A Wonderful Life - But Mind The Gap

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 City Equities has recommended the companies featured                         City Equities strives to be as objective as possible,
 in this publication to its clients in the past and therefore                 however, the research should not be construed as
 certain clients may or may not still hold a financial interest               independent as City Equities has dealt ahead of this
 in the shares featured. Additionally, City Equities may or                   information – please see the non-independent research
 may not recommend the companies in the future.                               disclosure notice on back page of this publication.

A Wonderful Life - But Mind The Gap
              hat can we say? Lehman Brothers, Halifax Bank of                 institutions follow this traditional model, as many building societies in
             Scotland (HBOS), Washington Mutual, Merrill Lynch,                the UK have continued to do, the amount of money they can lend
           Bradford & Bingley, Fortis and Wachovia. These are                  is directly correlated to the size of customer deposits. However,
just some of the latest casualties, whether they will be the last is           more aggressive banks, such as Northern Rock, HBOS and Bradford
difficult to predict. The global economy is undergoing a dramatic              & Bingley, became prepared to lend much more money than they
convulsion that has become a serious test of its soundness.                    could cover from customer deposits alone. In other words, there was
                                                                               a mismatch between loans and deposits. The demise of some of our
How did all this happen in our modern financial system? Well, as               banking giants highlights the inherent risky nature of all investments,
we rapidly approach Christmas, if you’ve ever watched Frank Capra’s            even the ones that are household names.
1946 film It’s a Wonderful Life, then you have a pretty good idea. In
the film, the Building & Loan Association where George Bailey (played          In order to fill the “funding gap” between loan commitments and sav-
by James Stewart) works is subject to a “run” as the Great Depres-             ings deposits banks have a few options. The first funding mechanism
sion approaches. When savers all turn up at the bank and demand                is to turn to the wholesale money markets. It is characterised by
back their money, they are told it isn’t there, instead having been lent       short-term lending and borrowing between reputable financial institu-
to poor families in the town to enable them to buy houses. They are            tions, generally benchmarked against the London Interbank Offered
faced with the realisation that when we deposit cash into our savings          Rate (LIBOR). This is all well and good when wholesale money mar-
accounts, it does not simply stay there and gather dust. In order to           kets are functioning normally and banks can use them to fund their
make a return, the banks take our money and lend it to people in the           loan commitments. Banks using wholesale money markets to help
community for mortgages, car loans, school loans etc. The bank only            fund their businesses is not necessarily wrong, although there is an
keeps a fraction of our total deposits in reserve to service our everyday
                                                                                                                                     Continued over
requirements. If we all queue up to withdraw our money at the same
time, we will soon find it is simply not there. In the film, as panic grips
the residents of Bedford Falls, Mr Potter, owner of most of the town,
senses an opportunity and offers to pay customers 50 cents on the
dollar against their savings. The collapse of the bank is only averted
because George Bailey uses his own money in order to pay customers
demanding an immediate return of their deposits.

