Hybridan Smallcap Wrap - Tangent on the straight and narrow, Rockhopper bounds ahead and there are no spots on Lipoxen

Amur Minerals Corp (LON:AMC) (5p/ £8.55m)

We write on AIM listed exploration and development company focused on Far East Russia for the first time. Yesterday Amur announced that nickel sulphide mineralisation has been exposed in a road cut located immediately to the south of the Ikenskoe deposit, which is the largest of the three drilled deposits within the Kun Manie exploration licence. The nickel and copper mineralisation is expected to continue to the east and south of the drilled area of the deposit.  During construction of the access road, the projected mineralised zone was exposed and visual inspection indicates the newly exposed outcrop contains abundant sulphides.  Results will be announced once the ore has been tested and the results have been verified by a western certified laboratory. 

The deposit looks large and the more Amur explores, the more it seems to find. This would appear to be one of the biggest nickel sulphide discoveries of the past decade or so. Nickel sulphide deposits are not being found very often and to make up the shortfall lateritic nickel projects are being developed where the costs are much higher. So nickel sulphide seems to be the place to be. The Company caught the attention of the market in August 2009 with its announcement that it had $6.9bn worth of nickel in the ground. At the current price Amur seems to have plenty of upside potential.

Focus Solutions Group (LON:FSG) (42.5p/ £12.59m) 

Focus Solutions Group, a leading provider of software and consultancy solutions to the financial services industry, announced its full year results to 31 March 2010 which saw revenues up to £9.85m (2009: £9.60m) with underlying PBT of £2.38m (2009: £1.88m), EPS 6.88p (2009: 6.03p) and net cash down to £2.4m (£4m) following an R&D spend of £2m on the new focus:360º product line. Apart from a number of notable contracts key events included gaining a US patent which protects the group’s entry into that market and the relationship with Mastek which will see the focus:360 º being marketed across North America, Europe and Asia Pacific regions. The group will address smaller firms with a Software as a Service (SaaS) version. Encouragingly the group restructured its balance sheet, clearing the way from the group to join the dividend list. The market is forecasting PBT this year of around £3m with 7.5p EPS – a prospective PER of 5.4p. 

Lipoxen (LON:LPX) (8.625p/£14.8m)

Lipoxen made an update regarding one of its most important partners (and the third largest shareholder), Baxter.  The two companies have been working together for over three years.  The lead candidate that both sides are progressing through pre-clinical studies utilises Lipoxen’s drug delivery technology combined with Baxter’s proprietary proteins.  Lipoxen’s PolyXen technology makes for more efficient, effective delivery, prolonging the active life and improving the stability of the active protein (Baxter’s half of the partnership).  Specifically in these trials, the programme is for the treatment of haemophilia, to produce a longer lasting form of blood clotting factors.  This is a $5bn market and could result in milestone payments of up to $73m to Lipoxen as the compound progresses through clinical trials and eventually into commercialisation.

The pre-clinical tests are delivering positive results, giving a strong suggestion that Baxter will look to continue the trials into the clinic.  We have recommended this stock before and so it was pleasing to see it up over eleven per cent today on the update.  However, we remain convinced that there is still time to invest in this exciting biotechnology company, following the lead of the management team who have put considerable money in themselves through the last two fundraises in 2009 and 2010.

Milestone Group (LON:MSG) (1.45p/£1.55m)*

The AIM listed provider of digital media and technology solutions last week announced its results for the six months ended 31 March 2010. Importantly revenue has been generated for the first time by the new digital solutions team. The Board has been strengthened with the appointments of Guy van Zwanenberg as FD and Mark Hargreaves as a NED. Since the end of March, Jeff Zie has also joined the team as COO and is leading the sales initiative. MSG is now firmly focused on generating revenue and we believe that this stock is well worth a look now that the turnaround is complete.

Rockhopper Exploration (LON:RKH) (284.5p / £498.4m) 

We last wrote about Rockhopper, the North Falkland Basin oil and gas exploration company, back in February of this year. Since then the company has had the fortune of an oil discovery at its Sea Lion exploration well, which is 100 per cent owned- current estimates of the discovery are that 242 million barrels of oil are recoverable from the well. Last week the company made a placing to raise £48.5m with shares priced at 280 pence, which is intended to be used to further the North Falkland basin campaign through the drilling of an exploration well on its Ernest prospect and flow testing of the Sea Lion exploration well. The company has demonstrated excellent progress since its inception in 2004, and we see this continuing well into the future. Dig deep and hold on to this one. 

Sarantel Group (LON:SLG) (2.75p/£8.0m)

We congratulate Sarantel with the production orders they have received from Inmarsat (LON:ISAT) whose new awesomely cool phone is to be launched later this month.  This is no iPhone rival for the metrosexual; here’s a man-phone that works from anywhere, at any temperature, is dust, splash and shock resistant with a keypad you can use with your gloves on.  Sarantel’s LBS Pro GPS antenna will make sure it works without fuzz.

Serabi Mining (LON:SRB) (1.375p/£4.5m)

The northern Brazilian gold miner has been held to be in non-compliance with two of the terms of its operating licence by the Brazilian federal environmental agency.  The breaches appear to be modest, relating to a late submission and the flora and fauna monitoring programme (or lack thereof).  Nevertheless, the penalties are severe as mining activities have been suspended and a fine of about $2 million has been assessed.  The company is appealing the judgements, but we cannot recommend any action until a resolution has been reached due to the potential body-blow ramifications of the judgements, should they hold up.

Tangent Communications (LON:TNG) (4p/£6.81m)

Tangent Communications, a provider of intelligent marketing and technology, announced its full year results to February 2010 which saw revenues increase to £18.19m (2009: £15.61m) with underlying PBT of £0.82m (2009: £0.92m) and adjusted EPS of 0.38p (2009: 0.35p) due to no tax in the year. The group has recommended a maintained 0.2p dividend and saw net funds at the period end of £1.1m having made a £1.1m spend on acquisitions. The group was disappointed with the performance of its latest acquisition and indicated that its central overhead cost, as a proportion of revenues, remains higher than the group would like suggesting the group continues to be acquisitive. The management team have impressed us in the past and we remain confident of accelerated growth as confidence in the economy returns so we’d recommend investors not veering off on a tangent any time soon. 

Titan Europe (LON:TSW) (38.5p/£31.95m)

Yesterday Titan issued a positive trading update for the first four months of the financial year ending 31 December 2010. Sales for the first 4 months came in at £103m; £10m ahead of management budgets for the same period in 2009. All parts of the Group and all geographic locations are now seeing significant market strengths, including the Agricultural business, which has recovered from a slow start to the year. Despite significant increases in steel prices, margins in the Wheels business remain broadly in-line with management forecasts. In the Undercarriage business, margins which had been impacted by low-volume-inefficiencies are now improving, again in the face of increases in input material prices. The stock reacted well and was up nearly 7 per cent on the day, on the news that management expect Titan to perform ahead of its original budget throughout the year and see a potential outcome for 2010 trading to be ahead of current market expectations. 

*A corporate client of Hybridan LLP

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The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week.  Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.  Our review is not intended to constitute research and is not to be taken as investment advice.