Small Cap Wrap: Month: August 2012

AIM Breakfast - Archive

07 August 2012

This week: ITM powers up, Stellar update from STEL and a colourful update from CYAN.

In the week to Friday, the FTSE 100 saw an increase of 162 points to close the week at 5,785 points, whilst the AIM All share closed the week some 15 points higher at 675. This was perhaps based on positive news in the US, with better than forecasted jobs data (163,000 jobs created in July), though locally news was less positive with a contraction in the Italian economy by 0.7 per cent in the second quarter, subdued retail sales in July (despite the Olympics at the end of the month) rising just 0.1 per cent compared to the year before and manufacturing and service provider sectors contracting in July. The week ahead see the BoE August inflation report, and trade, producer and construction data all being released.

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Disclaimer- This document, which does not constitute research, has been issued by Hybridan LLP for information purposes only- please refer to the disclaimer in full below.

APH Acquisition, CFC Update on Sale of Fuss Feed, CYAN Management Update, EBQ Acquisition, ENRT Acquisition, EHP Pre-Close Trading Update, FIP MedaPhor raises £1m and Nanotether raises £2.2m to launch, GTC New Contract Sale, HAL Interim Results, HCM Interim Results, ITM Placing and new agreement, LID Appointment of Japanese distributor, MTEC Statement Results, MONI JV formed, NAK Preliminary Results, NEW Danica Jutland Project, PMG Results from well, POL Filing of Technical Report, SOG Interim Results, STEL Resource Findings, SUMM Grant up to £150,000, TRT Initial Order from Anglo American, VAL Development Update, WAS Placing And Agreement Signed, SNCL New Site Opening.

Alliance Pharma (LON:APH 27.25p/£65.29m)
Alliance Pharma, the speciality pharmaceutical company, has announced that its wholly-owned subsidiary Alliance Pharmaceuticals Ltd. has acquired the antimalarial brands PaludrineTM, AvloclorTM and SavarineTM from AstraZeneca UK Ltd. The Company expects the acquired products to generate incremental contribution before financing costs of approximately £1.1m per year. Alliance is paying £4.2m as an initial consideration and may pay a further sum over the next three years, which is not expected to exceed £1m, dependent on sales of the brands. The initial consideration is being funded from existing cash and bank facilities, including a £2m drawdown from the Company’s £20m revolving credit facility and any deferred consideration will be funded from future cash generation.

China Food Company (LON:CFC 23.75p/£16.97m)
China Food Company, the Chinese manufacturer of cooking and dipping sauces, has announced that its wholly-owned subsidiary, Full Fortune Holdings Pte Ltd, has entered into an agreement with Wisehand Planning Co. to divest its animal feed business for a total consideration of US$16m. The first payment of US$4.5m is expected by mid-August 2012 while the timing of the remaining payments is subject to other milestones, including the completion of the land sale and the completion of the new factory, but it is expected that US$3.5m will be paid in autumn 2012 and the remaining US$8m will be paid by the end of the year. The disposal is expected to result in a one-off gain of approximately £4.8m.

Cyan (LON:CYAN 0.36p/£8.07m)
Cyan has reported a change in role for Geoff Sarney former VP strategy to Special Advisor, allowing there to be more focus and promotion to contacts in smart metering, M2M (Machine-2-Machine) and utility sectors, as well as assisting business development in China. On the 6th August Cyan, approved testing at the ‘Central Power Research institute’ in India.

Ebiquity (LON:EBQ 93p/£55.01m)
Ebiquity, the media and marketing performance measurement business, has reported the acquisition of FirmDecisions group for an initial consideration of £1m which is being satisfied from existing banking facilities. The maximum total consideration is up to £7m, payable in cash, depending on the performance of the FirmDecisions business in the three financial years ending April 2014. The acquisition is expected to be earnings enhancing in the first full financial year.

Environmental Recycling Technologies (LON:ENRT 1.3p/£7.29m)
Environmental Recycling Technologies, which has developed and is exploiting the patented rights to the Powder Impression Moulding process capable of converting mixed waste plastics into commercially viable products, confirmed this morning that a US Patent entitled ‘Process for Forming Plastic, Apparatuses for Forming Plastic and Articles Made There from’ has been granted by the US Patent Office. This granted patent is ERT’s core patent in the USA for the Powder Impression Moulding process.

