Hybridan Small Cap Wrap - Autoclenz cleans up, ValiRx targets Chlamydia and we’re loving Angel (Biotech) instead

 Angel Biotechnology Holdings (ABH 0.1825p / £3.8m)

 Angel, the contract manufacturer, providing extremely high grade materials for the biotechnology industry, has announced another contract win with the large Russian pharma, Materia Medica.

 Whilst this contract for £330,000 isn’t a huge contract compared to the size of previous Materia Medica wins (regularly over £1m) it is for regulatory consultancy. This follows on from the first signing in January for this type of work. It is validation of expertise Angel have, not only in supplying the advanced biologics but also in the complex regulatory procedures involved with these materials and the ability of the team to assist their clients throughout the whole process. The consultancy work relates to the regulatory process connected to specific antibodies that Angel is delivering to Materia Medica.

 This Company is now well funded since it’s placing in February, with the cash available for expansion and clear demonstration of it’s ability to keep pulling in contracts. It is surely an anomaly that the share price continues at these depressed levels, and a fantastic opportunity for investors to top up their holdings.

Autoclenz (ACZ 42.5p / £4.42m)

Autoclenz, the UK's leading provider of outsourced vehicle valeting and specialist cleaning services, gave an update at its AGM that the group is trading in line with budget. Autoclenz expects to at least maintain last year’s level of profitability of £1.4m. The Automotive Services division is recovering, with sales and profitability slightly ahead of budget and the previous year for the first four months to April 2010. The React Specialist Cleaning Services division saw revenues decline by 25 per cent in the same period. The group is reducing the cost base to reflect the decline in revenues but the group has continued to win new contracts although and there are major contracts up for renewal in Q4 2010. With an inevitable squeeze on both public and private expenditure, Autoclenz cannot of course be immune to any new deterioration in economic circumstances. Assuming earnings for 2010 remain flat at 12.5p, the group trades on a P/E ratio of 3.6x, a discount to the support services sector median of 7.4x so giving buyers the chance to clean up at these levels.

Corin Group (LON:CRG) (CRG 57.5p / £24.60m)

Leading manufacturer and supplier of orthopaedic devices last week published an interim management statement for the period from 1 January 2010 to 18 May 2010. Corin has made a steady start to the 2010 financial year, with constant currency sales growth of 6 per cent for the four months ended 30 April 2010. Corin remains in the early stages of rolling out its new cementless hip portfolio, comprising the Trinity acetabular cup, the Metafix hip stem and the innovative Minihip short stem hip.  Progress to date is encouraging; with the launch of the Trinity hip cup at the end of the first quarter going well.  Revenues from this product, which at this stage are predominantly in the UK, are increasing steadily.  The growth in these new cementless hip systems is offsetting a continuing decline in sales of Cormet in the UK.  The recent trend of narrowing patient indication ranges for hip resurfacing, as a result of concerns regarding metal ion reactions in a small proportion of patients, has continued. Corin’s operations in Australia have performed particularly well, led by the continued success of the LARS product. However, trading has been weak in Corin’s German business, where growth in Minihip sales is being outweighed by declining revenues from the existing product portfolio.   Sales to Stryker for the first four months of 2010 have been in line with the Board’s expectations. Corin has had a few spikes in its price, notably last October to 88 pence, but has been on the whole pretty range bound in the 50 pence range from the heady heights of £2.40 two years ago. With six analysts covering the share, only one is a BUY, having recently moved their recommendation from a Hold, whilst another three are effectively saying it is fairly valued. It strikes us as good news that the company is confident that three new hip products can drive sales growth, and with Corin making significant sales in Japan and Australia, and both the yen and the Australian dollar likely to strengthen against sterling this year, we would see this as another boost to the top line. It would appear that what Corin has going for it could get it back to the 80 pence level.

FFastfill (LON:FFA) (FFA 7.375p / £29.28m)

Ffastfill another software and services provider to the global financial community released it full year results which were marginally ahead of expectations. Revenue was £14.3m (£14.4m); EBITDA up 82 per cent to £3.1m (£1.7m); PBT £1.2m (£441k); EPS 0.28 (0.11p); Net cash from operating activities £3.3m (£0.9m); net balance sheet cash  £2.4m (£1.5m). The SaaS business model is performing strongly with SaaS revenue up 15 per cent to £10.5m (£9.1m). SaaS now represents 74 per cent of revenue (64 per cent) with a 12 month order book of £10.7m (£10.3m). Good progress for the company which for now seems fairly reflected in the price at 27x P/E this year just gone and a forward P/E of just under 13x. The business has clearly reached critical mass with a solid set of recurring revenues on which it is building fast.

