Small Companies News Flash

Avisen (AVI, 4.625p, £10.42m)

Avisen (AVI, 4.625p, £10.42m), the performance management specialist, reports prelims to 21 January 2010. Following the six acquisitions, revenues increased to £7.2m (10m 31 Jan 09: £2.4m), but the group still delivered an adjusted pre-tax loss of £1.7. The acquisitions have been successfully integrated. The board is now trading in line with management expectations. The outlook provides little information. We were sellers of the stock in January when the share price was 15.25p. We adjust our recommendation to a HOLD.  (Amisha Chohan) 

Recommendation: HOLD

Coe Group (COE, 5.5p, £2.02m)

Coe Group (COE, 5.5p, £2.02m) has received a recommended cash offer from Digital Barriers Plc, for the entire share capital of the group, for c. £3.3m, equivalent to 9p per share. We believe this is a good offer and recommend investor to ACCEPT THE BID. (Amisha Chohan)

Recommendation: ACCEPT THE BID

Filtronic (FTC, 33.5p, £24.90m)

Filtronic (FTC, 33.5p, £24.90m), the designer and manufacturer of microwave electronics products for wireless telecoms backhaul infrastructure market, proposes to acquire the entire share capital of Isotek Holding, for a total consideration of £4.35m cash and 18.55m Filtronic shares. Isotek is a developer and markets of leading-edge telecommunications products for a range of wireless infrastructure applications. The acquisition will add complementary IP and provides entry to a customised niche market for high added value base station filters. We expect the transaction to be earnings enhancing in FY2012, delivering c.£15m of revenues in the period. The statement does not comment on Isotek’s financial history. The stock is highly rated, trading on an unwarranted 2012 PER of 39x.We repeat our SELL recommendation with a 26p price target. (Amisha Chohan) 

Recommendation: SELL

Hartest Holdings (HTH, 89.0p, £7.65m)

Hartest Holdings (HTH, 89.0p, £7.65m) has been bid for again, but this time, by one of its larger shareholders, Elektron. This comes as no surprise. Elecktron has acquired shares from Peter Gyllenhammar at 90p, and now represents 29.05% of the group. Eleckron is making a mandatory cash offer of 90p per share, which values the business at £8.2m. The bid confirms our belief the group was undervalued. We recommend investors to ACCEPT THE BID. (Amisha Chohan) 

Recommendation: ACCEPT THE BID

Hasgrove (HGV, 50.0p, £11.92m)

Hasgrove (HGV, 50.0p, £11.92m), the pan European marketing and communications services group, reports a trading update for the interims to 30 June 2010. The Board anticipates gross revenues to increase by 7% to £14.1m (H109: £13.2m), of which £0.2m will represent adverse currency impact y-o-y, and adjusted operating profit to increase by 19% to £1.7m (H109: £1.5m). There will be £0.41m of exceptional in the period. Hasgrove has secured £4m of new business in H1; double that of the previous period. We believe this highlights the improvement in the economies, with lower exposure to project cancellations and delays. The full benefits of the cost reduction programme should benefit H2 2010. Net debt reduced to £5.9m (FY09: £6.5m). A review of the dividend policy suggests a progressive policy, post the earn-out payments next financial year, with a cover of at least 2x underlying EPS. The impact of the UK public spending cuts will have an impact on the remainder of the year. We believe some the group’s client base may start exercising increased caution in their expenditure in the face of slower growth or worst a double dip in the UK. We believe the uncertainty in the outlook is more than incorporated in the current valuation. The stock trades on a 2010 PER of 4x falling to 3.4x in 2011 with a yield of 1%. We upgrade our recommendation to a BUY with a target price of 62p, equivalent to 5x 2010 earnings. (Amisha Chohan)

Recommendation: BUY

Mount Engineering (MOU, 50.5p, £11.85m)

Mount Engineering (MOU, 50.5p, £11.85m), the manufacturer and supplier of certified explosion proof fittings and supplier of valves and actuators, reports a disappointing trading update the 6 months to 30 June 2010. Interims will be marginally below management expectations due to weaker project activity in Asia and Europe. H2 2010 estimates assumed improved trading, which is dependent on the timing of the recovery in demand of the international oil and gas market. We believe the market will reduce current 2010 PBT and EPS estimates from £2.8m and 8.4p. We therefore reduce our recommendation to a HOLD.  (Amisha Chohan)

Recommendation: HOLD

SQS Software (SQS, 181.5p, £49.48m)

SQS Software (SQS, 181.5p, £49.48m), the supplier of independent software testing and quality management services, has secured a new Managed Services contract with an existing client valued at least €15m over a three and a half year period. The contract will not make a material contribution to the current financial year. This is excellent news. Total orders to date stand at c.€40m (vs. €15m on 26 May 2010) – an excellent performance. €9m of total order book is expected to be recognised in the current financial year. The strong order book highlights market conditions are improving, providing the group with revenue visibility and improved quality of earnings. We reiterate our BUY recommendation with our 12 month target price of 258p.  (Amisha Chohan)

Recommendation: BUY

Acal (ACL, 182.5p, £51.86m)

Acal (ACL, 182.5p, £51.86m), the specialist provider of technology products and services across Europe and South Africa, reports a strong IMS for the period between 1 April to 28 June 2010. Underlying Q1 sales are up c.20% y-o-y and the current demand remains high, with orders up 29%. The Electronics divisions (77% of total revenue) is going from strength-to-strength were underlying sales have risen by c.26% and orders by 42% y-o-y. The non-Electronics division reports 3% uplift in revenues, with orders flat against the previous year. Margins in the Supply Chain division continue to be under pressure. The integration of BFI Optilas is on track to be completed at the end of the current financial year. The integration will deliver cost savings c.£2.7m during the year and the group is still seeking further operational efficiencies within the original group. The Board remains cautious about the sustainability of the recovery in H2. The market forecasts 2011 PBT, EPS and DPS of £3.0m, 6.5p and 7.0p respectively. Trading on a 2011 PER of 28x the group is not obviously cheap. However, with EPS growth of 2x in 2012 to 19.5p, primarily driven by the acquisition, an earnings rating of 9.3x with a yield of 3.8%, is undemanding. We reiterate our BUY recommendation, but reduce our target price from 225p to 205p. (Amisha Chohan) 

Recommendation: BUY

Chamberlin and Hill (CMH, 86.5p, £6.43m)

Chamberlin and Hill (CMH, 86.5p, £6.43m), the specialist engineering group reports the revenue recovery reported in H2 2010 has continued into Q1 2011. With the improving demand, a reduced cost base and production capability intact, the Board continues to be confident of a return to profitability in the year and views prospects very positively. With 2011 and 2010 earnings of 5.98p and 13.46p respectively, we believe the strong earnings growth of 1.3x is not reflected in the 2012 PER of 6.4x.  The latter combined with the recovery encourages us to increase our recommendation to a SPECULATIVE BUY with a target price of 96p. (Amisha Chohan)

Recommendation: SPECULATIVE BUY

Clapham House (CPH, 74p, £30.37m)

Clapham House (CPH, 74p, £30.37m), the owner and operator of Gourmet Burger Kitchen and The Real Greek, has reached an approach which may or may not lead to an offer being made for the company. We would therefore recommend investors to HOLD the stock until further information is released. (Amisha Chohan) 

Recommendation: HOLD

Finsbury Food Group (FIF, 17.75p, £9.35m)

Finsbury Food Group (FIF, 17.75p, £9.35m) is the manufacturer of cake, bread and morning goods and gluten free bakery products. The group is trading in line with management expectations. Revenues in H1 2010 have fallen by 4% to £168.3m, as consumers continue to seek better value by trading down and more frequently buying products on promotional offers. Strong revenues (+9.3%) from Bread and Free From were partially offset by the decline (-9.7%) in the larger Cake division. Internal efficiencies and investment in growth areas has helped the group manage the reduction in sales and volatile input prices. The group has successfully negotiated with the deferred consideration parties to reschedule c.£5m due in Q1 of the new financial year over the period to March 2012. This is good news and will help relax the group’s cash requirements. Based on the current market earnings estimates of 6.3p, the stock trades on a prospective PER of 2.8x, to reflect the high debt. We weak trading and high debt encourages us to reduce our recommendation from a speculative buy to a HOLD. (Amisha Chohan) 

Recommendation: HOLD

Getech (GTC, 17.5p, £5.12m)

Getech (GTC, 17.5p, £5.12m), the geosciences business specialising in the provision of data, studies and interpretation services to the oil and mining exploration sectors, reports the recovery has continued into H2. Strong revenues for H2 ending 31 July 2010, should lead an operating profit for the period. However, the latter combined with the £0.4m of pre-tax losses in the H1 will show a deficit for FY2010. The stronger performance in H2 encourages to upgrade our recommendation to a HOLD. (Amisha Chohan) 

Recommendation: HOLD

Hornby (HRN, 138p, £54.42m)

Hornby (HRN, 138p, £54.42m) Demand for products remained robust in UK, mainland Europe and the USA. Net debt at 30 June 2010 stood at £4.4m (30 June 2009 £12.4m) and the group have secured banking facilities of £21m in the UK maturing between 20112-2014. Pre-Christmas remains the key trading period for the group. An increase in distribution of products should help enhance revenues over the period.  The license for the London 2012 Olympics and Paralympics Games should to bolster revenues for FY2011 and 2012. The group has a wide range of products with strong brands (e.g. Scalextric and Airfix), which have proved to be relatively resilient to the downturn. Trading on a 2011 PER of 11x.we believe the stock is fairly valued. We reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

James Cropper (CRPR, 157.0p, £13.30m)

James Cropper (CRPR, 157.0p, £13.30m) Trading in Q1 2011 for the manufacturer and retailer of paper and paper related products has been profitable, with strong performances from Technical Fibre Products (TFP) and James Cropper Converting (converting). The order book for TFL has grown indicating the recession on downstream customers is easing. The Board expects a strong recovery over the coming year. Converting anticipates an increase in profitability from the increase in demand from digital printing boards from the US retailing sector coupled improvements in efficiencies. As anticipated increases in pulp and energy prices will drive the Specialty Papers division to report a small loss in Q1. The pulp prices have now stabilised and are expected to decline in H2. Price increase may be passed through to customers (currently being negotiated) although there will be a time lag. The Paper Mill has closed 3 underperforming outlets in Q1. The market forecasts 2011 PBT of £2.2m, EPS of 17.5p and DPS of 7.5p. The stock trades on 8.8x earnings for 2011 and 8x for 2012 with a compelling yield of 4.8%. The group has surpassed our target price of 147p, which encourages us to reduce our recommendation to a HOLD. (Amisha Chohan) 

Recommendation: HOLD

Lees Foods (LEE, 172.5p, £4.17m)

Lees Foods (LEE, 172.5p, £4.17m), the operator of Lees of Scotland and the Waverley Bakery, reports a strong H1 2010 (to June 2010) performance, will lead to both sales and pre-tax profits for the FY2010 to be ahead of market consensus PBT and EPS of  £0.7m and 22.7p respectively. The Board expect to report 9% uplift in H1 sales to £9.62m (H109: £8.85m) and PBT to significantly exceed the previous year’s £0.39m. Demand for the good is strong. The marketplace remains extremely competitive; however the competition from European manufacturers has eased due to the current strength of the Euro against the Sterling. The group seek to enhance revenues by adding new products, improve margins and keep costs under control. We expect the market to upgrade 2010 PBT of £0.7m, EPS of 22.7p and DPS of 6.7p. For prudence, assuming earnings and DPS remain flat at 27.6p and 7.2p respectively, the stock trades on 6.3x with a yield of 4.2%, an unwarranted discount to the food producer sector, which trades in 7.8x with a yield of 3.3%. The share price has risen 37% since our buy recommendation on 30/09/09 (126p). We reiterate our BUY recommendation and our target price of 220p, equivalent to 8x prospective PER. (Amisha Chohan) 

Recommendation: BUY

Legion Group (LGNG, Suspended)

Legion Group (LGNG, Suspended) Working capital constraints have encouraged the Board to request the stock is suspended, despite a healthy order book and stable trading performance. The group is currently in discussions with HM Revenues & Customs regarding PAYE and VAT liabilities. It has insufficient funds to meet this liability. The group has received interest for the business and assets. It is currently in advanced discussions. If this fails the group could go into administration. N/A (Amisha Chohan) 

Recommendation: N/A

Netplay (NPT, 8.5p, £16.68m)

Netplay (NPT, 8.5p, £16.68m) Towards the end of June 2010, the group reported a profits warning driven by lower revenues and higher costs. Since then the group have had conversations with ITV to change the format and scheduling of Challenge Jackpot and the new Bingo Stars shows, which management believe will enhance revenues. We remind investors the ITV teleshopping relationship is a trial and therefore could easily be terminated. The full benefits of the cost saving programme will come through in Q4 2010. The business is refocusing on core product offerings. The increase in depositing signups for the core supercasino.com business is encouraging, but margins for July declined from an average of 3% to 1.3% to reflect a large winner. The group is forecast to deliver a pre-tax loss of £0.8m for the current financial. HOLD (Amisha Chohan)

Recommendation: HOLD

Real Good Food Company (RGD, 27.0p, £17.55m)

Real Good Food Company (RGD, 27.0p, £17.55m) Good growth has been reported for the 6 months ended 30 June 2010 for the supplier of bakery ingredients and the manufacturer of sweet bakery products, especially Renshaws and at Hayden's Bakeries. Napier Brown sugar has suffered from lower prices which have negatively impacted revenues for the division. However, tightening of the supply position is expected to lead to a recovery in pricing levels at the start of the new contract season in October. The focus on cost and cash control is reflected in the £1.5m reduction in working capital y-o-y and an 8% reduction in borrowings to £2.3m. With current 2010 market estimates of PBT of £2.3m and EPS of 2.5p growing to PBT of £2.8m and EPS of 3.1p in 2011, the stock trades on a 2011 prospective PER of 8.7x. We repeat our BUY recommendation with a target price of 30p. (Amisha Chohan) 

Recommendation: BUY

Seeing Machines (SEE, 3,75p, £15.21m)

Seeing Machines (SEE, 3,75p, £15.21m) has secured a contract to install DSS driver monitoring equipment in the haul truck fleet market at an open-pit mine in Peru. This contract is good news and highlights the expansion of DSS in South America. We believe further contract wins will support the share price. HOLD (Amisha Chohan)

Recommendation: HOLD

St. Ives (SIV, 80.25p, £83.13m)

St. Ives (SIV, 80.25p, £83.13m) expects the performance for the year ending July 2010 to be in line with market expectations of PBT of £13.8m and EPS of 9.2p. There is still uncertainty surrounding the economic climate, but volumes are stabilising and some markets are showing signs of a recovery. The group continue to reduce costs and improve operational efficiencies. The market forecasts 2011 PBT of £16.5 and EPS of 10.9p. The stock trades on a 2011 prospective PER of 7.4x, which we believe fails to take into consideration the double digit EPS growth. The uncertainty encourages us to reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

Titon Holdings (TON, 49.5p, £5.23m)

Titon Holdings (TON, 49.5p, £5.23m), the UK ventilation systems and hardware manufacturer, reports total revenues in the 3 months from 1 April to 30 June 2010 were up 19% y-o-y, with UK sales up 15% and the ROW up 37%. Sales growth was driven by higher sales of mechanical ventilation systems and higher sales volumes in South Korea, albeit from a low base. The boost in revenues coupled with a reduced cost base will enhance the bottom line. The statement is encouraging. However, with 80% of revenues generated from the UK market, the uncertainty surrounding the UK construction industry does not bode well for the group. We believe the high level of unoccupied office buildings, combined with the slowdown in schools and hospital construction programmes, will adversely affect the sales of the group’s window and door hardware products in the aluminium window market for the foreseeable future. The current share price is supported by a strong balance sheet with net cash of £3.1m. The share price has risen by 27% since our BUY recommendation. This is an asset play. We recommend investors to take some profit, but reiterate our BUY recommendation. (Amisha Chohan) 

Recommendation: BUY

Air Partner (AIP, 300p, £30.77m)

Air Partner (AIP, 300p, £30.77m) Trading update for the final quarter has confirmed that the recovery seen building throughout the year continued, so with a strong Q4, expects results to be ahead of the June raised forecasts. The group does warn that forward visibility remains poor, and we believe vulnerable to a collapse in consumer confidence on the October austerity measure, so despite the upgrade today and the promise to pay a full year DPS we maintain the HOLD recommendation, with a 313p price target. (Julian Tolley) 

Recommendation: HOLD

Alkane Energy (ALK, 15.75p, £14.66m)

Alkane Energy (ALK, 15.75p, £14.66m) The coalition Government’s lack of will to accelerate either nuclear or conventional generation capacity will prove a long tern threat to the county. The desire to back renewable energy is ignoring the requirements for replacement base-load generation fro reliable sources. As such we see Alkane Energy as attractive, not lease to our view of steadily increasing energy prices, as well as the potential for a hostile bid against the group from major UK based generation companies. Other companies we see benefitting include TEG that is just entering it power generation phase having secured waste supplies for its composting services. BUY (Julian Tolley) 

Recommendation: BUY

British Polythene (BPI, 216p, £57.24m)

British Polythene (BPI, 216p, £57.24m) Poor weather conditions have hampered silage production and farmers are driving prices up already in anticipation of shortages in the winter. With BPI a major supplier of silage wrap we believe this will have a material impact. We move the recommendation down to a HOLD. (Julian Tolley) 

Recommendation: HOLD

Ceramic Fuel Cells (CFU, 10.75p, £121.0m)

Ceramic Fuel Cells (CFU, 10.75p, £121.0m) Q4 trading update and quarterly cashflow report highlights the significant advances. The group now boasts 49 BlueGen units from 14 customers in 6 countries as well as 30 units from the Victorian Government for public housing projects. Against Ceres CFU has 12 integrated units installed and operating in five countries, highlighting partially the reason for the rating disparity. In addition to the modular BlueGen units, CFCL is continuing to develop a microCHP with partners where it supplies the fuel cell related technology. The group, like other fuel cell business, is seeing an increasing interest in Government’s to incentivise the adoption of distributed generation, primarily through attractive feed-in tariffs. Cash outflow for the quarter was £3.1m, lower than the previous quarter, but with just £6.6m net cash at the period end it does raise the spectre oaf a modest further cash raise. However we see the scale of dilution from such a raise as relatively small so we maintain the SPECULATIVE BUY recommendation. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Coms (COMS, 2.88p, £1.25m)

Coms (COMS, 2.88p, £1.25m), the developer and commercialisation of internet telephony services and sale of associated equipment, has launched a new division to support Microsoft’s unified communications products, Office Communications Server (“OCS”). The division has already secured a major order with Wandsworth Health Authority – the value has not been disclosed. In addition, the group has completed the shipment of its largest order, valued at £0.1m to Wandsworth Health Authority. The market for Internet telephony is expected to grow worldwide. We believe Coms is well placed to take advantage of the growth. The share price has drifted of late. Trading on a 2010 revenue multiple of c. 0.56x, we believe the group is undervalued and therefore upgrade our recommendation to a SPECULATIVE BUY. (Amisha Chohan) 

Recommendation: SPECULATIVE BUY

Cove Energy (COV, 68p, £230.3m)

Cove Energy (COV, 68p, £230.3m) has agreed a conditional farm-in agreement with Dynamic Energy Exploration and Production Corporation (DEPCO) for a 15% working interest in 5 adjoining deepwater blocks over 30,500 kmsq, offshore Kenya. The licence will be operated by Anadarko Petroleum (Anadarko 70%/DEPCO 15% and Cove 15%). Recent 2 D seismic over 5,000 kilometres has been acquired and the area exhibits similar geological features to Cove’s Mozambique and Tanzania interests. Cove will pay $15.5m ($10.5m cash/$5m shares, at the 5 day average price prior to closing of the deal & locked in for 6 months) for acquisition costs, reimbursement of DEPCO's past costs and funding for the forward work programme for both company’s through the 1st exploration phase to June 2012. The transaction is expected to close in Q3 2010 pending government and Anadarko consents (the latter already giving preliminary approval).  An interesting early stage opportunity with a strong operator partner. HOLD pending news on Ironclad well operations. (Andrew McGeary) 

Recommendation: HOLD

Croma Group (CMG, 2.375p, £4.50m)

Croma Group (CMG, 2.375p, £4.50m) has announced talks are underway regarding the sale of its avionics subsidiary, RDS Avionics. With net debt falling due to organic cash generation, this has more to do with the group focussing its efforts on the support services aspects. For the time being we drop the recommendation to a HOLD as the price has almost reached our 2.4p price target set in mid March.