Epistem Holdings (LON: EHP 410p/£36.29m)
Epistem announced a pre-close trading statement for the year ended 30th June 2012 and the signing of a TB diagnostic supply and distribution agreement with BD (Becton, Dickinson and Company) a leading global medical technology group. The Company announced that trading over the full year is expected to be broadly in-line with market forecasts. The Company expects to release its final results for the year ended 30th June 2012 on 16th October 2012. The Company is also pleased to announce that it has reached agreement with BD for the supply and distribution of its Mycobacterium tuberculosis (TB) test on a global basis (excluding India and the Indian Sub Continent) using its Genedrive(TM) platform. The TB supply and distribution agreement includes an upfront payment of $1m with further milestone payments of up to $3m, alongside escalating supply volumes over the next 5 years.

Fusion IP (LON:FIP46p/£33.50m)*
AIM listed university commercialisation company which turns university research into business announced that Cardiff based company, MedaPhor, has successfully raised £1.06m in an equity funding round to accelerate US sales and new product development of ScanTrainer, its novel ultrasound training simulator. ScanTrainer is a virtual ‘real feel’ ultrasound-training simulator that provides students with a 24/7, educationally driven, training programme that replicates a real ultrasound scanning experience. The company, which has been selling its ScanTrainer systems to the obstetrics and gynecology markets in the UK, has recently made its first US, European and Australian sales and will use the funds to expand its US and European based sales, as well as accelerate the development of its ScanTrainer product range into general medical training. Separately Fusion announced that a new portfolio company, Nanotether Discovery Services Limited, has been formed under its exclusive agreement with the Cardiff University. Nanotether is founded on the invention of three Cardiff University professors whose breakthrough intellectual property has the potential to revolutionise drug discovery by miniaturising and accelerating the rate at which interactions between proteins and drug candidates can be studied for the pharmaceutical and biotechnology markets. Nanotether has raised up to £2.2m funding in committed funding that will cover the company’s technology development over the next 27 months. These funds are to be made available in three tranches, the first stage of which is £850k due immediately. Fusion’s shareholding is 21 per cent at the end of the first investment.

GETECH Group (LON:GTC 27.75p/£8.11m)
GETECH, the oil services business specialising in the provision of exploration data and geological exploration studies, announced a further sale of its Global Programmes valued at £0.5m, taking the total number of clients who have made a full commitment to six. Global Programmes is designed to provide exploration teams in oil and gas companies with a robust and constantly updated platform which supports their understanding, investigation and risking of new areas of interest- sponsors of the programme are large international companies who fund a three year programme of work (their initial funding commitment runs through until mid 2014). Last week, the Company announced a generally strong performance across all parts of the business, and that it expects results for the year to 31 July 2012 will exceed current expectations. In mid July, it announced the signing of a further licence for its Russian Arctic Shelf magnetic data set with a gross sales value of $1.28m.

Halosource (LON:HAL 55p/£27.67m)
Halosource released its interim results on the 3rd August. The Company’s revenue has increased by 17 per cent to $5.8m, which is up by $0.4m from last years. Cash burn was reduced by 50 per cent to $5.4m. There has been sustaining progress of projects, such as water purification increasing by 37 per cent leading to insights of the launch of multinational consumer products in Q3. Halosource has formed joint agreements in Latin America and Spain specifying a purchasing minimum of $0.5m with the clients. However, there have been reported losses of $6.6m which is lower than the loss of $7.1m shown earlier this year.

