There is indisputable weight of empirical evidence that leads to the definite conclusion that smaller companies simply have more room to grow and for share prices to increase.
In a former life I enjoyed being the Editor and main Tipster for Penny Share Focus. The challenge of trying to find and report unrecognised corporate value is a great fun and I have been encouraged by TradersOwn to repeat the process.
You are invited to click the link to www.tradersown.co.uk where shares can be bought and sold for £6 a trade. As encouragement to check-on this new informative share trading site there will be a speculative share tip from Tuesday 8.30, a tip where I think the potential for high reward more than compensates for the risk of you putting hard earned money into a small cap gold exploration share.
Last week …
… the AIM All Shares improved 2.32% to 736, the FTSE 250 increased 0.8% with the FTSE 100 up 0.5% to 6121.0. The FTSE 100 is at its highest level since May 2008 due to a combination of moderately bullish factors such as improving liquidity of banks, Chinese Inflation at 2.5% comfortably below 4% which would be the signal for ‘tightening’ polices. The UK almost remains flat evidenced by Industrial Production increasing by a tiny 0.3% in November.
This week …
… on Tuesday UK Inflation figures are to be reported. The broader, Retail Price Index RPI is currently 3.0% and CPI is 2.7% but could be creeping–up. Retail Sales Figures will be reported on Friday. Germany’s GDP is on Tuesday and following November’s slow growth in Production GDP could turn negative, giving a reminder of fragility of Euro Zone economies. US Consumer Prices and Industrial Production will be announced on Wednesday. Markets are likely to fall back this week.
Leeds Group (LdSG) – £6.9m at 24.75p
Needs a strategic initiative
The interim loss of £166k included the write-off of the Dawson acquisition so hides a reasonable performance from this 100 year old textile company. Over the years Businesses has contracted to its main subsidiary, Hemmers-Itex a German-based business that imports fabric, mainly from the Far East, for sale and distribution throughout Europe. Profit after tax from trading operations was £579,000, up by 20% on last year. In Euro terms, revenues increased by 14.9% compared with 2011 which was sufficient to offset the effect of the declining value of the Euro against the US $. Sales volumes and revenues at ChinohTex, the Chinese subsidiary of Hemmers, grew by more than 80%. Peter Gyllenhammer, the Swedish billionaire investors owns 24% and despite the tight market in the shares, the company is trying to buy back its own shares. If trading profits were the same as last year’s £0.8m the PER to May 2013 would put the shares on a prospective P/E of 10x.
The NAV is 45.2p a share which is mostly stock (£6m) while combination of profitable trading and working capital control net debt has been reduced to £1m.
Ilika (IKA) – £11.2m at 24.5p
Cash the catalyst
The advanced clean-tech Materials technology developer Ilika had already warned that contracts had been delayed and it had lost a client, so the fall in interim revenues was not a surprise. In the six months to October 2012, revenues fell from £745,000 to £392,000 and the loss increased from £1.39m to £1.87m.The figures exclude the non -core wound care activities which was disposed off. Energizer Battery Manufacturing Inc decided to end its battery project with Ilika but there are around 20 such JV projects. The business is second half weighted and full year revenues to be £1.8m.
Ilika has developed efficient hydrogen storage technology with Shell and the patents have been filed. The product could be launched this year and there is a potential market worth £19m to Ilika. The fuel cell electrode using palladium instead of platinum will undergo a full automotive testing plan this year. Ilika is hopeful that the thin-film battery technology developed with Toyota could be commercialised in 2014. R&D spending was increased by £250,000 to £900,000. Losses are expected to continue for the foreseeable future unless the a product such as the low cost fuel cell catalyst is commercialised early.
There was £3.55m in cash at the end of October 2012, which at the present rate gives 18 months cash burn.
OMG (OMG) – £27.5m at 37.5p
Route to $ms
The expected US expansion is under starters orders with the launch of Horizons software at a Tech show in Washington DC. The software enables a real-world view, and efficient management, of every aspect of the highway, and demonstrates how it uses OMG’s cutting edge computer vision technology for visualising highways assets. Horizon sales are growing fast in the UK and seem likely to win orders in the US, where everything is bigger! Also being exhibited is the Tempest Capture Vehicle, which is used for electronic surveying and can carry various combinations of sensors including specialised digital cameras, lasers and ground-penetrating radar to capture images helping Local Authorities to more effectively manage their road maintenance.
The share price is up 5p since we reviewed the finals in early December while profits for the September 2013 year end are forecast at £3.35m for an EPS of 3.15p giving a prospective P/E of 11.9x, which drops to a prospective P/E of 9.2x going a further year out to 2014 while yielding 1.2%.
Net cash is £4.3m and the focus is to continue the product development and geographic expansion with the US particularly targeted.