Recommendation: HOLD

Eleco (ELCO, 17.5p, £10.62m)

Eleco (ELCO, 17.5p, £10.62m) Trading update for the year ending June 2010 reports that the anticipated losses from its Building Systems operations are greater than previously anticipated and thus, despite markedly improved profitability at its software operations, the losses will be worse than previously forecast. The group expects net debt to end marginally lower at £1.9m (net debt £2.1m). Within the building operations, Bell & Webster Concrete is being restructured in the face of depressing market conditions while Milbury Concrete Systems, that supplies agricultural and retaining walls, reacted to being reduced to one location and is now profitable. Timber Engineering has been boosted by new business wins for its connector plate business both in the UK and South Africa, offset by lower expectations at both ETF, the timber frame manufacturer, as well as Downer, the specialist cladding business. With a £4m cost reduction programme underway we believe it is time to take the group off the Sell recommendation (first iterated in June 2009 at 48.4p) and move it to a HOLD. (Julian Tolley) 

Recommendation: HOLD

Endace (EDA, 187.5p, £28.09m)

Endace (EDA, 187.5p, £28.09m) AGTM trading statement reports the year has started well with god interest in its Financial Trade latency and Cyber Security monitoring platforms and technology. In addition it has partnered with Riverbed Technology to demonstrate their systems interoperability. We maintain the HOLD recommendation. (Julian Tolley) 

Recommendation: HOLD

First Derivatives (FDP, 310.0p, £48.57m)

First Derivatives (FDP, 310.0p, £48.57m) has secured a contract with Singapore Exchange to provide Delta platform for internal real-time monitoring. The contract highlights the strength of the platform and increases the group’s presence in Asia. We reiterate our BUY recommendation with a target price of 335p. (Amisha Chohan) 

Recommendation: BUY

Forbidden Technologies (FBT, 16.5p, £13.19m)

Forbidden Technologies (FBT, 16.5p, £13.19m) Note the FD and Chairman both adding to the shareholdings. Vic Steel, executive Chairman, bought 450,000 shares taking his holding to 812,500. Phil Madden, Financial Director, bought 75,000 shares taking his holding to 150,875. Investors should follow their lead into this exciting video editing software company. SPECULATIVE BUY (Julian Tolley)

Recommendation: SPECULATIVE BUY

Ilika (IKA, 56.5p, £20.66m)

Ilika (IKA, 56.5p, £20.66m) has been awarded a £0.153m grant from the UK Government to develop artificial skin for full thickness burns. The Ilika system offers a cheaper alternative with no rejection possibility and which enables a faster and more thorough recovery. For the time being a HOLD, but we are massively impressed by their fast material development process. (Julian Tolley) 

Recommendation: HOLD

Individual Restaurant Company (IRC, 11.5p, £6.86m)

Individual Restaurant Company (IRC, 11.5p, £6.86m) has warned that the impact of the bad weather and world cup football is expected to have a £0.6m impact on the full year results. Encouragingly, outside the world cup period, the second half has started stronger across the entire geographic area. While it is tempting to knee jerk reaction a recommendation to a short term sell instead we see good value here against other quoted restaurants so increase the hold to a BUY with a 13.25p price target. (Julian Tolley) 

Recommendation: BUY

Kea Petroleum (KEA, 15.75p, £79.87m)

Kea Petroleum (KEA, 15.75p, £79.87m) announced that the Kan Tan IV drilling rig has been anchored on the Tuatara-1 drill site in the southern offshore Taranaki Basin - AWE (operator 60%); Roc Oil Company (20%); Kea (10%) Carnarvon Petroleum 10%. The rig began drilling operations on Tuesday in the PEP permit considered lightly explored. Indeed this will be only the 2nd well on the block comprising 2,187kmsq. The Tuatara-1 well will be drilled in 50m water to a TD of 2km target expected to be encountered mid August. 2D seismic has identified a dip closed structural trap covering c.10kmsq, the target offers operator calculated median recoverable resource potential of up to 80mmbo (potentially up to 8m net to Kea). Operator AWE has successfully developed the offshore Tui oil field north of this basin so Kea anticipates the rapid monetisation of assets in the event of a discovery. Whist probably not a company maker of Kea on its own, in combination with Beluga and Windjammer prospects this offers additional risk diversification. Given the size of the prospect area there are also additional follow-up prospects which are expected to be pursued in the event of success here. HOLD (Andrew McGeary) 

Recommendation: HOLD

Lok’n’Store Group (LOK, 84.5p, £21.65m)

Lok’n’Store Group (LOK, 84.5p, £21.65m), reports good trading in H2 2010, with the Group’s operating performance for the year ending 31 July in line with market expectations. Occupancy is anticipated to have grown over 3% and self storage per square foot by 5% over the 12 month period. Tighter cost control and improvements in operational efficiencies have helped improve margins and the net cash position to over £5m (31 January 2010: £3.9m). We remind investors this is an asset play – adjusted NAV per share before deferred tax provision of 210p (31 January 2010) exceeds the current share price. We reiterate our SPECULATIVE BUY recommendation. (Amisha Chohan) 

Recommendation: SPECULATIVE BUY

Minco (MIO, 4.25p, £13.1m)

Minco (MIO, 4.25p, £13.1m) Follow-up drilling at Knockroe confirms a significant new zone with high grade zinc at Knockroe, part of the Pallas Green project. 5 holes have been completed on the newly discovered Knockroe deposit c.750 metres southeast of Caherconlish and 1.5-2.0km southwest of the Tobermalug with all five holes intersecting significant high zinc grade mineralization. The company is continuing to aggressively explore the Caherconlish area with 16 drill rigs to attempt to delineate the full extent of the Tobermalug deposit. Good news on the road to establishing a commercial >20Mt deposit. SPECULATIVE BUY (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

Norcros (NXR, 9.13p, £52.71m)

Norcros (NXR, 9.13p, £52.71m), the home consumer product group, reports group revenues for the 12 weeks to 27 June 2010 increased by 16% and 8.7% on a constant currency basis relative to the comparable period last year. The strong performance reflects an 11.8% growth in UK operations, 3.7% in South Africa and 13.6% in the ROW. Despite tough market conditions, the group has performed excellently. The Board will continue to focus on managing costs and cash generation. The outlook statement is slightly cautious, warnings investors about the uncertainty surrounding UK consumer spending patterns, especially on showers and tiles. However, the South African market should benefit from a small recovery. We previously expected the group to break-even in the current financial year, but the recent strong performance has encouraged their broker to suggest a profit will be delivered. The market forecasts 2011 PBT of £3.7m and EPS of 0.5p, which puts it on a PER of 18.3x with a yield of 1%. 2012 earnings forecast of 0.9p seem optimistic. We reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

Normand Broadbent (NBB, 87.5p, £6.75m)

Normand Broadbent (NBB, 87.5p, £6.75m) AGM trading update confirms the company has traded profitably in the first six months to June, following increased search revenues and lower costs. The group expects the trend to continue into the second half and is seeking additional offices to add to its networks. This is a confident move back into profits and we upgrade the hold to a SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Scapa (SCPA, 17p, £24.61m)

Scapa (SCPA, 17p, £24.61m) Q1 trading update to June 2010 confirms the positive momentum from the previous year. Q1 sales are up 10% against the comparable period last year. Increased volumes and lower costs will further boost profitability, boosted by a review of products to improve the margin mix. With the sector on 145x prospective PER we see a upside to around 24p, so we maintain the BUY recommendation. (Julian Tolley) 

Recommendation: BUY

Snacktime (SNAK, 124.0p, £13.52m)

Snacktime (SNAK, 124.0p, £13.52m), UK’s largest national operator of snack and chilled drink vending machines, reports prelims to 31 March 2010 are broadly in line with market expectations. Adjusted PBT increased by 5x to £1.2m (2009: £0.2m) on a 73% increase in group sales to £11.5m (2009: £6.7m), driven by the acquisition of Snack in the Box, a major competitor. A tax credit of £0.17m coupled with the substantial growth in profitability led to EPS of 16.25p (2009: 1.82p). Snacktime ended the year with a strong balance sheet with tangible net asset value of £9.1m, of which net cash represented £2.6m (2009: net debt £1.67m). The group continue to seek bolt-on acquisitions to enhance earnings and increase its penetration in the UK snack and drink market. The market forecasts PBT to remain flat at £1.3m and EPS to decline to 8.5p for the current financial year on the back of a 28% tax charge. The stock trades 14.6x for the current financial year, a premium to the market. We believe the current share price is supported by the strong balance sheet. We reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

Solid State (SSP, 64.5p, £3.97m)

Solid State (SSP, 64.5p, £3.97m) Finals to March 2010 saw revenues of £13.5m (£12.5m) with a PBT of £0.53m ( £0.62m), EPS of 6.6p (7.9p) and the recommendation of a final 2p DPS (1.25p) giving a full year payout of 3p(2.25p) DPS. Net debt ended the period at £1.18m (net debt £1.16m) reflecting cash generation of £0.42m post a £0.24m adverse working capital movement. Modest falls in distribution sales at £3.54m (£3.64m), considerably less than the market due to new product introductions, were offset by the manufacturing division which saw sales grow to £9.97m (£8.88m). Growth arose primarily from the UK rather than overseas. The group implemented a reorganisation in the distribution operation in Q1 of the new financial year to complement the 11.7% increase in order book year on year. Although currency has place modest gross margin pressure on manufacturing, both industrial and computer operations performed well and entered the new year with a 76% increase in its order book. Our forecasts of around £0.9m for the current year, giving 11p of EPS, put the group on a 5.9x prospective PER. We see upside to a 7.5x or even higher PER, suggesting a relatively short term target price around 82.5p, a continued BUY. (Julian Tolley) 

Recommendation: BUY

Straight Group (STT, 102.5p, £11.97m)

Straight Group (STT, 102.5p, £11.97m) Trading update for the six months to June 2010 reports it expects profits to be similar to the previous year with strong prospects for the full year, stronger than seen last year as it entered the second half. Sales of the lower margin plastic wheeled bins was faltering ahead of the group’s acquisition in March of Helesi UK’s business and that is now seen as a building block fro the second half. Retail remains strong with a good momentum on home composting schemes. The order book remains “strong” and the group ended the period with just £0.1m of net debt. We maintain the BUY recommendation with the 120p price target. (Julian Tolley) 

Recommendation: BUY

Surgical Innovation (SUN, 3.5p, £13.08m)

Surgical Innovation (SUN, 3.5p, £13.08m) has received FDA approval for its Logi Flex device, for gastric band deployment and other associated bariatric procedures. The device offers the US market with a high quality, cost effective product. We continue to believe, the current revenue multiple of 1.8x and earnings of 9.3x does not adequately reflect the growth profile of the business. We reiterate our BUY recommendation with a target price of 4.2p, equivalent to 2x revenue multiple. (Amisha Chohan) 

Recommendation: BUY

Synchronica (SYNC, 1.625p, £13.64m)

Synchronica (SYNC, 1.625p, £13.64m) Argentinean carrier Telecom Personal has launched their mass-market mobile email and synchronisation service at a cost of ARS9 ($2.3) per month. SPECULATIVE BUY (Julian Tolley)

Recommendation: SPECULATIVE BUY

Tarsus (TRS, 141p, £97.45m)

Tarsus (TRS, 141p, £97.45m) Interims to June 2010 saw revenues up 17% to £16.9m (£14.5m), with underlying organic growth of 7%, adjusted PBT up 22% to £1.1m (£0.9m), EPS 0.8p (0.8p) and an uncovered DPS held at 2p. Net debt ended the period at £31.9m (£30.7m at the December year end). The group is heavily weighted to H2, but the increase in visitor numbers to its exhibitions in the first half and the level of pre-bookings remains encouraging. The group saw a good performance in the US with its Off-Price and Medial events, stabilisation in France and the emerging markets showing healthy progress, especially at the MEBA business aviation event. Investors are beginning to focus not on the £9m PBT, 10.2p EPS to December 2010, but the £20m PBT with 22.3p ESP forecast for the following year, which sees PERs of 13.8x this year fall to 6.3x. While still feeling the current PER is high enough, the EPS progress is sufficient to justify a BUY with a price target of 189p. (Julian Tolley) 

Recommendation: BUY

Walker Greenbank (WGB, 32.25p, £18.83m)

Walker Greenbank (WGB, 32.25p, £18.83m) the luxury interior furnishings group including brands Sanderson, Morris & Co., Harlequin and Zoffany, reports in an AGM statement, trading for H1 2011 is significantly ahead of management expectations. The Board expect sales to be up c.13% to at least £33m, adjusted operational profits to almost double to c.£2m (H109: £1.05m) and PBT to surge to £2.1m (H109: £0.57m) – an outstanding performance. In the current consumer conscious market, wallpaper and fabric printing are a relatively cheap way of modernising a home. The mid-market brands Harlequin and Sanderson were the best sellers in H1 and the premium brand Zoffany has returned to growth. We expect the market to upgrade the current 2011 PBT, EPS and DPS estimates of £3.1m, 4.0p and 0.65p respectively. Assuming H1=H2, we forecast PBT of £4.1m and EPS of 5.0p. The stock sits on a prospective PER of 6.5x and a yield of 2%, a discount to the market.  The share price has exceeded our previous target price of 26p. We repeat our BUY recommendation and increase our target price of 40p – equivalent to 8x 2011 earnings. (Amisha Chohan) 

Recommendation: BUY

@UK (ATUK, 1.05p, £0.61m)

@UK (ATUK, 1.05p, £0.61m) Interims to June 2010 saw revenues fall to £1.01m (£1.23m), gross profits of £0.66m (£0.92m), reflecting gross margins of 65.2% (75%), offset by admin charges lower at £1.01m (£1.34m) leaving operating losses reduced to £0.35m (£0.41m) and pre-tax losses at £0.35m (loss £0.46m). The group ended the period with zero cash (net cash £0.18m). The reduction in cash balances has forced the group to acknowledge its need to raise cash in the second half. Clearly @UK is vulnerable to public spending cuts, though ironically its’ Web and ecommerce services reduce wastage in procurement, so we expect a further dip as the Government cuts deeper into organisations before @UK sees a substantial pickup as operations seek efficiencies.  On that basis we cut the rating to SELL in anticipation of substantial dilution. The group has indicated its cash burn had reduced to £18,847 in the last month – so to cover a year the group would need to raise some £0.23m. Assuming a 25% discount such an issue would represent dilution around 50% post typical cash raise costs. One final point, the share has a nominal value of 1p so the capital structure will have to be reorganised with the creation of nil-value deferred shares. 

Recommendation: SELL

Amino Technology (AMO, 41.0p, £23.74m)

Amino Technology (AMO, 41.0p, £23.74m), the digital entertainment solutions for IPTV, Internet TV and in-house multimedia distribution, reports interims to 31 May 2010. Adjusted operating losses reduced from £3.6m to £0.07m on a 42% increase in revenues to £18.1m (H109: £12.8m) and a 22% reduction in operating costs. However, profitability had been impacted by forex movements, higher component prices and the adjustment of margins as the company scales into tier 1 and tier 2 markets, where important new contracts have been secured during the period. A strong order book of 250k units (H109: 8k) demonstrates good demand and provides the group with revenue viability of £21m – an impressive performance.  The outlook statement is positive given the healthy order book for H2 and improving market conditions The Board have confidence in achieving a maiden PBT of £0.1m and EPS of 0.1p in the current financial year.  The current valuation is supported by a strong balance sheet with net cash of £13.1m. The latter coupled with the increasing momentum, encourages us to reiterate our SPECULATIVE BUY recommendation with our target price of 48p. (Amisha Chohan) 

Recommendation: SPECULATIVE BUY

Berkeley Mineral Resources (BMR, 1.8p, £6.58m)

Berkeley Mineral Resources (BMR, 1.8p, £6.58m) has appointed Turner & Townsend, the international mining project management company, to oversee the verification of the Kabwe mining tailings opportunity. BMR has reported that mineral and metallurgical due diligence is proceeding to time, with the first 17 sampling holes completed on 17th July with assay result expected mid August. Previous tests confirmed a very healthy average grade of 21.78% so suggesting the tested section of 411,500 tons could contain 40,240 tons of Zinc and 49,830 tons of lead. The group is using The Mineral Corporation to provide a JORC compliant estimate of the washplant slimes and post that report will exercise its option. The washplant slimes are of such a high grade the group will be able to sell them immediately to processors. The group expects to export some 5,400 ton per months, starting September 2010 with the group already in receipt of detailed off-take tenders. Phase Two, the mining tailings are estimated to have an 11 year life at a 60,000 tons per month at the standard 55% Zinc concentration. Al of which is very encouraging for this low risk metals play, still a SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Cosalt (CSLT, 5.13p, £20.75m)

Cosalt (CSLT, 5.13p, £20.75m)has formed a JV with Danish engineering company APRO, the provider of services to the wind energy market, to offer combined safety/engineering services to the growing UK offshore marketplace. Cosalt has acquired 80% of the renamed Cosalt Wind Energy for £0.2m with a deferred consideration of £0.43m, dependent on trading to December 2011. This we believe is a good strategic move, especially with the coalition favouring offshore wind over nuclear (!), and we maintain the BUY recommendation with a 7p price target. (Julian Tolley) 

Recommendation: BUY

DQ Entertainment (DQE, 116.5p, £41.90m)

DQ Entertainment (DQE, 116.5p, £41.90m) has signed a broadcast agreement for its Jungle Book animated 3D cartoon series with the Thai Broadcasting Service. Finals to March 2010 were in-line with expectations with revenues up 14% to $36.76m, ($32.25m) and PBT of $6.46m ($5.15m), EPS of $0.13 ($0.12) with an order book of $136m. The growing number of broadcasting agreements for the company’s flagship new product, Jungle Book, totalling 160 countries, together with a new major film in association with Disney for 2100 and a range of other strong titles encourages us to maintain the BUY recommendation. (Julian Tolley) 

Recommendation: BUY

Games Workshop (GAW, 405p, £126.1m)

Games Workshop (GAW, 405p, £126.1m) Full year earnings for the year ended May 2010 came in ahead of market consensus – a strong performance by the group. Revenues increased to £126.5m (2009: £125.7m), but declined by 3% to £121.8m (2009: £125.7m) at constant currency, despite the addition of 27 new Hobby centres. Northern Europe and North America showed a growth in revenues, whilst Continental Europe continued to decline, albeit at a slower rate and Australia had a disappointing H2. Higher margins and tighter cost controls led to a 1.1x improvement in adjusted PBT to £16.1m (2009: £7.5m) and EPS of 48.1p (2009: 17.2p). Strong cash generation has eliminated debt and the group ended the year with net cash of £17.1m (2009: net debt £1.6m).  The group propose a 25p DPS, which clearly demonstrates the group’s cash positions and confidence in earnings growth and cash generation going forward. We believe there is scope for the market to upgrade 2011 PBT of £17m and EPS of 43.4p. The stock trades on a 2011 earning rating of 9.3x and a compelling and sustainable yield of 6.1%. We reiterate our BUY recommendation and increase our target price from 427p to 520p – equivalent to 12x for 2011 and 4.8% yield. (Amisha Chohan) 

