… the FTSE 100 at 5363 declined -0.2%, with the FTSE 250 improving 2.1% and the Aim All Share up 3.28%. The Eurozone Credit Rating downgrades on Friday may have affected the FTSE 100 but there were downgrades on specific FTSE100 stocks. Improving news came from America where unemployment fell to 8.5% in December, as 1.6m jobs were created in 2011 which is the most since 2006. The BoE decided to maintain interest rate at 0.5%, the same level since March 2009 and QE was also unchanged at £275bn.
… UK Retail Price Index on Tuesday should continue a reducing trend but Unemployment on Wednesday is likely to increase. The dominant factor, however will be the secondary repercussions of Friday’s credit rating downgrade of nine Eurozone members and its impact on growth assumptions. Eurozone austerity measures may need to be accelerated to help save Greece from defaulting on a £12bn loan repayment etc. The UK 2012 GDP conscientious forecasts are already as near to negative growth for it to a ‘mild‘ technical recession. A flat week, on average, would be a good result.
Avesco Group (AVS) – £40m at 158p
A full investment picture is emerging…..
AVS are an international provider of services to the corporate presentation, entertainment and broadcast markets. Strong results for the year end September 2011 were reported as Avesco is benefiting from growth in the number and complexity of live events, from a more international market and from the trend of ‘one-stop shopping for services ’. The strategy of geographic expansion is proving successful as revenue from outside the UK increase to 64% of the total, up from 62%. Start-up services are improving profitability and cash flows as Avesco saw a strong performance from its Creative Technology US operations and a profitable turnaround of its “Full Service” technical support operations. The improved trading performance and continued cash generation allow the dividend to be tripled to 3p per share with an intention to reintroduce an interim dividend . The cash flow showed £17.9m of net cash generated from operating activities – funding a net £15.6m of investment spending, a with a £254,000 dividend payment net debt still fell to below £13m. 2012 is set to be a particularly strong year with the Olympics, UEFA Euro 2012 football championship and the Queen’s Diamond Jubilee. Profits forecast for the September 2012 year-end are for £4m for an EPS of 12p and a prospective P/E of 13x while yielding 2.6%
Avesco remain a play on the Celador/Disney court case outcome, due in 2013 and worth about 135p per share (after costs) if paid in full.
Pan Pacific Aggregates (PPA) – £1.76m at 0.45p
The keys to unlocking value are changing…….
An operator of quarries in British Columbia, Canada. Some of the strategic and trading uncertainty was lifted following the recent series of announcement and acquisition speculation. Acquisitions are a key part of the development strategy but none are currently reported to be under consideration. The Managing Director William Voaden has resigned to remain a consultant and Lynda Chase- Gardener is to become CEO. A share consolidation of 100 into 1 is being implemented and a £2m Seeder had been put into place. The Quadling Quarry met its production and revenue targets and is generating returns while operational efficiencies are beginning to become evident by improving margins
The net assets are around £3m with debt of £1m. A general meeting of the Company will be held on 26 January 2012 to approve the consolidation.
Ilika (IKA) – £18.1m at 49.5p
A £5m investment spark maybe needed…….
Ilka’s reported a interim losses but showing solid support for the company’s underlying revenue streams increased 37% and a 67% increase in gross profit. . Revenues, including grant income, grew 37% to £1.04m in the six months to October 2011 while the reported loss fell from £1.88m to £1.56m. lika owns technology that helps accelerate the discovery of new materials in the energy, electronics and biomedical fields.
Ilika has an opportunity to monetise one of its joint development projects. By applying jointly-held IP originally developed with Toyota, it is developing a new man-portable battery system for defence applications. Eg Soldiers can carry around 20lbs of batteries to power their equipment – radios, infra red sights, etc. Ilika believes that it can replace all those batteries with one single source of power. The Distributed Universal Batteries System (DUBS) will use one power management chip and could potentially provide more power than the existing batteries and for a longer period of time. Ilika will require a partner to help fund the development, though. A company with experience in the defence sector would be best. Supported with appropriate funding and a suitable manufacturing partner, the potential upside from this project is substantial.
The new project has a total cash requirement of £5m. Ilika is in discussions with potential development partners to fund this, but is prepared to do so itself if necessary, in which case it will require additional equity to strengthen the balance sheet. The battery project with conservative revenue forecasts takes near-term profit forecasts down, but raises the DCF valuation. The PBT forecast for April Year / end are for a loss of £2.7m. If the company finds a partner to fund the project then the potential value will increase further.
1PM (OPM) – £3.44m at 0.11p
Growing loan book increasing profits………
Asset finance provider 1PM is showing that it can sustain its profitability. It has been profitable for 18 months and the profit is growing strongly. The total lease portfolio has increased to £10.9m. Revenues rose 31% to £1.15m in the six months to November 2011 and overheads have been kept down which helped pre-tax profit to jump from £63,000 to £214,000. Bad debts are modest. The business is first half weighted so the second half profit is unlikely to be as high. 1PM has moved to a new office in Bath and this will provide room to grow employee numbers although that is not likely to happen in the short-term.
The existing funding facility has been increased by £1m. Funding has been the main constraint on growth but 1PM has plenty of scope to further grow its lease portfolio. 1PM is offering high net worth individuals the chance to lend it money and receive an attractive interest rate of 9.25%. The minimum investment is £50,000.
Jupiter Energy (JPRL) – £31m at 27p
Funding increased Oil Production………..
Jupiter has attractive oil and gas exploration assets in Kazakhstan and strong financial backers. Waterford and SNG have 30% and 9.9% respectively, which they acquired by injecting new money into the group. Jupiter recently obtained an AIM quotation to go with its long standing ASX listing. Jupiter hopes to attract UK institutional investment.
Kazakhstan is a major producer of oil and gas and Jupiter’s assets are in western Kazakhstan, an area with existing production. Baltabek Kuandykov is a non-executive director and he is an influential. Block 31 currently has reserves of 24m barrels of oil. Jupiter has drilled three exploration wells and a fourth is due to be completed. The reserve figure should be increased to nearer 40m barrels early this year. Jupiter has applied for an extension to its block and been granted the extension to the south. It now intends to apply for an extension to the west. Longer-term, Jupiter could be of interest to a buyer. Chinese buyers like to buy assets that are in production so they could be potential purchasers if full production commences.