full list.

Oil Equipment & Services. Provider of specialist engineering services to 30 June - Interim Results

the international oil & gas sector. AIM. 11 June - AGM Statement Skyepharma SKP Dec 07 Mar 09 Speculative Buy -27.4%

London Capital Group LCG Feb 09 June 09 Buy 7.4% Pharmaceuticals. Pharma with a raft of approved products in the oral,

General Financial. Specialist in online trading services including spread- inhalation and topical delivery areas. Major product in development,

betting. AIM. Flutiform, could transform the company's earnings. Full List

Management SOCO SIA Feb 06 May 09 Hold -16.5%

Consulting MMC Apr 05 June 09 Hold -40.6%  Oil & Gas Producers. Oil explorer specialising in exotic locations, currently

Support Services. Specialist firms of consultants implementing opera- Yemen, Vietnam and Congo. Full list.

tional improvements at no net cost to their clients. Operates globally Speymill SYG Sep 07 Mar 09 Hold -8.8%

across five continents. Full list. 30 June - Trading Update Support Services & Investment. Has property funds based in Germany and

MDM Engineering MDM Oct 08 Feb 09 Buy -8.6% China with property management and property support services divisions.

Support Services. African focused minerals process and project manage- AIM

ment business. AIM Spice SPI Feb 07 Apr 09 Buy 8.3%

12 June - Project Update Support Services. Highly acquisitive support service operator focused on

6 July - Final Results utilities. AIM.

Microgen MCGN Sep 04 June 09 Buy 22.5% Spring SRG Mar 04 June 09 Buy 2.0%

Software & Computer Services. IT services and consultancy run by an ex- Support Services. One of the UK’s larger suppliers of contract software

senior executive of Dell. Full list. developers and temporary IT staff. Full list.

MinorPlanet MPS Apr 07 Oct 08 Hold 0.0% SThree STHR Mar 07 May 09 Hold -26.0% 

Electronic & Electrical Equipment. Leading telematics provider making Support Services. Specialist IT staffing geared towards ICT, finance, human

strong recovery. AIM. resources, engineering and pharma. Full list.

NEOVIA Financial NEO Dec 08 June 09 Buy 16.5%  Summit SUMM Jun 07 Dec 07 Buy 0.0%

General Financial. The world's leading independent online payments Pharmaceuticals & Biotechnology. Niche drug discovery business with

business. AIM screening services for top life sciences firms. AIM.

11 June - Contract Wins Telecom Plus TEP Jan 09 July 09 Buy 8.6%

17 June AGM Statement Telecommunications. Independent utility services provider. Operates

Northern Petroleum* ** NOP Feb 07 Nov 08 Buy -7.1% through the Utility Warehouse brand name. Full List.

Oil & Gas Producers. Explorer with attractive portfolio of oil and gas Telspec TSP Nov 06 Mar 09 Hold -3.4%

assets in the Netherlands, the UK and Italy. AIM. Telecoms Equipment. Failing telecoms business recently taken over by new

Panceltica PANC Jun 08 Nov 08 Hold 5.9% management. Full list.

Construction & Materials. Provides fast track fabrication and construc- Trafficmaster TFC Jan 02 May 09 Buy 0.8%

tion of residential and commercial property units using its proprietary Media. Leading UK telematics technology provider. Full list.

technology, the Scottsdale technique. AIM

TT Electronics TTG May 05 Dec 08 Hold 9.7%

Parity PTY Jan 08 May 09 Hold -9.1% Electronics & Electrical Equipment. Electronics operations focused on

Software & Computer Services. UK focused IT services company. planes, trains, automobiles, telecoms, computers and utilities. Full list.30

Operates through three divisions; Resources, Training and Solutions. Full June - Pre-close Trading Update

List.

VT Group VTG July 09 July 09 Buy -7.5%

Pendragon PDG July 09 Aug 08 Speculative Buy 15.6% Aerospace & defence. Previously focused on shipbuilding now one of the

Automotive. Largest independent operator of franchised motor car country's largest support services business. Full List.

dealerships in the UK. Full list.