Recommendation: BUY

Horizonte (HZM, 9.875p, £5.83m)

Horizonte (HZM, 9.875p, £5.83m) has entered into an agreement contingent on shareholder approval to acquire from Teck Resources the Araguaia nickel project located in the Carajás mineral district of northern Brazil. The purchase constitutes a reverse takeover so is subject to shareholder approval. Effectively the deal is a combination of two projects by Teck rather than an actual takeover by Horizonte and the latter a will pay for the deal by giving Teck shares amounting to 50% of its enlarged shares capital. The deal has strong operational rationale as the combined Araguaia-Lontra project has the potential for a 100 million tonne resource with grades comparable to other world class projects in Brazil. The company has also placed £5.13m shares at 10p a premium to 8.75p (at yesterday’s close) indicating strong institutional support for the deal. The company intends also to acquire the remaining 50% of the Lontra project its does not own. The tie up with Teck, a major Canadian mining company looks strong. The company is initiating an 8km resource drilling programme shortly and aims to deliver a JORC-compliant resource by Q1 2011. We retain our SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

IDOX (IDOX, 11.5p, £39.14m)

IDOX (IDOX, 11.5p, £39.14m) has announced the £4.4m (£3.9m initial + a 1 year deferred £0.5m, both in cash) acquisition of Computershare Electoral Management Services. The business provides electoral management services to 116 local authorities, covering 13 m people. To June 2010 the operation generated £1.6m sales with £0.8m PBT after exceptional items, with 75% recurring revenues. CEMS has net assets of £0.4m with cash to be acquired of £1.2m. The acquisition aids the group’s penetration of the local authority market and raises the opportunities for cross selling. We maintain the BUY recommendation with the 14p price target unchanged. (Julian Tolley) 

Recommendation: BUY

ITM Power (ITM, 31.25p, £32.14m)

ITM Power (ITM, 31.25p, £32.14m) has announced the Forestry Commission will participate in Hydrogen on Site Trials (HOST) for its high pressure refuelling unit. HOST will begin in 2011 with two converted transits in use. We see substantially better value elsewhere in the fuel cell sector, led by AFC but we would not discount Ceres Power either in investor’s considerations. SELL (Julian Tolley)

Recommendation: SELL

Media Square (MSQ, 10.5p, £3.80m)

Media Square (MSQ, 10.5p, £3.80m) First 4 months of the year has seen an operating profit in excess of £0.4m (loss £1.3m), following the sales of loss making agencies, cost reductions and a modest increase in client spending. This would suggest the group is on track for break-even or better, we maintain the SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Morson (MRN, 94.5p, £42.85m)

Morson (MRN, 94.5p, £42.85m), the  provider of technical engineering personnel and project design solutions to the aerospace and defence, nuclear and power and rail industries, expects interims to 30 June 2010, to be in line with Director’s expectations. Despite challenging market conditions, the group has good customer retention, new contract wins and most importantly strong forward visibility, driven by on-going major key UK infrastructure projects. The recent acquisitions of Wynnwith Group Ltd and AceTech Personnel Ltd, will accelerate revenue growth in 2011 by cross selling a wider range of services to a broadened client base and extending its geographical reach. The market conditions in the current financial year will remain tough, but we believe the group is well positioned to take advantage of any recovery. The market forecasts 2010 PBT of £8.1m, EPS of 13p and DPS of 6p and in 2011 PBT of £8.3m, EPS of 13.3p and DPS of 6p. Given the encouraging forward visibility, we believe the group is undervalued trading on a 2011 earnings rating of 7.1x and a yield of 6.3%. This is a yield play. We reiterate our BUY recommendation with a target price of 113p. (Amisha Chohan) 

Recommendation: BUY

Patsystems (PTS, 24.25p, £45.19m)

Patsystems (PTS, 24.25p, £45.19m) Interims to June 2010 saw sales up 6% to £10m (£9.5m) with adjusted PBT of £1.03m (£0.75m), DPS of 0.2p (0.145p) with net cash of £9.18m (£8.90m at the December year end). The group sees good opportunities ahead for its global ASP solution, aided by the recently opened hubs. It reports a strong pipeline and healthy opportunities ahead, promising a stronger second half. Europe grew 25%, driven by last year’s contract win with the Turkdex Exchange. US revenues, down 20%, declined as expected due to client closures and reduced bespoke work. Asian revenues grew 16% due to the Bursa Malaysia which helped offset the Tokyo Grain Exchange. Cost of sales fell to £0.2m (£0.3m), with operating expenses underlying at £8.9m (£7.7m). We maintain the 30p price target. BUY (Julian Tolley) 

Recommendation: BUY

Probability (PBTY, 43.0p, £9.32m)

Probability (PBTY, 43.0p, £9.32m), the leading mobile phone gambling specialist, reports prelims for the year ended 31 March 2010 were broadly in line with expectations. A reduction in marketing and investment in technology spend, drove net gaming income to decline by 6% to £4.7m (2009: £5.0m), pre-tax losses to increase to £0.76m (2009: £0.15m) and net cash fell to £1.6m (2009: £2.2m). FY2010 was a year of strategic investment, designed to lay the foundations for future growth. The expansion of their product portfolio will introduce new revenue opportunities at a higher margin. In FY 2010, the group has had great success in launch of its first game on the iPhone and iPod Touch and the release of RingRingJuegos.com and a full suite of gambling games in Spanish for customers in Europe and Latin America. We believe the group is well positioned to offer further growth in the B2B business. The latter coupled with the explosive growth in smartphones internationally, offers Probability with huge opportunities. In our view, Probability’s strategy to expand into different brands and adding new geographies will help transform the company from a UK only business.  The market expects the group to deliver a maiden pre-tax profit of £0.4m with EPS of 1.6p in the current financial year. We believe new contract wins will assist share price growth. We reiterate our SPECULATIVE BUY recommendation. (Amisha Chohan) 

Recommendation: SPECULATIVE BUY

Telit Communications (TCM, 40p, £30.77m)

Telit Communications (TCM, 40p, £30.77m) has signed a commercial partnership with Orange Business Services for the distribution of Telit’s wireless systems in France. The group is being rated on promises of substantially better performance next year and is currently commanding a 54x prospective PER for the year ending December 2010 falling to 5.8x to December 2011. We maintain the HOLD, noting there is no room for slippage in the performance. (Julian Tolley)

Recommendation: HOLD

Turbotec Products (TRBO, 31.5p, £4.03m)

Turbotec Products (TRBO, 31.5p, £4.03m)has seen the aggressive requisition for an EGM by Execuzen with drawn and the appointment of Joseph DeSenza, a 13 5 shareholder and a managing director of Collins Stewart in New York, appointed to the board. We see this as a strategic move as we recognise the value of Turbotec’s low cost heat exchangers. We had previously viewed the hostile shareholding of Thermodynetics as an overhang, instead we see it now as the starting point for a bidder. We move the group to a SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Volex (VLX, 180.5p, £102.56m)

Volex (VLX, 180.5p, £102.56m) Trading statement is impressive with sales up 23% in Q1 on the final quarter of the last year and 39% of the comparable period last year. Gross margin has improved slightly to 19.7% (up 0.2% on Q4 and 0.5% on Q1), leading to operating profits of £4m. Net debt also reduced by £2.6m from the year end to £5m. Growth was seen across all four sectors (Telecom/Datacom, Healthcare, Consumer & Industrial). Telecom sales were up 26% on Q4 but down 5% on Q1 last year, driven by China and an improving but still difficult India market. Consumer saw a 19% increase q on q with a 50% improvement on Q1 FY2010 with increasing confidence especially in its Asian customers. Healthcare and Industrial continued more modest but still sequential growth. Although there are some concerns on the outlook we see forecasts increasing again from around £12m towards £14m, giving 18.9p EPS, putting the group on a 9.6x prospective PER. We see upside to around an 11x PER, giving a 208p price target, sufficient to maintain the BUY recommendation. (Julian Tolley) 

Recommendation: BUY

Arcontech (ARC, 0.19p, £2.91m)

Arcontech (ARC, 0.19p, £2.91m) Finals to June 2010 reflected the transition to the repeat revenue rental model, inevitably impacting reported revenues that fell to £1.07m (£1.4m), but contracted annual recurring revenues rose to £1.08m (£0.68m) giving a much improved quality of earnings outlook. The group reported a £0.9m operating loss and pre-tax loss. The group ended the period with £1.59m (£0.43m) cash balances, following a £1.51m cash raise. The group does have sufficient cash for the year ahead, not that that would rule out a further modest cash raise, which is useful as it is taking longer than previously anticipated to sign new contracts. So far contracted repeat revenues cover 54% of the cost base, up from 34% in 2009. The Cityvision product has been developed to work on the Solaris platform, with one of its major customers anticipated to roll it out this year. We maintain the SPECULATIVE BUY recommendation. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Burst Media Corporation (BRST, 7.12p, £5.10m)

Burst Media Corporation (BRST, 7.12p, £5.10m), the international online advertising services company reports a disappointing  trading update for the 6 months ended 30 June 2010. Following the acquisitions of Giant Realm and The Phone Media, revenues increased by 43% to $17.3m. The strong performance from Burst Network was offset by the poor trading in Giant Realm. A revised Giant Realm sales team are taking longer than anticipated to generate expected revenues – thus profitability for the full year will be below market expectations of £1.1m. Net cash fell to $2.1m. The poor performance encourages us to reduce our recommendation to a SELL. (Amisha Chohan)

Recommendation: SELL

Character Group (CCT, 122.5p, £32.33m)

Character Group (CCT, 122.5p, £32.33m), the designer, developer and international distributor of toys, games and giftware, reports trading for the year ending 31 August should be at least in line with market expectations of PBT of £6.0m, EPS of 17p and DPS of 3p. Furthermore, the group has granted an option to Cepia HK Limited, a subsidiary of Cepia, to subscribe for the issue of up to a maximum of 1m ordinary shares in Character (c. 3.79% of the current issued share capital of Character, excluding shares held in treasury) at an option price of 122.5p per share. Cepia supplies the group with unique and innovative products including ZhuZhu brand. We believe the arrangement illustrates the group’s close relationship with its supplier and will lead to further exclusive distributor deals of new and existing products. We believe the group is undervalued trading on 7.2x in 2010 and 6.5x in 2011. The low valuations with a yield of 2.4% in 2010 and good growth prospects (Yr 1 prospective EPS growth of 24%) justify our BUY rating with a target price of 156p, equivalent to rating of 9x for 2011. (Amisha Chohan) 

Recommendation: BUY

Clean Air Power (CAP, 16.25p, £9.10m)

Clean Air Power (CAP, 16.25p, £9.10m) has received a significant order from its customer Emissions Solutions Inc (ESI), worth $0.356m and follows on a $0.215m order received in April 2010. ESI is now considering the expansion of its model range to further address the bus and truck markets. CAP is well placed to ride the Obama greening of America wave; we maintain the SPECULATIVE BUY recommendation. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Creston (CRE, 86.5p, £53.06m)

Creston (CRE, 86.5p, £53.06m) Interims covering the start of the year from 1April to 25 July 2010 has confirmed continued healthy growth with like-for-like sales growing 11% in Q1 to the end of June, driven by new business wins. We believe the group is well placed to take advantage of the market with £1m of net cash and unutilised banking facilities of £25m. We maintain the BUY recommendation with the 110p price target. (Julian Tolley) 

Recommendation: BUY

Dialight (DIA, 337.5p, £106.65m)

Dialight (DIA, 337.5p, £106.65m) has announced interim results as well as a supply agreement for it sPowerPulse ANSI 200-amp disconnect/reconnect load switch, used to protect smart grids, with a major North American metering company. Interims to June 2010 showed revenues of £46.17m (£34.63m) with operating profits recovering from the lows of last year to £5.28m (£0.61m), giving a PBT of £5.24m (£0.53m) with basic EPS of 10.8p (7.3p) a DPS increased to 2.8p (2.3p) and the group ended the period with £6.98m of net cash ( £9.09m at the December year end), but that does reflect a £2.07m acquisition spend during the period as well. All 3 operations showed growth. Signals and illumination grew revenues 23%, driven by a 60% increase in Obstruction and White industrial Lights sales, with increased margins. The recent acquisition of BTI Light Systems extends the group into the European off-shore wind-turbine market. Traffic Lights grew 15%, with European growth replacing flat US sales. Obstruction Lights grew 60%, despite some signs of slow-down in wind-turbine related sales, thought he adoption of white lights for US telco towers bodes well. The LED indicator market is showing some signs of inventory build-up and so a downturn in H2 is possible. Electrical disconnect systems is a building momentum situation. The group is now close to our 350p price target so we drop the group to a HOLD. (Julian Tolley) 

Recommendation: HOLD

Eckoh (ECK, 5.0p, £9.98m)

Eckoh (ECK, 5.0p, £9.98m) has successfully renewed its contract with Enterprise Rent-A-Car, to provide a speech-enabled locator service, EckohLOCATE. This enables calls to be routed efficiently and direct customers to store or dealer locations. The renewal of the contract is good news and highlights the importance of Eckoh’s solutions to maintain Enterprises ‘good customer service. We believe the market still has question marks over the repayment of the Redstone debt. Nevertheless, the group is trading on a 2012 PER of 7x coupled with a strong balance sheet is potent encourages us to retain our BUY recommendation. (Amisha Chohan) 

Recommendation: BUY

Endace (EDA, 187.5p, £28.09m)

Endace (EDA, 187.5p, £28.09m) has announced funding of £2.06m from TechNZ, the New Zealand Foundation for Research, Science and Technology’s business investment programme, which will fund 50% of a number of major product developments over the next 24 months. We remain cautious regarding the need for future funding, but clearly this reduces them, consequently we move from a sell to a HOLD. (Julian Tolley)

Recommendation: HOLD

Forbidden Technologies (FBT, 15.5p, £12.39m)

Forbidden Technologies (FBT, 15.5p, £12.39m)has repaid the £78,500 loan from the Chairman that was costing 10% annually. The group continues to benefit from a non interest bearing loan of £0.71m from Chief Executive Stephen Streater. We maintain the SPECULATIVE BUY, recognising the continued shift towards cloud based computing which suggests FBT’s cloud based video editing is set for a significant adoption profile. (Julian Tolley)

Recommendation: SPECULATIVE BUY

Goldstone Resources (GRL, 3.875p, £8.62m)

Goldstone Resources (GRL, 3.875p, £8.62m) has completed an airborne electromagnetic survey over the southern section of the Homase deposit and entered into agreement with contractors Minerex to execute a 4km drilling programme for Homase in the next few weeks - subject to final agreement with the local communities for crop compensation. Final results of the survey are expected in the next 3 weeks and will also inform drilling. A comprehensive follow up survey is to be carried out if results identify promising targets. The programme will comprise around 20 boreholes to average depth of 200 metres and is expected to take around 3 months. On the earlier stage Manso Amenfi prospect a desktop study and geological mapping programme will begin shortly prior to the selection of targets for detailed soil sampling.  We retain our SPECULATIVE BUY recommendation and a 6.5p price target. (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

Matra Petroleum (MTA, 1.75p, £18.64m)

Matra Petroleum (MTA, 1.75p, £18.64m) A work-over and completions rig has been mobilised to begin investigative work on well-12 to identify and isolate water production. Local authority approval has been given for the work and the company has received an extension for test production until year end. The rig employed in well-13 is fully demobilized and when the rig becomes available from well-12 that will be used to complete W-13 for perforation, completion and test production. Progress in establishing production from well-13 and re-establishing well-12 is expected, subject to investigative work on well-12, by the end of August. Technical studies commissioned on the Sokolovskoe field to be complete in Q4 2010 will allow the company to optimise its field development plan. Independent consultants Equipoise Solutions will conduct a detailed review of the seismic data and interpretation in order to remap the Sokolovskoe field and provide an independent assessment of oil in place. Finally discussions with Russian authorities are progressing and having received an extension to its production testing licence, the company does not do not expect further significant delays in the issue of the production licence. Improved newsflow following a difficult few months. SPECULATIVE BUY (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

Newmark Security (NWT, 2.175p, £9.80m)

Newmark Security (NWT, 2.175p, £9.80m), the provider of electronic and physical security systems, reports prelims to 30 April 2010, slightly ahead of consensus.  Revenue grew by 6% to £13.8m, and a slight reduction in gross margins to 43.4% (2009: 44.4%) was due to a shift in the sales mix from the electronic division to the asset protection division. The latter combined with flat admin charges and lower interest charges drive adjusted PBT up by 20% to £1.65m (2009: £1.37m) and adjusted EPS of 0.33p (2009: 0.26p). A proposed uplift in DPS to 0.0275p (0.025p) suggest some confidence in the future.Net debt reduced to £0.17m (2009: £0.31m). The Board do warn, performance in H1 2011 will be weaker than strong performance in H1 2010 due to temporary postponement of orders, which are expected to come into H2 2011. The uncertainty surrounding the timing of the contracts make us slightly uncomfortable in the current economic client. We believe there is scope for the deals to be cancelled.   We have been buyers of the stock since December 2009, when the share price was 1.45p. The share price has risen by 50% over the period. We believe it is a good opportunity for investors to take some profit. The uncertainty and the surge in the share price encourage us to reduce our recommendation to a HOLD. (Amisha Chohan) 

Recommendation: HOLD

Nighthawk Energy (HAWK, 27.5p, £90.65m)

Nighthawk Energy (HAWK, 27.5p, £90.65m) cites strong interest for farm-into the Jolly Ranch project resultant of the Macquarie marketing campaign. A number of significant US domestic and international firms have expressed interest with 7 signing confidentiality agreements to evaluate data. The timetable will now be extended (no indication of when to) to allow these companies to evaluate the project. Meanwhile revenue from Jolly Ranch is at an all time high and completion activity and data evaluation is continuing with a new drilling program planned to coincide the divestment process. We had considered the original timetable for conclusion of a farm out of 23rd July ambitious, the expression interest is positive, but it is difficult to say to what extent it will underwrite a firm value of Jolly Ranch or indeed whether or not if a farm out will be successfully concluded. We maintain a SPECULATIVE BUY. (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

Patsystems (PTS, 24.25p, £45.19m)

Patsystems (PTS, 24.25p, £45.19m) has announced its first Japanese customer for the Hong Kong Hub, Okachi (Hong Kong) Ltd. We maintain a BUY with a 30p price target. 

Recommendation: BUY

Pinnacle Telecom (PINN, 0.275p, £4.78m)

Pinnacle Telecom (PINN, 0.275p, £4.78m) has completed another 2 high profile temporary voice and data contracts, this time for the Latitude Festival and T in the Park. With further contracts in August including The Big Chill Festival, V Festivals, Leeds Festival and Shambala Festival the group is certainly using its advanced telco expertise to carve itself a niche position. We maintain the SPECULATIVE BUY recommendation. 

