Proactiveinvestors News

Asia Digital Holdings (ADH, 0.5p, £3.5m), the online marketing group, reports a trading update for the year ended 31 December 2009, is ahead of expectations of pre-tax losses of £0.2m and EPS of -0.2p. The business returned to profitability at an EBITDAS level in Q409. This was driven by the Asian operations achieving break even trading, a post recessionary improvement in the Australian business and cost savings. Following the placing of £1.275m of new monies, the balance sheet has strengthened. The Board continue to manage working capital tightly. We would expect the group to be profitable in the current financial year. The share price has drifted since our Hold recommendation. On 2009 prospective revenue multiple of 0.2x, we believe the stock is undervalued and upgrade our recommendation to a SPECULATIVE BUY with a target price of 1.6p.

Baqus Group (BQS, 3.625p, £4.11m), the national construction consultancy and quantity surveying group, reports a trading for the interims to 31 December 2009 and the current financial year will be below market expectations of PBT of £0.3m and EPS of 0.17p.  Cutbacks and delays in projects largely due to Government cut-backs and a lack of banks lending in the construction industry has led to a decline in revenues. The latter combined with increase competition has reduced margins. The group have reduced overheads by £0.5m to reflect the deterioration in revenues.  At this stage, the group do not intend to pay a dividend – a clear signal of deteriorating profitability.  Net cash stood at £0.09m at the end of June 2009. The market remains weak and the level of uncertainty, especially in public spending, provides the group with uncertainty at this stage. We therefore reduce our hold recommendation to a SELL.

Cryo-Save (CRYO, 477.5p, £44.10m) Europe’s leading stem cell bank has acquired the remaining 30% in its Hungarian operation. As this is one of the most successful it is a logical if relatively small positive step. We remain firm fans of the company and re-iterate our BUY recommendation.

Harvey Nash (HVN, 32.5p, £23.87m) Trading statement for the year ending January 2010 confirms trading has been in-line with expectations and that revenues will be some £375m with underlying pre-tax profits not less than £4m with some £5m of net cash in the balance sheet. The group has indicated it will recommend a final dividend of 1.35p (1.2p), making a full year total up 10% to 2.2p (2p) – putting the group on a yield of 4.15% on the final alone. The minimum profits level would suggest EPS of some 3.8p to January 2010 – putting the group on a 8.6x rating about to go historic. The group will thus report a second half profitability of £1.7m or better – against £2.3m in H1. So forecasts for a flat profit, which would leave the group on 8.6x to January 2011 seem reasonable - a continued HOLD though yield is an attraction.

Minorplanet Systems (MPS, 15.5p, £1.02m) Final results to August 2009 reflected difficult trading conditions made worse by the increasingly limited availability of lease financing which triggered a major cost reduction programme. Revenues fell to £9.7m (£15.3m) and the group fell into a net pre-tax loss of £3.8m (profit £1.8m). The group remains in financial trouble with 12 months to pay an outstanding £2.1m tax to HMRC, has assumed the successful sale of its Australian subsidiary and is in breach of terms on a £0.5m loan that can now be called without notice and has been given notice of a legal action against its former Spanish subsidiary. Given these concerns we maintain our SELL recommendation.

Molins (MLIN, 60.5p, £12.20m) Finals to December 2009 saw revenues of £83.8m (£91.5m) with profits of £2.5m (£7.1m) with EPS of 6.3p (35.2p) on continuing operations and a held 2.5p DPS making a held full year payout of 5p. This puts the group on a 4.1% yield on the final alone. The group ended the period with £5m net cash (net debt £0.4m). The operations reported a mixed performance with tobacco machinery boosted by the new Octave cigarette machine, a good outcome for the scientific services while the packaging had a more difficult year. The group has warned it expects a flat year ahead, despite having a higher overall order book with higher sales but continued difficult trading in Scientific Services and Packaging. With a low PER we see the difficult year ahead as already discounted in the share price (assuming flat profits) but the group ill be able to maintain the yield and thus we rate the group as a Yield based BUY.

NXT (NTX, 13.25p, £20.03m) Interims to December 2009 saw revenues of £1m (2008 £2.1m though that included £1.2m off-off license income) and a net pre-tax loss of £0.86m (profit of £0.28m). Net cash fell to £0.21m but the group has raised an additional £1m via a placing at 13p –representing an additional 5% dilution – announced today.  The group is concentrating on achieving further licences for its haptic (force feedback for touch screens) technology which can act as a loudspeaker as well as a touch screen (Apple anyone?), after an agreement with Immersion Corporation that gave NXT access to touch screen technology. The move to flat-screen televisions is set to enhance the outlook for the group’s BMR loudspeakers, with its incorporation into some JVC screens. We maintain our SPECULATIVE BUY recommendation in anticipation of positive licensing news.

Rheochem (RHEP, 7.125p, £15.46m) Interims to December 2009 reports revenues of AUS$11.8m (AUS$21.50m) with sharply reduced loss before tax of AUS$1.81m (AUS$10.80m). The group had previously warned that conventional oil & gas exploration customers were reducing drilling activity but in the longer term the move towards coal bed methane and mineral drilling would offset the fall. The group was hit hardest in Australia by the reduction in drilling activity, while New Zealand was flat with contracts on-going till 2011 so far, while it is still tendering in India for work and has received the required licences to operate in Indonesia. The group did not write-down any further its oil and gas exploration assets. With the potential upside of its UK and American exploration assets we maintain our HOLD recommendation.

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