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HB Markets Daily Smallcap Newsflash including Earthport, Hot Tuna, Future Group,Melorio and others 
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ClearStream Technologies (CTN, 27.5p, £12.67m), has secured a new contract for the distribution of its coronary and peripheral angioplasty catheters across Australia and New Zealand with Victoria-based Life Systems. Over the recent months, ClearStream has also secured distribution agreements in India, Latin American and Caribbean territories, further underpinning growth and broadening geographical spread. We reiterate our BUY recommendation.
Customvis (CUS, 0.88p, £1.69m) announced interim results to 31 December 2009. Sales revenue was £760.8k (£904.7k), a reduction of 16% on the comparative. LBT was £651.5k after reversing out an unrealised forex gain of £1.7m. Clean LPS was 0.36p (LPS 0.40p). The group ended the period with net cash of £65k (£625.7k). Cash is clearly stretched, the forward looking statement is negative with the company seeking additional working capital. The statement also speaks of a sharp increase in marketing efforts from competitors and adverse fall out of negative publicity directed towards it which it is beginning to overcome but which it believes has adversely impacted sales in Q3. To mitigate this the statement speaks of a record number of sales enquiries but Q3 is clearly challenged. The group is trading at a discount to NAV of £2.4 but this includes £1m of inventories with little quickly realisable assets. Given impending dilution and the stretched financial position we cut our recommendation to SELL.
Earthport (EPO, 11.75p, £15.74m), the global payments utility business, reports interims to 31 December 2009. An increase in transactional volumes and new client integrations led to 30% revenue growth to £0.97m (H109: £0.75m). However, an increase in interest costs increased pre-tax losses excluding share based payment to £2.3m (H109: £2.2m). The group is going through a transition period. The changes to the management team and £5.0m of money raised through a placing and convertible loan notes, should help the group enhance growth. The Board believe the opportunity for a global cross-border money transfer infrastructure player is significant and the combination of the technology platform, the banking network and the recently raised funding, positions Earthport well to take advantage of this opportunity. We believe the market will downgrade 2010 pre-tax losses of £3.0m and EPS of -1.5p. We retain our HOLD recommendation.
Future Group (FUTR, 17.75p, £58.20m) Trading statement for the half year ending March 2010 is in-line with expectations for the year, though margin pressure will result in H1 profits lower than last year. Toughest markets are the games titles and which accounted for 30% of revenues. However we see the forecasts of some £6.9m PBT with 1.5p EPS leaving the group on a still attractive 11.8x prospective PER – still a BUY.
Hot Tuna (HTT, 0.325p, £2.12m). The surf wear manufacture announces interim results for the six months to 31 December 2009 and a £1.5m equity placing. Revenue was reduced dramatically from £619k to £271k. Good cost control restricted losses to 543k (£688k) and LBS 0.10p (0.4p). New internet distribution agreements with ASOS and Amazon are a positive development and the fund raise shores up the financial position. However it remains uncertain whether the company can translate this into sales momentum, with distribution agreements lumpy and buying decisions made on spec season by season. SELL
Hyder Consulting (HYC, 222.5p, £85.37m) Trading update ahead of the March 2010 year end confirms our optimism with underlying pre-tax profits expected ahead of market forecasts (£14.8m) and the previous year (£15.6m) – suggesting say £15.8m with EPS of 32.1p – putting the group a soon to be historic 6.9x PER. There is scope for the group to pay a higher dividend than currently forecast of 5p (yield 2.25%) with a greater than 6 times cover – though the expected figure represents growth of dividend income of some 11% already. With 80% of operating profits generated overseas the group is benefiting from Sterling weakness. We move the target price up to 250p and maintain the BUY.
Indian Restaurant Group (IRGP, 3p, £0.39m) Finals to September 2009 includes results for the group from February 2009, the date of the acquisition. Revenues of £2.47m (£1.11m) saw gross profits rise to £1.81m (£0.91m) but higher administration (especially marketing) charges left the group in a pre-tax loss of £0.68m (£0.42m). The group ended the period with net assets of £1.73m with net cash of £0.24m (£0.55m). With the new year starting slowly due to the weather there is a high probability of a further cash raise, and to that end the group split its 10p face value shares into one 0.5p and one 9.5p deferred. Given the discount to NAV we maintain the shares as a HOLD but do note the danger of dilution.
Melorio (MLO, 130p, £50.83m), the provider of training and assessment services across the information technology, construction, logistics and healthcare sectors, reports prelims to 31 March 2010 will be materially ahead of market expectations. An increase in volumes of learners undertaking IT and construction apprenticeships aided by strong financial support from the National Apprenticeship Services, provides the group with strong revenue visibility for FY2011. The increase in demand is encouraging the group to open new training centres. We believe the market will upgrade 2010 PBT of £12.1m and EPS of 21.1p. The strong revenue visibility may encourage an increase in 2011 PBT of £14.9m and EPS of 26p. We continue to believe the group is undervalued, trading on just 5x for 2011. We acknowledge the debt is high, but it had an interest cover of 4.9x EBIT at the interim. We reiterate our BUY recommendation and increase our target price from 161p to 208p.
Mid-States (MST, 4.5p, £5.21m) Interims to December 2009 is inline with the January 2010 update with revenues of £0.19m (£0.23m) and a loss before tax of £1.09m (£1.02m) and net cash down to £0.93m (£2.23m at June 2009) – giving a £1.303m cash usage. However the outlook is more encouraging with the group expecting order intake to exceed 400 air disinfection units for the quarter ending March 2010 as opposed to 627 units in the first 6 months. The first half orders include larger orders from distributors in Norway, Spain and the Middle-East with lower volumes from potential distributors in the UK and overseas. Despite the launch of a wall mounted version, the group will need further cash and as a result we maintain the SELL recommendation ahead of potential substantial dilution.
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HB Markets Daily Smallcap Newsflash including Earthport, Hot Tuna, Future …