Recommendation: SPECULATIVE BUY

Shanta Gold (SHG, 18.75p, £23.87m)

Shanta Gold (SHG, 18.75p, £23.87m) Investors that recently received heavily discounted shares in lieu of deferred payments have entered into a lock in for 12 months commencing July 9 2010 with an orderly markets arrangement for the subsequent 12 months thereafter. This applies to 11.5m shares or c.9% of issued share capital. While this may fall short of drawing a line completely under the unfortunate issue, its does remove the short-term overhang. Operationally we continue to be happy with the progress and maintain our SPECULATIVE BUY. (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

TEG Group (TEG, 37p, £27.84m)

TEG Group (TEG, 37p, £27.84m) has announced it is to construct its first anaerobic digester (AD) in a joint venture, TEG Biogas (Perth), with Albion Ventures, to process 16,000t of food waste. The group will receive some 20% of the £4.5m total capital cost via a grant from Zero Waste Scotland, a Scottish Government funded organisation. With planning permission already in place the group expects it to be operational by the end of Q1 2011. SPECULATIVE BUY (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Universe Group (UNG, 3p, £3.44m)

Universe Group (UNG, 3p, £3.44m)has announced the sale of JetSet Wash Systems for £0.4m in cash. JetSet reported sales of £1.93m and operating losses of £0.24m with net assets of £0.576m. We see this as a good move that will enable the group to reduce development spend and concentrate on the Forecourt Services and On-Line Loyalty schemes. Although there is a danger of a modest cash raise, we see value now and move the group to a SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Zoo Digital (ZOO, 40p, £9.45m)

Zoo Digital (ZOO, 40p, £9.45m) has launched an automated style guide, which sets standards, styles and format-setting documents for product packaging and marketing campaigns. Launch customer is Warner Home Video International. We maintain our SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Alterian (ALN, 147.75p, £86.53m)

Alterian (ALN, 147.75p, £86.53m),the leader in customer engagement technology and solutions reports an IMS from 1 April 2010 to 22 July 2010. Q1 traditionally represents a small proportion of FY revenues and this year is no different. Q1 2011’s performance is in line with management expectations. The group continue to broaden their geographical distribution and their product development, especially in digital marketing. We reiterate our BUY recommendation. (Amisha Chohan) 

Recommendation: BUY

Digital Barriers (DGB, 135.0p, £33.46m)

Digital Barriers (DGB, 135.0p, £33.46m) has acquired the business and assets of the Solutions division of Overtis Group Ltd, for a total cash consideration of £3.2m through its own cash resources. Overtis Solutions is a UK-based specialist provider of integrated security solutions used in the protection of high value physical, human and information assets on a global basis held by high risk government departments, public sector bodies and major corporations. In the year ended 31 October 2009, Overtis Solutions' reported revenues of £2.64m, with EBITDA of £0.07m and net assets of £1.30m. On the basis of the reported figures and assuming the business is cash neutral and paying a corporate tax rate of 21%, the group is paying a historic revenue multiple of 1.2x, EV/EBITDA of 45.7x, PER of 57.9x. On a profitability basis, the group is expensive, but seems relatively sensible on revenue multiples supported by balance sheet. The addition of Overtis Solutions’ complements the Security Application acquisition purchased in March 2010. We reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

Ebiquity (EBQ, 59.5p, £33.24m)

Ebiquity (EBQ, 59.5p, £33.24m) Finals to April 2010 saw revenues of £21.2m (£18.5m), gross profits of £11.60m (£9.85m), gross margins of 54.7% (53.5%) with underlying op profit of £2.6m (£2.4m) and pre-tax profits of £2.5m (£2.1m) and underlying EPS of 6.03p (5.46p). The group ended the period with net debt of £2.04m (£2.19m) post a £2.42m cash generated by operations, a £0.75m share issue and two acquisitions. Excluding the benefit of acquisition the underlying sales grew 10% to £20.2m (£18.4m), driven by the analytic operation that saw 18% growth to £15.2m (£12.9m), so representing 75%. Within analytics the international assignments grew 32%. The platform business saw renewals at 80%. The April 2010 acquisition of Xtreme information added materially to the group’s geographic reach and rebalanced the group, reducing the analytics operation weighting. With a major move by the group in the last 17 days of the financial year the past is little guide to this year’s outlook. Forecasts are set to increase from the £4.2m towards £4.6m with EPS rising from 5.4p to 5.9p, putting the group on a 10x prospective PER. We see this as too cheap for a group offering media analytics and set a price target of 88.5p, or 15x. BUY (Julian Tolley)

Recommendation: BUY

Metals Exploration (MTL, 12.5p, £33.71m)

Metals Exploration (MTL, 12.5p, £33.71m) has received a takeover approach from holder Solomon Capital which, already being a 44.1% holder ran over its whitewash in acquiring a single share at 13p. The company is also in receipt of acceptances that will amount to >53%. According to Fidessa the shareholder register shows only one other party, Alliance SE with >3%. Though a reasonable offer, in light of the presiding share price the offer is probably at the bottom end of the value scale for Metals Exploration which recently announced results of its feasibility. In fact that feasibility indicated a reasonable premium to the offer (depending on your view of long term gold price) but there is scope for upside through molybdenum recovery and the potential to add further resource through step-out drilling. At this stage we do not speculate as to whether the bid will be successful and gain necessary acceptances (we assume to be >75%). As it stands we view the company as being worth around 15p on fundamentals with scope for upside. This seems to reduce the potential shareholder upside at this point (i.e. an investor buying in now may be taken out at parity or worse given the transaction costs if the takeover is successful) and we thus reduce to a HOLD awaiting developments. (Andrew McGeary) 

Recommendation: HOLD

Scisys (SSY, 49.5p, £14.36m)

Scisys (SSY, 49.5p, £14.36m) Trading update for the six months to June 2010 confirms it is on target for the year expectations, noting some caution regarding UK public spending cuts, and has been cash generative in the first half of the year. With a price target of 50p we maintain a HOLD recommendation. (Julian Tolley) 

Recommendation: HOLD

Velti (VEL, 403p, £151.25m)

Velti (VEL, 403p, £151.25m) has announced H1 will show revenues of some $40m for the first half. While we suspect the group will struggle to report profits given the leap in H2 in admin costs we see significant upside for investors, even after the substantial run. Velti’s exposure to mobile marketing and the recently announced intention to list on the US NASDAQ exchange will support a substantially higher price. We believe the group is sitting on 2x forecast revenues and suggest that 3x is achievable given the potential for arbitrage between the US and UK markets. With a very speculative target price around 585p, we move the group down from a buy to a SPECULATIVE BUY. (Julian Tolley)

Recommendation: SPECULATIVE BUY

Cello Group (CLL, 35.5p, £21.80m)

Cello Group (CLL, 35.5p, £21.80m) Trading update for the six months to June has confirmed good growth an anticipated “double-digit” operating growth for the period. While the UK has held up well but there is some nervousness regarding forthcoming public sector declines, the US has shown good growth and the group will invest in that area on the second half. Research and Consultancy has returned to like for like income growth, boosted by pharmaceuticals, health and overseas, sufficient to overcome any UK public spending fears and underline a confident second half. Cello’s response communications business, Tangible, saw modest declines due to the public spending uncertainties – though private sector wins should aid H2 together with cost cutting last year to reduce the base and ensure significant progress on the previous full year outcome. We maintain the BUY recommendation with a 42.75p price target. (Julian Tolley)

Recommendation: BUY

Colefax (CFX, 153.0p, £22.46m)

Colefax (CFX, 153.0p, £22.46m) designs and distributes furnishing fabrics and wallpaper and has a leading interior decorating business.  Prelims for the year ended 30 April 2010, report PBT up 51% to £4.4m (2009: £2.9m) on an 8% decline in group revenues to £67.4m (2009: £73.0m) – a good performance.  The key drivers to the 53% uplift in earnings to 21.6p are: 1) the benefits of the cost savings programme implemented at the end of last year, 2) strengthen of the US Dollar and 3) a strong performance of the Decorating Division.  Strong cash generation increased net cash to £5.5m (2009: £3.1m) and has encouraged an 8% increase in proposed DPS to 3.10p (2009: 2.88p). The proposed increase in dividends sends a positive signal on enhancing profitability and cash going forward. The US market continued to suffer in H2 2010. The outlook statement is mixed. A small improvement in sales suggests the market is finally starting to recover, but uncertainty still remains. The strength of the US dollar against the sterling will increase margins in the US and offset some of the sales decline over the past two years. However, cost pressure from suppliers following increase in raw material costs will offset some of the dollar gains.  There are no forecasts in the market, but we do expect earnings to improve in the current financial year. Trading on historic earnings rating 7.1x, yield of 2% and an EV/EBITDA of 3.9x, we believe there is some upside from the markets recovering. We upgrade our recommendation to a SPECULATIVE BUY with a target price of 168p. (Amisha Chohan) 

Recommendation: SPECULATIVE BUY

Coolabi (COO, 8.5p, £4.10m)

Coolabi (COO, 8.5p, £4.10m) has announced a range of gift cosmetics, Scarlett & Crimson, has been reordered by Boots with a larger range, up to 9 from 7, and in 20% more Boots stores. Coolabi has joint ownership of Scarlett & Crimson with is founder. With our concerns of a UK double dip recession we see the 8.5x prospective Per as appropriate. HOLD (Julian Tolley)

Recommendation: HOLD

Goldplat (GDP, 8.375p, £9.39m)

Goldplat (GDP, 8.375p, £9.39m) All relevant documentation necessary for the granting of a mining lease for the Kilimapesa Hill gold mining project have been  approved. The outstanding ‘formality’ is the issuance of a Mining Right number from the Director of Survey and the Commissioner of Mines & Geology has pledged assistance to fast-track this issue.  Not fait accompli as yet but the government is said to be very positive about the granting of the lease. As ever Goldplatt looks cheap at only 6x 2010 earnings and with a good track record. Progress on the Kenya front which may have been somewhat of a drag on the share is therefore positive. BUY (Andrew McGeary) 

Recommendation: BUY

Holders Technology (HDT, 93.5p, £3.68m)

Holders Technology (HDT, 93.5p, £3.68m), the international supplier of materials, equipment and services to the Printed Circuit Board (PCB) industry, reports interims to 31 May 2010. The recovery in the PCB market coupled with the JK Components acquisition helped enhance sales by 9% to £7.1m (H109: ££6.5m) and return to profitability, with PBT of £0.1m (H109: -£0.6m) and EPS of 1.78p (H109: -11.61p). New sourcing arrangements to increase the product lines from China and the Far East improved gross margins. However, the increase in the length of the supply chain increased working capital requirements.  Net cash remained flat at £1.0m against the previous year, but down from FY2009 £2.1m. The uncertainty surrounding global economies encourages the group to remain prudent and report a flat interim DPS of 2.1p. We are encouraged by the progress the group has made this year. The group is well placed to take advantage of the market recovery when there is stronger demand for PCB’s in the electronic and automotive industries. Liquidity of the shares remains an issue for existing and potential investors, with 47% of the small equity base owned by the chief executive and another 32% held by another five shareholders. We remind investors tangible NAV per share of 136p exceeds the current share price of 93.5p - a clear premium. We believe Holders is an asset and yield play, with a compelling yield of 5.7% (DPS FY09: 5.35p). We reiterate our BUY recommendation and introduce a target price of 136p. (Amisha Chohan) 

Recommendation: BUY

Microgen (MCGN, 82p, £71.26m)

Microgen (MCGN, 82p, £71.26m) Interims to June 2010 saw revenues of £16.15m (£13.60m) with underlying operating profits of £3.82m (£2.51m) and adjusted pre-tax profits of £3.81m (£2.49m) with 3.1p (2.3p) basic EPS and a 0.9p (0.8p) DPS proposed. The group ended the period with net cash of £22.97m (£21.96m at the year end) with only property related borrowings, as a result the group has proposed a tender offer to return £10m to shareholders by the purchase of up to 14.99%. Microgen’s Apptitude Solutions Division drove the numbers with a 66% revenue growth to £7.8m (£4.7m) and 12.9% operating margin from a loss the previous year giving a £1m operating profit (loss £0.6m). High recurring revenues, a diverse customer base and a recovery in some of its markets helped the Financial Services Division to show reliance, sales were £8.3m (£8.9m) though flat on h2 2009, with healthy profits margins of 48% giving £4m operating profits (£4.3m). Some 52% of the group’s revenues are recurring, down slightly due to the growth in the Aptitude Division. We see forecasts increasing to some £8m or potentially even higher, implying 6.6p EPS and thus raising the price target to 91p. A repurchase would boost EPS forecasts by some 10% next year, so raising the potential for further share price performance. With a forecast DPS of 2.6p or higher the group currently offers a 3.1% prospective yield as well. BUY with a 91p target. (Julian Tolley) 

Recommendation: BUY

Nationwide Accident (NARS, 81.5p, £35.21m)

Nationwide Accident (NARS, 81.5p, £35.21m) cites encouraging trading for the 6 months to 30 June 2010 with H1 anticipated to be in line with management expectations. Strong cash flow generation continues with net cash at 30 June anticipated to be £8.0m (£7.9m) despite the c.£1m investment per annum in support of development activities in fleet and retail markets. Launch of the rebranded and enhanced mobile repair services is on track for late summer. The company added an additional bodyshop in Newcastle in May and expects to continue to add repair capacity. The signing of a major new multi-year insurance contract with Groupama in April bodes well for revenue security in the core insurance market. The outstanding and covered (1.8x on EPS forecasts) FY dividend expectation of 5p suggests an impressive 6.1% yield if maintained. On P/E terms the rating of 9.2x is reasonable but given the net cash position strong dividend and reasonable if not dramatic growth prospects we maintain our 100p price target (suggesting a supportive yield and around 11x EPS. BUY (Andrew McGeary) 

Recommendation: BUY

Patsystems (PTS, 24.25p, £45.19m)

Patsystems (PTS, 24.25p, £45.19m) has announced the roll-out of three Application Service Provider hubs, in Hong Kong, Singapore and Sydney, which together with its existing hub in Tokyo, allows users access to other exchanges without investment in infrastructure. Sitting on just 10x prospective PER to December 2010 we see upside to 30p or more by the year end, a maintained BUY. (Julian Tolley) 

Recommendation: BUY

Sopheon (SPE, 7.5p, £10.92m)

Sopheon (SPE, 7.5p, £10.92m) Trading update for the six months to June 2010 confirms that a number of opportunities were closed towards the end of Q2, thus ensuring a strong half, with both revenues and EBITDA expected to show material improvements on the comparable period. Encouragingly the full year revenue visibility has also improved. In May we rated the group as a hold at 8.75p and we return the group to a SPECULATIVE BUY with that as a price target. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

StatPro (SOG, 103.5p, £62.54m)

StatPro (SOG, 103.5p, £62.54m) announces the beta launch of StatPro Revolution™, its Software as a Service Product (SaaS). The SaaS platform should reduce costs, complexities and broaden the company’s target market to smaller fund managers. The high level of recurring revenues provides us with confidence the group will achieve FY expectations of PBT of £7.0m and EPS of 8.5p. The company benefits from high earnings and cash visibility combined with the good growth prospects. We reiterate our BUY recommendation with a target price 127p. (Amisha Chohan) 

Recommendation: BUY

Uniq (UNIQ, 10p, £11.48m)

Uniq (UNIQ, 10p, £11.48m) Interims to June 2010 saw revenues of £156.3m (£141.1m) with a pre-tax loss from continuing operations of £6.0m (loss £12.8m). During the year the group sold its overseas operations and became a UK chilled foods business. Underlying the continuing businesses made an operating profit of £1m (loss £3.7m) due to the sales growth – so underlining the operational gearing. Food to Go grew revenues 15.2% to £77.2m sales, boosted by sandwich and salads volumes with operating profits of £5m (£1.7m) while Desserts saw virtually no sales growth at 0.6% to £79.1m with a decline into a reduction in the operating loss to £1.8m (loss £2.2m) – ahead of group costs of £3.2m (£3.7m). Input costs, especially cream, squeezed margins but the group reports it is underway with price increase negotiations, though there is the risk that customers may not share the pain. An entry into the cottage cheese market is forcing the group to re-examine the capacity for its own unit. Our risky Hold has proven much too optimistic, with the huge pension fund deficit and the failure to reach agreement on the framework with the Pensions Regulator implying an increasing danger of, as the company puts it, a recapitalisation of the group. While the group has £18m net cash the pension deficit could force a deeply discounted cash raise, we thus move, belatedly, to a SELL. (Julian Tolley) 

Recommendation: SELL

Vertu Motors (VTU, 28.0p, £55.80m)

Vertu Motors (VTU, 28.0p, £55.80m), the 8th largest UK motor retailer, reports earnings in the 4 months ended 30 June 2010, is in line with FY market expectations of PBT of £6.8m, EPS of 2.5p and DPS of 0.5p. The weak and fragile UK economy, ending of the scrappage programme, increases in VAT to 20% in January 2011, the introduction of the new car “showroom” tax in April and the weak Sterling against the Euro, indicate that new car sales to private customers may decline over the remainder of the year. However, the stock trades on a prospective P/E of 14x in 2011, falling to 9x in 2011. The share price is underpinned by a strong balance sheet, with tangible net assets per share of 37.3p (2009: 46.2p) as at 28 February 2010. The share price has drifted of late. The strong balance sheet coupled with the prospective yield of 1.8%, encourages us to upgrade our recommendation to a BUY with a target price of 37p. (Amisha Chohan) 

Recommendation: BUY

Victoria Oil and Gas (VOG, 3.21p, £45.26m)

Victoria Oil and Gas (VOG, 3.21p, £45.26m) La-106 is currently being flared to clean-up ahead having been delayed by lack of equipment availability. Whilst operational progress has been slower than anticipated, sands at La-106 are much better quality than anticipated and an independent reserves upgrade is expected in Q3 2010 (which should be a valuation catalyst). The well drilled in May but severe delays in the mobilisation of specialist high temperature equipment and explosives delayed perforation until June. Additional high temperature equipment and firing heads to complete perforations ahead of flow testing are expected within the next 4 weeks. In any case VOG now expects initial demand to be satisfied by La-105 with La-106 used as backup. First gas is expected to be delivered in December 2010 (probably the most significant near terms trigger for valuation) with binding contracts being signed and the impressive $16/ MMbtu off take holding firm. Whilst further delays are a disappointment we view this as more than offset by good news on the capex front. Initial plant costs estimated at $30m have fallen to $7m, which should dramatically improve the payback. The Logbaba Exploitation licence is pending but the company cites full support of Cameroon State Oil Company. Having completed the Environmental & Social Impact Assessment (ESIA) approved by the Ministry of Environment and Protection of Nature for 105 and 106, the regulators have also approved the terms of reference for the 2nd study for construction and production operations - VOG expects all approvals by the end of Sept & has been given the go ahead by the Government to carry out all works. Initial findings of Tomography Survey in West Medvezhye suggest 3 additional structures. West Med has prospective resources of over a 1bn boe. Following full interpretation the company will target new locations for exploration drilling and has until 2012 to drill 2 wells. Cash flow from Logbaba should help support this and future exploration activities which will diversify the portfolio. SPECULATIVE BUY (Andrew McGeary) 

Recommendation: SPECULATIVE BUY

AFC Energy (AFC, 18p, £27.16m)

AFC Energy (AFC, 18p, £27.16m) Air Products has announced plans for 1 49MW renewable power plant in Tees Valley which will use pre-processed waste via a gasification process which could be used with Waste2Tricity’s fuel cell – which will use an AFC fuel cell. Subject to initial scoping studies the group anticipates formal planning and environmental permit regulation applications later this year. AFC continues to build a raft of opportunities ahead for it unique, serviceable industrial scale alkaline fuel cell. A continued SPECULATIVE BUY. (Julian Tolley) 

Recommendation: SPECULATIVE BUY

Blacks Leisure (BSLA, 41.5p, £34.88m)

