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HB Markets Daily Smallcap Newsflash including Advanced Medial Solutions, Essenden, Rok Group, St. Ives and others

Advanced Medial Solutions (AMS, 42p, £60.91m) Finals to December 2009 saw revenues rise to £24.1m (£20.3m), PBT of £4.1m (£2.70m) and EPS of 3.09p (2.31p), slightly ahead of expectations. The group ended the period with net cash of £1.7m (£7.3m), post a significant (£6.7m) investment in a new facility. The group is on schedule to open its new facility by the end of 2010 and is flagging its confidence in the future with a commitment to pay a final, maiden dividend. During the year the group achieved the first sales of LiquiBrand in the key US market and acquired in September and fully integrated Corpura, the supplier of foam technology. The group saw good growth in advanced wound care, driven by the silver alginate range sales up 27%. The InteguSeal skin sealant grew 28%. The group got close to an acquisition, but terms could not be agreed, the group continues to explore such opportunities. Similarly the group continues to explore the potential of licensing the opportunities. On a low rating for the current year, some 11.8x PER, we see good upside and return the shares to a BUY with a 53p target price, as a result we urge investors not to accept any offer below that level. On 26th February 2010 Consort Medical approached the group.

Blinkx (BLNX, 14.5p, £43.6m) The world's largest and video search engine announced a new partnership with Knowlera Media, the owner of the creator of lifestyle-focused video content for distribution via the Web and broadcast television. This will provide users will access to more than 10,000 How-To videos which Blinkx will place contextually relevant advertising against. Like most deals announced not likely to have a material short term impact but another useful tie-up nonetheless. SPECULATIVE BUY

BrainJuicer (BJU, 145p, £18.75m), the online market researcher, reports prelims to 31 December 2009 are in line with expectations. Revenues increased 27% to £11.8m (2008: £9.3m), PBT up 21% to £1.7m (2008: £1.4m), EPS up 21% to 9.2p (2008: 7.6p) and DPS of 1.9p. The cash generative business with zero debt drove net cash up by 36% to £2.3m (2008: £1.7m). Despite challenging market conditions, the group has made excellent progress over the past twelve months, increasing their global presence and expanding their product portfolio by adding innovative products. The group continue to expand their geographical coverage and will open offices in Brazil and China this year. The market forecasts 2010 PBT of £1.8m, EPS of 10.3p and DPS of 2.3p. The stock trades on a prospective PER of 14x with a yield of 1.6%. We retain our BUY recommendation with a target price of 170p.

Cap-XX (CPX, 34.5p, £21.41m) has signed a new technical collaboration agreement with existing partner Murata and enhances the potential market for Cap-XX’ products as it covers the development of surface mounted devices which is the assembly method used for mass manufacture of electronics. Cap-XX will receive AUS$1.43m over the next 13 months in 4 equal instalments. We maintain the shares as a Hold but the agreement opens a major avenue of future growth while simultaneously bringing cash, we are moving closer to a SPECULATIVE BUY.

Eckoh (ECK, 5.125p, £10.2m) Following a meeting with the FD late last week, we are provided with some confidence the group is comfortable with current market estimates for the year ended March 2010 with pre-tax profit of £0.7m and EPS of 0.36p. A shift in the sales mix to higher margin speech solutions (c.70% gross margins) from lower margin IVR (c.10% gross margins), coupled with cost savings will drive earnings growth going forward. The business is focusing on winning new clients in the speech solutions division on 3-5 year contracts. We expect the group to end 2010 with net cash of £4m. A £2.7m loan owed by Redstone Plc, will be paid in two instalments of £1.0m and £1.7m expected in October 2011 and 2012 respectively. The business has gone through a transformation period focusing on higher margin speech solutions. The group has a strong blue chip client base. The recent William Hill contract renewal demonstrates the group’s strength in providing hosted speech recognition services. We are encouraged by the progress the group has made. Trading on a 2011 PER of 5.6x coupled with a strong balance sheet is potent. We upgrade our recommendation from a sell to a BUY with a 12 month target price of 7.2p, 40% upside.

