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					                                                                                                                                                                                    THE INVESTOR’S GUIDE TO
SEPTEMBER 2011                                                                                                                                                                        LOWER PRICED SHARES

 THE HL PENNY SHARE SERVICE - BY SUBSCRIPTION ONLY - £40 PER ANNUM                                                                                          ISSUE 180                      

Markets still nervous
Stock markets remain volatile but there have                                                                   that nothing was going to happen.                      where some things are
been some good days amongst the bad. At the                                                                    Meanwhile, the Greek trade unions are urging           going well - the Far
time of writing the FTSE 100 index is                                                                          citizens, with some success, to oppose the             East, and particularly
standing at around the 5,200 level but it is                                                                   government's austerity measures, and Italy,            China.         Economic
sobering to recall that at the beginning of July                                                               together with Portugal, is looking shakier by          growth rates are not as
it was over the 6,000 mark.                                                                                    the day.                                               high as earlier times, and
    There have been some days when                                                                                  There is the situation in the USA where           currently stand at, would you
investors have been optimistic on the chances                                                                  measures taken to bring back growth to the             believe it, around 8%. I’m sure the rest of the
that the euro zone policymakers will take                                                                      economy seem to be having no effect.                   world would be happy with a fifth of that.
decisive action to tackle the problems of                                                                      Basically the public have lost faith and that is           Meanwhile, stock markets will continue
sovereign debt. But generally there have                                                                       difficult to deal with. Who would want to be           to be volatile while the euro zone sorts itself
perhaps been longer periods when they felt                                                                     in President Obama’s shoes at this time?               out, which may involve, as we suggest, Far
                                                                                                                    At least there is one area of the world           Eastern participation.
 Share of the Month .............................................................................. Anite       Share of the Month ... Anite (AIE)
 Focus on September .............................................................. Cello Group
                                                                     Metalrax Group                            Anite is the global leader in wireless device          2009 when the share price stood at around
                                                                         Rentokil Initial                      testing - it tests new technology for mobile           28p, having fallen from the July 2007 high of
                                                                                                               makers - and has benefitted from the increased         85p. Since then he has strengthened the
 Editor’s Update ................... Cable & Wireless Worldwide
                                                     DDD Group                                                 use of mobile phones. The Anite Conformance            management as well as investing heavily in
                                                                                                               Toolset is the first to be approved by the Global      research, and closing down some of the
 Penny Arcade ........................................... Barratt Developments                                 Certification Forum (GCF) for the certification        peripheral activities. Helped by the
                                                                                                               of devices intended for deployment on LTE              rationalisation measures and the rise in
 Results Service .................................................................................... Prezzo
                                                                                       Debenhams               bands (Long Term Evolution frequency bands)            demand for mobile phones, we think Anite is
                                                                                                               which aim to increase the capacity and speed           emerging as a stronger company.
 Smart Cat Corner .................... Omega Diagnostics Group                                                 of wireless data networks. It is a provider of IT          The recent Interim Management Statement
                                                                                                               solutions, software, system integration and            was encouraging. Trading continued to
                                                                                                               managed services.                                      increase, with operating profits ahead of the
                                                                                                                   Anite also provides travel firms with              same period in 2010, thanks to growth in both
                     TO DEAL                                                                                   systems and applications which enable them to          the Wireless and Travel divisions, and Anite's
                     TEL: 0117 980 9800                                                                        offer online booking services. In April the group      handset business maintained its clear lead for
                                                                                                               signed a multi-year contract with TUI Travel to        certified protocol test cases available to
 Privilege Commission Tariff
                                                                                                               implement its @comRes reservation system in            customers. Finally, it was confirmed the
 Min Dealing Charge per deal .......................................................... £10
                                                                                                               the TUI UK and Ireland division. Anite's CEO,          financial position was "robust".
 Max Dealing Charge per deal ........................................................ £50                      Chris Humphries used the occasion to say that              Good results are expected for the year to
 Plus Certificated Dealing Charge ................................................................ £20         he was increasingly confident that Anite would         30/4/12 and beyond - in other words, we think
 UK Equities                                                                                                   exceed market expectations.                            this could be a turning point. Consider as a
 On deals up to £5,000 .............................................................................. 1%           Chris Humphries joined Anite in January            strong buy.
 When dealing, please remember to inform the dealer
 that you are a member of the HL Penny Share                                                                      ANITE AIE
 Service in order to qualify for the above tariff. Please
 note: If you receive this tariff, all online trades will be                                                    Price: 64p Bid: 63.75p Offer: 65p                     Year End: 30th April
 charged at a flat rate of £11.95 per deal. You will not                                                        Current NET Yield: 1.6% (variable & not guaranteed)   Sector: Software & Computer Services
 receive the lower online rates available for frequent                                                          Year’s High: 78p Year’s Low: 41.5p                    Prospective PER: 19.7
 dealing.                                                                                                       Market Capitalisation: £191.3m                        Next Results: Interims - December 2011

             These are tips and should not be deemed as personal advice. Please read the Important Investment Notes on page 2 as these are higher risk shares.

