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Monday 24th November OMG! Opportunity 4 Material Gains!
www.advfn.com newsletters, OMG!
On Wednesday 26th: One Company… One Recommendation. Last week TLS
Market Snapshot: Sideways but a Good Start to the week
PLUS: Buy Recommendations are made in Company Previews and Reviews (Scroll Down)
…Last Week….
…….. the FTSE 100 improved 1.54% to 6,750, while the FTSE All Small Cap at 4,327 was -1.6% lower with the Aim All Share up 1%. In October year-on-year Retail Sales improved a pre-Christmassy 4.3%. At the BOE despite yes votes from two of our ‘clever’ Bankers Interest Rates were left unchanged by the other seven. In a surprise move China cut Interest Rates by 0.4% to 5.6% as strong growth matures. At the Eurozone the Head-Banker said very firm words about the need for further monitory easing should prospects deteriorate.
……..This Week………..
………perhaps politics will be a trigger to activity; with OPEC setting oil production targets on Thursday. David Cameron’s speech on Tuesday is on immigration and Europe and not the economy. Positive UK Consumer Confidence figures are likely to be announced on Friday reflecting the recent improvement in earnings. There are plenty of Eurozone reports with Consumer Confidence and Unemployment on Thursday and Friday; where bad could be good. For ‘if words have meanings’ deteriorating figures would accelerate monitory easing, according to the recent statement. In the US, GDP is reported on Tuesday with Employment on Wednesday both should be in a positive zone. A sideways week seems likely with increasing interest in the smaller caps.
Pause for Thought
VCTs (Venture Capital Trusts) are likely to raise less new funds than last year’s £400m, despite there being strong demand from Investors. As the successful Managers are already cashed–up and do not want the pressure of looking for new investments or changing investment strategy.
FT Money
REPORTS – scroll down for Previews and Reviews
Preview
ULS To be better than expected
SND Performing well
RNWH Onwards and Upwards
CMH Further to progress
Review
FUTR Up 29% with further to go
RENE Building Break
Previews
ULS Technology (LSE: ULS)
37.25p (36.5p-38p)
Mkt Cap £24.1m
Next Results: Interim’s Thursday 27th November
ULS was floated at 40p in June by Numis and after October’s negative trading update will be making its first earnings announcement this Thursday. Six months ago at the IPO ,£12.1m was raised and after paying debts there is £10m or so available to rev-up the growth. ULS are a B2B (Business to Business) provider of an Award winning SaaS online comparison service for residential conveyancing which is a large and growing market valued at £1.6bn. ULS had signed a four year contract with a key distributor, Mortgage Market Review (MMR) but as it on-line there is relatively good visibility and so lower volumes were reported. We do not think that the management would get it wrong twice so Thursday’s interim’s could be a positive surprise. Revenue expectations were set at £8.2m with profits at £1.43m showing a 31% increase in operating profits. An estate agency comparator product is being launched in the first half of 2015 while improvements to the core platform, eConveyancer2 will increase functionality and features which are expected to make it more ‘sticky’. Full year profits forecasts were nudged lower to £2.9m which gives an EPS of 3.6p and a prospective P/E of 10x and there should be a dividend of 1.5p for a yield of 3.5%.
Financials
This should be a highly cash generative business so relatively low levels of additional capital are required as it grows. An interim dividend is expected to be paid.
Trading Strategy
The shares may rally as the attractive business model gains traction and with £10m there are certainly funds available.
Sanderson Group (LSE: SND)
71p (69p/73p)
Mkt Cap £39m
Next Results: Finals 25th November
Enterprise resource planning software provider Sanderson Group is set to report good full year figures on Tuesday. The share price has performed strongly since the pre-close trading statement in October which said that profit and revenues will be slightly higher than expectations of £2.7m and £18m respectively. Underlying operating profit grew by more than one-fifth in the year to September 2014. The order book is 20% ahead of the same time last year, helped by a contribution from mobile ecommerce business One Iota. Although customers remain cautious there is some improvement in the business sentiment of smaller businesses. Sanderson has just over £6m in the bank and the dividend is expected to be increased to 1.8p a share. At the moment a profit of £3m is forecast for 2014-15 with a forecast dividend of 2p a share.