Wolfson

Phoenix IT PNX Mar 08 July 09 Buy 6.5% Microelectronics WLF Mar 08 June 09 Hold -15.3%

IT Services. Provider of IT Services including systems management, disas- Hardware & Equipment. Supplier of mixed signal semiconductor chips.

ter recovery services and remote telephone support. Full list Full list

Plant Health Care PHC May 08 July 09 Long-term Buy -11.4% XP Power XPP Oct 08 July 09 Buy -1.8%

Chemicals. Plant Health Care develops naturally based products for use Electronic & Electrical Equipment. Supplier of power supply products to the

in the agriculture and horticulture markets. AIM. mid-tier electronics industry. Full List

Platinum Australia PLAA Oct 06 Dec 08 Buy -17.1%

Mining. Junior explorer with three projects in development. Smokey

Hills and Kalplats are headed towards production. Also developed pat-

ented Panton Process. AIM.

Platmin PPN Nov 08 Nov 08 Speculative Buy -17.0% 

Mining. Has four platinum group metals projects in the Bushveld com-

plex, South Africa. AIM.

Porvair PRV Mar 04 Dec 08 Buy -10.4%

Chemicals. Developer of microporous fibres and other materials suppos-

edly on verge of breakthrough of several technologies. Full list.

22 June - Interim Results





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smallcapshares August 2009





And finally...

editor'smessage

CLARKSON

There are plenty of reasons why the current recession will be a long

and drawn-out affair; one of them, as we all know, is the state of

the banking system. Here in the UK, state intervention in the banking

CKN £116.3m 616p BUY system has created a curious paradox where the agendas of owner-

ship and management are at odds. The government would like to see

PRE-CLOSE TRADING UPDATE FULL LIST

credit to consumers and businesses extended, whereas management

Shipping giant Clarkson has announced a brief update stating are wary of economic conditions and are intent on rebuilding balance

that trading since 13th May this year, the date of its last interim sheets (which in the banking world often means ‘shrinking’ balance

management statement, has been in line with expectations. Results sheets) and capital ratios.

for the six months to 30th June 2008 will be announced on 28th

August.

This presents a problem when it comes to economic recovery because

COMMENT ▼ – as everyone in the post credit-crunch world knows – banks are the

We recommended Clarkson shares as a buy in the June edition lifeblood of a dynamic economy. The amount of company directors

we meet that lament the overly stringent terms imposed on them

of the newsletter at 557p and are standing on a 10.6% gain on

by bankers – even when their business is financially sound – remains

that tip. This has largely come on the back of a recovery in ship high. In some cases, businesses are treated in an appallingly arbitrary

charter rates, demonstrated by a circa 60% increase in the Baltic manner, even when they have long-standing amicable relationships

Dry Index - which tracks international prices for various dry bulk with the bank in question. Politicians seem to think that more regula-

cargoes - since the May interim management statement. Dry bulk tion is the answer, but is it really as simple as that?

chartering is Clarkson's largest activity, it generating almost a third

of revenues in the last financial year. The shares have also been driven

As we write, the Bank of England has revealed that lending in the

by a 40% increase in the Baltic Dirty Tanker Index, which measures

corporate sector fell by £5.4 billion in April 2009, the biggest drop in

rates for crude oil tankers, and subsequent broker earnings upgrades. nine years. Bankers have been pariahs now for so long; it is easy to

We note however that these benefits will be offset to some extent just heap the blame on them. However, could it be that this push for

by the recent strengthening of the pound against the dollar as all of tighter and more interventionist regulation is having a negative effect

the company's ship broking income is received in dollars and costs on the banking system and its willingness to lend? After all, what use

are in sterling. is it to bank X if it extends new loans to businesses only to find out

later down the line that some bureaucrat in London or, God forbid,

The market consensus is for Clarkson to post earnings of around Brussels has set a new capital requirement or imposed restrictions on

80p in the current financial year (to December 2009), rising to 90p lending? Regulatory practices always result in market distortion of

in 2010. We note that broker Daniel Stewart is more bullish on the some kind, but whether the current round will have a positive or a

company's prospects, it forecasting earnings of 104.9p and 111.5p negative impact over the long term remains to be seen.

respectively for 2009 and 2010. On consensus forecasts the shares

trade on a price earnings multiple of 6.8 times for 2010, which

Best Wishes

looks cheap in itself but all the more considering that Clarkson

had 177p per share of net cash on the balance sheet as at 31st The Small Cap Shares Analyst Team

December 2008, along with £16.1 million of investments. If last

year's 42p dividend is maintained (it should be given the strong

financial position and cover of more than 2 times) the shares also

offer a highly attractive yield of 6.8%. They remain a BUY.

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