                                                                                                                                                                                     Enquiries: 0117 980 9800

Focus on September
This month we feature two small companies,            indicated a good performance in the full year,              Rentokil Initial’s shares are languishing
Cello and Metalrax, and also the larger Rentokil      which ends 31/12/11.                                   at the lower levels. We think the medium term
Initial.                                                  Metalrax Group operates in niche markets           outlook remains good, and consider them a
     We think Cello Group could be set for a          which gives it some shelter from recessionary          buy at current levels.
reasonable profits performance. It performed          conditions. The shares are valued at 6.3 times
well in 2010 and the 2011 interim results             earnings, which we think is a low rating.

                                                      and healthcare sectors, and has expertise in
                                                                                                                CELLO GROUP CLL
                                                      FMCG (fast moving consumer goods),
                   on Cello Group                     telecoms, retail, financial services and                 Price: 34.25p Bid: 34p Offer: 35p
                                                      charities.                                               Year’s High: 62p      Year’s Low: 30.25p
                                                           The group recently reported interim results         Year End: 31st December
We featured Cello, which is a leading global          in-line with expectations. Revenues increased            Prospective PER: 4.9
insight and strategic marketing group, in             by 1.9% year-on-year from £29.9m to £30.3m               Current NET Yield: 4.5% (variable & not guaranteed)
March 2011 at 56p. The company had just               in difficult conditions. The pharmaceuticals             Market Capitalisation: £24.9m
reported good results for 2010 and we                 sector was the source of 31% of group                    Sector: Media
considered the shares a strong buy. We were           revenues. Lower interest rates and cost control          Next Results: Finals - March 2012
impressed by its stated mission to "cut through       helped towards a small rise in adjusted pre-tax          Opinion: We thought that, overall, Cello's interim
the increasing mass of customer data and              profits from £2.8m in the same period of 2010            results were good considering the relatively poor
                                                                                                               business conditions. It remains on target to increase
discover the real value of information for            to £2.9m. Earnings per share fell 17.7% from
                                                                                                               profits to around £7.7m by 2012. We feel the forward
brand owners, allowing them to deliver results        3.0p to 2.5p. The interim dividend was lifted            PER of 4.5 substantially undervalues the prospects.
more quickly than the competition."                   from 0.5p to 0.8p, and net debt at the end of            Consider as a buy.
    Cello is structured like a professional           the period was 43% lower at £11.2m.                      (Cello is quoted on the higher risk Alternative
partnership and operates in more than 70                   The full year outlook is for a rise in pre-tax      Investment Market. See Important Investment Notes
countries, with professional hubs in the UK           profits from £6.4m to £7.2m, with adjusted               below)
and USA supporting a growing number of                earnings per share falling from 7.2p to 6.6p.          figures suggest that Cello is currently trading
global client account teams. The group is             Analysts are forecasting earnings per share of         on a prospective PER of 4.9 and a forward PER
focused to an extent on the pharmaceutical            6.7p for the year ending 31/12/12. These               of 4.5.

                                                      solutions tailored to meet individual customer         well established brands.
                   on Metalrax                        requirements. It operates from two divisions:              Specialist Engineering is the larger of the
                                                          Consumer Durables produces and                     two divisions, and makes specialist products
                   Group                              markets the majority of bakeware sold in the           that incorporate value adding technology for
                                                      UK, together with associated ranges of kitchen         unique applications in the medical, specialist
Metalrax (MRX) makes and supplies specialist          accessories to both retail and commercial              metal coating and premium automotive
steel products. It operates in niche markets with     markets. Businesses in this division have a very       markets. Global brands include PG Lifelink
significant barriers to entry, and aims to provide    good reputation and own some very strong and           operating theatre systems, which provide

