“ I try to buy companies when they are special and sell when …

… they become ordinary”

Jim Slater

 

Last week …

… underlying optimism that the  Chancellor’s extension of mild austerity policies is sufficient for recovery helped the FTSE 100 to close at 5914 which was up 0.8%.  The FTSE 250 improved 1.3% while the Aim All Share at 688 which very marginally lower. UK Manufacturing PMI picked up at a relatively faster pace to 49.1, although 50 would show standstill.  US Unemployment dropped from 7.9% to 7.7% while  the  troublesome fiscal cliff negotiations are on-going.

This week …

… UK Unemployment will be reported on Wednesday with Balance of Trade on Tuesday the latter is likely to show higher imports so could negatively impact on employment.  The EU and US report a host of production and prices, perhaps Thursday’s Retail Sales from US will be watched most closely. End of year optimism still helps markets.

 

Company Reports

OMG – £23.5m at 32.5p

Seeing future growth

Finals from OMG (Oxford Metrics Group) showed a strong recovery with a PBT of £1.8m compared to £0.7m. Revenue was £29.5m up 7.8% with PBT margins of 6.1%. OMG have evolved to produce a verity image understanding products and services to a wide range of international customers from entertainment, defence, life science and engineering industries. There are cash cow in life science products but two raising stars are 2D3 and Autographer. Investment in the 2d3 a defence industry product that delivers high quality intelligence from aerial imagery, has paid off. Two US defence contracts have been won for over $1m each and is now profitable A completely new kind of camera aimed at consume Autographer,  is the world’s first intelligent, wearable camera. It offers spontaneous hands-free image capture, featuring a custom wide angle “eye-view” lens, it has five in-built sensors, which choose the right moments to take photos. It will be sold exclusively available through OMG’s own online store. Profits for the September 2013 year end are forecast at £3.2m for an EPS of 3.45p giving a prospective P/E of 9.4x while yielding 1%.

Financials

Net cash is £4.3m  and  the focus is to continue the geographic expansion with the US particularly targeted as well as product development.

 

Plastics Capital (PLA) – £19m at 69.5p

Niching the World

Interims to September showed this innovative plastic niche products manufacturer suffered from lower European sales.  Revenues were 3% lower at £15.7m but sales are stabilising as seven new potential customers could produce an extra £1.8m of annualised sales value.  PBT fell from £2m to £1.8m reflecting the adverse exchange rate movement and lower margin contracts with production companies.  The new product development is centred on improvement to existing  ranges such as such as ball bearing for photocopy toner cartridges which is a potentially  £2-£3m market. Sales from f miniature bearing for a camera lens focus system are expected. In the second half there will be an additional £1.2m of capital investment in new capacity for the high strength film packaging business which is supported by a contract. There is still spare capacity at the factory in Thailand and there are offices in China, Japan, USA and India with sales to over 80 countries worldwide.  Full year profits to March 2013 are forecast to improve from £3.7m to £3.9m which would give a prospective P/E of  6.2x while yielding 1.5%. PLA would look to acquire earning enhancing bearing and casing businesses but are perhaps held back but the current rating.

Finance

Cash generated from operations continues to reduce borrowings and net debt was £8.6m and net debt will fall further assuming no acquisitions are made.

 

Vianet (VNET) – £28.2m at 101.5p

Growth could flow from US

After restructuring Vianet has shed low margin and unprofitable business.  So the Interims to September reported a 5% decline in sales to £11.2m with profit 2% lower at £1.87m but there are more cost reduction benefits to come.  The number of pubs taking its core beer monitoring systems has fallen but Vianet has sold more of its higher value iDraught systems. Currently 3,000 of the 18,000 pubs and bars that are customers now use iDraught and 70% of total revenues are reoccurring. This division of the business still makes all of the group profit but the vending and machine-to-machine operations are near to profitability. One of the key areas of potential growth is the US, where the iDraught system has been test marketed on a localised basis. A sales team has been recruited and a deal made with a firm that can install and service the systems on a national basis. The aim is to have 5,000 systems in place in three years time generating recurring revenues of £12m. Profits for the full year to March 2013 are likely to show little growth at £2.5 which gives an EPS of just under 10p so a prospective P/E of 11x but yielding 5%.

Finance

Net debt has been reduced to £2.44m and the interim dividend has been increased by 2% to 1.7p a share.

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