Hutchison China Meditech (LON:HCM 410p/£213.19m)
China-based healthcare and consumer products group announced interim results for the six months to 30 June 2012. Revenues increased by 25 per cent to $102.9m (H1 2011: $82.3m), and operating profit an impressive 97 per cent to $7.2m (H1 2011: $3.6m). Net cash on the balance sheet stands at $25.6m (30 June 2011: $11.7m). On a divisional basis, the China Healthcare business was the Company’s biggest contributor generating $12.3m (H1 2011: $11.0m) of net profit attributable for Chi-Med with substantial growth being seen in the prescription drug and distribution businesses, whilst the drug R&D division and consumer products division saw losses of $4.5m (H1 2011: -$7.8m) and $1.1m (H1 2011: -$0.4m) respectively for Chi-Med equity holders. With capacity expansion on the cards and reducing raw materials prices, the Company believes there is much to be gained in the Healthcare business, and similarly a rapidly progressing pipeline of oncology and immunology drug candidates is promising in the drug R&D division.

ITM Power (LON:ITM 99.25p/£60.29m)
The energy storage and clean fuel company announced that it has raised £5m before expenses through the issue of 10m New Ordinary Shares, at 50p per shares, to certain institutional investors and Peter Hargreaves, a Non-Executive Director, with valid acceptances from Qualifying Shareholders representing 19.8% of the Open Offer shares offered. The Company further announced an agreement with GMI Renewable Energy Group Ltd to offer renewable power coupled to hydrogen generation for back-up power in a zero carbon process, with GMI offering existing and potential new customers the hydrogen alternative- ITM will provide the hydrogen generation and refuelling equipment and, if required, the fuel cell systems to enable customers to produce zero carbon hydrogen at the point of use. Other applications include materials handling solutions and industrial processes., such as forklifts and pallet trucks.

LiDCO Group (LON:LID 17.38p/£30.29m)
LiDCO, the UK-based hemodynamic monitoring company, has announced that Nihon Kohden, a pioneer and global market leader in monitoring technology, has been appointed as the exclusive distributor for the LiDCOrapid monitor and disposable kit in Japan. Nihon Kohden will work with LiDCO, and its existing partner Argon Medical Devices, to market and sell LiDCOrapid products in Japan. LiDCO will continue to supply Argon with LiDCOrapid Smartcards, for assembly into kits with Argon’s blood pressure transducer with Nihon Kohden being the exclusive distributor of these kits in Japan.

Matchtech (LON:MTEC 203p/£47.50m)
Matchtech announced a 21 per cent growth in net free income for the period ending 31st January 2012 to £17m, alongside a record number of contractors at the end of the period, which increased  by 23 per cent. However, there has been a reported fall in permanent fees growth as it grew by a weaker 22 per cent. However net fees increased by 21 per cent to £29.8m. Matchtech will be releasing its full year results in October.

Monitise (LON:MONI 27p/£284.36m)
Monitise announced a joint venture partnership in Mobile Money Network’s (MMN) with Associated Newspapers. The network will provide a technology platform over which transactions using the ‘Mail Shop Instant Mobile Checkout App’ to make purchases from The Daily Mail and The Mail on Sunday. Monitise’s current technology platform processes over one billion transactions per annum, and payments and transfers worth more than £9.5bn on a current weekly annualised basis – all made over mobile devices. It is expected that mobile commerce revenues will rise across Europe and the UK, whereby the UK will reach revenues of €6.1m and Europe of €19.2m by 2017.

Nakama Group (LON:NAK 2p/£2.36m)
Group revenue increased by 47 per cent to £13.3m (2011: £9m) to March 31st 2012 primarily reflecting additional revenue following the acquisition of Nakama in October 2011. Operating profit before exceptional items, amortisation and depreciation was £232,000 (2011: £321,000) and the Group loss before taxation £180,000 (2011: Profit £303,000). Net fee income (NFI) improved by 68 per cent to £2.74m (2011: £1.63m) and the profit margins increased again to 20 per cent (2011: 18 per cent). No dividend was recommended, but a resumption in future dividend payments will be kept under review. The acquisition of Nakama and name change – integration is progressing well, with locations in Asia and Australia added through acquisition as well as a new specialisation in online and digital markets. Contractors on site and permanent placements are increasing overall, with an increase in new clients in specialist areas. As at the end of July 2012, Nakama has seen strong progress across a number of fronts during this new financial year and the Board is pleased to report that operating profit before exceptional items, amortisation and depreciation during the first 4 months of the current period is predicted to be close to that achieved during the whole of the last financial year. The Board believes that the company’s infrastructure can support many more consultants than it currently does at present, but without a corresponding and marked increase in its cost base.  The current year has started positively and in spite of the poor general economic outlook, the Group looks to the future with growing confidence. The increase in the demand for social media site development and content as well as the growth of social media on mobile is driving recruitment volumes in all Nakama locations and will help drive the Group’s strategy over the next few years.