 Important Investment Notes:
 This newsletter is provided solely to enable sophisticated investors to make their own investment decisions. It may not be suitable for all
 recipients and does not constitute a personal recommendation to invest. If you have any doubts as to the suitability, you should contact
 our financial practitioners or another adviser for advice.
 Past performance should not be seen as an indication of future performance. These investments are intended as long-term investments.
 Their value and the income from them can fall as well as rise and you may get back less than you originally invested. All yields are
 variable and neither income nor capital are guaranteed. Where companies have significant overseas earnings their profitability and
 therefore their share price could be significantly affected by currency movements. There may be only one market maker for some of the
 shares profiled in this newsletter.
 AIM and penny shares carry a higher degree of risk of losing money than other UK shares. It may be difficult to deal in these shares. There
 is a big difference between the buying price and selling price of these shares. If they have to be sold immediately, you may get back much
 less than you paid for them. The price may change quickly. It may be difficult to obtain reliable information about their value or the extent
 of the risks to which they are exposed. AIM shares cannot be held in an ISA.
 All price objectives and estimated figures are forecasts and they are not guaranteed. Companies in the Hargreaves Lansdown Group may
 have dealt in these investments over the past 12 months. Income and capital gains derived from shares are liable to taxation, the basis
 and levels of which are subject to change. In accordance with the principles of the Market Abuse Directive a summary of quarterly tips
 provided through this publication is available from us on request. Additionally you can view our policy on Conflicts of Interest in the field
 of Investment Research at . Unless stated otherwise, all prices are mid prices. Yields and prices are correct as at
 28/09/11. The views stated are those of the author and may not be shared by Hargreaves Lansdown.

                                                                                                            ALL PRICES WERE TAKEN IN THE AFTERNOON OF 28/09/11.
                                                                                                                       PENNY SHARE PROPHET - ISSUE 180

   METALRAX MRX                                                                                                  of around £200m, earnings per share of 8.0p,
                                                             Comment          on Rentokil                        for the full year ending 31/12/11. The
 Price: 8.75p Bid: 8.5p Offer: 9p
                                                                                                                 consensus is that the dividend will be
 Year’s High: 12.25p      Year’s Low: 4p                                      Initial                            restored, emerging possibly at 1.5p. If these
 Year End: 31st December                                                                                         figures are achieved, then the shares could be
 Prospective PER: 8.0                                      The group operates through three trading              trading on a prospective PER of 9.5 and a
 Current NET Yield: N/A                                    companies: Rentokil Pest Control, Rentokil            yield of approximately 2% (variable and not
 Market Capitalisation: £10.5m                             Property Care and Rentokil Insurance Ltd              guaranteed).
 Sector: Industrial Engineering                            providing a range of, principally, business to            Looking ahead, analysts are forecasting
 Next Results: Finals - March 2012                         business support services.                            pre-tax profits in 2012 of £225m, with
 Opinion: We think the outlook for the rest of 2011 and         Rentokil has been in existence for 80            earnings per share rising to over 9p and the
 the year ending 31/12/12 looks promising. Our forecast
                                                           years and attributes its success to its high          dividend increased to 3p. If achieved then the
 suggest that the forward PER is around 6.3, which feel
 is a low rating for a company of this calibre. We think   quality of service delivery and consumer              shares could be trading currently on a PER of
 the shares are undervalued - consider as a buy.           loyalty, together with a highly skilled               8 and a yield of 3.9% (variable and not
 (Metalrax is quoted on the higher risk Alternative        workforce. This has enabled the group to              guaranteed). We think the shares are
 Investment Market. See Important Investment Notes         expand across the globe and Rentokil                  beginning to look good value at current
 on page 2)                                                currently operates in more than 40 countries.         levels.
                                                           Its expertise in pest control is second to none.
reliable and safe power solutions in patient                    Pre-tax profits for the year to 31/12/10            RENTOKIL INITIAL RTO
critical environments.                                     were £145m compared with a loss of £55m in             Price: 74.85p Bid: 74.75p Offer: 74.9p
     In the six months ending 3/7/11 operating             2009. Earnings per share rose by 18% to                Year’s High: 107.9p      Year’s Low: 70.2p
profits before exceptionals rose from £0.6m to             7.81p, cash generation was strong during the           Year End: 31st December
£0.9m. Basic earnings per share emerged at                 period and net debt reduced by £154m to                Prospective PER: 9.3
0.02p compared with a loss of 0.32p previously.            £954m. There was no dividend. Cost cutting             Current NET Yield: N/A
The Specialist Engineering division produced               and efficiency measures strongly helped the            Market Capitalisation: £1.36bn
on-going revenue growth of 30% compared                    improved level of earnings.                            Sector: Support Services
with a decline of 8% in the Consumer Durables                   In the six months to 30/6/11 pre-tax              Next Results: Finals - February 2012
division.                                                  profits of £29.7m were marginally down on              Opinion: Rentokil is a substantial company, which,
     We think that, overall, MRX could be set for          the same period of 2010, but earnings per              after problems in 2009 when a pre-tax loss was
an advance in pre-tax profits in the year ending           share rose from 2.22p to 2.44p. Again, there           made, looks set for further profits growth in 2011 and
31/12/11 to £1.4m, bringing down the                       was no dividend payment, but the group                 2012. The shares could be trading on a forward PER
                                                                                                                  of under 10, which we think looks cheap for a
prospective PER to around 8 - the results are due          confirmed that reinstatement was under                 successful company like this. Consider as a strong
in March. We have pencilled in pre-tax profits             consideration.                                         buy.
of £1.7m for 2012, a forward PER of 6.3.                        The market is looking for pre-tax profits

