Alexon Group (LON:AXN) (AXN, 21.25p, £31.26m)is the ladies clothing retailers trading under six womenswear brands. Weak consumer confidence and uncertainty surrounding the UK economy drove l-f-l sales down 5.4% for the 19 weeks ended 12 June 2010. An increase in promotional activity drove margins to also decline in the period. We are disappointed by the group’s performance, especially when comparing it to its peers. The group is focussing on turning around the business. The benefits of the some store refits, expansion of retail outlets (opened 34 new outlets) and invest in online capabilities are slowly beginning to bear fruit. The group still has a long way to go. The remainder of the year will continue to be challenging with high unemployment, the World Cup, increases in taxes and interest rates and a possible double-dip, all negatively impacting consumers spending. For the current financial year, the market forecasts a PBT range of £1.0m - £5.0m and EPS of 0.8p – 5.1p. We believe the results are likely to be at the lower end of the forecasts. 2012 will be the key year to represent the benefits of the turnaround strategy. We reiterate our HOLD recommendation.
Caspian Hldgs (LON:CSH) (CSH, 0.45p, £1.65m) In an operational update Caspian has highlighted its interest, via 50% Black Gold Inc shareholding, in US on-shore oil production. Black Gold is acquiring leases in low volume production “sipper” wells with existing infrastructure, initially in the Irvine field in Kentucky, and already has several wells producing some 90-100 barrels or oil per month. Black Gold has recently installed a central gun barrel oil/water separator and expects meaning cashflows to be generated as production increases. Caspian is pursuing other such opportunities already identified. The group is continuing to fight the Kazakhstan’s Supreme Court’s ruling confirming the revocation of Taraz LLP’s rights to the Zhegeldy oil field, any success will fall to the bottom line as the group has fully written down the value. The group also announced a £0.2m placing at 0.25p, including £50,000 from Executive Chairman Michael Masterman whose shareholding will increase to 36.24%. SPECULATIVE BUY. N.B: HB Markets act as broker to Caspian Holdings.
Chaarat Gold (LON:CGH) (CGH, 43p, £48.55m) Management has stated that operations in Bishkek in Bishkek and the North West of the country are unaffected by the developments near Osh in the south of the country. At least 97 people are said to have been killed in outbreaks against ethnic Uzbeks with more than 1,200 wounded. Russia is said to have sent troops over to help stem the violence. This is the latest development in a country recently rockedby political instability and violence. We maintain some caution on Chaarat but point that the violence is occurring 300km from its administrative operations and further form it mine. We will monitor the situation. HOLD
Cml Microsystems (LON:CML) (CML, 69.5p, £10.39m) Finals to March 2010 saw revenues of £18.02m (£16.09m) with gross profits up 22.5% to £12.49m (£10.2m) a gross margin of 69.3% (63.4%) and a loss before tax reduced to £0.39m(loss £2.09m). The group ended the period with a reduced net debt of £2.09m (net debt £3.87m), reflecting healthy underlying organic cash generation with profits reported after £3.75m of amortised development costs. Storage products grew 40% to become 40% of revenues, with new design wins widening its customer base. Wireless grew 3% to represent 41% of revenues with a wider RF portfolio for this year and Telecom was down to 13% of revenues but with growth opportunities still ahead. H2 was significantly stronger with £10.84 of revs (H1 £7.18m) with a return to underlying operating profits of £1.00m (loss £0.99m) and the group reports the strength is continuing into the current year. Cautious forecasts will look for £1m PBT with little taxation, implying 6.7p EPS, with the potential to upgrade on continued strength, putting the group on a prospective of 10.4x, relatively cheap for a semiconductor related business, BUY to the 13x level or a price target of 87p.
Innovise Plc (LON:INNO) (INNO, 23.5p, £9.20m) Interims to 31 March 2010 report revenue growth of 76% to £7.9m (H109: £4.5m) driven by the integration of three acquisitions made in 2009. However, lower gross margins of 38.7% (H109: 51.8%) due to a shift in the sales mix from consulting and support to lower margin license re-sale activity, coupled with a 55% higher cost base, reduced adjusted PBT to £0.48m (H109: £0.60m) and adjusted EPS to 0.9p (H109: 1.3p). We are disappointed by the results. Net debt deteriorated to £2.13m (FY09: £1.97m) due to 1) capex fit out on Slough office, 2) high levels of growth in the more capital intensive ESM division, and 3) a general deterioration in payment terms as customers react to the recession and liquidity constraints by negotiating more favourable terms. Although trading conditions have somewhat improved in recent months, we expect the IT services market to remain challenging for the remainder of the year. Despite an encouraging sales pipeline, we believe the current 2010 PBT and EPS estimates of £1.5m and 2.53p respectively are optimistic. We expect the market to downgrade estimates. We believe c.2p of earnings for the current financial year and 2.5p for 2011 is more sensible, which puts it on 11.8x and 9.4x respectively. We believe the group is fairly priced and reduce are recommendation to a HOLD.