Essenden (ESS, 17p, £3.6m), the UK operator of 38 bowling sites in the UK, reports prelims to 27 December 2009, are below market expectations with PBT of £0.9m and EPS of 0.6p. Revenues declined by 7.5% to £58.1m (2008: £62.8m), but the group did move into profitability with adjusted PBT up to £0.28m (2008: -0.22m). Net debt was reduced to £3.6m (2008: £4.0m). The group is going through a transitional period with the recent appointments of a new CEO and FD. The strategy is to turn the group into a modern family friendly leisure retail business with the next 12 months seeing actions to drive footfall and extend dwell time. The group will add new products such as Karaoke. We expect trading in the current financial year to be tough, especially if the UK has a double dip. The adverse weather conditions in January 2010 hit revenues – thus the group are trading broadly in line with 2010 PBT of £1.3m and EPS of 0.9p. We expect the market to slightly downgrade the earnings estimate. The group is highly rated on the current 2010 estimates, trading on 18.9x. Given the scope for a turnaround, we initiate with a HOLD.

Forbidden Technologies (FBT, 18.5p, £14.6m) announces Molinare selected its FORscene Cloud-based editing platform fro the production of documentary Paradise Lost. Molinare chose to provide FORscene to its client Studio Lambert for the production the 60 minute documentary which follows the lives of ex-pat Britons in Florida and which to be broadcast on ITV1 later this year. We can see the benefit of a cloud editing suite and this is a positive piece of news but as a one off programme far too small to get us too excited at this stage. We maintain our SELL stance with a target price of 10p.

Goodwin (GDWN, 1160p, £83.52m) Trading update for the first 9 months to the end of January 2010 shows revenues of £68.18m with £9.53m PBT – similar to last year. Order book stands at some 6 months of sales, aided by Sterling weakness. The group is on target for EPS around 120p, putting the group on 9.6x PER, leaving some upside, BUY to the 1320p level.

Interior Services Group (ISG, 163p, £54.05m) Interim results to December 2009 saw revenues down 14% to £484m (£562m) with underlying pre-tax profits of £5.0m (£7.0m), EPS of 11.70p (17.40p), DPS 4.2p (4.00p) and the group ended the period with net cash of £32m (£26.8m). The group ended the period with order book of £780m (£950m), 63% in the private sector, of which £442m (£494m) is deliverable in the current year. In London fit-out volumes declined 6% with a 29% decline in construction with some signs of recovery being seen in fit-out helping the order book to £303m (£347m), despite the volume declines operating profits increased to £3m (£2.2m) on sales of £192m (£232m). In regional construction operating profits increased to £2.6m (£1.3m) with an order book of £267m (£311m) and expectation of a 10% decline in revenues. Retail saw operating profits decline to £2.5m (£3.9m) but the H2 outlook is for a recovery with an order book of £103m (£108m) of which £77m (67m) is for delivery in H2. Asia saw operating profits of £0.3m (£1m) on revenues of £37m (£31m) but once again the H2 outlook is for a recovery with an order book for £41m (£28m) for the remainder of the year. The Middle-East is building from a low base but the order book is £7m (£1m). Europe was the worst hit with revenues down to 313m (£18m) and a fall into losses of £0.9m (profit of £1.4m) – though a record order book of £29m (£9m) gives confidence for a positive output for the year. We maintain our BUY recommendation and the 190p price target.

James Latham (LTHM, 166p, £31.9m) reports revenues for the year ended 31 March 2010 are broadly in line with market forecasts, but earnings are likely to be higher than 14.7p. Latham continues to be an asset play stock with net assets of £40.8m at the end of September 2009, exceeding the current market capitalisation of £31.9m. We retain our BUY recommendation with our target price of 206p.

