Hybridan Small Cap Wrap: Axis Shield on the defensive, Boomerang JV to bring better returns, Cello in tune with forecasts and sparkling valuation for Stellar

This week: Axis Shield on the defensive, Boomerang JV to bring better returns, Cello in tune with forecasts and sparkling valuation for Stellar 

The FTSE 100 fared well during the middle of last week rising 50 points, but closed at similar levels to the week’s opening, whilst the AIM All Share increased by some 0.9%. The Greek debt crisis was helped by news that European banks were planning to club together to potentially allow Greece more time to repay its debts, but there was fresh worry in the form of the crisis potentially focusing attention again on Italy and Spain. Further, UK CPI inflation fell to 4.2 per cent in June, which was widely forecasted to hold at 4.5%, and interest rates continued at the 0.5% level they have been for the last 27 months. The week ahead sees unemployment figures released on Wednesday, US inflation figures and a BoE report on its programme of quantitative easing.

Activity on AIM- an update

Following our recent “Activity on AIM” comment market activity has continued in line with the trends outlined. The month of June saw thirteen companies admitted to the market of which nine came from the UK and four from overseas. During the same period eighteen companies left AIM, although three of those left the junior market to move to the main list Allied Gold Mining (ALD 192.5p/£384.93m), Cape (CIU 574.5p/£678.34m) and Park Plaza (PPH 294.5p/£123.15m).

This month has already seen the arrival of Smart Metering Systems (SMS 75p/£62.5m) and Waterlogic (WTL 158p/£122.62m) on AIM with a third, Bayfield Bayfield Energy a successful fundraise of £54.4m and admission to AIM next week. Last week Smart Metering Systems a provider of gas infrastructure connection services to the UK’s key gas suppliers, raised £10m of new investment at 60p per share (valuing the company at admission at £50m) and has seen its price rise to 75p per share. At the beginning of this week, Waterlogic, a leading manufacturer and distributor of point-of-use drinking water systems, announced it had raised £48.5m from institutional investors giving it a market capitalisation at admission of £112.5m.

The IPO momentum looks likely to continue through July but the professional advisers, having seen blips of activity before, remain cautious, even bearish. At a recent conference of nominated advisers, more than 40 per cent of those present thought that the number of companies on AIM could continue to fall from 1,151 - and bottom out at fewer than 1,000. 

Angel Mining (LON:ANGM) (ANGM 2.12p/£16.02m)

Angel Mining, a gold and zinc/lead mining company with two active projects in Greenland, provided an operational update last week in which it announced that further to its first successful gold pour at Nalanuq; a second one has now been completed, producing a dore bar of 1.2 kilograms. However, it was unable to measure the gold content of ore, carbon or tailings due to the failure of its atomic absorption machine which is used for measurement, but it is expected to be back in action within the next two weeks. In the meantime, the Company will continue to process ore within the plant and, thereby, increase the gold content resident within the carbon inside the plant. Furthermore, the team on site is completing a further assessment of the resource at Nalunaq having recently discovered what the directors believe is additional high grade ore that may be capable of being extracted from the old workings in the mine. We last wrote on Angel in June when the Company raised circa £2.2mbefore expenses to fund the construction of the cable car connecting the mine entrance to the mine camp at the Black Angel zinc/lead mine, expand production at the Nalunaq gold mine, and provide capital for the Company. Angel Mining and Socius also agreed to terminate the second tranche of the medium term note programme for £3.0m. The Company appears to be well positioned to further its projects.

