… because it sounds like he cares.
Last week …
… the FTSE 100 improved 1.1% to 5868.5 with the FTSE 250 up 1.6% while the Aim All Shares at 703 regained 0.7%. New Mortgage approvals improved but House Prices dipped by 0.2% while Construction orders fell for the fifth consecutive month. US Jobless data improved by 176,000 which was more than expected and enough to cause worries about the need for ‘post-election’ economic stimulation.
This week …
… are a number of the more interesting UK economic news; Production on Tuesday, Retail Prices on Wednesday with Balance of Trade and the BOE Interest Rate decision on Thursday. In between a US President will be elected and the knee–jerk reaction to a Republican win is usually more bullish but for both a financial debt canyon remains. Another week of progression seems likely.
LiDCo (LID) – £26.2m at 15p
Monitor 80% EPS growth
Interims showed revenues had increased by a moderate 4% to £3.35m at this patient monitoring devices developer ,LiDCo. Significantly its distribution deal with Covidien has been renegotiated and this should help to grow sales in North America. It appears that North American sales were lower in the period but this is down to a one-off licence payment (£290,000) in the corresponding period. Even so, there is still a lot to go for in the US and Covidien has other products to focus on. Additional distributors should help to increase the rate of growth of sales in the US. The newest product enables more elements to be monitored. The loss also increased from £242,000 to £312,000 for the six months to June. Some of the revenue growth came from third party product sales, which were only included for part of the corresponding first half. Underlying gross profit margin from LidCo products increased from 75% to 80%. UK revenues rose 49% to £2.38m, although monitor revenues fell. Disposable revenues for LiDCo machines jumped 24% to £1.27m. New distribution arrangements should boost future Japanese revenues and a new product Lidco Rapid is set to be launched. Profits are forecast at £0.3m giving an EPS of 0.5p for the 31 January 2013 year-end and compares with breakeven which gives a prospective P/E of 30x. Further out to 2014 profits could be treble to £0.9m although EPS of 0.9p halves the prospective P/E to 16.6x.
There is net cash of around £0.6m and the current ratio is 4x so there seems sufficient working capital for the development spending on the new LiDCo Rapid.
Mirada (MIRA) – £3.82m at 12p
Bottom of the curve
Recent interims to 30th September reported Mirada had become a PROFITABLE audiovisual content interactive software specialist with an EBITDA of £0.61m. The PBT of £0.025m was just the right side of break-even and the first profit in the Mirada’s history. After years of development the company has transformed from a mixed bag of services into being focused on two products for the growing Digital TV market. Navi is a content navigation tool, and iris is a TV anywhere and on anything software product. Digital TV is coming of age and the two year partnership with Ericson to support GVT of Brazil is succeeding as they are reported to have 200,000 new subscribers and are the fastest growing Digital TV operator in Brazil. Mirada and Ericson are in negotiations with other operators in Eastern Europe and Latin America with a possibility of winning a contract by the March 2013 year–end. The license fee income is related to volume so there is a lead-time for a new contract to become profitable. Cablecom a US customer of iris launched a High Definition service in July which should be making an increasing contribution. The commercial launch of navi with a Mexican broadcast customer is likely following 14 months of development. In addition to the licence fees earned on new subscribers which are very high margin, fees are also earned from recurring annual support and maintenance. Forecast for the March 2013 year-end of £220k (no-tax) would put the shares on a prospective P/E of 16x.
Cash flow from operations was £0.6m while there are net current liabilities of £2.5m and longer term debt of £3m. Much of the debt is convertible and the balance sheet would benefit from early conversion.
Tristel (TSTL) – £14.4m at 36p
Human and Animal healthcare products supplier Tristel reported better than expected revenues and profit for the year to June 2012. Revenues rose 18% to £10.9m while underlying profit improved from £510,000 to £750,000 for an EPS of 1.77p compared to 1.27p. The main growth came from the international business where revenues grew from £1m to £2.1m. In the UK, the main growth is coming from the sales of wipes to hospitals. It is taking time to build up the sales of Crystel contamination control products to the pharma and personal care sectors. Sales were £235,000 last year and this could double in the current year. The past two years have been characterised by investments in new products, processes and geographies and the company are in the process of reviewing operations to seek increased value and there are likely to be operational changes. Profits are forecasts for 2103 at £1m for an EPS of 2.2p for a prospective P/E of 16.4x giving a yield of 2.8%.
There is little long term debt and net cash increased to £540,000 as cash generated from operations increased to £1.48m a significant turnaround from last year.
Silvermere (SLME) – £3.14m at 10.75p
More to do
An operations update reported oil from this junior US oil producer. A flow rate on the Mustang Island test well had produced oil at a rate of 155 barrels per day as well as 700k of gas. The higher than anticipated proportion of oil to gas was seen as encouraging. After much investment and further £0.5m in the six months to June the installation of facilities now allows the company to move forward with the Mustang Island redevelopment which has already been in production between 1980 and 1995. Silvermere own a 33.33% working interest and 20.83% net entitlement interest in the Mustang Licence Area which has significant potential. It is still too early, however to make firm predictions about the commercial flow rates. The competent person report assigned proven and probable reserves valued of £18.35m on Silvermere’s net entitlement.
The last fund rising in July 2012 and £630k was raised at 8p. The time-lag to production for the first well has impacted on the corporate development as the team’s ambitions are to use this production as a stepping stone to the acquisition of further US production assets.