Blacks Leisure (BSLA, 41.5p, £34.88m), the leading retailer (Blacks and Millets) of outdoor clothing, footwear and equipment, reports a disappointing trading update for the 17 weeks to the end of June 2010. Sales declined by 30% to £53.9m (£76.9m) primarily due to the closure of 107 stores during the restructuring period last year. Tough trading in May led to l-f-l sales down 7.5%. However, gross margins improved by 1.15 against the previous period. Following the £19.7m (net) placing, the group has opened 7 new stores and has a pipeline of an additional 8 stores by the end of the current financial year. New store sales have been encouraging. The group has implemented a number of initiatives such as the launch of a customer loyalty card, a significant store training programme and a range of new branded lines which will be exclusive to Blacks. We expect consumer confidence to remain weak for the remainder of the year. We reiterate our HOLD recommendation. (Amisha Chohan) 

Recommendation: HOLD

Contentfilm (CFL, 1.25p, £2.18m)

Contentfilm (CFL, 1.25p, £2.18m) reported a reasonable FY to year to 31 March 2010. T/O was only marginally down at £18.4m (£21.1m); GP of £8.3m (£8.6m); EBIT was £2m (loss of £14.5m); PBT of £1.7m (£1.5m) after interest payments of £1.5m. Normalised EPS (adding back library amortisation, depreciation, exceptionals & share based payments) 1.0p (0.8p). Reported PBT is £0.3m (loss - £17.5m); net debt of £19.9m (£23.9m). The television division has had a good year in a difficult environment whereas film improved and the refocus of the DVD arm should help drive performance there. The independent library valuation of $71m is not taken account of in the balance sheet but is important in terms of debt consideration. The group also has up to £13m of tax loss it may be able to use. The forward looking statement cites cautious cash management which is limiting near term growth prospect and 2011 FY results are once again expected to be H2 skewed. Group has high debt but a low market cap reflects this so EV/EBITDA is probably the most appropriate valuation method. Here we see the company trading at just under 8x which looks fairly rich given lower than 2x EBIT cover for interest. We retain our SELL due to this and the foreshadowed reliance on H2 which limits visibility going into 2010/11 FY but could be persuaded to revisit if prospect continue to improve. (Andrew McGeary) 

Recommendation: SELL

Entertainment One (ETO, 79p, £132.36m)

Entertainment One (ETO, 79p, £132.36m) Q1 trading update to the end of June 2010 reports a successful period with revenues up 16.7% (5% on a constant currency basis), with growth in both Film and TV. Film, up 11%, was boosted by a strong set of releases, including the Twilight series, with a further boost expected in this quarter from the UK release that occurred at the start of July plus a range of other films, some of which were well received at the recent Cannes film festival. TV more than doubled its revenues, boosted by the US and Canadian release of police drama series Rookie Blue, with further progress expected from products including comedy Call me Fritz. Licensing saw further success for Peppa Pig with a range of new toys launched while US and Canadian distribution performed in-line with last year. With a move to the main market completed, thus opening the group to a wider range of audiences, the group is set to take advantage of its size by making acquisitions. We continue to rate the group a BUY. (Julian Tolley) 

Recommendation: BUY

Fairpoint (FRP, 76.25p, £33.25m)

Fairpoint (FRP, 76.25p, £33.25m), the debt solutions business, reports trading in H1 2010 is slightly ahead of the previous year and in line with market expectation. Case numbers have grown significantly over the period. This trend is expected to further improve into H2. The group has in excess of 33,000 (FY09: £26,342) customers in long term debt solutions. This morning’s acquisition of Moneyextra.com Ltd, a product comparison site, complements the group’s strategy to accelerate the growth of Value Added Services division. The website allows consumers to find lower prices in, inter alia, the markets for insurances, utilities, media, mobile phones, lending products, savings and investments. The acquisition is financed by £1 with up to a further £1.0m of working capital being made available to Moneyextra in the current financial year to replace existing borrowings fund integration activity and support revenue growth. An earn out consideration is payable to the vendors contingent on a multiple of 49% of the future earnings of the Moneyextra business. The ultimate consideration is expected to be around £8m. The transaction is anticipated to increase non-IVA revenues to c.33% of annualised revenues before revenue synergies from Q42010 and beyond. The acquisition will benefit from synergies of shared overheads and will introduce Fairpoint to substantial lead generation. The impact of the acquisition will be very modest in the current financial year. The Board anticipate exceptional costs of £0.4m relating to the transaction. We do not believe the acquisition will be immediately earnings enhancing for the current financial year, but will strengthen the group’s position in the debt solutions market. The weak and fragile UK economy will continue to fuel consumer demand for debt solutions. Against this backdrop the Group is well placed to grow; building on its operational efficiency, regulatory preparedness and broadening product range.  In our view, the 2010 prospective P/E rating of 6.1x and a yield of 4.6% does not adequately reflect the double digit growth profile of the business. We reiterate our BUY recommendation with a target price of 106p. (Amisha Chohan) 

Recommendation: BUY

GB Group (GBG, 25.75p, £22.03m)

GB Group (GBG, 25.75p, £22.03m) Trading statement for the start of its financial year from 1 April to 21 July 2010 reports revenues up 12% to £5.6m (£5m) with a 92% improvement in operating profits to £0.26m (£0.14m) with £5.2m of net cash (£5.75m at the December year end). The group saw continued progress in DataSolutions with DataAuthentication showing an underlying recovery from the previous quarter. The group is cautious regarding the impact of public spending cuts, but there are signs of a pro-active management with it announcing its move to Aim from the full list which makes corporate transactions swifter and cheaper. With net cash the group is in a strong position to make EPS accretive acquisitions. We maintain the BUY recommendation with a 32p price target. (Julian Tolley) 

Recommendation: BUY

MDM Engineering Group (MDM, 95p, £35.4m)

MDM Engineering Group (MDM, 95p, £35.4m) will assist the pre-feasibility study for Amari Manganese Kongoni project, in the Kalahari manganese field. The company will be responsible for processing plant and surface engineering studies. Seems to gaining decent traction from new contracts but without more guidance on potential contribution it is difficult to gage the level of progress, greater clarity on economics may encourage us to revisit our recommendation. SELL (Andrew McGeary) 

Recommendation: SELL

Mobile Streams (MOS, 3.75p, £1.36m)

Mobile Streams (MOS, 3.75p, £1.36m) Trading update for the half year to June 2010 is encouraging with Operator Service revenues stable but the more exciting Mobile internet revenues tripled, driven by Latin America. Revenues are up 20% to £4.2m on the same period last year and 23% on H2 last year. The group will report a trading EBITDA over £0.1m and a small pre-tax profit. Although cash reduced to £1.4m (£1.7m at the December year end) this was primarily due to investment in an App community website, appitalism.com, which will launch in the ext few weeks. We continue to rate the group a Buy, noting there is little in the market rating other than cash, BUY with a modest price target of 9p. (Julian Tolley) 

Recommendation: BUY

Optos (OPTS, 106p, £74.66m)

Optos (OPTS, 106p, £74.66m) Nine month trading update reports Q3 revenues of $24.2m ($24.4m) giving 9 month revenues of $71.5m($72.2m), comprising pay per patient revenue of $22.2m ($23.5m) or $67.6m ($69.9m) and capital sales and service contracts income of $2.0m ($0.9m) with $3.9m ($2.3m) to date. Net debt reduced by $6.8m in the quarter to $25.9m. The numbers demonstrate a new pricing model is retaining the existing client base, 82% renewal rates, and ensuring the visits per site is relatively stable. The group is experiencing a 1% de-install rate, so lost 107 sites but installed 109, so maintaining a relatively flat number of outlets. We maintain the HOLD recommendation ahead of product enhancements to be launched in the foreseeable future. (Julian Tolley) 

Recommendation: HOLD

Sagentia (SAG, 50p, £20.86m)

Sagentia (SAG, 50p, £20.86m) Interims to June 2010 saw revenues decline to £9.85m (£12.09m) with gross profits of £1.17m (gross loss £0.56m) with an underlying pre-tax profit of £1.05m (loss £0.71m). Net cash ended the period at £6.55m (£net debt of £2.69m) at the December year end) with a £7.67m cash raise partially obscuring healthy underlying cash generation. With basic EPS of 3.9p in the first half the rating still looks extremely reasonable. The net cash is enabling the group to look for acquisitions as well, so on a relatively low rating and EPS accretive acquisitions possible we maintain the BUY and raise the target to 60p or some 12x this year’s EPS. (Julian Tolley) 

Recommendation: BUY

Seeing Machines (SEE, 3.25p, £13.19m)

Seeing Machines (SEE, 3.25p, £13.19m) has announced another contract win for its driving monitor system at two open-pit mines in North America. The contract if for 45 units and forms part of the contracts delayed from last year. HOLD (Julian Tolley)

Recommendation: HOLD

Zetar (ZTR, 214p, £28.33m)

Zetar (ZTR, 214p, £28.33m) Final results to April 2010 saw sales of £131.9m (£118.6m) with adjusted PBT of £6.4m (£4.5m) slightly ahead of the £6.3m market expectations. Basic EPS at 32.6p was well ahead of expectations, and net borrowings fell to £11.1m (£15.4m). The group saw growth across the board with confectionary sales rising to £83.21m (£75.09m) and natural snacks increasing to £48.72m (£43.51m). Profits by segment also increased with confectionary driving adjusted operating profit to £4.69m (£4.38m, though operating margins declined slightly to 5.4% (5.8%), while Natural Snacks saw operating profits surge to £2.63m (£1.67m), reflecting operating margins of 5.4% (3.9%). Sales in the first 11 weeks are up 11% and the group expects to complete its credit-backed banking facilities with HSBC shortly to support its growth plans. The group has been active in expanding product lines, such as Reggae Reggae Nuts. We maintain our BUY recommendation. (Julian Tolley) 

Recommendation: BUY

Abbeycrest (ACR, 6.25p, £4.60m)

Abbeycrest (ACR, 6.25p, £4.60m), the international jewellery designer and manufacturer provide a trading update for the period 1 March 2010 to 19 July 2010. A disappointing statement. High gold prices coupled with weak UK macros have led to weak consumer demand for jewellery for the group’s Essentials and Brands divisions. The high gold price continues to squeeze margins. The group has breached its profit covenants with its senior lenders, Burdale Financial, and is working closely with them to reset these covenants.  In addition, Abbeycrest is also in negotiations to increase the level of and improve access to the existing facilities with its long-standing finance partner in Thailand, Siam Commercial Bank.  The directors are confident of a successful conclusion to both these discussions. We believe higher unemployment, tax and interest rate expected in the next 12 months will prevent a quick recovery in consumer confidence. The breach of its covenants, a slow recovery with the scope for a “double dip” and high gold prices encourages us to reduce our hold recommendation to a SELL. 

Recommendation: SELL

Acta (ACTA, 66p, £27.15m)

Acta (ACTA, 66p, £27.15m) has announced an agreement with Girelli Bruni S.p.A., one of Italy’s leading installers filling station forecourt equipment, for the supply of photovoltaic systems and integrated hydrogen generators. Acta estimates this contract could be worth some €5m annually and take 12 -18 months to ramp up. Acta will be the exclusive supplier of photovoltaic (PV) system. The adoption is being driven by regional legislation requiring any new fuel service station to install a minimum level of PV capacity and provide a gaseous alternative to petroleum. The Acta offering meets both requirements. This combined with attractive PV feed in tariffs are helping drive Acta’s local market at least, a continued SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

Deltex Medical Group (DEMG, 10.0p, £12.99m)

Deltex Medical Group (DEMG, 10.0p, £12.99m), the global leader in oesophageal Doppler Monitoring, reports a trading update for the 6 months ended 30 June 2010. Growth in revenues across all areas (UK, USA and Spain) has led to group turnover to increase in excess of 12% to over £2.9 (H109: £2.6m). UK growth was driven by an increase in probe sales for the use during surgery. Management believe the group is strongly positioned to benefit from the UK policy initiatives aimed at delivering better quality care at lower cost through the introduction of innovative evidence-based technologies. Deltex has been informed that such initiatives have been endorsed by the UK's new coalition government. However, we believe there could be a time lag with investment decisions being delayed. We are encouraged by the statement. Sales growth and tight cost control should result in the group achieving cash neutrality. We expect the year to end with net cash of £1.5m. We upgrade our recommendation from a hold to a SPECULATIVEBUY recommendation with a target price of 11.5p. 

Recommendation: SPECULATIVE BUY

Independent Resources Group (IRG, 86.5p, £39.65m)

Independent Resources Group (IRG, 86.5p, £39.65m)Exploration well Oryx-1 (18.97% IRG) on the Ksar Hadada Permit onshore Tunisia was spud yesterday. Oryx-1 is the first of a 2-well drilling programme agreed when PetroAsian Energy farmed into the Ksar Hadada Permit. IRG is free carried on 2 wells (up to c.$14.5m). TD is expected to be min 1,165 metres and to take c.19 days with dry hole cost estimate of c.$ 4.35m. Immediately following completion the rig will be moved to drill Sidi Toui-4 well.  Low case gross recoverable prospects are estimated at 2mmbl for Sii Toui and 6m for Oryx whilst medium are for 16m and 47m with a relatively robust 40% and 35% chance of success respectively. This is one of IRG’s 3 areas for value creation where major success in either one of which could more than underwrite the current share price. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Mid-States (MST, 2.875p, £7.49m)

Mid-States (MST, 2.875p, £7.49m) Year to June 2010 trading update from the manufacturer of air disinfection (AD) systems highlights revenues of £0.3m (£0.3m). The group received total orders during the year for 1,564 Ads, with a period end order book in excess of 400 units that will be delivered during Q1 of 2011. The group raised £3.8m in June 2010 at 2.8p so is fully funded for at least the year ahead. The group is heavily dependent on its emphasis on distributors for its success. We move from a SELL to a speculative Hold in anticipation of distributor led sales news. 

Recommendation: SELL

RSM Tenon (TNO, 45.75p, £147.7m)

RSM Tenon (TNO, 45.75p, £147.7m)Underlying profits for FY to 30 June 2010 are expected to be in line with expectations. The key business segment Entrepreneurial Britain is providing a stable and promising environment for growth. Recovery services continued to grow and increase market share. Senior appointments are expected to drive Recovery services during the new financial year. Risk Management is the only division exposed to public sector and the company has acted to protect profitability there. Cash generation has improved against market expectations and over 40% of total bank facilities were unused at the year end, a strong result given the integration challenges. Integration of RSM Bentley Jennison on track to be completed during the H1 2010/11 and co-ordinated with that of Vantis plc acquired just before Y/E. In H2 Tenon made strong progress with acquired businesses. The stock continues to look a robust value opportunity. The market is looking for PBT of £23-24m of and EPS of 6.6p with a dividend of c.1.5p, (3.3%) around 7x EPS. We maintain our BUY. 

Recommendation: BUY

Superglass Holdings (SPGH, 23p, £13.33m)

Superglass Holdings (SPGH, 23p, £13.33m) Trading update for Q3 includes an update on the furnace failure. While repairs on the furnace are progressing faster than expected a combination of overtime on the other furnaces and a shortfall in production will result in a £0.9m impact on profits, which although a substantial part will be recovered eventually from insurers will impact the P&L this year. One benefit is the downtime has allowed other work on the furnace, so extending its working life by a further 18 months from a previous rebuild date in 2011. The repair cost of the failed unit (£0.3m) is being matched with spending on the second furnace that will similarly extend its working life to 2014 and improve reliability. The previous UK government’s lack of re-commitment to the CERT (carbon emissions reduction target) programme is leading to a significant fall off in insulation work, despite new sales initiatives to other segments of the market. The coalition Government has reconfirmed the CERT and with the Statutory Instrument expected to extend the programme to December 2012 Superglass is confident of a recovery in the next financial year. We see forecasts slipping dramatically, investors will need to focus on next year where forecasts around 6p put the group on a Year 2 prospective PER of 3.8x. HOLD 

Recommendation: HOLD

Synchronica (SYNC, 1.75p, £14.69m)

Synchronica (SYNC, 1.75p, £14.69m) has announced the proposed acquisition of Toronto listed iseemedia Inc for the equivalent of £5.3m by the issue of 311.3m new shares. iseemedia is generating relatively little income from its wireless messaging to the last update (March 2010) with most arising from a real estate website (www.RealBiz360.com) but was seeing good acceptance in India for its iseemail, email solution, iseedocs exchange edition, a email attachment viewing system, and iseedocs platform edition, that enables viewing of a range of rich media without downloading the full content, iseepublish, that enables the publication of high definition documents and other media. In the most recent document iseemedia estimated the deployment of its mobile related business would cost between $1m & $2m. The logic for Synchronica is that it brings more patents and agreements with 4 contracts with a subscriber base of a further 193m, on top of Synchronica’s existing estimated 660m potential. A logical acquisition with the potential to sell the non-core operations, such as the real-estate website and a piece of panoramic software licensed to Kodak. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Xaar (XAR, 129p, £81.14m)

Xaar (XAR, 129p, £81.14m) Interim trading statement to June 2010 are in line with expectations, showing revenues ahead of the comparable period last year. Encouragingly while the P! (platform1) printing product sales were stable the newer P3 generation is seeing an increase in demand with the group now expanding production. Gross margins have been hit on the older products but the group expects that impact to reduce in H2, so allowing the group to achieve the year expectations. The group has committed to paying an interim dividend, aided by net cash of £8.2m (£11.1m at December 2009 year end), but allowing for £2.8m of capital expenditure and £0.9m of dividends the group has generated £0.8m of cash. We continue to rate the group a HOLD as it is sitting on over 23x PER for this year, falling to some 14x next year.

Recommendation: HOLD

Access Intelligence (ACC, 4.25p, £10.83m)

Access Intelligence (ACC, 4.25p, £10.83m) The provider of Software-as-a-Service (SaaS) solutions for areas in compliance, procurement, media relations and PR, reports interims to 31 May 2010 are line with FY estimates. Following the acquisitions of Ether-Ray (July 2009) and Cobent (March 2010), revenues have increased by 63% to £4.1m (H109: £2.5m), adjusted pre-tax profit by 2.5x to £0.59m (H109: £0.17m) and EPS by 83% to 0.22p (H109: 0.12p). Net cash of £2.4m provides the group with sufficient cash to make further small and earnings enhancing acquisitions. The group’s strategy is to focus on the SaaS business model enhancing recurring revenues, which now represents 57% of group revenue.  The outlook statement is cautiously optimistic. Access Intelligence will focus on the cost saving opportunities offered by their software and the low-cost entry that hosted solutions provide will both contribute to future growth and will, to some extent, shield the Group from spending cuts. Access Intelligence has strong cash generation and high revenue visibility combined with exposure to a relatively defensive market. The strong management team will continue to grow the business organically and via earnings enhancing acquisitions. We regard 11.5x 2010 PER falling to 9.7x in 2011 an attractive investment opportunity. We reiterate our BUY with a 12 month target price of 8.25p. 

Recommendation: BUY

Accsys Technologies (AXS, 0.295p, £59.18m)

Accsys Technologies (AXS, 0.295p, £59.18m) has reported a €3.2m revenues in Q1 with a 23% reduction in staff costs, or an annualised saving of €2.8m. The group reports it has received a good response from its exposure at the American Institute of Architects national exhibition in June with a number of leads. It reports Diamond Wood, the Chinese licensee, has now received term sheets from a potential funder, albeit on the recently announced less ambitious plan. For the time being we maintain the SELL to 0.25p. 