Although a little more complex, the credit crunch we are currently                             The Private
facing is very similar. The banking system was founded on this simple                           Investor
model of lending out savers’ money. The interest rate spread between                            Awards
what the banks pay on deposits and charge on loans is their return. If
immediate mismatch between long dated assets and short dated liabili-        paralysed. Unfortunately, as was always the case, in the long run,
ties. However, if financial institutions are going to be persuaded to lend   institutions will not lend against poor asset quality, such as sub-prime
to each other, they have to be confident that the assets they are lending    mortgages. The splurge in low quality consumer lending has come to
against, for example mortgages, are of good quality and secure.              an end. Banks will be forced to be much more rigorous when making
                                                                             loans available in the future.
Another mechanism banks can use to fill the “funding gap” is
securitisation. Different loan types can be rolled up, sold to Special       So what does all this mean for equity market investors? Obviously, the
Purpose Vehicles (SPVs) and given different tranches to create Col-          deterioration in the wider market has had distressing consequences on
lateralised Debt Obligations (CDOs) that can be freely traded. When          equity market valuations. As an asset class, equities have performed
banks perform this task, they eliminate the assets and ownership             very poorly during 2008 and it is undoubtedly prudent to have a
rights from their balance sheets, receiving the proceeds from the sale       well-diversified portfolio, with some exposure to fixed income securi-
and redressing the asset/liability imbalance. Through various forms of       ties. The banking sector is an interesting example to draw upon for
financial management, loans made for example to the US sub-prime             a number of reasons. It should be noted that while some banks have
sector, were packaged into CDOs with AAA credit ratings. Virtually           indulged in reckless lending activity, others haven’t and in the longer-
all banks began to invest in CDOs in order to generate strong returns        term, the new banking giants that emerge from this turmoil will likely
from perceived “safe” assets. However, when the individuals started to       dominate their chosen markets. We believe this will deliver very
default on loan payments, some of who had been given loans despite           strong returns to their equity holders over the medium-term.
having patchy or no credit ratings, losses on these instruments started
to spiral. The situation may prove worse, as many banks have insured         The financial sector is central to the global economy and its troubles
some of their exposure to CDOs with Credit Default Swaps (CDSs). If          have impacted other areas. Commodity prices, buoyed by strong
they turnout to be worthless, as highlighted by American International       gains over recent years, have suffered steep falls. However, funda-
Group’s (AIG) problems, there could be further ramifications.                mentals still look good, with increasing quantities of raw materials
                                                                             being demanded by the newly emerging global elite of nations
The credit crunch has brought about a seizure in secondary funding           such as China and India, in order to drive forward their economies.
mechanisms. Financial institutions remain cautious about lending             Consequently, it is difficult to envisage commodity prices remaining
to each other amid doubts concerning counterparty risk. The TED              depressed by immediate financial concerns indefinitely. Similarly,
spread, an important measure of 3-month LIBOR versus 3-month US              we expect equity holders of strategically well-placed commodity
government debt rates, or in other words bank counterparty risk, has         companies to see strong returns when the market starts to function
recently ballooned to almost 500 basis points, the widest in over a          normally again.
quarter of a century.
                                                                             Across other industries, there has been an indiscriminate downward
In order to provide liquidity for banks, the authorities have taken a        shift in equity valuations, in many cases, affecting good and bad
number of measures. The Bank of England’s Special Liquidity Scheme           alike. This is troublesome in the short-term but can present interesting
has recently been extended until January next year and enables banks         opportunities. Throughout history, during challenging economic
to swap difficult to trade mortgage assets for highly liquid government      times, there has always been a flight to quality, such as investor
securities. When the scheme was originally setup, the BofE said it           demand for gold or good grade fixed income assets. We believe a
expected £50 billion to be used. Latest data is shrouded in secrecy,         similar pattern will be seen in the equity market. Well-run companies
with some estimates pointing to a figure closer to £200 billion. Also,       with sound business models will capitalise on these conditions to
in conjunction with a number of other central banks, the BofE has            cement positions within their respective sectors, buying competitors
consistently injected many billions into the money market in order to        at appealing prices and potentially becoming attractive targets in their
improve liquidity. We await further details of the proposed US $700          own right. We believe our clients will benefit from being invested in
billion Toxic Asset Relief Program (TARP).                                   companies that have the potential to be among this band. Predicting
                                                                             an end to current market difficulties is not easy, although as many
The word “credit” has its roots in the Latin credere, meaning to believe     well-respected fund managers have often commented, situations such
or have confidence in. Sadly, at the moment, our banking system is           as these can provide significant scope to generate solid returns for
distinctly lacking in confidence. From the last few years of abundant        long-term investors.
liquidity within the global financial system, we are now faced with
the mechanisms by which banks fund themselves as having become               KEVIN WALLACE, RESEARCHER

                               City Equities Limited, Aldermary House, 10-15 Queen Street, London, EC4N 1TY.
                                                Telephone: 020 7489 5555 Facsimile: 020 7489 5566