Ark Therapeutics (LON:AKT) Group (AKT 4.88p/£10.2m)

Ark announced that it has been awarded a grant of up to €0.4m from the Finnish Funding Agency for Technology and Innovation to support the further development of Ark's proprietary lentiviral vector production technology using baculoviruses to achieve the scale and GMP quality required for clinical use. Ark has also been awarded €0.2m grant from the Finnish governmental organization Centre for Economic Development, Transport and the Environment to progress validation work in its GMP3 manufacturing facility in Kuopio. Ark also announced that Nature's Gene Therapy journal has published in its June issue a paper describing Ark's latest advances in world leading Baculo-lentiviral vector production technology. Professor Seppo Yla-Herttuala, Ark's Consultant Director of Molecular Medicine and the current President of the European Society of Gene and Cell Therapy, commented: "The TEKES and ELY-centre grants and the Baculo-lentiviral publication further demonstrate Ark's international reputation as a world-leader in gene-based medicines and its pre-eminence in biotherapeutic and viral based manufacturing founded on Ark's unrivalled viral manufacturing expertise. We look forward to announcing further progress in this area in due course."

Axis Shield (ASD 496p £247.99m)

Alere Inc., a medical diagnostics company listed on the New York Stock Exchange with a market capitalisation of c US$3.2bn, announced last week that it had made an indicative proposal to acquire Axis-Shield, the international in vitro diagnostics Company by way of a cash offer of 460p per ordinary share .This offer represents a premium of 37 per cent to the Axis Shield share price on the day preceding the announcement and values Axis-Shield at approximately £230m. The board of Axis Shield confirmed that it had rejected the approach on the basis that it “fundamentally undervalued the Company and its future prospects”. The Axis Shield share price spiked to 496p in response and we await further developments with interest.

 

Bloomsbury Publishing (LON:BMY) (BMY 122p/£90.5m)

Yesterday, the publisher for the Harry Potter series announced that it had acquired Continuum for a total cash consideration of £20.1m from Nova/Paul Investments Capital and management shareholders. Continuum, which is based in New York and London, is an international academic and professional publisher with a small trade list. It has world class academic lists, some of which date back over 170 years and include a number of the most distinguished international authors in the humanities and social sciences; including Karl Barth, Martin Heidegger, Pope Benedict XVI, the Archbishop of Canterbury Rowan Williams, Chief Rabbi Jonathan Sacks and Alain Badiou. The Continuum lists are highly complementary to Bloomsbury's existing academic lists, offering the Company the ability to improve revenue momentum within its Academic & Professional division, especially in the key US market, as well as opportunities for material cost synergies. Earlier this year, Continuum was awarded Independent Publishers' Group Publisher of the Year 2011 and Academic & Professional Publisher of the Year. Continuum is forecasting EBITA of £0.6m for the year ended 30 June 2011 on turnover of £10.7m. Bloomsbury has identified potential cost synergies in excess of £1m in the first full year of combined operation. In the year ended 30 June 2010 Continuum reported a loss before taxation of £1.2m and turnover was £10.6m. Bloomsbury's strategy has been to increase its proportion of academic and professional revenues compared to trade revenues through retail channels. Academic revenues are more predictable and have lower related costs of sale with resulting higher margins, and are much less reliant on retail bookshop sales. Around 60 per cent of Continuum's sales are outside the UK, thereby increasing Bloomsbury's exposure to the global book market. Through this acquisition, Bloomsbury will have an academic editorial and marketing team in the US.

Boomerang Plus (LON:BOOM) (BOOM 55.5p/£4.95m)

Boomerang Plus, an AIM listed media group, announced a Joint Investment into a Welsh classical music agency, Harlequin Agency, alongside one of its artists, Bryn Terfel. Boom Talent is Boomerang’s existing agency, which will widen the scope of the new venture to include actors and presenters alongside classical singers, accompanists, conductors and West-End stars. The new Joint Venture will be 50 per cent owned by Boomerang and 50 per cent by Bryn Terfel. Harlequin Agency was established in Cardiff in 1986 by its Managing Director, Doreen O'Neill, whose main aim was to nurture young talent in Wales. It currently represents more than twenty-five artists including the world's finest bass baritone, Bryn Terfel, international tenor, Gwyn Hughes Jones, singer, presenter and actress, Shan Cothi, The Three Welsh Tenors, mezzo-soprano, Leah-Marian Jones, and West-End Star, John Owen-Jones. This comes after news in June that the Company acquired the trade and certain assets and liabilities of Oxford Scientific Limited, a London based BAFTA & Emmy award winning Production Company focused on history and science programs, for a cash consideration of circa £516k. Both acquisitions demonstrate Boomerang’s intention to take advantage of the opportunities in this space and help expand the business geographically and in terms of product offering.