Nationwide Accident Repair Services (LON:NARS) (NARS, 78p, £33.69m) - AGM statement. Trading since the beginning of the current FY has been encouraging. On 30 April NARS reported a major multi-year contract with a leading insurance group & on 18 May the acquisition of a bodyshop in Newcastle increasing both its insurance and fleet & retail repair business. The company is increasing business development expenditure by c. £1m to expand Nationwide's mobile repair capability. Formal launch of rebranded & expanded mobile repair services will take place later this summer. Board views prospects with confidence. Nationwide remains well positioned for growth given strong cash flows, a robust balance sheet with substantial net cash (£8.3m at 2009 Y/E). The FY dividend of 5p is a 6.4% historic yield which is the same estimate going forward. The FY rating of 8.8x is reasonably full but dividend attractions and the strong cash position and growth prospects suggest the stock is still worth of a BUY rating.
NEOVIA Financial (LON:NEO) (NEO, 52.5p, £62.96m)has signed a contact with bet-at-home.com & 5 other gaming merchants for payment processing solution Neteller (LON:NLR) e-wallet & Net pre- paid card. Frankfurt listed bet-at-home-com is a leading European online gaming & sports betting company with 2m registered users with particular penetration in Eastern Europe & German language countries. Further good progress. While we retain some caution given last year’s result. The rating is beginning to look attractive. HOLD for now.
N.W.F Group (LON:NWF) (NWF, 87p, £40.83m) In a statement for the year ending March 2010, the group reports trading ahead of expectations, resulting in a record year. The group has also secured long term financial backing from a bank with facilities totalling £51m. Food distribution will report a record result with efficiencies and resilient ambient product volumes. Feeds distribution has seen a stronger second half, ensuring a performance in line with the year expectations. Fuels had a very strong performance thanks to good service levels throughout the severe winter period. Forecasts around £6.8m PBT would give EPS 10.1p, putting them on a soon to be historic 8.6x PER, but a key attraction remains the forecast full year dividend around 4.3p – a yield of 4.9%. BUY with a 101p price target.
Oxford Instruments (LON:OXIG) (OXIG, 270p, £133.84m) Finals to March saw revenues rise marginally to £211.5m (£206.5m) with maintained gross profits of £90.6m (£90.7m) with an underlying operating profit of £14.7m (£13.1m) with reported PBT of £18.1m (loss £9.3m) and an underlying PBT of £11.9m (£11.1m). Adjusted EPS grew to 17.8p (14.8p) aided by a tax charge lower at 27% (35%). The group held its DPS at 8.4p with net debt falling to £10.4m (net debt £28.3m) due to organic cash generation. Underlying operating profits in Nanotechnology fell to £8.2m (£8.6m) on revenues of £101.5m (£93.8m), with Industrial profits returning to a £1m operating profit (loss £1.3m) on revenues down to £71m (£75.1m) with Service revenues increasing to £39m (£37.6m) but with operating profits lower at £5.5m (£5.8m). However a major swing was a move from loss of £9.3m on derivative instruments to a gain of £10.7m. The order book grew to £102m, though excluding the large ITE order, the underlying position still increased by £5.4m. Rationalisation savings boosted the year by some £9m, with a further £4m to be seen this year. Growth of some 15% would imply underlying PBT around £13.7m, or EPS of some 20.4p, putting the group on a prospective PER of 13.2x with a yield of 3.1% (based on a held DPS). We see some upside to around 15x over the year, suggesting a price target of 306p, just sufficient to maintain the BUY.
Serabi Mining (LON:SRB) (SRB, 1.375p, £4.51m) the federal environmental agency (IBAMA) has suspended mining at Palito (limited open pit mining of the surface oxides). The operator has been found non-compliant with 2 terms of its license; failing to submit on time its ‘Cadastro ambiante (environmental) rural’ & monitoring programme of flora and fauna. The underground mine remains on care & maintenance. Planning for the exploration programme is unaffected for now. The company is appealing the decision, it had been dealing with SEMA (an offshoot of IBAMA) on an informal basis but IBAMA has overriding responsibility. Very disappointing newsflow, the company is expecting to be able to lift the suspension in relatively short order but a decision on the fine is likely to take longer. IBAMA has proposed a fine amounting to c. $2m, hugely material to Serabi
(it had $4m cash in hand at Y/E & was expending c. $1.5m though we were expecting expenditure to ramp this year). We cut to HOLD in light of increased risk & uncertainty.
Sopheon (LON:SPE) (SPE, 7.75p, £11.28m) - The AGM update. The company has secured 14 new & extension license orders since the start of the year. Total licensed customers now number 173 with annual recurring revenues at £3.9m. FY contacted revenue visibility now £6.0m.This group is cautiously optimistic of the market & may exceed last year’s first half depending on several prospect opportunities which have the potential to fall in Q2, but this suggests some slippage is possible. HOLD
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