If, Christine Lagarde sums up your feelings for 2012 prospect …

If, Christine Lagarde Managing Director of the International Monetary Fund sums up your feelings for 2012 prospects, then remember there is always a bull market somewhere in something:

 “The world is facing similar threats seen in the 30s Depression: economic retraction, rising protectionism, isolation. There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating.”


Last week …

… the FTSE 100 was off -2.6% at 5287 while the FTSE 250 fell -3.2 with the AIM All Share at 676.5 down 3%. Oh la la, Euro growth prospects impacted market sentiment with Greece, Italy and Spain’s bonds needing support from the Euro Bail fund. The Fund has a further Euro 600 billion in reserve and may need more.  The threat to France’s triple A rating is likely to impact on its 2012 growth as it tries to pull out of its mild recession.   UK Inflation at 4.8% is lower and set to fall further still when VAT comes out of the annual comparison.


This week …

… the BOE Minutes on Wednesday may, by defending the decision to not increase QE, be relatively sanguine. Consumer Confidence however on Tuesday is set to fall while Balance of Payments on Thursday could be improving.  US statistics should be supporting the prospects of a mildly increasingly economy when GDP is reported on Thursday. The balance of probabilities is that markets will drift down as risk appetites fade.


Company Reports

MIRADA – £3.5m at 11.5p

Following the interim figures for the 6 months to September, showing turnover of £2.3m, the refocused Digital TV and Broadcast Group recently raised £1.1m. This is £0.8m in new money and the rest is the capitalisation of liabilities. The funds support operational expansion as the capital investment in development has been made in its two main Digital TV products, Navi and Iris. These are beginning to show commercial success with major new customers being signed. Revenue streams from the Navi and Iris products are generated from initial set-up fees and a royalty-based model, which given IPTVs growth forecast could generate higher recurring revenues than the traditional professional services business.

Navi is a content navigation tool used for finding and purchasing programming on IPTV and is the product used under the Ericsson partnership agreement as the user interface for their IPTV offering. Ericsson is the world’s second largest IPTV infrastructure supplier to telecommunication companies. Iris is mirada’s multi-screen “TV everywhere tool”  allowing digital television subscribers to find and use content when and where they want. Both products are being rolled out so news flow can be anticipated. The year-end to March 2012 should see sharply reduced losses.


There is around £3m of relatively long term debt. The recently raise fund sshould be sufficient to get the company to sustainable positive EBITDA. While there is a car park payment division that could be sold.


Avingtrans (AVG) – £15.5m at 59.5p

A new contract and trading update was reported by this supplier of highly engineered components particularly for the aerospace and defence sectors.  A  £3m contract is for Sigma Precision Components to supply rigid pipe assemblies for a market leader in flight controls for the aerospace and defence market and covers three years with a potential for a two year extension. It will be supplied utilising Avingtrans’ UK and Chinese facilities.  The in-line with forecast trading statement given the current difficult economic environment would seem to endorse the group’s global strategy and winning these longer term contracts. Interims are to be reported in early February and should show that for the June 2012 year end PBT of £2,1m for an EPS of 6.2x giving a P/E of 9.8x while yielding 1.7%. The P/E could drop to 7 .5x for 2013.


The debt of £6.7m is supported by an NAV per share of 86p so giving gearing of 29%.


CSF Group (CSFG) – £100.2m at 63p

Data centres operator CSF reported interim in late November which almost doubled its revenues to RM91.7m (£18.4m) in the six months to September 2011 but pre-tax profit was slightly lower because of the sale and leaseback gain on a data centre in the corresponding period of the previous year. The Malaysia-based company reported a fall in profit from RM32.5m (£6.5m), including a £4.5m gain on the sale of the CX1 site, to RM30.1m (£6m). That means that the underlying operations made a significantly higher profit. The CX1, CX2 and CX3 data centres were running at full capacity in the period. CX5 is still being developed but the first tenant is being signed up. The first phase should be completed by the end of the year. CSF believes there are plenty of opportunities for expansion in Malaysia, Singapore, Vietnam, Thailand and Indonesia. An Indonesian joint venture plans to open CXJ in Jakarta. The company has also secured joint venture partners to help it move into the Chinese market. CSF wants to double its capacity over the next three to five years.  PBT for the March 2012 Year end are for £13m giving an EPS of 6.45p so a P/E of 9.8x while yielding 3.5%. Data centres have a ‘sticky’ reoccurring income stream.


CSF had cash in the bank of RM58.2m (£11.7m) at the end of September 2011. There was a cash outflow of RM24.1m in the first half but the majority of that was the final dividend.  There are plans for two more data centres in Malaysia that will each cost £20m, plus another aimed at the government which will cost £14m. There are also proposals for data centres in Singapore and Taipei.


Fluormin (FLOR) – £32.4m at 60p

Fluromin, which was formerly known as Maghreb, is focused on the fluorspar market. Recently appointed a Corporate lawyer  as General counsel and granted options. Flurospan is predominantly mined in China, but its exports are reducing. The mineral is used in fluoropolymers, aluminium production and gas for air conditioning and refrigeration. Demand is rising but production is falling with limited potential new capacity on the horizon.   Fluormin is buying out the minorities in its Witkop mine in South Africa and the transaction has been completed. Fluormin also has a 20% stake in a Kenyan fluorspar mine. Witkop should be able to produce 135,000 tonnes a year and could generate more than $15m in cash a year. Fluromin also has a 49% stake in a fluorspar trading business.


The company’s former lead zinc operations were sold for £10m plus potential royalties.

There will be around $15m in the bank after the South African deal. Once it is up and running the South African mine will be highly cash generative and Fluormin will get a cash dividend from its Kenyan investment.

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