Cello (LON:CLL) Group (CLL 36p/£28.18m)

Cello Group, the independent insight and strategic marketing group, is quickly developing into a global research and consulting business, and it also has a focus on the pharmaceutical sector amongst with other international, high margin client sectors. The group has traded in line with the Board’s expectations for the first six months of the financial year. With more than five per cent growth in headline profits before tax, the group has concurrently accelerated the expansion of its international presence in New York, San Francisco, Philadelphia, Singapore, and Basel. Cello Group continues to focus on digital innovation, with the eVillage product seeing strong revenue growth and receiving industry-wide recognition; and E-Luminate showing good client uptake. CEO Mark Scott is confident that the focus on innovation, especially in social media based research, will be the strategy that will deliver strong shareholder growth.

Chamberlin (LON:CMH) (CMH 138p/£10.26m)

Chamberlin, the specialist engineering group, last week announced that it had raised £500,000 through a placing of new shares to a new institutional investor a t a premium of 8 per cent to the market share price. The proceeds of the placing will be used to support the Company’s strategy to deliver growth via acquisitions as well as organically – a number of which it has already identified.

Highams Systems Services (LON:HSS) (HSS 3.12p/£2.16m)

Highams Systems, a recruitment agency and niche provider of technology, business and professional services to the insurance and financial services sectors, announced full year results showing an increase of 131 per cent in annual profits on revenues of £9m, from £7.5m a year earlier. This is a remarkable turnaround from 2 ½ years ago when a fund raise was needed to save the Company from collapse. It is already considering resuming paying dividends. Its main focus is in the temporary or contractor market which accounts for around 65 per cent of the business and is the area in which the Company wants to grow. The Company is considering re-opening a London office, possibly by way of acquisition, if appropriate. The Company has a very good record with permanent placements with 83 per cent of candidates placed still in their jobs two years later. That kind of ‘stickiness’ clearly also applies to Highams own employees, with the consultants averaging fifteen years with the Company and some exceeding twenty years. It certainly seems that the recent ‘dark days’ are well behind them now.

Max Petroleum (LON:MXP) (MXP 14p/£129.23m)

The oil and gas exploration and development Company, focused on Kazakhstan, announced that it has begun testing the ZMA-ET1 appraisal well in the Zhana Makat Field , successfully flowing 47 degree API oil at an equivalent rate of approximately 1,200 barrels of oil per day (bopd) from perforations in a Triassic reservoir from depths of 1,282 to 1,288 metres during a five hour flow-back period. The well will be connected to temporary production facilities later this week and brought onto production. The Company expects the well to produce at a stabilised rate of between 500 and 1,000 bopd. Completion and testing of the ZMA-ET2 well is expected to begin shortly, with production beginning in the next few weeks. Both wells will initially be placed on test production, pending confirmation of reserves necessary for future inclusion in Zhana Makat’s full field development programme.

Ncc (LON:NCC) (NCC 653.5p/£222.61m)

NCC Group, the Escrow and Assurance services business, provided preliminary results for the year to 31 May 2011. Group revenue improved 49 per cent to £71m, and adjusted profits were up 21 per cent to £17.3m. The Escrow business acquired Escrow Associates LLC, a complementary business in Georgia which helped increase its US presence and boosted Group Escrow revenue by some 8 per cent, whilst the assurance business exhibited 17 per cent growth and also built its US position through an acquisition (iSEC Partners). Interestingly, the Company forecasts that Group Escrow renewals are to increase by 12 per cent to £17m, whilst the Assurance Testing order book and renewals are up 23 per cent to £22.6m for 2011/2012. During the interims, the Company stated that there was a surge in demand for NCC’s services following the high-profile attacks associated with the Wikileaks website. Given the rise of malicious and illegal activities across the internet, NCC continues to believe that there will be considerable opportunities for the Assurance testing division, which could be the key driving force behind NCC’s growth.

