“Patience is the key as we await recovery.”

Bruce Rowan, Chairman -Starvest

“We feel it is fair to say -bear markets do not last forever.”

Clem Chambers, CEO- ADVFN

Last week …

…  buyers were scarce. The FTSE 100 fell 1.5% to 5806, with the FTSE 250 down 1.2% while the Aim All Share at 698 dropped 1.9%. The recession is over with a reported 1% leap in GDP, half of this is a statistical blip and reality was restored by a Survey from Markit, showing that in October 29% (from 7.25%) of Households reported deterioration in finances. Some global US companies reported disappointing earnings although US Third Qtr GDP was an annualised 2% slightly better than the 1.9% expected. Markets were reminded of the Euro Zone drift with the worst PMI for 40 months. (Purchasing Managers Index is a forward looking indicator.)

This week …

…  is a slow week for UK  economic  news, New Mortgages on Monday should be higher. There could be encouraging productivity and sales data from the US, including Employment on Friday. Germany Retails Sales on Wednesday may give a deteriorating insight into Euro-growth. Ignoring more than two days of disruptions from Hurricane Sandy we remain positive.


Company Reports

Lombard Risk Management (LRM) – £24.4m at 10.5p

Increasing Reward  

Financial risk and compliance software developer Lombard Risk Management invested significantly more in development in the first half and the benefits should start to show through in the second half. Revenues for the six months to September improved by one-fifth to £7.65m but there is a higher amortisation charge due to the capitalised development  investments. Pre-tax profit fell from £1.75m to £1.33m and there would have been a small loss if all the development spending had been expensed.  New software versions have been developed to keep ahead of regulatory changes in the global financial sector but it should provide increased  demand for Lombard’s software. This year will benefit from reporting and derivatives clearing regulation, as well as the Dodd-Frank Act coming into effect at the end of this year which will also boost demand from reporting software. A Transaction software Reform has been launched. A much better second half is expected to help Lombard report an increase in underlying full year profit from £2.5m to £3.6m which puts the shares on a prospective P/E of 7x for March 2013 year-end. The interim dividend has been increased from 0.02p a share to 0.025p a share so the year end yield would be 0.7%.


Net debt was £148,000 at the end of September 2012 but they should be next cash by the year –end.



ADFVN (AFN) – £31m at 5p

Still a way to go

Europe’s leading stock and shares website grew the number of users by 18% to 2.6m, turnover however was slightly lower at £8.5m (£8.6m) but the company fell back into an EBITDA loss of £0.36m compared to a profit £0.34m. The Net loss for the year end June 2012, was £1.6m compared to £0.6m and there is £1m of amortization a non cash item taken out each year.  The performance was framed by a poor economic background but the company is winning market share. A mobile service was launched that should make a meaningful contribution next year and the expansion into e business books is also additional revenue.  The company may need to attract a wider investment audience perhaps with more analytical reports. The plan remains to leverage the brand and the 2.6m users and due to the low variable costs of the business an extra £0.5m of revenue produces an EBITDA profit. To make a value proposition we would look for around £2m of PBT which would imply a £3.2m leap in turnover assuming historic gross margins.


There is net cash of £0.5m and up to a further £1.2m from the sale of Equity Developments the final instalment would be July 2017.

Share Plc (SHRE) – £35m at 24.5p

Sheer Hard Work

If you were concerned that Goldman Sacs  are only sharing $10.5 billion in bonuses you would perhaps cry for Sharemart, an Auction Based Trading Platform which was disposed of for £100k cash and 1% equity.  Along with this disposal the Share plc reported Third Qtr. revenues from its on-going business of running the Share Centre and Sharefunds. The Share Centre is an execution only retail stockbroker that also offers share services for corporates and employees. A high proportion of income is derived from stable fees and interest-based revenues which increased 1% of the Third Qtr, although this in shorter term could be adversely impacted by the RDR (Retail Distribution Review) when it’s implemented in January 2014. Commission on non-discretionary business fell 16% and given the market uncertainties and lower retail volumes reported by the LSE this was relatively robust.  Other retail brokers commissions have fallen an average of 28% in the Third Qtr. Profits for the December 2012 year end are forecast to fall to £1.3m  (£2m)on turnover of £14.0m  for an EPS of 0.75p giving a prospective P/E of  32x while yielding 1.8%. The tight share structure is reducing the share price volatility and market share is mildly increasing and champagne times for the surviving brokers will surely come again.


There is net cash of around £3m and the NAV at December 2011 was  £24.7m.  You may note the shareholder perks of a 30% discount to all online deals for shareholders with over 500 shares (£125).


STARVEST (SVE) – £2.41m at 6.5p

Bottom Fishing

Starvest is a mining investment company reported finals to September 2012 and showed a 34% discount to the 9.86p NAV.  An After Tax loss of £0.75m was reported as investment values declined by 36% to the bid price. The report contains an update on around 20 mining cap stocks there are more detailed reports on 10 companies that make up 85% (£3m) of the portfolio, Red Rock, Regency, Ariana Resources etc.  The focus of the investment strategy remains on relative early stage natural resources  with an emphasis on Gold and Bruce Rowan the, chairman and 25% shareholder, did well buying at the bottom of the  last cycle. Mr Rowan seems confident that given time Starvest is in a strong position to benefit from a general market upturn as well as specific to junior mining stocks. The question from here is can sufficient value be released before investee companies require further development funds.


Since the year end the NAV is increased to £4.04m (10.8p)and the discount to 39.8%. Last year a 0.75p dividend was paid there is none this year as  dividends are only paid when a profit is taken.   


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