‘Penny Share’ Lessons
With the market tending to look ahead rather
than assessing the present, it is sometimes
better to travel than arrive. This phonemeon is
experienced by investors on a daily basis and
some of the more interesting and extreme
are examined here. Knowledge of how the                                                                              issue 62         October 2008
market prices in sentiment expectations can
be key in knowing when to invest and to
maximise potential profit gains. It is also
useful to know when a share has been over-                  agreement. Perplexingly, on each occasion
sold after reaching its destination, in order to            the news has been positive and aided long
spot the next investment opportunity.                       term prospects for the Papua New Guinea
                                                            gas exploration concern, but as the graph
                                                            illustrates, the shares have fallen once news
                                                            has been revealed. The reasons behind this
                                                            could be due to over expectations by some
                                                            investors, or that too many short term
                                                            speculators became involved in each rally.
                                                            The shares now trade around 4.75p.
                                                                                                                     Galleon Holdings.......... p5
                                                               East European coffee bar operator Coffee-
                                                            heaven appears to still be in the expectation
                                                            and business growth phase, where the eventual
Griffin Mining’s bell curve shows what can                  hope is that it may in the future be acquired by a
happen when an explorer moves into the                      global coffee bar giant. Clients were advised to
mining phase. Clients were recommended the                  buy in the early stages between 2003 and 2005
stock on three occasions up to 16p, between                 at 9.5p to 15p*, and have since had the chance
2001 and 2003, and had the opportunity to                   to profit from its growth, with the shares reach-
profit from a substantial rally to 2007, which              ing an all-time high of 49p in early 2007. The
took the shares above 100p. Griffin was an                  stock has since retreated to 25.25p, we believe
early AiM exploration pioneer in China, with                due to global worries rather than any factor at
the stock appreciating significantly on                     the company level, with Coffeeheaven still
                                                                                                                     Immupharma....................... p5
expectations of mine development, which                     appearing to be in the growth and hope phase.
finally came about in 2005, with the full                      Although Surgical Innovations has mostly
production milestone reached a year later.                  traded in a tight trading range of 1.5p to 3p
A combination of factors seem to have led to                for the last ten years, the shares experienced
an arrival downturn, being lower commodity                  a spike in early 2007, on anticipation of
prices, production problems and an aborted                  growth from a new distribution model and
takeover. With the stock now back at its 2005               expansion into the US. Clients were advised
levels at 24.25p, it could be argued that the               to buy on several occasions in the last eight
post-arrival sell off has gone too far.                     years, between 2.25p and 4.25p, and some
   Another resources company, Rift Oil has                  had the opportunity to take a decent profit in
been recommended several times during its                   the recent rally. With the new strategy being            Judges Capital..................... p6
tenure on AiM, between 3.5p and 7p. The                     executed, it is puzzling to witness the recent
stock has experienced three expectation peaks               expectation rally now fade, with the shares
ahead of drilling and the signing of an off-take            now at 1.13p.

NB1: For prudence, the highest price clients paid for each recommendation is quoted.
NB2: Unless stated, mid market prices are quoted.
NB3: Potential profits do not include the transaction costs of buying, selling and any capital gains tax incurred.

* Adjusted for 10 for 1 share consolidation in November 2005.

JASON ROBERTSON, RESEARCHER.                                                                                         SectorGuard .......................... p7

