Hybridan Small Cap Wrap featuring Torotrak, Tangent and Tyratech

This week: On track with Torotrak, a chipper chairman at the Tangent AGM, and TyraTech harnesses Natural Forces

Bglobal (BGBL, 24.0 p / £17.4m)

We have reported good news for this market-leading provider of smart metering services to the UK energy market over the past month. This week Bglobal announced that it is helping Vodafone to cut carbon emissions and reduce energy costs by at least £2m a year, through the installation of smart meters at base station sites in the UK. Real-time data from Bglobal's smart meters enables Vodafone to monitor and reduce energy consumption and cut costs and carbon emissions. Bglobal’s share price has tracked sideways over the past week, but has nearly trebled in the time we have been writing on this share (since 2nd July 2009).

Ceres Power Holdings (CWR, 215.8 p / £151.0m)

Fuel cell Company Ceres yesterday announced that it had completed the fit out of its mass manufacturing facility, and its share price rose by 5 per cent on the announcement. Ceres said an initial manufacturing line will be commissioned during Q3 2009 and manufacturing operations will commence during Q4 2009 for field trials under the contract with British Gas. Ceres is gearing up for volume launch with British Gas in 2011 and also with Calor Gas and EDF Energy. This news is further evidence that it is moving into the next phase of development with British Gas. Chief executive Peter Bance said: ‘Our residential CHP products have the potential to make a major contribution to reducing carbon emissions.’ We see Ceres as having the potential to be one of the fuel cell winners as it heads towards making this area of renewable energy a reality. We last wrote on Ceres on 26th June, when it received a £2m payment from British Gas. Its share price is up 10 per cent since then.

Filtronic (FTC, 34.0p / £24.5m)

Filtronic has been through quite a bit recently, having sold off three of its four divisions for £120m. This leaves the company today as the leading independent supplier of microwave components used in mobile phone networks. These components constitute the “backhaul” from the base station and transmit voice and data traffic point to point. The long-term prospects for this business look good, as the increasing use of smart phones requires the mobile network operators to invest in cost-efficient backhaul infrastructure, and particularly the microwave connections used by these base stations. As Filtronic is the leading independent supplier of these microwave components to the OEMs (such as Nokia, Ericsson and NEC) it is well placed to take advantage of these longer-term trends. However, in the short term the market has been plagued by de-stocking and demand contraction, particularly in Asia, and revenues fell from £40m last year to £29m this year. But an aggressive cost- cutting programme led to operating profits improving from a loss of £26m last year to a positive £2m this year, while the company still has £16m cash on the balance sheet. Nevertheless, the company indicated that its short-term trading prospects were still “subdued” so it can’t (micro) wave goodbye to its problems just yet.

Imaginatik (IMTK, 6.0p / £8.0m)

The group that builds software to help companies generate strategic business concepts has seen a slow start to the new financial year. But, at the AGM, the chairman, Howard Marshall said it had nonetheless secured some good client wins, including Siemens and BAE Systems. And he was optimistic about Imaginatik’s sales pipeline and expects another year of revenue growth. It’s not hard to imagine further upside for Imaginatik.

Motive TV (MTV, 0.3p / £1.6m)

Motive TV, whose portfolio of TV production interests includes ‘How Not to Live Your Life’ (which appeared on BBC2) and ‘My Dad: The Serial Killer’ (Channel 4), is now turning its hand to set-top boxes. An announcement today said it had secured the global rights from Spanish technology developer Adecq Digital to distribute its BesTV digital terrestrial technology (DTT) to broadcasters worldwide. In the UK, this DTT set-top box will operate as an enhancement to the Freeview box, offering catch-up television and video-on-demand (including popular movies) in addition to the full range of DTT channels. Interestingly, it will do so without an internet connection and without purchasers having to pay for broadband, cable or satellite subscriptions, making this an extremely easy option for consumers. The shares rose by 54 per cent to 0.5p on the day of the announcement, and could well move further north if BesTV gets traction. You could call that boxing clever.