Editor’s Update
Cable & Wireless Worldwide (CW.) is an                     PER of approximately 6 with a dividend yield          up a considerable client base.
international telecommunications service                   of 9% (variable and not guaranteed). Profits              We regard the shares as an interesting
provider. Since February the shares have fallen            recovery is expected in 2013. We regard the           speculation at this stage. It is likely to take at
from over 70p to the current price of 31.36p               shares as an interesting speculation at current       least a year to develop a flow of profits, so
(Bid 31.11p Offer 31.37p), and we feel this fall           levels - consider as a buy.                           patience is required. The shares were 40p four
may have been overdone. Part of the fall is due                DDD Group is involved in the                      months ago but currently stand at 27.25p (Bid
to a statement the group issued in June,                   development and licensing of Software and             26.5p Offer 28p). However, there have been
warning that full year pre-tax profits would be            Hardware        Intellectual      Property    and     signs of a pick-up in the share price as the
between 5% and 10% lower than expected.                    Technologies. The management recently                 latest news is digested. Consider as a buy.
The CEO also confirmed that the dividend                   indicated they expect to become profitable in             (DDD Group is quoted on the higher risk
would be halved.                                           the first half of 2012, based on the signing up       Alternative Investment Market. See Important
     In the year ending 31/3/11 the company                of additional partners and as existing licence        Investment Notes on page 2)
produced pre-tax profits of £140m compared                 agreements move to volume production.
with a loss of £94m previously. Earnings per                   DDD’s technology converts 2D displays to
share were 8.5p and a dividend for the period              3D, and up until now it has derived most of its
of 4.5p was declared.                                      revenue from the TV market. However, DDD
     Analysts' current forecasts reflect a                 expects revenues from personal computers,
relatively optimistic view of the results for the          smartphones and tablet computers to grow in
current year ending 31/3/12. The consensus                 importance, as royalties from Intel and LG
is that pre-tax profits could emerge at around             Group in particular begin to flow through.
£94m and the full year dividend will be cut to                 It is too early at this time to produce profits
2.77p. This scenario suggests to us that the               forecasts, but we think that the business model
shares could be cheap at current levels. After             could be capable of producing considerable
the fall in the share price they are trading on a          profits. DDD is well established and has built


Penny Arcade
We featured Barratt Developments in July              year ending 30/6/11. On turnover unchanged                     Meanwhile,       the    next    interim
2011 at 103p. In the current shakeout the             from 2010's £2,035m, there was a pre-tax loss              announcement, covering the six months to
price has fallen sharply to around 83p. We            of £11.5m, a considerable improvement on the               31/12/11, is due in February and could
think this fall has been overdone and that,           pre-tax loss of £162.9m sustained in the year              confirm progress is being made. Consider as
although the Building & Construction sector           ending 30/6/10. The market expects pre-tax                 a strong buy at current levels.
may not be the most attractive at this time, the      profits for the current year, which ends                       Price 83.15p Bid 83.1p Offer 83.2p;
shares could be worth considering as a                30/6/12, to emerge at around £85m with                     Sector: Household Goods & Home
recovery play.                                        earnings per share of 6.5p, a prospective PER              Construction; Market Cap: £806m; EPIC
    Barratt recently reported its results for the     of 12.9. Further growth looks likely in 2013.              BDEV

