… UK markets were virtually unchanged with the FTSE 100 closing on Friday at 5938 which was -0.2% lower, the FTSE 250 was -0.3% down, while the Aim All Share at 876 declined -0.4%. The Euro debt remains in a deadlock, UK consumer confidence was better than worse expectations, although US GDP was not revised upwards.
… there are market sensitive US employment statistic on Wednesday and Non Farm Payrole on Friday with the forecast of 8.9% unemployment likely to be positive. UK Manufacture with the PMI Index is reported on Wednesday and at 54.7 likely to show marginal improvements from April’s 54.6. Despite the underlying tensions a mildly positive week,
Datong (DTE) – £7.89m at 57p
Surveillance technology developer Datong reported an improved underlying profit in the six months to March 2011 even though revenues fell. Revenues fell from £7.41m to £6.33m but that was due to lower third party sales where margins are lower. Own product sales rose from £4.36m to £5m as North American sales recovered. New product launches will generate revenues in the second half although sales cycles are getting longer outside of America and Europe. The underlying profit improved from £530,000 to £762,000 and Datong remains on course to return to profit in the full year. Forecast for £1.1 for the September11 year end give an EPS of 7.7p for a prospective P/E of 7.4x. Capitalised development spending of £701,000 was similar to the spend in the first half of the previous year.
Net cash was £1.57m at the end of March 2011. Datong hopes to sell its old premises for £375,000 before the end of the financial year.
Datong wants to acquire similar businesses with their own technology platforms.
Corero (CORO) – £16m at 33.5p
Network security group, Corero still owns an educational software business but the new management team and the recent appointment in the US helps define the new strategy of building a network security software business. Increasing awareness of the threats to computer networks and systems means that this is a growing sector. Escalating cyber crime and attempts to disrupt businesses mean that the growth is likely to continue. The first acquisition in the buy and build strategy is Top Layer. This is a software-focused business covering the higher education, healthcare, financials and e-commerce sectors. The management has experience with South Africa-based IT services company Datatec. This experience will be useful in building international reseller networks to sell group services. Marginal losses are forecast for the December year-end then profits are likely.
There is more than £5m in the bank. The educational software business will be a useful cash cow for Corero.
Corero continues to look for complementary acquisitions.
Chamberlin (CMH) – £8.33m at 112p
Finals from castings maker Chamberlin says that trading is back to the levels it was prior to the start of the recession in 2008 and it is confident enough to start paying dividends once more. Chamberlin is paying a final dividend of 1p a share, which is covered nearly seven times by underlying earnings. Revenues jumped by two-fifths to £39.8m in the year to March 2011. An underlying loss of £1.03m has been turned into a profit of £804,000 giving EPS of 6.7p for a P/E of 16.7x.
Demand for heavy castings are reported to be greater than pre-recession levels with demand from rail and wind turbines. Turbo charger castings demand has also returned the light castings trading to past levels. Management believes that light castings capacity can be increased without significant spending. The medium sized castings business has been a little bit slower in its recovery.Chief executive Tim Hair believes that supply chain inflexibilities experienced from the transfer of work to China means that companies are keen to bring some work back to foundries in the UK.
Revenues will continue to rise this year and underlying profit could double to £1.6m putting the share on a prospective P/E of 8x for 2011-12.
Net debt was £2.9m at the end of March 2011 and it should continue to fall even though spending on capital equipment will rise in order to take advantage of increased demand for Chamberlin’s services.
Chamberlin is particularly keen to acquire other foundries but it is also looking at other engineering businesses which have niche businesses. Ideally, the businesses should generate revenues of £5m-£15m a year. These purchases could be debt financed. A number of share-based mergers have been attempted but Chamberlin could not gain the agreement of the management of its merger targets..
GGG Resources (GGG) – £43.5m at 26.25p
Gold miner, GGG has extended its bid for Auzex Resources to 20 June. Auzex, GG’s partner in the Bullabulling gold project, has published its defence document, which says that it wants to raise $25m as part of a flotation on Aim. It also plans to demerge all of its other assets and concentrate on its 50% stake in the Bullabulling gold project. However, GGG argues that there is very little new in the document. It also asks what the details of the demerger would be and whether Auzex would retain a stake in the demerged company. GGG questions whether a nominated adviser has been appointed for the Aim admission.
The latest drilling news shows that Bullabulling is still making progress despite the bid battle. There could be further resource news in the next few weeks. That could increase the resource from 2m ounces of gold to 3m ounces of gold.
Whatever happens GGG has finally achieved its ASX listing.