Trading strategy
The recent share price rise has put the shares on a more realistic rating.
Renew Holdings (LSE: RNWH)
304p (303p/305p)
Mkt Cap £186m
Next Results: Finals 25th November
Engineering services provider Renew Holdings has sold its affordable housing construction businesss Allenbuild for £2.5m. Allenbuild generated annual revenues of £50m but margins are low and the disposal will not affect profit. The disposal came after the year end. Analysts expect a 2013-14 profit of nearly £15m. In the summer, Renew diversified its services to utilities through the £14.8m acquisition of replacement gas mains installer Forefront Group, which is focused on London and the South East, and there will be a small contribution in the period. Other main markets include nuclear, rail and environmental.
Trading strategy
The shares are modestly rated on less than 13 times prospective 2014-15 earnings and the restructuring of the business has enhanced the quality of earnings.
Chamberlin (LSE: CMH)
105p (109p/68.5p)
Mkt Cap £8.36m
Next Results: Interims 25th November
Engineer and castings manufacturer Chamberlin appears to be past the worst but the latest interims to September 2014 will only mark a step on its recovery and return to profit this year. They will not include the recently announced contracts which will only start to make a contribution later in the financial year and in 2015-16. Chamberlin is currently expected to make £800,00 this year and a profit of £900,000 had been forecast for the year to March 2016. There have been no upgrades yet on the back of these contracts and analysts are waiting to see the figures before making any decision. An eight year turbo charger components contract worth €26m starts in 2015 and will not make a major impact until 2016-17. That followed another turbo charger contract worth €6.7m over four years, which also starts in 2015 and should generate €1.6m in its first year.
Trading strategy
The interims should give a further indication of how the recovery is progressing and there may be a forecast upgrade on the back of the new contracts as long as general economic conditions have not deteriorated.
Reviews
Future (LSE: FUTR)
8.76p (8.51-9.5)
Mkt Cap £29.3m
Next Results Interims to March
These final,s are likely to be the turning point; from a low margin magazine printer into being a high margin international internet media group. The transformation programme was initiated in June 2014 and the property portfolio has been rationalised, non-core businesses sold so with around £7.5m of net cash the balance sheet has been strengthened and the cost base materially reduced. Revenues are reported at £66m with a kitchen sink operating loss of £10.3m.
Directors brought £40k worth of shares at upto 8p after the announcement clearly think there will be a strong performance improvement in the current year. Over the last three months, there has been encouraging growth in higher margin e-commerce activities. The focus is on what is considered to be areas of the highest potential such as consumer technology, games, entertainment, music and photography. Early Forecast for September 2015 give a PBT of £2m for an EPS of 0.5p so a prospective P/E of 18x.
Financials
After £24.8m of property and non-core business sales there is net cash of £7.5m
Trading Strategy
The shares have improved 29% since last week and we expect there is more to go.
LAST OMG! Price 7p
ReNeuron (LSE:RENE)
3.38 p (3.25 p/3.5 p)
Mkt Cap £60m
Next Results: Finals May
ReNeuron is on course to move into its new manufacturing facility in Wales in the first half of 2015. Some relocation costs will be covered by the Welsh government. There was £16.1m in the bank at the end of September 2014 and the company says that will last until the second half of 2016. This gives ReNeuron time to produce data from trials that will help it to raise additional cash.
Phase I data for a trial of ReN009, a treatment for critical lower limb ischaemia, should be available in the middle of next year and later in 2015 there will be Phase II data for ReN001, a treatment for ischaemic stroke. Phase I/II safety data for the company’s retinitis pigmentosa treatment should be available in the first half of 2016.
Trading strategy
There is unlikely to be any short-term news that will push the share price upwards with the likely triggers for share price movement not due until next year.