                                      Beowulf Mining
                                      When selecting small cap situations to recom-            culture. Sweden is also the largest iron-ore
                                      mend, most of our research time is taken up              producer in the European Union. Underlying what
                                      with poring over annual reports and past compa-          can be achieved, the Kiruna iron ore mine, located
                                      ny announcements, in addition to meeting man-            150km northeast of Ruoutevare, is currently the
Status	         AIM                   agement face-to-face during investor roadshows           second largest underground mine in the world.
Code	           BEM.L                 in London. It can also be useful to conduct site
Recent	Price	   1.88p	(1.75p-2.00p)   visits to get a feel for a business, or as is the case   Our visit with Beowulf’s technical director Jan-Ola
High	           4.50p                 with resource companies, gain an understand-             Larsson was just an inspection; the real exploration
Low	            1.63p                 ing of an exploration or mining project. To this         work starts next month in November, when a team
Market	Cap	     £1.5m                 end, a recent site tour of Beowulf’s interests in        led by Australian Stock Exchange listed WAG Limited
                                      Northern Sweden was undertaken.                          intends to conduct an exploration programme to
                                                                                               move towards earning 50% of the project, by
                                      Most of the visit involved a look at the Group’s key     spending A$1m on up to 5,000 metres of drilling.
                                      Ruoutevare interest, which has an estimated JORC         The campaign will focus on testing for extensions
                                      inferred figure of 140m tonnes of ore at a grade of      to the known mineralisation, with the objective of
                                      39.1% iron and 5.7% titanium. This was outlined          producing a new tonnage and perhaps, improved
                                      by new joint venture (JV) partner WAG Limited and        grading. The hope is with new information gathered,
                                      based upon old drilling data from the 1970s, along       a metallurgical report and scoping study can be
                                      with more recent mapping work performed by               produced in early 2009. if positive, this should help
                                      Beowulf. Evidence from previous exploration cam-         improve the economics of the project, as the original
                                      paigns on the deposit could be seen, such as old drill   conceptual study completed over two years ago was
                                      caps, as noted in the picture. We also observed sev-     based upon resources prices then, and old 1970s
                                      eral outcropping rocks, illustrating the obvious point   drilling data. However, this must be balanced against
                                      about how close the mineralisation is to surface and     what may now be higher mining costs.
                                      potential for an open pit mining operation.
                                                                                               Originally, we intended to visit Ruoutevare during
                                      it was also quite clear that Ruoutevare is located       the November drill programme, but then learnt that
                                      in a very remote region, being 13 km from the            temperatures can plunge below minus 20c (-4f) at
                                      nearest village of Kvikkjokk, with a population of       this time of the year. Therefore the trip was brought
                                      8 people at the time of our visit, which itself is 120   forward to September, when we experienced a
                                      km from the town of Jokkmokk. Given the location,        more ambient plus 3c (37f), without the risk of
                                      there is little infrastructure at the moment in place.   losing any fingers or toes from frostbite! Neverthe-
                                      However, there are good quality local roads, which       less, the more acclimatised local led drilling team
                                      seemed in remarkable condition, considering the          will have to experience these temperatures, but at
                                      extreme arctic weather faced here each winter            the same time benefit from being able to move the
                                      and appeared in a much better state than typical         rig around the site more easily than getting bogged
                                      potholed country roads found in Britain. A tarmac        down in Autumn mud. Results from the Ruoutevare
                                      road, some 11km from the deposit, provides access        campaign may drive the price in the short term,
                                      to the network, although a potential road-rail re-       along with news from the other Beowulf-WAG JV
                                      loading site is a distant 180km away. There are also     at Kallak. Sentiment towards the stock has been
                                      several hydroelectric dams in the region, including      dampened in the last few years due to disappoint-
                                      Europe’s largest hydroelectric station, located 15km     ments from other JV pursuits, which may soon
                                      away. Ruoutevare’s location may be remote, but           reverse if positive news is received.
                                      it’s in a country with low sovereign risk, a highly
                                      skilled workforce and strong mining                      JASON ROBERTSON, RESEARCHER.

                                                                                                                      Far left: Ruoutevare deposit.
                                                                                                                      Left: Former drilling work.

                                         Galleon Holdings
                                         Galleon has a come a long way since gaining an          Other interactive formats are in the nearterm
                                         AIM listing in 2001 and has been led in recent          pipeline, including those with a wider family
                                         years by Chairman David Wong, who is now                appeal, such as ‘The Limit’, a prime-time variety
                                         progressively steering the Group towards the fast       game show with a family shopping experience.
Status	         AIM                      growing markets of the Far East.                        At the same time as pursuing high growth
Code	           GON.L                                                                            opportunities and benefiting from its Croco cash
Recent	Price	   19.75p	(19.50p-20.00p)   Although the chief revenue producer appears to          cow, which gained €7.25m in new contracts in
High	           33.56p
                                         remain Croco, which provides in-pack premium            July, the Group is also continuing to exploit its
                                         toys for global food companies such as PepsiCo,         conventional entertainment portfolio, including
Low	            19.50p
                                         this may soon be overtaken by iP within the             children’s animated/comedy TV series Skunk Fu!
Market	Cap	     £19.7m
                                         Entertainment division. One such property is ‘Super     Key to Galleon’s expansion into Asia, has been
                                         Soccer Star’, a reality talent show aired on the        the successful integration of recent acquisitions,
                                         Guangdong Sports Channel in partnership with            Yunbo and Phoenix. This led to a maiden interim
                                         Chelsea Football Club, earlier this year in China. To   pre-tax profit of £0.36m in the six months to 31
                                         monetise the show, Galleon provides viewers with        March 2008, on turnover of £5.8m, representing
                                         an interactive experience and generates revenue         a step-change performance from 2007’s interim
                                         from a variety of sources such as mobile phone          loss of £0.36m on £2.4m sales.
                                         voting. Although this was aired in only one Chinese
                                         province and could be picked up in some neigh-          The Group is starting to build up momentum for
                                         bouring areas, its potential reach came to 90 million   its interactive entertainment offerings, within the
                                         people. Expanding out from China, Galleon recently      exciting and high growth Asian markets. To this
                                         struck a deal with a prime-time TV channel in           end, we look forward to further updates and iP
                                         Malaysia, to broadcast a 13 episode series of ‘Super    development traction.
                                         Soccer Star’ from January. Next up is likely to be
                                         indonesia in 2009, subject to securing sponsors.        JASON ROBERTSON, RESEARCHER.

