It's been a busy December, so I am a bit late in picking a 2006 doubler. A lot of my possibles have already gone - AVM, CEY, IVS, FAN, RDG, TGP. However, there is one good un still available.
My one and only doubler for 2006 is DSY - Dawmed Systems. Dawmed claim to be 'the largest specialist medical washer-disinfector-dryer(WDD) manufacturer in the UK' and have been established for over 35 years. They have recently produced some excellent results moving from a loss of £254K to a profit of £264K at the EBITDA level. The Exec Chairman's statement from these results gives a very good summary of the company and its future prospects.
I believe that the company is grossly under-rated. This is partly because it is small (cap £3.3m) and the shares are not always easy to trade - Friday's closing spread at 14p/18p is awful, but 1p or 2p has been the norm in recent weeks. In fact, on Friday the price moved from 13p/15p to 14p/18p - probably connected to a trade of 1m shares (5% of share capital) logged at 19p. This rise almost put me off picking these, but the potential is so big here that missing this 20% should not be a major problem.
The risks:- As with all small companies the shares are difficult to trade and if anything were to go wrong, would probably be impossible to get out of. And DSY are not without their potential banana skins. They have in the past tended to rely on sales of their large WDD machines e.g. this year they had a large project to supply a Belfast hospital. These large projects are low margin and require a lot of working capital and mean that the business can be 'lumpy'.
The investment case:- Dawmed are expanding and diversifying. They are moving into higher margin products and services and have a number of new products coming in during this financial year. The expansion of their consultancy division and the new products should be enough for a significant re-rating of the shares. However, the product that could be the 'joker' to double the share (and hopefully a lot more) in 2006 is their 'Clinic' bench top WDD. The Department of Health require that all Primary Healthcare practitioners (This includes dental practices) are to be equipped with fully compliant decontamination equipment by the end of March 2007 which should mean that 2006 is a bumper year for Dawmed's sales team. All the development for this product is complete and the sales are starting to come in (see 2005 chairman's statement).
So there you have it. A tiny profitable company with a number of new products to supplement their existing range and with at least one of the new products capable of being a company maker. And watch for an RNS on Tuesday to find out who has bought 5% of the company at 4p over the then offer price.
