The FTSE 250 gained 0.6% last week with the FTSE 100 increasing 0.3%, while the Aim All Share at 959 increased 2%. The BOE interest rate decision was unchanged, but tension is likely to be mounting due to inflationary pressures. Not just the UK, but in Europe where inflation is 2.2% and 0.2% above target. Worldwide commodity prices are increasing, so is the prospects for Asian inflation. Euro Zone sovereign debt concerns retreated, as Portugal Bond yields fell back below 7%.
There is a continued flow of trading updates with retailers and pubs likely to be affected by poor weather. On Tuesday, the last inflation report before the 2.5% VAT increase will be announced and there is a growing discussion on whether the CPI, which shows UK inflation at 3.3% is a sufficient measure. UK employment is to be reported on Wednesday followed by Retail Sales on Friday. Today, New York is closed to respect Dr. Martin Luther King.
Pause for thought
In November, private clients invested a record £208million into actively managed commodity funds, making this the second most popular sector.
Netcall (NET)12.5p – Mkt Cap £15.25m
A trading update reported a firm first half to December and Netcall is on track for meeting market expectations. The planned cost savings of £1.5m from the integration of an acquisition is also being achieved. Netcall, over the years, have developed a suite of software products that provide a soup-to-nuts solution for call handling, callback, smart automation, workforce management and data unification. Netcall have a customer base of over 600 organisations in both the private and public sectors. It includes over 60% of the NHS Acute Health Trusts, major telecoms operators such as BT and Cable & Wireless. The software platform helps organisations meet customers growing demands and helps saves clients cost by improving internal efficiencies. A healthy pipe-line of new business is reported as cross sell selling opportunities are being developed.
Turnover for the June 2011 year end is forecast at £14.1m and PBT of £2.4m giving an EPS of 1.5p for prospective P/E 8.3x. The strong cash balances of £4.8m reflect the placing in August at 11.75p, acquisition & reorganisation costs savings and strong operational cash flow.
Hightex Group (HTIG)6.75p – Mkt Cap £12M
Hightex, operate worldwide and designs and installs large architectural polymer membrane structures for roofs and facades (similar to the 02). A year-end trading update stated that although turnover was broadly in-line, profits would be curtailed by adverse exchange rate and increased marketing costs. There are three high profile stadium contracts underway at Kiev, Warsaw and Vancouver, so forecast turnover of Euro30m for the December 2010 year-end may not slip, but profits expectation were reduced 16%. This is due to increased marketing costs for trying to win large stadium contracts in Brazil and France, while attempts are being made to win new non–stadium business. The finals are due in April and the management are confident that new contracts will be won before then.
Reset profits expectations are for £1.7m but that is strong growth from the December 2009 year-end profit of £650,000. This gives an EPS of 0.64p and a prospective P/E of 11x. The working capital ratio is 1.2x, so cash flow is being decently managed and there is no long term debt.
Weatherly (WTI)14.5p – Mkt Cap £80m
Weatherly International has copper mining interests in Namibia, which is a stable African country. The existing licences and resources are sufficient to sustain a copper mining business capable of 20,000 tonnes per annum at an average industry costs of production for the next ten years. It is forward selling 975 tonnes of production from its Ongopolo mine in Namibia. This is likely to represent around 10% of the total production during the 18 month period which will be delivered progressively at a fixed price of US$ 9,260/ tonne. Production is expected in mid-February and the first delivery under the forward sale contract by end of April. Weatherly will retain a 25% holding in a joint mining venture, which is likely to be floated on Aim in the Spring. The Namibia Government had given its permission to transfer the Berg Aukas mine license to a new company ECE ( East China Exploration). Following Admission, the first objective of the new company will be to complete a bankable feasibility study for Berg Aukas as a starting point to building a profitable and widely-based resources business.
Weatherly has US$140m of carried forward tax losses and is now revitalised, refocused and is well positioned for growth. In 2010, a niche smelter was sold for US$33million, contributing to an overall US$9million profit. Since then £4.4 million has been raised at 5p to increase the group’s cash position to £6.6 million which will allow more aggressive exploration.