                                         Some may say making an investment in                    pharma gains potentially interesting drug candi-
                                         Immupharma is like buying a little piece of             dates, in many cases having had large amounts
                                         France, given that it has an exclusive relation-        of money already spent on them. in return, if any
                                         ship with the Centre National de la Recher-             treatments reach the market, the CNRS will receive
Status	         AIM                      che Scientifique (CNRS), France’s national              royalty payments. The Company has an extensive
Code	           IMM.L                    scientific research institution. The Company            library of research molecules at varying stages of
Recent	Price	   54.00p	(53.00p-55.00p)   is a drug discovery business with the goal of           development. We believe the unique relationship
High	           77.50p
                                         developing candidates to treat clear and unmet          with the CNRS heavily underpins the stock.
                                         medical needs. If one or more of its candidates
Low	            44.0p
                                         progress satisfactorily through clinical trials,        in our view, immuPharma has a strong manage-
Market	Cap	     £41.8m
                                         the future could be very exciting indeed.               ment team with experience of operating in a “big
                                                                                                 pharma” environment that should prove crucial
                                         Lupuzor, its lead candidate, is a potential             in developing the drug pipeline. Management
                                         blockbuster treatment for systematic lupus              have worked at major pharmaceutical companies
                                         erythematosus. Lupus can be a difficult disease         including GlaxoSmithKline, Bristol-Myers Squibb
                                         to diagnose and is caused by the body’s own             and Roche. We believe a partner deal with a large
                                         immune system attacking major organs such as            pharmaceutical company might be close.
                                         the kidneys and lungs. There is currently no cure
                                         and a new drug to treat the condition has not           Developing new drugs is a notoriously difficult
                                         been approved in over 40 years. The Lupus               business. However, if it can get things right, there
                                         Foundation of America estimates that over 1.5           exists the potential to generate multi-billion
                                         million Americans have some form of lupus.              dollar per annum revenues from Lupuzor alone.
                                         Although lupus can strike a person at any age,          Based on the potential of its lead candidate,
                                         nine out of ten people are women of childbearing        management, institutional investor support and
                                         years. Lupuzor is in the middle of a phase iib trial    relationship with the CNRS, we think the shares
                                         that is due for completion later this year.             look interesting.

                                         The relationship with the CNRS is crucial as immu-      KEVIN WALLACE, RESEARCHER.