New World Oil & Gas (LON:NEW 9.25p/£23.27m)
New World Oil and Gas, an oil and gas operating company focused on Belize and Denmark, has announced that the Danish Energy Authority has formally approved the assignment of an initial 12.5 per cent working interest in Licences 1/09 and 2/09, totalling 4,107 sq km, located in the Jutland on-shore area in South Western Denmark to the Company’s wholly-owned subsidiary New World Jutland ApS. This represents the assignment of the first tranche under the Farm-Out Agreements announced on 11 October 2011 and follows the acquisition of 135 line km of 2-D seismic data.

Parkmead Group (LON:PMG 12.75p/£86.12m)
The oil and gas exploration and production company announced a strong set of results from its Platypus gas appraisal well (in which it holds a 15 per cent interest in the business) in the Southern North Sea, which recorded a test flow rate of 27 Million Standard Cubic Feet (mmscf) per day on a 96/64″ choke. On April 11th, well 48/1a-6 was spudded with the Ensco 80 jack up drilling rig, reaching a total measured depth of 14,175 feet on 19 June having successfully drilled a 3,100 foot horizontal section within the reservoir. A Drill Stem Test was successfully completed on 23 July and the well is being suspended for use as a future production well.

Polo Resources (LON:POL 2.9p/£67.97m)
Polo Resources, the natural resources exploration investment company with interests in gold, oil and gas, coal and iron ore, has announced the filing on SEDAR (www.sedar.com) of a technical report on the Nimini Gold Project, also known as the Komahun Gold Project, in Sierra Leone, in which Polo has a 90 per cent interest. The Technical Report has been prepared in compliance with Canadian National Instrument 43-101 by SGS Canada. With further drilling underway at Komahun, the management believes that this highly prospective asset is well positioned to complete the pre-feasibility study in Q1 2013.

StatPro (LON:SOG 93.5p/£57.93m)
AIM listed provider of portfolio analysis and asset pricing services for the global asset management industry, announced interim results for the 6 months to 30 June 2012, which saw a marginal increase in revenues to £16.08m (2011:£15.61m) although pretax profit for the period fell to £1.44m (2011:£1.79m). Recurring revenue for the period however remained at the 2011 level of 94 per cent reflecting the strong relationships built by the Company, and with sales of StatPro Revolution reaching 111 clients, including 10 fund administrators it, the Company believes it is well positioned and that it will meet market expectations for the full year.

Stellar Diamonds (LON:STEL 3.5p/£9.93m)
Stellar Diamonds reported that bulk buying of the first 3 Katcha Dyke samples at its Droujba project in Guinea was greater than expected. 188 carats per 100 tons were found from the predicted 100 carrots from 100 tons. These results will complement previous findings such as the 2.5m carats already confirmed as an inferred resource at the nearby Droujba pipe. Chief Executive Karl Smithson expects to upgrade the global project resource (including both the pipe and the Katcha Dyke) during the fourth quarter of this year prior to commencing a pre-feasibility study to analyse the economics for an open pit mine.

Summit Corporation (LON:SUMM 2.38p/£8.41m)*
Summit received notification from the Technology Strategy Board (TSB) last week that it has been offered a grant worth up to £150,000 from the Biomedical Catalyst.  The grant will provide additional support for the development of the Company’s OGA inhibitor programme for the treatment of a group of neurodegenerative diseases called tauopathies.  Receipt of the grant is conditional on a compliance review by the TSB and agreement of terms between both parties. The Biomedical Catalyst was announced by the Prime Minister David Cameron in December 2011 as part of the UK Government’s Life Sciences Strategy.