Johnson Service Group (JSG, 17.75p, £44.26m) Finals to December 2009 saw underlying pre-tax profits of £12.2m (£6.0m) on revenues of £229.3m (£242.6m) with 3.4p (2.8p) EPS and 0.5p (nil) final DPS making a full year total of 0.75p (nil). A significant proportion of the pre-tax improvement arose from lower borrowings, resulting in net interest charge of £5.7m (£11.8m). Textile Rental revenues declined modestly to £116.9m (£122.6m) but cost cutting led to operating profits up at £14.6m (£14.3m). As significant is the reduction in working capital which led to £17m of net cash being generated by the division. Apparelmaster revenues declined to £90.1m (£94.4m), primarily due to a £4.8m fall in direct sales of garments, with operating profits of £12.3m (£13.8m) with further benefits from the redeveloped Stalbridge facility that returned to profitability. Drycleaning saw revenues of £83.5m (£91.5m) with operating profits of £3.0m (£4.4m), the revenue decline of £5m from the retail division and a £1.1m drop in operating profits. Some signs of recovery have been sighted post a refurbishment emphasising the green nature of the dry-cleaning business. Facilities Management has nearly 45,000 units and generated revenues of £28.9m (£28.5m) with an operating profit of £3.3m (£3.1m) with a positive H2 trend. Flat outlook for the year would put the group on a prospective PER of some 5.5x PER with a 4.2% yield assuming a held dividend. Despite the worries over the UK consumer exposed dry cleaning business we see the actions taken to date as positive and move the shares from a Hold to a BUY with a 21p price target.

Rok Group (ROK, 42p, £75.31m) Finals to December 2009 saw revenues of £714.8m (£1,011.2m) with underlying pre-tax profits of £20.4m (£20.4m), EPS 8.3p (8.1p), DPS 2.4p (2.4p) and net debt £46.7m (£43.7m). The maintenance and improvement business now accounts for 83% of profits and the rating does not reflect the repositioning of the group over the last year. The final dividend of 1.65p alone represents a yield of 3.9%. The group has some 85% of the management’s revenue forecast either secured or probable. With the markets still difficult flat results would still see the company sitting on 5.1x PER, we maintain our BUY recommendation with a 56p price target.

Scott Wilson Group (SWG, 85.75p, £63.1m) is a global integrated design and engineering consultancy for the built and natural environments. The IMS from 15 December 2009 to date reports trading is in line with current market expectations and strong performance in JV could lead to the group exceeding estimates. The international business is demonstrating strong organic growth, whilst the UK and Ireland market remains uncertain. 2010 PBT estimates of £18m, EPS of 16.8p and DPS of 4p, puts the stock on 5.1x and a compelling yield of 4.7%. The market expects a decline in earnings in 2011, suggesting PBT of £16.6m, EPS of 15.4p and DPS of 4p. The stock trades on a 2011 PER of 5.6x and a yield of 4.7%. We believe the share price is undervalued. We retain our BUY recommendation, but reduce our target price from 150p to 139p.

St. Ives (SIV, 54.25p, £56.18m) Interims to January 2010 saw revenues of £187.7m (£208m) with underlying PBT £8.3m (£4.4m) from the continuing operations, underlying EPS of 5.59p (4.15p) and an interim DPS of 1.75p (1.75p). Book revenues increased modestly, aided by investment in digital presses and automated warehouse facilities. Magazines continued to be hit by reduced pagination and the move on-line, resulting in a loss despite the closure of the Andover facility which still leaves excess capacity in the marketplace. Direct mail and general commercial printing market conditions remain tough with excess capacity despite the failure of competitors and the closure of the Crayford facility. Point of sales materials continued to do well, though pressure on margins is resulting in the group turning away work – a trend that is continuing in H2. We move from a Sell, last iterated on 30/11/09 at 66p, to a HOLD.

Zotefoams (ZTF, 91.5p, £35.04m) Finals to December 2009 saw sales of £31.82m ( £34.78m) with underlying PBT £3.16m ( £3.93m), EPS 5.9p (8.3p)  and a 3p final DPS, making a full year total of 4.5p. The group generated cash, enabling the reduction in net debt from £1.15m to £0.43m at the period end. While the larger markets of UK, Eire and Europe saw lower sales, growth was achieved in North America and in the Rest of the World. The prime business of foams base on Polyolefins saw a 12% reduction to £30.17m sales, the HPP foams grew strongly, albeit from a low base to £1.64m (£0.80m) sales. Sitting on some 14x PER, based on £3.3m PBT with 6.5p EPS, the group does offer upside and we move the shares from a Hold to a BUY with a price target of 110p, backed by a yield on the final alone of 3.3.

Disclosure: The author holds no positions in the company