Ovoca Gold (LON:OVG) (OVG 30.125p/£26.6m)

In an update the Russian gold mining company has announced a fresh mineral resource estimation for the Olcha Project. At a gold cut-off-grade of 1.0 g/t Olcha contains 9.2 Mt of Inferred Mineral Resources at an average gold grade of 2.20 g/t for a gold content of 650,000 ounces gold. Additionally the Inferred Mineral Resource includes an average silver grade of 12.12 g/t for a silver content of 3.59mn ounces silver.

Plexus (LON:POS) Holdings (POS 61p/£48.91m)

The oil services company has made an agreement with Niko Resources (Trinidad and Tobago) to supply the POS-GRIP 10,000 psi wellhead equipment with mudline suspension systems for use on initially three and potentially ten oil exploration wells offshore Trinidad. This contract is worth between £1m and £3.25m and revenues are expected to start in the third quarter.

Plexus, who also recently signed contracts with Centrica and Statoil, is clearly benefitting from an increased awareness and demand in the oil and gas exploration industry for safer and improved operating practices post the Gulf of Mexico incident.

Rockhopper (LON:RKH) Exploration (RKH 243.25p/£627.93m)

A North Falkland Basin oil and gas exploration Company, Rockhopper has announced that it has entered into a further assignment agreement to secure an additional well slot on the Ocean Guardian drilling rig. Also, RKH will shortly drill well 14/10-6, its third appraisal well on the Sea Lion feature, followed by an additional three wells in succession.

Serabi Mining (LON:SRB) (SRB 30.62p/£19.59m)

The Brazilian focused gold exploration Company yesterday announced further results from its ongoing Phase 1 discovery drilling campaign from the Currutela prospect at the 100 per cent owned Jardim do Ouro project in the Tapajos region. Assay results have been received for a further five completed holes on the target. Drilling continues to intersect multiple zones of hydrothermally altered granite, similar to previously reported Currutela intercepts and to those hosting mineralisation at the Palito gold deposit along strike. We should see further results from the rest of the Currutela drill programme, which will be forthcoming over the next month. The share price rose 8 per cent on the news.

Service Power Technologies (SVR 11.75p/£22.27m)

AIM listed market leader in outsourced services and field management today gave an update on trading for the six month period ended 30 June 2011. The Company has enjoyed strong trading during the period and expects to report results for the six months ahead of expectations. Revenue for the half is expected to be approximately £6.0m; EBITDA approximately £1.0m and profit before tax in excess of £0.8m. The Company's net cash position is expected to have improved to £3.9m (31 December 2010, £3.7m). This strong level of trading combined with a healthy pipeline of prospects for the second half of the year mean the Board expects EBITDA for the year ending 31 December 2011 to be ahead of current market expectations. In addition, the increase in new business opportunities combined with the increasing level of multi-year contracts being secured has resulted in a greater level of revenue visibility for subsequent years providing further confidence in the Company's business model. The pipeline continues to bear fruit for the Company and it won several contracts in the period, including Steritech, one of the largest outsourced food safety and quality assurance companies in the US, and HomeServe, the international home emergency repairs business; an unnamed North American leading home appliance retailer; RicherSounds, the UK's hi-fi, home cinema and flat panel TV's specialist retailer; and, a transformational contract potentially worth £12.5m. The final contract listed above was the first to be won in partnership with Assurant Solutions, one of the world's leading speciality insurance providers, demonstrating the early success of this licence and revenue share partnership agreement signed earlier in the period.

Stellar Diamonds (LON:STEL) (STEL 6.38p/£13.82m)

Stellar Diamonds, the diamond mining and exploration Company focused on West Africa, has updated on its Tongo Dyke project located in eastern Sierra Leone. The Company said that the valuation of the first parcel of diamonds, 639 carats, exported from Tongo is excellent at an average $191 per carat. The parcel comprised predominantly gem quality stones and the valuation suggests that the project has a potential in-situ kimberlite value of $209 per ton. With over 80 per cent of the phase 1 surface bulk sampling programme completed, a 6,000m drilling programme will commence in August, with the objective of defining an initial inferred resource on Dyke 1 to a depth of at least 200m. We look forward to the Company providing further updates on progress of this programme.