Transense Technologies (LON:TRT 13.62p/£26.60m)*
Transense announced that subsequent to recent successful field trials, it has received an initial order for its iTrack Tyre Temperature and Pressure Monitoring Systems for mining and off-the-road vehicles from Kumba Iron Ore, a wholly owned subsidiary of Anglo American Plc. This first batch of systems will be installed onto 29 large haul trucks at Kumba’s Sishen mine in the country’s Northern Cape Province, one of the seven largest open-pit mines in the world. Translogik now has a technical staff member permanently based in South Africa who will be responsible for training Kumba’s tyre service provider in the installation process and ongoing support of the system. It is anticipated that the South African Translogik team will expand as further mines sign up for the iTrack system.  Transense separately announced that it issued 2,039,190 ordinary shares of 1p each following the exercise of warrants at a price of 4.5 pence per share. Lastly, Transense issued options over 1,500,000 ordinary shares of 1p each under the Transense 2011 Enterprise Management Incentive Option Scheme to Melvyn Segal, the Company’s Finance Director. The Options provide the right to subscribe for Ordinary Shares at an exercise price of 10.25 pence per ordinary share if the Company’s share price reaches 20 pence and expire on 2 August 2022.

ValiRx (LON:VAL 0.56p/£7.12m)*
ValiRx gave an update on progress regarding its revolutionary GeneICE technology and its lead compound VAL 101 which has shown good progress in the preclinical phase and the development programme is going ahead as planned. The Eurostar Programme, a two year grant of €1.2m awarded to an international consortium led by ValiRx to develop the GeneICE technology, has now been completed. The final reports on the scientific and developmental results from the programme are being compiled for submission and under the terms of the contract, this data will trigger the release of final payments to the consortium from the grant. The production of the lead compounds from this part of the programme is about to be upgraded for GMP production. In addition, a number of unique target sequences have been identified for future potential therapeutic development. The agreement with Imperial College has been extended and Imperial College will continue with the further development of this cancer therapeutic work. The validation of the optimised version of VAL101 in cellular systems has been concluded and they show results that are in line with predictions, as far as the shutting down of particular rebellious genes is concerned, thereby halting and reversing tumour growth. The establishment of the subsidiary, ValiRx Finland OY, in Finland and the acquisition from Pharmatest Services Oy of Oulu, Finland, of its biomarkers business unit together with several families of patents and patent applications and related intellectual property has provided the Group with both an increased exposure to the Biomarker market. The Company has built on this specialist biomarker expertise to develop its own companion diagnostic biomarkers to complement ValiRx’s therapeutics, its existing intellectual property and its companion diagnostic activities, as well as marketing that expertise for the development programmes of other companies.

Wasabi (LON:WAS 1.18p/£32.35m)
Wasabi has announced it has raised £3,300,000 enabling the Company to complete the placement previously mentioned. It also stated that the firms Chinese Licensee Shanghai Shenge New Energy Resources Science & Technology Company (SSNE) has signed a Design and Technical Services Agreement with China Petroleum & Chemical Corporation (Sinopec), China’s leading petrochemical producer. The collaboration designed a 4.0 MWe Kalina Cycle(R) power plant at the Hainan petrochemical plant, where 4.0 MWe Kalina Cycle(R) is the most thermodynamically efficient power cycle. An agreement was signed on the 6th of August for the power plant that will capture the waste heat from the paraxylene (PX) process stream and turn it into zero emission electricity as well as reducing the overall greenhouse gas emissions from the petrochemical plant, thus, supporting the sustainable development objectives of the Chinese government.

William Sinclair (LON:SNCL 142.5p/£24.26m)
William Sinclair has recently struggled through the heavy rainfall affecting its ability to harvest peat from its peat bogs in Cumbria and in Scotland. Drying technology has been used which has led to a reduction in the unit cost of production. William Sinclair has also announced the opening of a new site to increase production of SuperFyba in the North of England.  This will be commissioned with the former SuperFyba production at Ellesmere Port and will increase efficiency with two new extruding machines rather than only one. However, William Sinclair announced on the 2nd August that they will not be able to meet profit expectations for the financial year due to the high material costs and volumes changes caused due to the weather.

*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.