Recommendation: SELL

Atlantic Global (ATL, 12.5p, £2.80m)

Atlantic Global (ATL, 12.5p, £2.80m) Trading update for the six months to June 2010 reports revenues some 20% higher than the same period last year, with a return to profitability, with net cash of £2.096m and a healthy order pipeline. With forecasts looking more secure a move into even modest forecasts of £0.4m (though their own broker is forecasting £0.6m) would imply EPS around 1.2p, putting them on just over 10x PER, with a yield of 8% on a 1p held dividend. We raise the recommendation to a BUY with a short term target price of 18p, which would still have significant yield support at 5.5%. 

Recommendation: BUY

Baobab Resources (BAO, 8.25p, £13.11m)

Baobab Resources (BAO, 8.25p, £13.11m) has signed a JV Heads of Agreement (HoA) with Southern Iron for the Changara base metal and manganese project, Mozambique. The JV will cover a 5-year, 4-stage investment structure; the first 2 stages of $1.5m earning 50% and with further investment to bring discoveries to pre-feasibility increasing project interest to 65% and the option to fund the Definitive Feasibility Studies and earn up to 80%. This is positive given that it offers the company the potential to monetize these non core assets whilst maintaining focus on its core Tete magnetite-ilmenite iron ore project also in Mozambique. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Beacon Hill Resources (BHR, 8.125p, £21m)

Beacon Hill Resources (BHR, 8.125p, £21m)has entered into an excellent looking deal for Minas Moatzie its JV with Consolidated Mineral. The proposed investment of $55m by Global Coke represents a 26% interest in BHR Mining and an off-take agreement for the purchase by Global Coke of all the coking coal produced by the Mine over its life, at a pegged in relation to market rates, delivered at mine gate. This looks like an excellent deal for 2 reasons; first it allows the expedited development of the valuable property. Second it should help address BHR (and our) investor’ concerns over how the substantial project would be financed. On the back of an envelope calculations $55m for 26% stake values the entire project at c.$210m. Thus assuming a 36% stake (ignoring for now BHR’s back in rights) this would suggest c.$75m net to Beacon Hill or 19.5p per share. Even if assume a generous discount to NAV of 50% (and allowing for some share dilution) this would suggest 9.7p per share (greater then the current share price). BHR has also issued a convertible loan note, repayable within 364 days which can convert into Beacon Hill shares at 8p per share. Alongside the strategic investment by Global Coke the Minas Moatize project is now fully financed. Excellent progress and of course there is the not inconsiderable Arthur River Project in Tasmania on which the company was floated. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Brady (BRY, 66.5p, £18.8m)

Brady (BRY, 66.5p, £18.8m) H1 trading update to 30 June 2010 shows 20% T/O growth and a corresponding level of progress in terms of EBIT (before exceptional transaction costs for Viveo Switzerland). Viveo is trading ahead of expectations with 3 substantial new licenses.  Forecasting is in light of a challenging trading environment but the company is trading in line with the Board's expectations. The market is looking for pre tax of £1.9m and EPS of 5.2p the company is very second half weighted. A strong financial position/net cash of £3.2m and no debt enables a buy and build strategy. A positive statement with the company nearing our 69p price target (which we retain for now) we place our recommendation on HOLD but could see cause to revisit. 

Recommendation: HOLD

Ceramic Fuel Cells (CFU, 10.25p, £105.56m)

Ceramic Fuel Cells (CFU, 10.25p, £105.56m) has announced Harvey Norman, an Australian leading retailer, has been appointed as a distributor of its BlueGen fuel cell based CHP gas to electricity generators. Importantly Harvey Norman is already an established distributor of other leading edge technologies, such as solar hot water and solar energy systems. We maintain the SPECULATIVE BUY recommendation as we see this as the lead in the race to commercial sales; though remind investors of the valuation differential to the industrial orientated AFC Energy which remains our favourite in the quoted fuel cell arena. 

Recommendation: SPECULATIVE BUY

Clean Air Power (CAP, 13.5p, £7.56m)

Clean Air Power (CAP, 13.5p, £7.56m)has signed the long awaited formal supply agreement with Volvo Powertrain. The supply and development agreement is initially for 5 years and will see CAP’ OEMs solution marketed by Volvo Truck Corporation. In addition the group has signed a separate £0.16m contract with Volvo to enable its exiting engines for dual-fuel use its buses. The group also highlighted a delay in a Tasmanian gas facility, being built by BOC, has resulted in a backlog of unfulfilled orders. Similarly the activity required to land the Volvo deal led to some slippage in the progress of its Genesis Edge product, though it did manage to gain its first order for 10 units from HAM sp. As a result revenues will be below expectations for the year, as will be cash generation. While cash may get tight to the end of the year, we believe the progress being made will come through in 2011 so we maintain our SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

CML Microsystems (CML, 85.5p, £12.78m)

CML Microsystems (CML, 85.5p, £12.78m) Trading statement for the first 3.5 months of the year reports results are materially ahead of internal expectations, driven primarily by the Americas and the Far Eastern territories. With stable gross margins the group has been able to fund the working capital pressures and still reduce the debt levels. The group has almost attained our 87p price target, we see forecasts increasing from our cautious £1m to around £1.25m with EPS of 5.9p, putting the group on a prospective multiple of 14.5x, which we believe is high enough and thus we drop the recommendation to a HOLD with an increased price target of 88.75p (or 15x). 

Recommendation: HOLD

CORRECTION: Uniq (UNIQ, 15.5p, £17.80m)

Uniq (UNIQ, 15.5p, £17.80m) has not received backing from the Pensions Regulator regarding the long-term framework for its rather large pension deficit (£436m). The regulator has stated that the Framework; ‘as currently stands, does not meet all of its criteria for clearance’. Company and Trustee continue to work on a resolution but this may take some time. Until the full financial impact is known we maintain the group as a risky HOLD. 

Recommendation: HOLD

Cryptologic (CRP, 155p, £19.83m)

Cryptologic (CRP, 155p, £19.83m) has announced “Instant Click” a new package that enables the rapid roll out of its games on 3^rd party platforms. The first taker is Tain, a leading European provider of e-gaming infrastructure licensed in Malta. We remain cautious, reminding investors it has hired an external consultancy to advise on its future, we maintain the SELL with a 135p price target.

Recommendation: SELL

e2v Technologies (E2V, 62.5p, £134.28m)

e2v Technologies (E2V, 62.5p, £134.28m) Trading statement covering the 1 April 2010 to 16 July 2010 reports results significantly ahead of the comparable period with an order book supporting an optimistic view for the year. Medical and Science is seeing strong OEM demand for radiology while Commercial and Industrial is reflecting the recovery in the underlying markets. The Imaging division benefitted from a pick up in demand for machine vision, medical and science for scientific imaging while dentistry was down as was Space – due to technical and timing issues. The specialist semiconductor division saw an improvement saw test and assembly boosting aerospace & defence demand while a recovery in overdue orders helped the demand from commercial and industrial segments of the market. The order book at £146m (£127m) includes £15m related to the restructuring so the group anticipates a return to more normal levels once the reorganisation is completed. We maintain our BUY with a 71p price target and suspect the 26^th July update to the City on the restructuring may boost the target higher. 

Recommendation: BUY

Gulf Keystone (GKP, 68.75p, £464.9m)

Gulf Keystone (GKP, 68.75p, £464.9m) Initial loads of production facility equipment have arrived at the Shaikan field, the aim to enable an 18,000 bopd capacity. The AOS Discover-1 drilling rig has arrived on site at the Sheikh Adi-1 exploration well site. Spudding is planned in August with results dependent TD planned for 3,850m and drilling expected to take 6 months. Should promote further excitement with oil-in-place potential is in excess of 1 billion barrels. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Hydrodec (HYR, 9.13p, £33.04m)

Hydrodec (HYR, 9.13p, £33.04m) Trading update reports Q2 sales volumes of SUPERfine up 79% on Q1 2010 at 6m litres and 36% up on the previous record set in Q4 2009, leading to $4.7m of revenues. Although raw material prices tracked SUPERfine achieved prices, so limiting margin improvement, the group did manage to generate cash. The group has seen feed price hikes limiting sales in July and the group expects to achieve a license to process PCB contaminated oils by the end of the year, so requiring a $0.4m performance bond that still requires funding. We maintain the SELL based on the price being ahead of the situation and the potential need for a further dilutive issue. The group is extremely sensitive to movements in the underlying oil price. 

Recommendation: SELL

ILX (ILX, 21.5p, £5.07m)

ILX (ILX, 21.5p, £5.07m), the e-learning software and business training company, reports an encouraging trading statement – strong trading in Q4 2010 has continued into Q1 2011. Q1 revenues and profits are substantially ahead of last year, albeit from a low base. The new international business (20% of total revenue) is performing well with 60% revenues growth in Q1 2011. The UK’s Best Practice division continues to consolidate its market position, with 10% revenue growth and increased margins.  The Finance Training division is benefitting from the reduce cost base and continues to win new e-learning contracts. Financial training outlook remains depressed in the UK though the group is seeing accelerating outlook internationally. This is a YIELD stock, with a yield of 7% (div. cover 2.8x) in 2011. We reiterate our BUY recommendation. 

Recommendation: BUY

Kewill (KWL, 112.75p, £101.03m)

Kewill (KWL, 112.75p, £101.03m) Trading update for Q1 from the March year end confirms continued progress with a healthy order pipeline. We maintain the Hold, given the group has received a preliminary approach at 130p, which is not sufficient upside V.S. risk to justify even a SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

MBL Group (MUBL, 151.0p. £26.12m)

MBL Group (MUBL, 151.0p. £26.12m), the distributor of home entertainment products, reports prelims to 31 March 2010 ahead of market expectations. A 36% uplift in revenues to £194.9m (2009: £143.6m) drove PBT to increase by 22% to £9.9m (2009: £8.1m) and EPS growth of 18% to 40.3p (2009: 34.3p). Net cash stood at £5.7m (2009: £2.6m). The group proposes a 25% increase in DPS to 7.5p (2009: 6p) which demonstrates the group’s cash position and confidence in the future. Following a strategic review, the group has decided to identify complementary areas to diversify the operations and secure new customers. New contracts with Best Buy and WH Smiths have already been secured and the Global Media Vault has been acquired. Consolidation of the Leyland operations into a single, purpose built distribution facility should reap rewards in 2011 and beyond. Market conditions remain challenging. For prudence, assuming earnings remain flat at 40.3p and DPS of 7.5p, the stock trades on 5.7x with a yield of 5%. On this basis, the valuation seems relatively attractive. However, the Board acknowledges the current concentration of the business on its major customers, is presently contracted to September 2011. Our concerns over the potential loss of a large contract encourages us to retain our HOLD recommendation. 

Recommendation: HOLD

MDM Engineering (MDM, 92.5p, £34.46m)

MDM Engineering (MDM, 92.5p, £34.46m) has been awarded the Tarkwa Mine Conceptual Study for Gold Fields Ghana. MDM will complete conceptual studies for reclamation and reprocessing of the South Heap Leach Pads and optimisation of the crushing plant at the mine. It is good to see the company wining contrast as it attempts to claw its way back from last weeks major earnings disappointment. However, we remain cautious and our price target of 85p still warrants a SELL. 

Recommendation: SELL

Psion (PON, 75.5p, £106.13m)

Psion (PON, 75.5p, £106.13m) Trading update for the six months to June 2010 has confirmed trading is in line with shortened order delivery times and yet a strengthened order pipeline activity. However the impact of exchange translation will materially impact the second half results. More encouragingly the group is readying a modular product as well as re-launching a low cost PDA under the Psion brand, initially aimed at China. We do see optimism regarding new products, but that is fully reflected in the ratings (YR1 of 33.4x based on £4.8m PBT 2.26p EPS and Yr2 of 19.7x based on £8.1m PBT with 3.84p EPS), though the forecast uncovered 3.9p DPS gives a yield of 5.2%. HOLD with a price target of 83p. 

Recommendation: HOLD

Scientific Digital Imaging (SDI, 21.5p, £3.87m)

Scientific Digital Imaging (SDI, 21.5p, £3.87m) Finals to April 2010 saw a 6% increase in revenues to £7.2m (£6.8m) with a 13% increase in gross profit to £4.3m (£3.8m) an a recovery in reported PBT to £0.26m (£0.06m), with 1.67p (0.05p) EPS. The group saw revenue growth across the overseas markets with only the UK falling. The group has reported a positive outlook for Synoptics scientific imaging operation, boosted by new products for the microbiology arena, growth in the distribution of its gene related products overseas helping offset a flat Europe and UK sales and continued growth in sales and development in its microscopy product that is distributed via Leica. The group continues to invest in its Atik range of consumer imaging cameras for deep sky astronomical and life science imaging, with it now accounting for 8% of sales and sales just starting in the US, boosted by a new 8MP unit. We move from a Sell to a HOLD, noting the group could use its highly rated paper to make EPS accretive acquisitions. 

Recommendation: HOLD

Turbotec Products (TRBO, 31.5p, £4.03m)

Turbotec Products (TRBO, 31.5p, £4.03m) has been named as an additional defendant in an civil action brought by Wells Fargo Bank against its largest shareholder, Thermodynetics, regarding foreclosure of its Windsor Connecticut facility, of which Turbo Products is a tenant. Turbo’s naming is merely as a tenant and should not have a liability, though this must put into question the financial stability of Thermodynetics which still has a further cost to pay regarding its failed UK high court action against Turbos plus now the $1.82m plus additional costs from Well Fargo. We cut the rating to a HOLD given the perception that the Thermodynetics’ 29% shareholding is overhanging the market. 

Recommendation: HOLD

Uniq (UNIQ, 15.5p, £17.80m)

Uniq (UNIQ, 15.5p, £17.80m) has received backing from the Pensions Regulator regarding the long term framework regarding its rather large pensions deficit (£436m). Until the full financial impact is known we maintain the group as a risky HOLD. 

Recommendation: HOLD

Clapham House (CPH, 57.0p, £23.40m)

Clapham House (CPH, 57.0p, £23.40m), the owner and operator of Gourmet Burger Kitchen and The Real Greek, reports prelims to 28 March 2010 in line with the bottom end of market consensus.  Despite the tough market conditions, the group increased revenues by 4% to £44.5m (2009: £42.7m), EBITDA fell to £6.0m (2009: £7.3m), but PBT and EPS increased to £1.5m (£1.0m) and 2.1p (2009: 0.8p) respectively. Net debt reduced to £10.1m (2009: £13.6m) at the end of March 2010. The group raised £2.1m post the year end to support their increased opening programme. Trading for the current financial year has been negatively impacted by the FIFA World Cup Football. Heavy promotional activity in the restaurant market continues to be a key theme, which may impact the margins going forward. The group expect to add an additional 4 GBK’s this financial year. For 2011 the market forecasts between PBT of 1.5m-2.2m and EPS of 2.5p – 4.2p. Even if the group achieves the top end of 2011 earnings, the group sits on 13.6x. We think earnings of 3p are more suitable, which puts it on 19x, slightly below Carluccio’s. We reduce our recommendation to a HOLD.

Recommendation: HOLD

Judges Scientific (JDG, 235p, £9.81m)

Judges Scientific (JDG, 235p, £9.81m) Interims to June 2010 trading update confirms good underlying progress with a healthy order book for the period ahead. The period will include a 6 month contribution from Quorum and a 3 month contribution from Sircal which has already been integrated with FTT. Cash will be hit due to its size increase now requiring it to pay corporation tax in advance. There will be a negative non-cash adjustment for the increase in share price impact on the convertible redeemable share notional cost. However with forecasts of £1.9m, potentially going higher, with 31.1p EPS and 5.5p DPS the group is sitting on a prospective PER of just 7.6x with a yield of 2.3%. We still see upside to around 264p, sufficient to maintain the BUY. 

Recommendation: BUY

Printing.com (PDC, 36.5p, £16.19m)

Printing.com (PDC, 36.5p, £16.19m) The AGM statement highlights a cautious outlook. Trading in April and May were slightly softer. A strategic document, ‘Vision 2015’ has been developed for franchisees. An integral part of this strategy is to add 'web-to-print' templates to the tools utilised by our network of outlets. We believe that by adding these systems, greater efficiencies can be realised, making the business model more robust and sustainable. Management believe the template based solution will open up new markets, in particular larger businesses and multi-site operators. We believe the market may drop current earnings estimates from 3p. The challenging market conditions encourage us to reduce our recommendation to a SELL with a target price of 30p. 

Recommendation: SELL

RCG Holdings (RCG, 48.5p, £138.48m)

RCG Holdings (RCG, 48.5p, £138.48m) Trading update is in-line with expectations for the first half, with revenue growth continuing, slightly lower gross margins offset by lower admin charges.  The group has announced the issue of 5m new shares at 42.16p (HK$5) which will be used to finance anticipated projects in its Solutions, Projects and Services business segment for public and private companies in the South-East Asia and Greater China regions. This segment takes longer to pay and so places working capital pressure on the group, hence the cash raise. The group remains on a particularly low PER, leaving plenty of upside to our year end target price of 98p, which would give a 4x PER with a 2.4% yield. BUY 

Recommendation: BUY

SDI Group (SDIG, 2.0p, £2.19m)

SDI Group (SDIG, 2.0p, £2.19m) Disappointing prelims to 31 March 2010 are below market consensus. Revenues declined to £31.1m (16m 2009: £53.1m) and adjusted pre-tax losses grew to £1.1m (16m 2009: £0.5m). Exceptional charges of £17.6m relate predominantly to   write down in goodwill and default on payments on a completed project and some non-recurring issues. SDI Group suffered from retailers reducing their capital expenditure, slowing down their decision processes and putting pressure on margins. The increase in UK VAT to 20% will continue to impact retailers’ investment decisions, providing uncertainty for SDI. There is similar uncertainty in SDI's other major markets. We recommended investors to sell the shares in January 2010, when the share price was 7.87p. A potential MBO at an indicative offer price of 2.6p per share, reflects a market capitalisation of £2.8m, which will be below the current net cash of £2.52m. The group is loss making, but we would still expect the indicative price to be around the net cash figure. The potential MBO encourages us to be buyers of the stock. BUY 

Recommendation: BUY

WIN (WNN, 145p, £15.27m)

WIN (WNN, 145p, £15.27m) The mobile content creator has received an indicative cash offer around 150p from ECI and Mobile Interactive Group MIG), topping the 141p cash offered by Imimobile Europe Limited. The group has now achieved our 136p price target, but we need to examine what price ECI/MIG or Imimobile should pay for control. The group is forecast to achieve £1.5m PBT with 11p EPS with the media sector on 13x prospective PER - so adding a 25% premium for control we see a target exit price around 178p, which would equate to a Yr1 Per of 16x, falling to 11.3x, before the acquirer’s costs reductions, such as £0.5m cost of maintaining the public quote. We drop the recommendation from a Buy, to a highly SPECULATIVE BUY in anticipation that a bid war may drive the price higher.

Recommendation: SPECULATIVE BUY

Work Group (WORK, 14.0p, £4.01m)

Work Group (WORK, 14.0p, £4.01m) is a marketing services business. For the 6 months ended 30 June 2010, the group will report an adjusted operating profit on a 3% increase in net fee income to £5.6m. The group has a strong balance sheet, with zero debt and net cash in excess of £1.1m (FY09: £2.3m). The Board is confident it will achieve 2010 PBT of £0.3m and EPS of 0.8p. With 10% of the group’s revenues potential exposed to public spending cuts, we believe the remainder of the year and 2011 will be challenging. The group is sitting on a very healthy 17.5x, so the market is already looking towards next year when the rating falls slightly to 10.8x – still up with events. We maintain the HOLD. 