First Derivatives Plc (LON:FDP) (FDP 292.5p/ £42.27m)

The global service provider in the capital markets technology sector with offices in New York, London and Ireland, released its final results to February 2010 which saw a 45 per cent increase in turnover to £25.48m (£17.55m), PBT of £5.65m (£4.46m), EPS of 25.8p (22.2p) and a final DPS of 2.75p which added to the interim DPS of 6.75p gives a full year DPS of 9.5p (9p). Sales were driven by growth in the second half from delta product sales and in consultancy which responded to a major recruitment drive in Summer 2009. During the period the group made four acquisitions, Hologram in April 2009 that enhanced the service provision in the Asia Pacific Region, in October 2009 a further 17 per cent in KX systems (to 22 per cent), Reference Data Factory in October which extended the group’s data management expertise and in February 2010 the business and assets of Cognotec. Net assets also increased to £16.31m (£11.27m).  The group has reported a strong start to the current year. The group announced three further delta contracts worth in excess of $1m annually from three leading financial institutions in the UK and North America. Analysts see a 10 per cent upside on the current share price, so first in line will get the stock.

 Future Group (FUTR 18.5p/£60.66m)

Future Group, the specialist magazine publisher, released its interim results to March 2010 which saw revenues of £71.4m (£76.6m) with underlying PBT of 3.6m (£3.2m) and adjusted EPS of 0.7p (0.6p). The group increased the interim DPS to 0.5p (0.4p), underlying healthy cash generation that has seen net debt fall to £11.5m. A key improvement was from the US operations returning to profits on revenues down 10 per cent with an ongoing robust performance from the UK where revenues fell 3 per cent. Encouragingly the advertising revenue trends have continued into the third quarter. A key feature of the first half was the absence of any major drivers for the gaming industry – which limited the magazine potential, but the outlook in terms of games and new peripherals suggests a stronger H2 should be expected. The stock is trading on a P/E of 10.5x which is at a discount of about 25 per cent to the media sector generally. 

Image Scan Holdings (IGE 2p / £1.23M)

Image Scan, specialists in the field of real-time 3D and 2D x-ray imaging for the 'Homeland Security' and 'Industrial Inspection' markets, reported interims to March 2010 saw revenues increase to £0.92m (£0.74m) with improved gross margins of 54 per cent (44 per cent) with lower overheads of £0.60m (£0.70m) leading to a substantially reduced loss before tax of £0.11m (Loss £0.36m). Net cash ended at £0.64m (£0.93m) after a placing of 5.5m shares at 2p which raised £0.11m in March 2010, so cash usage since the year end was some £0.21m from the year end though that does include £20,000 savings costs, a £33,000 cost of the office relocation and an increase in demonstrator systems to support the sales push. The group is expanding both sales channels while strengthening direct sales by appointing a UK sales manager. The group benefited from the reduction in build cost programme on its standard security system. The largest sector, Security, accounted for 85 per cent of group revenues and grew 48 per cent against the comparable period, boosted by sales of the portable FlatScan-TPXi. Industrial remains depressed but with some signs of renewed interest. The group seems to be getting good traction in its markets and appears well managed.

Immupharma (LON:IMM) (IMM 79.5p/ £64.47m)

Since our recent comment on Immupharma it has released both its results for the year to 31 December 2009 and an announcement of the approval by the French authorities to initiate Phase I/IIa studies in patients for the very promising oncology drug IPP-204106.

Briefly on the latter, this positive news supports the Company’s high expectations for this drug and that it should command increased interest from both clinicians and investors alike. The pre-clinical studies comprised breast cancer, prostate cancer, melanoma, glioblastoma (common and aggressive form of brain tumour) leukaemia, colon cancer and pancreatic cancer.

Regarding the results, the major elements include a yearend cash balance of £22.5m; revenue of £22m; and fully diluted EPS of 10.0p (6.1p). As stated previously, Cephalon has paid the Company $45m ($15m option payment in November 2008 and $30m license fee) for the exclusive worldwide rights to Lupuzor. In addition, Cephalon is responsible for all future costs (including the forthcoming Phase III trials, regulatory filings and commercialization and sale of the product). IMM pays a 15% royalty to the Centre Nationale de la Recherche Scientifique (CNRS) on revenues from the exploitation of Lupuzor.

If we wanted to nitpick on the numbers, it would only be that the CNRS royalty on the $15m Cephalon option payment was expensed in 2009 and not as it would be expected in 2008.

We continue to recommend investors follow this exciting company.

Scientific Digital Imaging ( 22p / £3.96m)

AIM Listed Company in the digital imaging technology market last week gave an update on trading following its financial year-end of 30 April 2010. It reported that the Group has performed broadly as anticipated and that the results for the year will show trading profits a little ahead of market expectations, in part due to better than expected performance at Atik and from Synoptics in the US. SDI  also announced the appointment of Mike Creedon to its Board as Chief Financial Officer. Mike has served as Finance Director at Innovision Limited, Ninth Floor plc, Ideal Shopping Direct (LON:IDS) plc, and at Nextgen Group (LON:NGG) plc, and CFO at Durham Scientific Crystals Limited. It would appear Mike is no stranger to the life sciences and technology market places.