Results Service
Prezzo has just announced a good set of results       the shares could be trading on a prospective               maximise cash profits by investing in top line
for the half year ending 3/7/11. On turnover up       PER of 11.5, which is undemanding in our                   growth has proved successful, resulting in
23% from £48.43m to £59.56m, interim pre-             opinion for a possible growth situation. Further           headline profits before tax exceeding forecasts.
tax profits emerged 17% higher, rising from           progress is expected in 2012 and we have                       The management remains cautious over the
£6.2m to £7.3m. Earnings per share increased          pencilled in pre-tax profits of £17.5m, a forward          strength of consumer confidence and the timing
from 1.91p to 2.19p. At the end of the period         PER of 10.3. We first featured the shares in April         of economic recovery, but stress that they can
168 restaurants were operating.                       2011 at 64p. Consider as a buy.                            make progress in the coming year. Net debt has
     This was a good performance. The profit              (Prezzo is quoted on the high risk Alternative         been reduced by £130m to approximately
margin averaged 14.0% over the interim period,        Investment Market. See Important Investment                £365m. In the meantime the company has
compared with 14.4% in 2010, which is                 Notes on page 2)                                           signed the lease on a new head office building
unsurprising given the weakening of consumer              Price 56.25p Bid 55p Offer 57.5p; Sector:              in London and will move there in summer
markets. Operating profit was up 8% to £7.2m.         Travel & Leisure; Market Cap: £127.3m; EPIC                2013.
The effective tax rate was down 1% point to 30%.      PRZ;                                                           We think that pre-tax profits could be set to
     During the period seven new restaurants                                                                     emerge at £165m compared with £139m in the
were opened and 2 units closed. A further seven       Debenhams, the well-known department store                 year to 31/8/10. Given this, earnings per share
new restaurants have been opened in the               and fashion retailer, is due to report its results         could increase from 7.95p to 9.0p which
second half and 3 have been closed, taking the        for the year ending 31/8/11 on 20 October. The             indicates the shares are trading on a prospective
total number of restaurants to 172. Further           management has said that it has focused on                 PER of 6.2. This looks cheap to us, but much
openings are in the pipeline.                         maximising cash margins and expects to                     depends on the level of consumer spending in
     The second half overall is likely to prove       announce full year pre-tax profits before                  2012. On balance we consider the shares a
more difficult as consumer confidence comes           exceptional items to be ahead of the market                speculative buy.
under pressure, but we think the full-year pre-       consensus, despite the fact that gross margins                 Price 58.85p Bid 58.75p Offer 58.9p;
tax profits could be set to rise to around £16m,      during the period were flat. The Chairman                  Sector: General Retailers; Market Cap:
compared with £11.5m previously. Given this,          reiterated that he thought the decision to                 £757.3m; EPIC DEB

 Smart Cat Corner
 It was Thursday, the day of maximum HGV activity on the main road. The roar of lorries pulling away from the
 traffic lights at the bottom of the hill was deafening as I strolled towards the bend where Ozzie and his friend Twinkle
 could usually be found playing chicken. I always felt that I was approaching the scene of a terrible accident and
 felt relieved when I saw them sitting shoulder to shoulder on the kerb, waiting to startle some unwary driver into
      As I approached, Twinkle was coughing. "These exhaust fumes will be the death of me," he wheezed. "Yeah,"
 agreed Ozzie. "They're dangerous. Something ought to be done about them!" It seemed strange that two moggies,
 both likely to end up squashed into the tarmac, could feel so strongly about pollution.
      As they waited on the kerb, my mind turned to the attractions of a small but interesting company - Omega Diagnostics Group. It's involved in
 the manufacture, development and distribution of medical diagnostic products. The share price is at its lowest level for several years, although the
 company is profitable and has no borrowings. Admittedly pre-tax profits in the year to 31/3/11 fell from £0.21m to £0.10m, but the company has
 said that, after the transitional acquisition of the German company, Allergopharma, its revenue growth is set to accelerate. I take this to mean that
 pre-tax profits in the current year could reach £1.6m, and £4.0m in the year to 31/3/13 with earnings per share of 3.5p - a forward PER of 9.1. Of
 course it's risky, but not as much as sprinting across a busy road. I consider the shares a buy.
      Just then a lorry sped towards the bend. "Your turn!" roared Ozzie. "Yo!" shouted Twinkle and sprang into the road, careful to make sure that he
 could be seen. Intuitively the driver slammed on the brakes and turned the wheel, making the vehicle swerve. Twinkle grinned from the other side of
 the road. "Classic," he said with deep satisfaction. I think I'll stick to share dealing for recreation.
      (Omega Diagnostics Group is quoted on the higher risk Alternative Investment Market. See Important Investment Notes on page 2)
      Price 13p Bid 12.5p Offer 13.5p; Sector: Healthcare Equipment & Services; Market Cap: £11.08m; EPIC ODX

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