                                      Irvine Energy
                                      The adage ‘no news is good news’ was clearly             order to achieve meaningful figures.
                                      lost on Irvine holders who apparently thought
                                      the opposite mid-September. It took three                The big test is the ‘unconventional’ side and
                                      weeks from a cryptic announcement that                   early signs are promising, with the Jones 1-5H
Status	         AIM                   Managing Director Aaron Close had left, until            Woodford shale well in Oklahoma flowing gas.
Code	           IVE.L                 we were provided with an operational update              A proportion of the fracturing fluid needs to be
Recent	Price	   2.05p	(2.00p-2.10p)   and some respite. The stock had been knocked             recovered first, but hope is that the well will
High	           4.31p
                                      to 1.5p as share sale triggered sale, and                produce at commercial levels and infrastructure
                                      doubtless a few stop-losses to boot.                     is in place to capitalise as soon as test results
Low	            1.50p
                                                                                               allow. Owning rights over some 166,500 gross
Market	Cap	     £16.3m
                                      Although detached from needing to worry                  acres, the Group could add significant value if
                                      about share price as opposed to the creation of          it shows that it can produce economically from
                                      shareholder value, it is a paramount lesson for          shale. investors are only too aware that BP has
                                      any PLC director about keeping shareholders              been on the acquisition trail for producing shale
                                      informed. The strange thing is, irvine has plenty        assets in areas not too far from irvine’s virgin
                                      to talk about and the relative liquidity of the          territory. it is the blue sky such as shale gas that
                                      shares demonstrates that a number of people              keeps irvine on the radar screen and approval
                                      have taken an interest. irvine is classic high           for drilling its coal bed methane targets is being
                                      risk/high reward and offers a mix of                     sought and this adds to the mix.
                                      ‘conventional’ and ‘unconventional’ oil &
                                      gas exploration/production. Far from being a             With so much going on, at least Management
                                      start-up, though, it already has 40 ‘conventional’       seems to have got the message, promising
                                      producing wells on its Kansas/Oklahoma                   newsflow to come. The question is: how will it
                                      licences. OK, the daily output figures are low,          be received by those watching?
                                      but in these areas it is not unusual to sink a
                                      multitude of cheap-to-drill, shallow wells in            ANDREW THACKER, RESEARCH MANAGER.

                                      Judges Capital
                                      If you thought British manufacturing was dead            As detailed in the interim Results on 26 August
                                      then think again. The UK is a leader in the              2008, things are progressing well. Adjusted fully
                                      manufacture of scientific instrumentation and            diluted EPS reached 12.5p, compared to 4.6p in
                                      Judges Capital hopes to capitalise on this. The          the first six months of 2007. The Group currently
Status	       AIM                     companies it owns produce products such as               has an encouraging pipeline of orders. Cash bal-
Code	         JDG.L                   calorimeters, devices used in measuring the              ances rose and due to the cash generative nature
Recent	Price	 97.0p	(94.0p-100.0p)    heat of chemical reactions and particularly              of the underlying businesses, the Company was
High	           124.7p                important to make sure materials comply with             able to reduce its debt. On a standalone basis, we
                                      the latest fire regulations. In addition, the            expect net debt to continue to reduce and improve
Low	            90.8p
                                      Company produces Ultra High Vacuums, which               returns for equity holders. As well as growing rev-
Market	Cap	     £3.9m
                                      are used in areas such as nuclear research               enues, we believe Judges Capital is a margin story.
                                      laboratories.                                            The management team has a rigorous emphasis
                                                                                               on costs and have consistently advanced operating
                                      Judges Capital is led by an experienced manage-          margins within the companies they own.
                                      ment team. David Cicurel, the CEO, is a relatively
                                      well-known smaller company investor and turna-           The lowly multiple to current earnings seems due
                                      round specialist. The strategy is to steadily acquire    to the general slide in small cap valuations and
                                      businesses operating in the scientific instrumenta-      potentially concerns regarding the impact of any
                                      tion sector and extract synergies within the com-        dramatic slowdown. We feel the Company will
                                      bined group wherever possible, although acquired         prove resilient to challenging economic condi-
                                      companies continue to trade individually under           tions. The Group has not made an acquisition
                                      established brands. Management has demonstrated          for some time and we hope the current market
                                      it can acquire quality businesses at attractive prices   environment will be an attractive opportunity to
                                      and has made four separate investments so far.           buy a leading business at a good price.
                                      Acquisitions are constructed sensibly, using a
                                      mixture of cash, debt, deferred earn out and shares.     KEVIN WALLACE, RESEARCHER.