Scientific Digital Imaging has a strong brand in a number of different markets, from amateur astronomy cameras to having a 10 per cent share of the gel documentation market, yet at the same time have a myriad of potential applications and markets to penetrate. Its technology does clever things like enhance images taken from microscopes, DNA protein imaging, count bugs on Petri dishes and Syncroscopy – or “deep field imaging”. SDI Group Plc (LON:SDIG) ( has a range of customers from Universities and Research Institutes to Big Pharma companies. It will continue to grow organically or perhaps by acquisition of new technologies or markets, or where it could for instance capture margin. We advocate keeping a close eye on this one.

SeaEnergy (LON:SEA) (SEA 36.25p / £25.05m)

AIM listed off shore Wind Company last week put out an announcement about its developments concerning SeaEnergy Renewables Limited's (SERL) interest in the Inch Cape Offshore Wind Farm (Inch Cape). In February 2009, The Crown Estate awarded the Inch Cape site to a consortium comprised of SERL, SeaEnergy's 80 per cent owned subsidiary, and RWE npower renewables as a part of the Scottish Territorial Waters leasing round conducted by The Crown Estate in association with the Scottish Government. In connection with the site award, the consortium entered into an Exclusivity Agreement with The Crown Estate providing the exclusive right for the consortium to negotiate an agreement for lease (AFL) for a term of 50 years. The Exclusivity Agreement also provided the right to undertake further studies into the feasibility of the 905MW offshore wind farm, 15.5 kilometres east of the Angus coastline. Entry into the AFL is scheduled to follow the completion of a Strategic Environmental Assessment by the Scottish Government which is expected later this year.

RWE npower renewables has notified SERL and The Crown Estate of its desire to exit the Inch Cape project. This is due to the considerable size of its other onshore and offshore renewable generation commitments. The Crown Estate views the Inch Cape project as being important to the delivery of the Scottish Territorial Waters leasing round and to the UK in maintaining the delivery of the Offshore Wind Energy Programme. To demonstrate their joint commitment to the project The Crown Estate and SERL have entered into discussions with the aim of ensuring that the site's development schedule and activities can progress as expeditiously as possible. These discussions are intended to lead to the establishment of a MOU between The Crown Estate and SERL that will provide terms for the delivery of Inch Cape and may increase SERL's interest in the project.

AIM listed off shore wind play has come back a long way since it ran up to the mid-80 pence, with the announcement that it had been awarded acreage by The Crown Estate (Zone 1) to develop offshore wind farms in the Moray Firth, Scotland as part of the UK Round 3 awards last year. The share initially fell on this announcement regarding RWE’s lack of interest, but then has begun to creep back up, hopefully as investors realise that it is a good endorsement that the Crown Estate remain committed to this project and that by the same token SEA could increase its stake in the Inch Cape project. Investors should see these lows as a perfect buying opportunity. 

Serabi Mining (LON:SRB 1.875p / £6.15m)

The northern Brazilian gold miner is on track with its progress at Palito having completed and reviewed the geophysical survey that commenced in March. Having surveyed 14 anomalies the company has identified 9 drill targets. The company is in negotiations with drilling contractors and is on schedule to start drilling in July.

Serabi hopes to be able to identify two or three Palito “look-a-likes” that can be developed concurrently so that they would be feeding into a central processing plant. The “new” Serabi is managing its exploration assets in a considered and rational way and we look forward to hearing about the drilling results late this summer.

Valirx Plc (LON:VAL 0.45p / £1.51m)

The announcement of an additional product to the over the counter Self-Check range brings the Valir-Rx portfolio of retail products in the market to ten.

This new product, which checks for Chlamydia in about 10 minutes at home, comes at a time of increasing rates of Chlamydia in the UK and a government campaign of education about the sexually transmitted infection. When left untreated it can cause infertility in women.

The Valirx Chlamydia kit is expected to be significantly cheaper to the consumer than existing products, which generally involve sending the sample to a lab for analysis and the results being made available a few days later. This clearly gives VAL two significant advantages: being cheaper and giving almost instant results at home.

The Company expect the product to be available to the consumers by Q3 2010.

This latest product launch continues to highlight the diversified risk profile of Valirx Self Check generating revenues now whilst some diagnostic programmes such as GeneICE are funded by European grants alongside the traditional biotech area of drug discovery, where  Valirx has two compounds in pre-clinical studies.

With cash in the bank from the recent fund raise, at only slightly below the current share price, we think now is a great time to invest in this exciting Company.

*A corporate client of Hybridan LLP

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