Recommendation: HOLD

21st Century (C21, 6.375p, £5.88m)

21st Century (C21, 6.375p, £5.88m) The trading update for H1 2010, for the vehicle installation service provider supplying public transport CCTV and other monitoring systems, is positive. Earnings in the first half exceed management expectations. The group continued to roll out the EcoManager with Arriva UK Bus and delivered its first series of EcoManager units to Arriva in mainland Europe. Furthermore, the business has won a new contract with First Group UK Bus. The final tranche of the bank term loan was repaid in February. Despite the strong performance in H1, we believe H2 will be tougher, reflecting potential constraints on customer’s budgets. The market forecasts 2010 PBT of £0.8m and EPS of 0.6p and in 2011 PBT of £1.1m and EPS of 0.9p. Trading on a 2011 PER of 7.1x, suggest the group is undervalued. We upgrade our recommendation to a BUY and introduce a 12 month target price of 8p – equivalent to 9x 2011 earnings. 

Recommendation: BUY

32Red (TTR, 14.5p, £10.14m)

32Red (TTR, 14.5p, £10.14m), the online betting and gaming operator, reports the performance in H1 2010 is expected to be in line with market expectations. A 33% increase in total revenues to £7.8m was predominantly underpinned by a 29% increase in 32Red Casino and the acquisitions of Nedplay and Golden Lounge. The impact of the casino marketing campaigns has attracted new customers and helped increase the number of active customers. The group will continue to invest in marketing campaigns. All outstanding bank debt has been repaid, improving the strength of the balance sheet. Regulatory risk and heavy reliance on the online casino are key issues, but the stock looks cheap on 7.6x, albeit a little speculative. SPECULATIVE BUY to 20p 

Recommendation: SPECULATIVE BUY

AFC Energy (AFC, 19.5p, £29.42m)

AFC Energy (AFC, 19.5p, £29.42m) is supporting B9 Coal and its affiliate B9 Gas with its alkaline fuel cell being used with a steam reformer to generate clean power from natural gas. We maintain our optimism for this commercial scale alkaline fuel cell development. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Ascent Resources (AST, 3.875p, £20m)

Ascent Resources (AST, 3.875p, £20m) has increased its interest in the M10/11 block offshore Netherlands to a 54% by consolidating McLaren Resources’ 27% interest in return for a 3% net profit interest and a one-off payment of C$125k conditional upon a drilling licence being granted. The license is now comprised of Ascent 54%/ EBN 40%/GTO 6%. M10/11 is an appraisal project in shallow water where a discovery well (M11-1) was drilled by NAM in 1985.  The area has good quality 3-D seismic coverage with a number of other prospects identified. The JV is also considering drilling an appraisal well for the Terschelling Noord discovered by NAM in 1992 which lies partly within the M10/11 license area. This is a sound deal and with no initial outlay the company is able to direct the drilling decision. The stock remains very cheap which should begin to rectify in the short to medium term as the market gains increasing confidence in delivery. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Asia Digital Holdings (ADH, 0.285p, £2.02m)

Asia Digital Holdings (ADH, 0.285p, £2.02m) Trading for the 6 months to June 2010 is reporting material lifts in revenues, up over 50%, and in gross profits, up over 30%, resulting in the group reporting a positive EBITDA. Two thirds of the group’s profitability arise from Australia and New Zealand and that area has shown a continued improvement. The group has launched in China during the first half, with Dell as its launch customer. This suggests the group is on track for revenues of £30m and approaching breakeven at the PBT by the end of the year. As such this looks significantly undervalued and we maintain our SPECULATIVE BUY recommendation. 

Recommendation: SPECULATIVE BUY

Baobab (BAO, 7.75p, £12.32m)

Baobab (BAO,  7.75p, £12.32m) Positive results from the firsts round of scout Drilling at Chimbala with encouraging ‘reasonably consistent’ results with the South Zone continuing to impress. The first round of scout diamond drilling at the Chimbala prospect has been completed with 24 holes drilled for an aggregate of 4.95km. Drilling, testing magnetic targets over a 3km2 area, has intersected significant widths of magnetite-ilmenite mineralisation including. TDH0028 - 2 significant intercepts of 51.5m comprising (31.0m - 63.1% Fe; 0.69% V2O5 with 28.6% mass recovery from 28.0m (20m - 62.8% Fe, 0.68% V2O5 & 36.0% mass recovery).  TDH0031 - 4 significant intercepts of 38m including (30.5m - 60.2% Fe, 0.72% V2O5 and 19.2% mass recovery from 60.5m (15m - 61.3% Fe, 0.69% V2O5 and 27.6% mass recovery). TDH0032 - 4 significant intercepts, totalling 52m, including: 34.0m - 57.4% Fe, 0.62% V2O5 and 19.1% mass recovery (93.0m which include 8m - 60.0% Fe, 0.65% V2O5 and 33.8% mass recovery). C.12km of combined diamond and reverse circulation is planned to assess the Chimbala and South zone prospects of the Massamba trend and improve confidence in the 400 to 700Mt target and to clarify geological parameters. On the metallurgical side the good news is contaminants (silica and sulphur) seem relatively low. A sleeper in terms of valuation, the company is nevertheless progressing nicely, we can see significant upside, weakness should be viewed a buying opportunity. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Blinkx (BLNX, 56p, £171.28m)

Blinkx (BLNX, 56p, £171.28m) Further good news, this time Blinkx will have the only App on Samsung’s Galaxy S smart phone, based on Android, the new star of mobile operating systems, which is being seen as a major threat to the Apple’s closed wall market position. The Blinkx Android App will feature a never ending playlist of “snackable “video of short clips, as well as enabling the search of all Blinkx mobile compatible content. Samsung is the second largest manufacturer of mobile phones and has recently been launching truly market leading product with organic LED displays based on Android. We see this as a major boost to Blinkx outlook with video downloads fast becoming a major money spinner for service providers now they are charging for data and not offering all you can eat services. A continued SPECULATIVE BUY

Recommendation: SPECULATIVE BUY

Brulines Group (BRU, 117p, £32.8m)

Brulines Group (BRU, 117p, £32.8m) - AGM statement. Trading is in line with management's expectations. The leisure division is buoyed by a good level of recurring revenues, i-draught installations (which the company expects to continue to drive demand) both UK and overseas and encouraging progress with Vianet vending telemetry solutions. The horizontal diversification into forecourt sector continues apace. Recent acquisitions have extended the offering and allow the company to provide a one stop shop for stock analysis, fuel pump calibration, adjustment & legal verification, audit & compliance, gauging systems, tank lining and contract/project management solutions etc. Indeed the company now supplies solutions to UK forecourt retailers accounting for over 60% of fuel sold in the UK.  We suspect that while this will likely limit the pace of top line or acquisitive growth it should begin to foster economies. Encouraging, we retain our BUY. 

Recommendation: BUY

Character Group (CCT, 117.5p, £31.01m)

Character Group (CCT, 117.5p, £31.01m) plans to distribute a collection of official Michael Jackson dolls. The figures, to be distributed by Character Options in the UK, will be launched in autumn from both retailers and collector's websites. Revenues from the figures are expected to be mainly reflected in FY2011. The group continue to widen their product portfolio and wide their sales distribution in the UK and internationally. We believe the group is undervalued trading on 6.9x in 2010 and 6.3x in 2011. The low valuations with a yield of 2.6% in 2010 and good growth prospects (Yr 1 prospective EPS growth of 24%) justify our upgrade to a BUY with a target price of 156p, equivalent to rating of 9x for 2011. 

Recommendation: BUY

Clyde Process Solutions (CPSP, 60p, £24.23m)

Clyde Process Solutions (CPSP, 60p, £24.23m) has won a £1.4m order from Anglo American for pneumatic conveying systems for its Nickel operation in Brazil. Encouragingly the group reports a significant upturn in enquiries across all its key customer markets and geographical territories. We recently highlighted out target price of 64p, so the recent price increase now suggests that HOLD is the right recommendation.

Recommendation: HOLD

Cohort (CHRT, 83.5p, £34.06m)

Cohort (CHRT, 83.5p, £34.06m) Surrey Satellite Technology Limited (SSTL) has chosen Cohorts SEA subsidiary to provide an Instrument Control Unit for the European Space Agency’s EarthCARE mission, which will be worth some €3.5m. Cohort is confident of further collaboration with the ESA ahead of the satellite launch in 2013. We maintain the BUY rating with a 116p price target. 

Recommendation: BUY

Cryptologic (CRP, 165p, £21.11m)

Cryptologic (CRP, 165p, £21.11m) Trading update for Q2 has highlighted it expects a modest decline against Q1 revenues with operating costs higher than anticipated. As a result Q2 will show a greater loss than Q1 and the group is warning the outlook is “less encouraging”. Despite the world cup football, casino revenues did increase, but less than hoped, due to a swing to Blackjack and Roulette. Wagering and deposit levels were steady. The rollout of its Casino Games at Betsafe was delayed to July. As a result the group has hired a consultancy to advise on future strategy. The market will be surprised by the lack of progress and we see short term weakness down to 135p or so. SELL 

Recommendation: SELL

Empyrean (EME, 5.875p, £10.71m)

Empyrean (EME, 5.875p, £10.71m) The Kowalik-1R well in the Sugarloaf (Block B) project, Texas US was spud on 9th July and is currently at a depth of c.6k ft. The well is the first at Sugarloaf to which Empyrean will contribute on a heads up basis where it will pay 10.2% of costs for an equal economic interest. While this brings obvious cost implications, we view this as positive given Empyrean’s greater share of this well following a raft of successful recent wells drilled on Block B. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Hamworthy (HMY, 307p, £139.41m)

Hamworthy (HMY, 307p, £139.41m) has secured the design and supply contract for cargo handling systems for eight LPG carriers from Brazilian shipyard Estaleio Promar S.A. This helps offset the short term malaise in ship building by building the order outlook, with this contract due for delivery between mid-2012 to mid-2015 and increasing the group’s presence in the local Brazilian market. However the group is sitting on 17x prospective PER (based on £11.2m PBT with 18p EPS) to March 2011 falling to 15.9x PER (based on £12.2m PBT with 19.3p EPS) which we see up with events - so a continued HOLD. 

Recommendation: HOLD

Ilika (IKA, 55.5p, £20.30m)

Ilika (IKA, 55.5p, £20.30m) has announced it has moved to a Joint Development Project status with a major vehicle manufacturer for its transport scale fuel cell technology. Ilika will be free to use the technology in other areas, such as motorcycles or the electronics sectors. Clearly good news we do however see the rating as up with events given valuations place on the other fuel cell companies in the market who are much closer to commercial product, such as AFC Energy, Ceramic Fuel Cells and Ceres Power, with our clear favourite being AFC Energy. Ilika has also released finals to April 2010 with gross revenues of £1.1m with a net loss of £3.1m. The group is working with Toyota on lead free technology for batteries, on hydrogen storage, on memory chips, on the replacement of lead in ceramic piezo electric devices and has a number of biotechnology developments which it is now commercialising. The group floated post the year end, raising £5.175m at 51p in May. HOLD 

Recommendation: HOLD

Intercede (IGP, 34.5p, £16.62m)

Intercede (IGP, 34.5p, £16.62m), the producer of Identity and Credential Management software, called MyID, has release MyID PIV Version 8 Service Release 1 (SR1) for US Federal, State and Local Government. The new version extends functionality further than smart cards, into credential management, enabling deeper penetration of an expanded customer base.  Management anticipate the US Federal Government Agencies currently using Version 8 (over 10 agencies) will upgrade to the latest version in the coming months. The stock trades on a prospective 2011 PER of 8.4x, a warranted discount to the software sector, given its poor revenue viability and lack of critical mass. We reiterate our HOLD recommendation. 

Recommendation: HOLD

Managed Support Services (MSS, 6.125p, £10.13m)

Managed Support Services (MSS, 6.125p, £10.13m) has won a 3 year extension with one of the group’s largest planned maintenance customers, Bruntwood Limited, addressing 95% of its managed portfolio, or more than 5.5m sq.ft. HOLD 

Recommendation: HOLD

MDM Engineering (MDM, 90p, £33.53m)

MDM Engineering (MDM, 90p, £33.53m) was awarded a contract for the engineering work for the plant upgrade for Andalucita project in Peru. Good news but unlikely to offset yesterday’s disappointment. SELL to 85p. 

Recommendation: SELL

Nature Group (NGR, 42.5p, £16.71m)

Nature Group (NGR, 42.5p, £16.71m)– gave a robust pre-AGM statement. In Norway successful operation of its 1st offshore treatment unit continued and it is focusing on upgrading design for 2nd generation Unit with ongoing discussions with a leading offshore oilfield and drilling fluids on potential further deployments. Onshore, the focus has been the treatment unit delivered to Kazakhstan in 2009 where commissioning was deferred until this year. Efforts are now focussed on later prospects and in conjunction with reduced rental income from its Stavanger deployed unit this has held back revenues in Norway for this year but not for the group as a whole. Gibraltar achieved revenues +45%, reflecting inflow of waste oil tonnage in larger shiploads from Malta and Ceuta and Las Palmas. The Gibraltar government has given indicative approval for site expansion to enable tankage to be expanded during 2011 from 7k cubic metres to 12k command for a potential extension of the site lease beyond the existing 17yrs. Transhipment arrangements with Waste Oils Company in Malta have been extended for 2yrs from January 2011. In Oman the contractor has accelerated the site timescale for the new port facility at Duqm and all plant modules now ‘confidently’ expected in 2010. Group H1 turnover to 30th June will be c.£3.9m compared with £2.7m in the same period last year,  overall gross margins will be lowered slightly by the Omani project. FY estimates look for £2m and EPS of 4.68p. Last year the company made £1.65m per tax on £5m of turnover, so looks well on track. We upgrade our price target to 51p, which reflects 11x the FY expectation. BUY 

Recommendation: BUY

PSG Solutions (PGS, 24p, £6.22m)

PSG Solutions (PGS, 24p, £6.22m) Results for the year to March 2010 saw revenues of £11.03m (£10.11m) with gross profits of £6.01m (£5.24m), gross margins of 54.5% (51.8%),higher admin charges at £4.81m (£4.10m) leaving op. profits up slightly at £1.19m ( £1.14m) and underlying PBT of £1.22m (£1.25m) though post exceptional costs the group reported a loss of £3.19m (profit £1.33m). The group ended the year with net cash of £4.47m (£3.21m) post acquisition spend of £1.03m, reflecting underlying operating cash generation of some £1.84m. Auditel’s contribution rose from £0.72m to £1.04m with orders for its stealth surveillance products seeing across the board and winning its first order with the MOD. Property Information Services saw its operating contribution fall to £0.32m (£0.52m), together with a £4.5m goodwill write-off reflecting the abolition of HIPS. Moore & Buckle, flexible packaging specialist, was hit initially in the year by the downturn in construction and automotive sectors, but it did mange to increase revenues, offsetting lower gross margins, so op. contribution increased to £0.25m (£0.22m). Despite the furore caused by the abolition of HIPS in May 2010, we see some upside, not least in the cash backing and potential return to shareholders muted in the statement. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

StatPro (SOG, 104.0p, £62.84m)

StatPro (SOG, 104.0p, £62.84m) The provider of portfolio analytics and data solutions for the global asset management industry reports trading in the first six months to 30 June 2010 is in line with expectations. Net debt is c.£6.3m at the end of June (FY09: £8.9m). New businesses signed in H1 have been satisfactory, but the group warn that new business in H2 may be affected by longer sales cycles, especially for new data services contracts. Renewal rates remain relatively flat at 90%. The group have increased investment by an additional £0.7m. StatPro Revolution has signed its first integration test and will begin to generate revenues in 2011. StatPro Revolution should reduce costs, complexities and broaden the company’s target market to smaller fund managers.  The high level of recurring revenues provides us with confidence the group will achieve FY expectations of PBT of £7.6m and EPS of 9.5p. Trading on a 2010 PER of  10.9x and 10.3x in 2011, we continue to believe the group is undervalued. We reiterate our BUY recommendation but reduce our target price 127p.

Recommendation: BUY

Stellar Diamonds (STEL, 11.5p, £11.64m)

Stellar Diamonds (STEL, 11.5p, £11.64m) operational update at its Mandala mine and Bomboko trial mine in south east Guinea is positive with the company continuing to deliver on promised made at the time of the reversal.  Production at Mandala has exceeded 83k cts to date, Bomboko over 4.5k with combined diamond sales of $2.9m. There looks to have been reasonable progress at Mandala with a modest uptick in production over only a short period. If we take the first 8 months production (83k – 36.9) this suggests c.5.7k cts per month which has risen to around 6.15k a month in H1 this year. While the ultimate target is 12k cts for Mandala the production ramp is now well underway. Trial mining at the lower grade higher diamond value Bomboko mine has yielded 3.15k cts at an average grade of 4cpht for the 6 months. Total production at Bomboko has now reached 4.5k cts an average grade of 4cpht and an average price of $116.7 per ct. H1 was much about logistics and mobilisation but in the last quarter additional earth moving equipment has been introduced to both despots (four 30-ton dump trucks, 2 excavators and 2 front end loaders) which should enable a dramatic uplift in production.  With the first part of a two pronged strategy (increase throughput mine efficiency and therefore cashflows/advance potentially higher impact exploration projects) well underway the company can now begin in earnest the second potential more exciting part for investors. In fact work on the Tongo Sierra Leone kimberlite dyke prospect is already in progress with bulk sampling underway. SPECULATIVE BUY 

Recommendation: SPECULATIVE BUY

Synchronica (SYNC, 1.875p, £15.74m)

Synchronica (SYNC, 1.875p, £15.74m) Interims to June 2010 has seen revenues up to £3.43m (£1.33m), gross profits of £3.28m 9£1.18m), increased costs of £4.1m (£3.5m), leading to reduced loss before tax of £1.34m (loss £2.49m). The group ended the period with £0.78m net cash, having spent £2.16m on acquisitions and raised £2.51m via an equity issue. During the period the group launched its MessagePhone, hardware specifically designed to accelerate the use of the MobileGateway software, as well as 3 other device manufacturers for bundled software and signed a raft of increasing contract wins for the software. The group is confident of further progress in H2 with larger deal sizes. Depending on the timing of the cashflow there is the potential the group will need to raise further cash in the second half, but despite this we see the group on track for profitable growth next year and the scale of the potential dilution would be modest, so we maintain the SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

Wilmington (WIL, 140p, £115.69m)

Wilmington (WIL, 140p, £115.69m) has announced trading in the year to June 2010 will be in-line with expectations. Training & Events will be marginally ahead of the previous year, while Publishing & information continues the trends of H1. Surprisingly the training activity in the investment banking arena continues to improve. The group is investing heavily, some £2m, in expanding its product range, especially it Flexible Legal Practice course. Forecasts to June 2010 are for some £13m PBT with 10.2p EPS followed by £13.7m PBT with 11p EPS, putting it on a 13.7x prospective PER about to go historic with a Yr II PER of 11.5. The group has achieved our initial price target but the confidence of the statement, together with investors focussing on resilient areas of the market, encourages us to maintain the BUY with a 162p year out price target. 

Recommendation: BUY

1st Dental Laboratories (FDT, 4.62p, £1.94m)

1st Dental Laboratories (FDT, 4.62p, £1.94m)the provider of dental laboratory products and services, reports interims to 31 May 2010. Higher margins from improvements in operational efficiencies helped the group to break-even, with PBT of £0.01m (H109: loss £0.33m) on a 4% decline in revenues to £4.9m (H109: £5.1m). Net debt stood at £1.4m. Poor revenues in April and May are apparently attributable to disruptions caused by the volcanic ash – a large number of customers (dentists) may have been stranded overseas - a poor excuse. Generally, the Group and its key customers have experienced weaker demand in recent months. While the level of NHS revenues is stable, the group are seeing a decline in private work, which in part includes dental work of a more discretionary nature. The launch of a new range of products may help enhance sales growth. 1st Dental is traditionally H2. We would expect the group to report a very small profit for the full year. The balance sheet is weak and group is highly geared. We retain our SELL recommendation. 