Sigma Capital Group (SGM, 14.0p / £6.6m)

Sigma Capital announced that its PLUS-quoted subsidiary, Frontier IP Group, has established a dedicated private equity fund for investment in intellectual property developed by Robert Gordon University, Aberdeen. The investors in the fund, named RGU Ventures Investment Fund LP, are Frontier (for £300,000) and Robert Gordon University (for £800,000). The RGU Fund will help accelerate the development of commercial opportunities emerging from Robert Gordon University's research programmes, and RGU has the first right to fund any spin-out companies from the institution. The fund will consider any sector where there is a clear and defensible intellectual property base and its portfolio is expected to be broadly spread across a range of technology and life sciences companies. As any expected benefits should be shared with long-suffering taxpayers, a certain other Gordon should be happy too.
Tangent (TNG, 5.1p / £8.7m)

Chairman Piers Caldecote was in chipper mood at Tuesday’s AGM, and with good reason: he announced that trading in the first four months of the financial year was ahead of expectations, and that net cash remained above £2m. That’s an impressive result given that Tangent largely provides marketing services to B2C businesses facing a consumer downturn. And the shares reacted accordingly, increasing by 13 per cent on the news. However, it was the comments on Tangent’s property related business that particularly piqued our interest. Mr Caldecote said the number of estate agency branches using Tangent’s print and design services rose by a staggering 37 per cent in the last seven months and that ‘we are beginning to see a recovery in unit order levels from these clients’. What’s interesting here is that the property related business has high fixed costs (related to its printing facilities). And this means that, if property revenues rise, much of these additional sales will flow down to the profit line, as the costs won’t rise proportionately. And when profits tick upwards so, more often than not, does the share price.

Tarsus (TRS, 110.0p / £66.1m)

B2B events business Tarsus is benefiting from its work in emerging markets. While performance was resilient in the US and poor in France, emerging markets rocketed, driving a 5 per cent rise in organic revenue in the six months to 30 June and suggesting attractive prospects for the future. Moreover, the group is supported by good visibility. Indeed, at its larger events, 60-80 per cent of attendees sign up at the end of the previous function and contracted revenues for 2009 already stand at 86 per cent of management’s expectations for the full year, reflecting the ‘must-have’ nature of events such as November’s Dubai Airshow and September’s Modamont trade fashion do. Furthermore, despite a difficult February, Tarsus saw strong sales in June and July. But some of the group’s smaller functions took a hit, especially in France, prompting chief executive Douglas Emslie to ruefully announce at the analysts’ briefing: ‘There’s not even green shoots in France.’ Well, C’est la vie.

Torotrak (TRK, 24.3 / £38.2m)

Many companies dream of stepping up a gear. Torotrak dreams of replacing gears – with its infinitely variable transmission systems. Currently these are used in outdoor power equipment (such as large sit-on lawnmowers and tractors) with plans in place to attack the automotive, commercial and electric hybrid markets. Advantages of the Torotrak system include optimising engine efficiency and economy and a refined drive. The company derives licensing revenues from its technology as well as sales revenues through joint ventures. Torotrak said first-quarter trading was in line with market expectations and that its second- half order book is looking strong. Importantly, the company said it is close to achieving breakeven at the post-tax level. Less positive was news that the anticipated launch in the third quarter of the outdoor power equipment’s second product remained challenging. But with a strong balance sheet (cash was last reported to be about £15m) the 10 per cent share price fall looks overdone.

TyraTech (TYR, 40.0p / £8.7m)

This novel eco-technology company for human, animal and environmental health said it has an agreement with Natural Forces LLC, which plans to market and sell co-branded TyraTech Natures Technology insecticide and repellent products into the US mushroom production and processing markets. The share price, like a mushroom in the dark, didn’t react on the day of the announcement. There has been some share price appreciation in the past three months, but it started to tail off after a profit warning over the failure of its Indian partner to ramp up sales. At any rate it is a long way from the lofty heights of 290p this time last year. TyraTech was formed in 2004 to develop and commercialise products for the control of invertebrate pests and pathogens, using the company's proprietary technology. A great alternative in this space is Plant Impact (PIM, 26 p / £6.9m)* a developer of plant stress management technologies, and crop protection (BugOil, nematicide) products. Plant Impact recently signed a 20-year global licensing deal with Arysta LifeScience for its benign BugOil pesticide. This share would look attractive on any weakness: Plant Impact has a long way to go and we believe it will be the one making the most impact in this sector.

*A corporate client of Hybridan LLP