                                      Broadening one’s horizons is said to be an                 London, as well as those in the local authority, trans-
                                      important part of development and, particularly            port, health and welfare sectors, and organisations
                                      in times of economic uncertainty, this can prove           including Invesco and Hiscox. Such a diversity of
                                      even more vital for smaller companies.                     clients, the management believe could help weather
Status	         AIM                                                                              the economic storm. Of course, given the current
Code	           SGD.L                 Having gone through a period of fairly significant         backdrop, the Board would be somewhat short-sighted
Recent	Price	   1.63p	(1.25p-2.00p)   change over the last couple of years, SectorGuard          to underestimate associated risks this presents. How-
High	           2.82p
                                      now brands itself as a ‘total security solutions group’,   ever, it believes that potential downward pressure on
                                      rather than simply a provider of security guards. Its      wage inflation and increased requirement for security
Low	            1.50p
                                      aim is to offer a ‘one stop shop’, which has been          during periods of downturn could mean the business
Market	Cap	     £6.4m
                                      built through acquisitive growth, with the addition        is well placed to grow over the coming year.
                                      of businesses such as ManGuard and Protector. As
                                      a result, the Company we see today offers tailored         Naturally, risks to successful progression remain
                                      solutions including fire and intruder systems, CCTV        numerous, and these include the impact of changes to
                                      and retail asset tagging to its customers. Successful      regulation. The fallout of precisely this was notable in
                                      integration of acquisitions can in itself pose a risk,     the Company’s last release, as holiday pay increased
                                      particularly to smaller organisations. However, re-        following changes to statutory leave entitlement, and
                                      cent Final Results suggested that things were broadly      there can be no guarantee that similar actions in
                                      going to plan and the statement implied the Group is       future will not have a negative bearing on the business.
                                      now well positioned to build on these and develop
                                      respective market and cross-selling opportunities.         Whether the Board’s confident outlook proves
                                                                                                 unfounded remains to be seen, but with a diverse
                                      What’s more, accreditations such as ‘Approved Sup-         offering and customer base, the hope is future
                                      plier’ status to the London Universities Purchasing        newsflow endorses the strategy further.
                                      Consortium means clients include institutions like
                                      Kings College London and University College                CHRIS RICHARDS, RESEARCHER.

                                      Albert Einstein once said “information is                  In this day and age, it is fairly unsurprising to learn
                                      not knowledge”, and, it seems, the correct                 that the areas of homeland security and surveil-
                                      interpretation of data can be what sets                    lance also represent significant potential markets
                                      success apart from failure.                                for the business. Indeed, recent updates have
Status	         AIM                                                                              reported take-up by a U.S. Military Base, and use
Code	           VIY.L                 Too much detail arguably poses as many issues to           in advanced terrorist attack warning systems by
Recent	Price	   3.38p	(3.25p-3.50p)   organisations as not enough. These can include             Los Angeles County. Such news provides some
High	           9.57p
                                      costly and unwelcome distractions at best, but can         weighty endorsement of the technology, and,
                                      be rather more serious at worst. Vialogy’s clever          what’s more, recent results suggested that further
Low	            3.38p
                                      QRI technology, developed by a spin-off from               successes could be on the way.
Market	Cap	     £17.0m
                                      the NASA Jet Propulsion labs, offers a potential
                                      remedy to exactly these problems. It works by cut-         Of course, while the versatility of its offering is
                                      ting through what the Company calls ‘background            notable, the plight of companies such as Vialogy
                                      noise’ to enhance the quality of information. In           in these economic conditions can be a tough one.
                                      real terms, this means improving the readings of           The market is not always understanding of the
                                      sensors, such as cameras and radar, which can be           merits of individual businesses, rather focusing
                                      brought together and more effectively analysed.            purely on share price performance, and the busi-
                                      The science has a broad range of applications in           ness also faces risks of potential competition, still
                                      areas as diverse as medical diagnostic production          being at a relatively early stage of development.
                                      to building management, and interestingly has also
                                      proven a useful tool in the oil and gas industry.          Nevertheless, further evidence of efficacy in the
                                      On this front, a contract is in place with Atascosa        oil and gas industry, along with additional
                                      Exploration, which has found the system successful         contract news, could lead to improved rating for
                                      in confirming the location, size and even porosity         the shares as time goes on.
                                      of a prospective drilling site. However, while this is
                                      no mean feat, it is only part of the story.                CHRIS RICHARDS, RESEARCHER.

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