Recommendation: SELL

Brainjuicer (BJU, 154.0p, £19.18m)

Brainjuicer (BJU, 154.0p, £19.18m)The trading update for the 6 months ended 30 June 2010, is in line with management expectations. A strong performance in the period is illustrated by 48% revenue growth, primarily driven by the UK and US business.  Despite challenging market conditions, the group has made excellent progress over the past twelve months, increasing their global presence and expanding their product portfolio by adding innovative products. The group continue to expand their geographical coverage and will open offices in Brazil and China this year.  The market forecasts 2010 PBT of £1.8m, EPS of 10.3p and DPS of 2.3p and in 2011 PBT of £2.4m, EPS of 13.8p and DPS of 3.1p. The stock trades on a prospective 2010 PER of 15x with a yield of 1.6%. We retain our BUY recommendation with a target price of 170p. 

Recommendation: BUY

Corero (CORO, 34p, £0.52m)

Corero (CORO, 34p, £0.52m) A £6.5m (gross) fundraising at 25p and the unsecured loan stock converted into ordinary shares, will eliminate debt from the business. The disposal of the Financial Markets division to Rivington Street Holding Plc, will allow the group to focus on the Business Systems division. The new monies will be utilised for the buy and build strategy to establish a network security solutions business alongside the existing Business Systems division. We await the outcome of the convertible unsecured loan stock (CULS). HOLD

Recommendation: HOLD

Craneware (CRW, 400p, £101.39m)

Craneware (CRW, 400p, £101.39m), the market leader in automated revenue integrity solutions for the US healthcare market, reports trading for the year ended 30 June 2010 will be in line with management expectations. Increased product range and strengthening of its partner relationships, supported by favourable conditions in the US healthcare market has helped the group achieve record new contract wins. Most of the new secured contracts will be recognised in future years, providing excellent revenue visibility. The Board remain confident about the future. The stock remains highly rated on a 2010 and 2011 rating of 32.3x and 24.9x respectively. We believe further contract wins will help sustain the share price. We retain our HOLD recommendation.

Recommendation: HOLD

International Greetings (IGR, 59.0p, £30.76m)

International Greetings (IGR, 59.0p, £30.76m), one of the world's leading designers, innovators and manufacturers of gift wrap, crackers, cards, stationery and accessories, reports prelims to 31 March 2010 are slightly ahead of market consensus. A focus on higher quality and margin business drove sales from continuing operations to decline by 8% to £200m (2009: £217m). The latter combined with tighter costs and improvements in operational efficiencies helped the group to move back into profitability with adjusted PBT and EPS of £3.0m (2009: loss £0.3m) and 3.4p (2009: loss 0.1p) respectively. Stronger cash generation helped reduce net debt to £48.8m (2009: £68.5m). The renewal of their principal banking facilities provides headroom. A majority of the restructuring has now been completed. The group now has a solid platform for global growth. Management are keen to reduce the seasonal nature of their business, predominantly surrounding Christmas, by creating a more balance product portfolio. The market conditions remain challenging, but the order book is encouraging. The market forecasts 2011 PBT of £5.1m and EPS of 6.2p, which maybe challenging. The stock trades on a prospective PER of 9.6x. We previously recommended investors to sell the stock to 62p. This has now been achieved. We therefore move our recommendation to a HOLD.

Recommendation: HOLD

InterQuest (ITQ, 58.5p, £18.23m)

InterQuest (ITQ, 58.5p, £18.23m) Trading update for the six months to June 2010 has seen a strengthening throughout the period, leading to a 14% increase in net fee income H1 on H1. The group has seen improved demand in both permanent and contract recruitment, offsetting some weakness in the public sector. The group has successfully completed its first in house training programme, called iQad, and expects another to start in September. Despite the dangers of a double dip recession the rating, below 7.3x reflects the danger, and we maintain the SPECULATIVE BUY recommendation with a 69p price target. 

Recommendation: SPECULATIVE BUY

MDM Engineering (MDM, 112.5p, £41.91m)

MDM Engineering (MDM, 112.5p, £41.91m)the Africa focused engineering and project management group serving the mining industry announced disappointing FY results to 31 March 2010. Revenue $33.2 m ($36m); GP $10.1m ($16.7m); PBT $5m ($11.6m); strong Net Cash of $10m ($14m); EPS 9.25c (21.15c) & FY DPS of 4.6c (11.25c) 2x covered - a c.2.7% yield. Recovery has taken longer than expected with many projects being deferred and now moving the pipeline towards the end of FY 2011. Increased competition is squeezing margins & reducing contract wins. The decline in earnings was predominantly owing to the settlement with First Uranium Corporation on the close out of the Ezulwini project & suspension of Mine Waste Solution's Phase 1b and Phase 2 projects in February 2010. EPS seems very divergent from the estimates showing on our screens (PBT £4.3mm; EPS 8.04p; DPS 4p - assuming no ccy errors) against the reported £3.3m; 6.1p; 3p (converted £1/$1.5) so looks like a shock for the market. In addition while it would be a harsh reversal for the shares with the company perhaps nearing the bottom, we are nevertheless concerned that the yield support level would be around 80-85p. If we look further out to 2011 forecasts seem challenged with the risk of contract slippage implicit in the statement given the pipeline has moved to the end of that year. We sell down to 85p, but are minded that as a contractor the impact of a good win is likely to have a geared effect. SELL

Recommendation: SELL

Mission Marketing Group (TMMG, 9.25p, £6.70m)

Mission Marketing Group (TMMG, 9.25p, £6.70m) First half trading update has seen revenues slightly ahead, offset by margin pressure, leaving operating profit down 7%. The refinancing we warned about has taken place, but that has improved the financial position for the second half with debt equity down to 30% (50%). The outlook is for a more pronounced H2 in terms of trading, together with the lower interest charge should enable the group to report progress year on year. Forecasts around £6m will give 6p EPS or so – suggesting sufficient upside to return the group to a BUY with a cautious 15p price target.

Recommendation: BUY

NXT (NTX, 10.75p, £17.05m)

NXT (NTX, 10.75p, £17.05m) Trading update to June 2010 has seen an absence of the deal the size of Nissha Printing ($1.8m) that fell into last year, so over all revenues are down and the absence of the high margin major license deal has led to operating losses. This has created some short term pressures on cash flow. The component business outlook is being boosted by the acquisition of Audium Semiconductors and its chip amplifier which is synergistic with the BMR loudspeaker. Encouragingly the group has appointed James Lewis, the founder of Oxford Semiconductors which exited to a NASDAQ listed business, who is well equipped to take the group forward. While there is a clear danger from the cashflow pressure and we expect to see some short term weakness on this announcement, we maintain a risky SPECULATIVE BUY based on its haptic touch screens, which is an immense potential market with the technology in its infancy, and where the group has seen models displayed with its technology.

Recommendation: SPECULATIVE BUY

Turbotec Products (TRBO, 32.5p, £4.16m)

Turbotec Products (TRBO, 32.5p, £4.16m) has received an EGM request to remove board members related to the Thermodynetics who recently failed in its attempt to redefine the agreement between the 2 parties in the UK high court. With Thermodynetics influence greatly reduced by the past placing of some of its shares, we see this move as a strengthening of the group’s independence and maintain the 45p price target with a BUY recommendation. The Obama effect will drive energy efficiency and that will require a significant number o low-coast high performance heat exchangers, such as those made by Turbotec.

Recommendation: BUY

All Leisure Group (ALLG, 51.5p, £31.80m)

All Leisure Group (ALLG, 51.5p, £31.80m), the niche cruise operator, reports interims to 30 April 2010 are in line with management expectations (pre-ash related costs). Revenues fell by 6% to £32.4m (H109: £34.6m). Disruptions caused by the volcanic eruption and the subsequent closure of a significant proportion of European airspace cost the group £1.4m, which led to pre-tax losses of £4.5m (H109: £1.2m). Unrestricted cash stood at £15.2m.  Management actions have eliminated Group debt, enhanced the asset register and reduce the Group's dollar currency risk in anticipation of an improved future trading environment. The confidence in the outlook statement is also reflected by the interim increase in DPS. Trading on a 2010 PER of 7x and a yield of 3.8% encourages us to retain our HOLD recommendation. 

Recommendation: HOLD

Animalcare Group (ANCR, 105p, £21.05m)

Animalcare Group (ANCR, 105p, £21.05m) A positive trading statement by the supplier of veterinary medicines and other products to the vet and agricultural market, reports group earnings slightly ahead of market expectations of 8.8p. For the year ended 30 June 2010, group revenues grew by c.15% to c. £20.3m. Revenues in the vet supplies business grew by c.20% driven by new product launches and the agriculture business grew by 9% due to a strong demand in electronic sheep tags. New product launches in the current financial year should continue to enhance revenues in the vet supplies business.  However, the market for the key livestock products is challenging due to the implementation of the new regulations for the electronic identification of sheep and downward pressure on identification tag pricing. Good progress has been made in reviewing the strategic direction for the future. We await the outcome of the review in the prelims announcement in October. 2011 market forecasts of PBT of £3.0m, EPS of 10.2p and DPS of 3p, suggest a prospective PER of 10.3x and a yield of 2.9%.  We upgrade our hold recommendation to a BUY with a target price of 120p. 

Recommendation: BUY

BGlobal (BGBL, 36.25p, £35.96m)

BGlobal (BGBL, 36.25p, £35.96m) Finals to March 2010 saw revenues surge as the group increased its installed base to over 100,000 smart meters, driving revenues up 99.3% to £13.23m (£6.64m), including service revenues (repeat) up 133% to “2.26m (£0.97m). The group reported gross profits of £4.37m (£1.60m), gross margins of 32.8% (23.5%), which together with lower admin costs of £4.95m (£5.63m) led to a loss before tax down to £0.67m (£4.28m). The group ended the period with net cash of £1.22m (net debt £0.47m) post a £2.25m cash raise during the period at 49p, so masking a £0.55m cash outflow, though that did include a £0.25m increase in capital expenditure. The group already has orders for 40,000 meters for installation this year with work now on building the order book for the following year. This is a confident statement with security of outlook in difficult market conditions. We maintain the BUY with a 75p price target. 

Recommendation: BUY

Clyde Process Solutions (CPSP, 57.5p, £23.22m)

Clyde Process Solutions (CPSP, 57.5p, £23.22m) has won a £1m order from the US’ largest producer of PVC, for a series of vacuum un-loading, pneumatic conveyor systems and an air filtration system to separate the dust. The firm has highlighted the petrochemical sector as an opportunity by appointing a director to target the market. We do see some further upside to some 9x forecasts of 7.1p EPS, giving a raised target of 64p, just sufficient to maintain the BUY.

Recommendation: BUY

Gooch & Housego (GHH, 223.5p, £43.06m)

Gooch & Housego (GHH, 223.5p, £43.06m) has upgraded expectations for the year to September 2010, boosted by a sustained recovery in the aerospace & defence sector, with record order books and “considerable pressure on manufacturing capacity”. The order book increased a further 11% from March to £22.1m. At the start of June at 181p we highlighted the potential for forecast to increase above the then £3.8m, setting a target price of 225p, and we now see expectations towards the £5m level which will give 17.5p EPS, putting the group on a 12.8x prospective PER. Given the confident statement the shares should command a premium to the 14.5x PER for the Electronics sector, so we see further upside to 262p, a continued BUY.

Recommendation: BUY

iPoint-Media (IPNT, 1.5p, £2.26m)

iPoint-Media (IPNT, 1.5p, £2.26m) The group has confirmed previous cautionary statements that slippage on all tenders delivered with Ericsson, its strategic partner, is forcing the group to seek a further injection of cash, potentially a mix of debt and equity. We went to a Sell at 3.5p at the start of December 2009. Still a SELL until the cost of refinancing becomes clear.

Recommendation: SELL

K3 Business Technology Group (KBT,119p, £30.52m)

K3 Business Technology Group (KBT,119p, £30.52m), the provider of Enterprise Resource Planning solutions to supply chain industries, expects results for the 12 months and 18 month period to 30 June 2010 (change in year end from 31 December) to be in line with market expectations. Trading across both divisions of retail and manufacturing software have been encouraging.  Strong cash generation has reduced net debt to £2.5m (2009: £13.5m). The new business pipeline for the manufacturing software division is strong. The benefits of the reorganisation in 2009 and the synergies of the 3 acquisitions made will benefit 2011. We believe the group is undervalued trading on a rating 8x in 2010 and 5.6x in 2011, a discount to the software sector, which sits on 9.4x. We reiterate our BUY with a 12 month target price 158p. 

Recommendation: BUY

Kea Petroleum (KEA, 17.25p, £90.91m)

Kea Petroleum (KEA, 17.25p, £90.91m) Tuatara-1 in which recently Kea farmed in for 10% is expected to spud before the end of July. Operator, AWE New Zealand confirmed that its rig currently working on another well is making good progress and should be free for Tuatara by 27th, with the caveat that additional testing may cause this guidance to slip. The Tuatara structure has a mid-case resource estimate of 80mmbo. The well is located in c.50 metres of water, 15 km from the coast and will target a TD of 2km with rapid results expected before the end of August. The project is a useful diversification from the Beluga risk. HOLD 

Recommendation: HOLD

Luminar Group (LMR, 11.5p, £11.55m)

Luminar Group (LMR, 11.5p, £11.55m) AGM trading update for the 19 weeks from the 26^th February is in line with the lowered expectations. Like for like trading is down 19.9%, with admissions revenues down 26% on footfall down 19%, offset by drinks per head up 2.2%. Key impact has been the world cup football which cost an estimated additional 6%. Flat gross margins have limited the group’s ability to combat the revenue decline, though a cost cutting programme to deliver £10m of savings is underway. Net debt is expected to fall further despite the poor trading conditions. With debt still a key concern (some £92m at the year end) we still see some upside and maintain the very high risk SPECULATIVE BUY. 

Recommendation: SPECULATIVE BUY

Monitise (MONI, 21.5p, £115.40m)

Monitise (MONI, 21.5p, £115.40m) has announced a £2.4m cash raise at 20.75p, which includes £6.6m from Visa Inc, its key strategic partner, and £2.1m from First Eastern Holdings. The subscription by Visa takes its holding to 14.4%. The group has released a June year end trading statement highlighting significant progress with revenues of £6m (£2.7m) including £4.3m (£1.6m) in H2. Underlying that move is the exciting transactional revenues that increased to £2.9m (£0.5m) with most growth in H2 with £2.1m of revenues. Visa has extended its partnership by another year to 2015 and increased the minim fee to $16m, and appointed a representative to the board. Growth is being driven not least by its smart phone apps and the group now has some 2m registered customers in the UK and USA, double that in October 2009. With the future profitability to be delivered by the immense potential in transactional revenues we rate the group a SPECULATIVE BUY.

Recommendation: SPECULATIVE BUY

Pentagon Protection (PPR, 0.225p, £1.80m)

Pentagon Protection (PPR, 0.225p, £1.80m) A warranty claim against the PPUK will not be settled with the expected timeframe, so the group will sell its UK operations to the then CEO at the time and he will take responsibility for resolving the claim. The consideration received is £1 + 20% of any resolution. The group has been awarded a €3m contract to protect a number of the EU’s commission buildings. This is a major blow to the group with PPUK representing £1.43m out of £2.95m revenues in the last full financial year. The strength of the overseas opportunities encourages us to maintain the SPECULATIVE BUY.

Recommendation: SPECULATIVE BUY

Pinnacle Telecom (PINN, 0.28p, £4.87m)

Pinnacle Telecom (PINN, 0.28p, £4.87m), has secured a contract to supply a UK Television broadcaster with Pinnacle's Voice over Internet Protocol (VoIP), hosted telephony service for its short term events, valued at £0.5m. The contract highlights the group’s ability to provide IP telephony to remote and short-term events. This is a turnaround story and the group continue to focus on a buy and build strategy. Further contract wins should help increase the share price. We reiterate our SPECULATIVE BUY recommendation. 

Recommendation: SPECULATIVE BUY

Seeing Machines (SEE, 3p, £12.17m)

Seeing Machines (SEE, 3p, £12.17m) has announced another production license for its API tracking software, this time by Pillar Vision Inc, a manufacturer of basketball sports training products. We maintain the HOLD recommendation.

Recommendation: HOLD

Webis Holdings (WEB, 1p, £2.07m)

Webis Holdings (WEB, 1p, £2.07m)A profits warning from the gaming company with FY trading to May 2010. EWS is actively pursuing acquisition opportunities. Sportsbook strategy is being reviewed. The group's pari-mutuel (think Betfair) business, European Wagering Services (EWS) increased T/O but competition in B2B slightly reduced margin. Management expects a similar gross profit to the previous year for the division (Parimutuel recorded PBT of £531k for 2009). The Group's sportsbook operation, betinternet.com was the problem here with a significant reduction in T/O attributed to a fall in casino play, particularly in the 'high-roller' business. Fixed-odds was also hit by unfavourable results throughout the football season (favourites winning - we heard this a lot from William Hill) while a challenging environment for horse racing (ditto) also impacted. The sportsbook recorded a substantial EBIT loss for the FY. Fortunately the cash position was fairly neutral at the interim, with net cash of £780k, however this may have been slightly flattered by the positive working capital position with and if we net out the creditors benefit underlying cash looks more like £183k. Thus cash may now be fairly tight. We retain our HOLD due to the sharp share price reaction. While the start of the year looks more encouraging with the new FY starting well due to higher than expected world cup revenues, we are concerned of the implications of losses for the cash position. HOLD 

Recommendation: HOLD

Range (RRL, 6.88p, £75.44m)

Range Resources (RRL, 6.88p, £75.44m)has entered a binding Heads of Agreement to acquire a 10% interest in three production licences onshore Trinidad and significant local onshore drilling operations for $4.25m. The country has produced >3bn bbls and currently produces 100k bopd with all onshore oil acquired by the state.  Competent Person’s Forrest Garb assessed the 3 producing fields to contain of 4.8mmbl 2P, 2.1mmbl 3P and 20 mmbl prospective. At this stage we are attributing an additional 0.42p of value for the prospects which may be conservative. Prior to further information on economic and fiscal terms of the PSA we assign $15/bbl of the 2P which seems reasonable given the relatively stable geopolitical backdrop (no.82 on the World Bank’s ease of doing business ratings) and existing production. We assign the same for the P3 and the prospective resources (for which we attribute a 10% chance of success). Current production from the fields is 700 bopd, however Range perceives a work program could lift this to > 3.5k bopd within 3 years. Range will be carried through initial development expenditure, is planning to use company-owned drilling rigs and equipment and cashflow from existing production is expected to make operations self-sufficient. This looks like a sound deal. Ultimately an increase in the production to between 800 -1,000 bopd attributable to Range is targeted which suggests between 8k bopd to 10k beopd. We estimate that the initial 3.5k bopd would lead to revenues in the region of $8m per year for Range’s share. Thus we see the value now significantly underwritten by proven and probable producing assets (5p in our view) and mobilisation is likely to lead to great deal of excitement with share price volatility (and a potential run). We upgrade our price target to 7.32p. We expect to see some profit taking (always advisable for speculative situations in good >30% profits) but while still very high risk, investors attracted by the original Puntland assets may be advised to hold some of their stake given potential for news flow in Q3 (or before) - when mobilisation of a rig for Puntland is targeted - could herald a further run in the shares. HOLD 

Recommendation: HOLD