Sunrise Resources (LON:SRES) (SRES 2.8p/£8.74m)

Sunrise Resources, a mineral exploration Company, has announced that, following the completion of a positive concept study for the development of an underground mine; it has now commenced a drilling program at its Derryginagh Barite Project in south-west Ireland. Eight diamond drill holes have been planned to test the main vein system over a strike length of 500 meters and to a depth of up to 150 meters. The drilling, which is aimed at the definition of a JORC Mineral Resource, is expected to last about six weeks and results should be available approximately six weeks after completion of the drilling.

Toumaz (LON:TMZ) Technologu (TMZ 8p/£50.36m)

Toumaz, a pioneer in low cost, ultra low power wireless communications technology, announced this week that the Sensium disposable digital plaster has received 510(K) approval from the US FDA. The company expects the initial launch of the product into hospitals in the US to take place as planned, before the end of the year. The company then announced separately that it had established a new joint venture with California Capital Equity LLC to continue the development, commercialisation and distribution of the Sensium plaster in the US under which CCE will fund the joint venture over the next two years with up to $25m.

Victoria Oil and Gas (VOG 4.35p/£93.04m)

The AIM quoted oil and gas exploration and development Company with assets in Cameroon, gave an update on its appraisal and delineation programme in the West Medvezhye, (West Med) oil, gas and condensate licence area in Russia. VOG's wholly owned subsidiary, ZAO SeverGas-Invest holds a twenty-year Exploitation Licence for West Med covering 1,224 sq km. West Med is located in one of the most prolific oil and gas producing areas of the world and is adjacent to Gazprom's giant Medvezhye field that has already produced over 70 trillion cubic feet of gas. Whilst VOG's principal focus has been the development and commencement of gas and condensate production at Logbaba in Cameroon which is scheduled for Q4 2011, SGI's technical team and consultants have been utilising this time to acquire data and to carry out integrated multi-discipline studies in West Med. Initial studies have highlighted that an early production scheme of the Well 103 discovery could involve the sale of small volumes of crude into the local market with prices of US$60 per barrel achievable. The results of preliminary development assessment work on the Well 103 discovery indicate first oil sales in 2015 subject to further refinement and screening.

Wasabi Energy (LON:WAS) (WAS 2.78p/£60.91m)

Last week, WAS gave a trading update to the markets and said that it has further developed the Kalina Cycle technology in Asia, including the commencement of a Kalina Cycle Laboratory and Testing Facility in Shanghai by Chinese licensee Shanghai Shenghe New Energy Resources Science and Technology Co. Ltd SSNE; has had success with various engineering milestones for the Khairpur Kalina Cycle Power Plant in Pakistan with delivery progressing as scheduled for commissioning in Q1 2012; and has advanced its Build Own Operate (BOO) strategy for the Kalina Cycle power plants including the recent announcement of a 4.5MW power plant in Taufkirchen, Germany with Geysir and the Swiss utility AXPO and the 2.0 MW power plant in Husavik, Iceland. Over ten initial waste heat to power projects have been identified in the cement and lime industries by its new Kalina Cycle licensee FLSmidth, a leading EPC provider to that industry. The Company is in discussions with major industrial groups in the steel and petrochemical sectors for BOO waste heat to power Kalina Cycle plants (including a 20MW project currently under review) and has accelerated the commercial roll-out of the AquaArmour product following Aqua Guardian Group's JV with Srithai for water conservation in South-East Asia. John Byrne, Executive Chairman of Wasabi, commented: ‘Overall we are well positioned in the green technology sector with products that provide significant benefits globally through greenhouse gas reductions and water conservation.’

*A corporate client of Hybridan LLP