Hybridan Small Cap Wrap featuring Angel Biotech, Lighthouse, Cryo-Save, Cello Group, Clean Air Power, Servicepower

Angel Biotechnology Hldgs (ABH 0.245p / 5.05m)

Angel, the contract manufacturer specialising in stem cells and complex biotech, producing low volume but extremely high grade materials announced that it has signed two new contracts with Reneuron Group. Under these contracts Angel will manufacture material to support Reneuron’s clinical trials for which it recently gained final ethical approvals for its work in stroke patients. This demonstrates the high value, complex work that Angel can complete, making it a leading GMP (Good Manufacturing Process) manufacturer.
After the recent placing in February, Angel are now funded for future growth and we think that the low share price is an excellent opportunity to participate in this exciting story, without taking on the risk usually associated with biotech (as manufacturer Angel gets paid for its work, whether the treatments are ultimately successful or not).

Cello Group (CLL 30p/ £17.56m)

Cello, the market research and consulting group, has reported prelims to 31 December 2009. LfL operating income was down 7 per cent to £60.5m, PBT down 40 per cent to £5.0m (2008: £7.0m) and EPS down 44 per cent to 7.28p (2008: 13.08p) – in line with market consensus.  The company’s strong cash generation reduced net debt to £11.5m and positive trading momentum and a reduction in the cost base has led to an increase DPS by 4 per cent to 1.3p. The company reported that strong trading in the final quarter of its year has continued into the current period with good revenue pipelines and marked increases in levels of new business activity. The market forecasts 2010 PBT of £5.6m, EPS of 6.1p and DPS of 1.3p. With the stock on a 2010 P/E ratio of 4.5x we think this is one fiddle worth a play.

Cryo-Save Group (CRYO 495p / 45.71m)

The provider of storage for stem cells which are taken at birth and saved for potential use in future medical treatment announced strong growth and a positive set of year end results. Stem cell therapy is currently common practice in 70 - 85 diseases.

The private stem cell bank now has over 120,000 samples currently stored, which is approximately 50 per cent market share in Europe. Cryo-Save has operations in 38 countries across Europe, Asia and Africa (laboratories and storage facilities in Belgium, India, France, Germany, The Netherlands and Dubai) and a network of subsidiaries and partners responsible for regulation and marketing locally.

The sample of cord blood and cord tissue is collected at birth by the midwife or obstetrician and is delivered to the laboratory within 48 hours where it is tested for disease and contamination and then frozen in the low cost liquid nitrogen for storage. The sample is then split into two halves for dual storage in two separate locations.

The drivers for the revenue growth of 30 per cent to €38.4m (2008: €29.5m) are increased awareness and scientific breakthroughs which has lead to more medical treatments being suitable for stem cell therapy, which helped underlying profit before tax to rise 38 per cent to €5.4m (2008: €3.9m). Cryo Save propose to pay a dividend of €0.06, up 20 per cent (2008: €0.05).

Clean Air Power (CAP 10.25p/£13.09m)

Clean Air Power, has reported finals to December 2009 which saw revenue fall to £5.79m (08:£6.47m) with a loss before tax of £2.49m (08: loss £2.34m) and a period end net cash position of £2.94m (08:£1.63m) – though that masks an underlying £1.52m cash usage as it raised a net £2.83m during the year. Within the falling revenue the group’s component sales increased to £2.90m (08:£2.07m). Key to the outlook is the post period end agreement with Navistar, a major US’ truck manufacturer, to develop a dual fuel 13 litre engine. With sufficient capital for the year and major contract work with Volvo and Navistar we think this could be more than just hot air.

Corero Plc (CORO 34p / £0.5m)

Corero, the provider of software solutions to the banking and securities and education markets, has secured a three year agreement with ABG Sundal Collier for its Blue Curve product suite. The value of the contract has not been disclosed. Net cash at the end of 31 December 2009 stood at £0.685m which exceeds the current market capitalisation. The latter combined with a 2010 P/E ratio of 2.3x suggests to some the group is undervalued but with this company’s history of underperformance and with a balance sheet raddled with £4m of convertible debt this Corero is a no-go.

Geopark Hldgs (GPK 492.5p / £204.85m)

Latin American oil and gas explorer and producer GeoPark Holdings has announced a new discovery on the Guanaco prospect on the Fell Block in Chile in which the company has 100 per cent interest. Facilities are currently being installed for production to commence in the following week, adding to GeoPark’s existing 30 per cent stake in Chile’s total oil production. The company’s recent performance has been very strong with a 123 per cent increase in reserves and a 180 per cent increase in production which have contributed to a 248 per cent jump in revenues for the year ended in June 2009. Although indicative of strong investment returns, this increase in revenues has also been helped by a substantial rise in oil and gas prices in Chile. Further to its recent discovery, GeoPark is well positioned for future growth and has a strong balance sheet which will allow it to invest in new discovery opportunities.

Green Compliance (GCO 2.38p / 24.7m)

Green Compliance, provider of energy and employment consultancy services to residential and commercial marketplaces, has announced it will acquire Waterchem for an initial consideration of £5.53m comprised of £4m cash, new ordinary shares of £1m and loan notes of £533k. Waterchem is engaged in the provision of water hygiene and water treatment services to facilities management companies, hospitals, universities and local authorities. Green Compliance will be adding Waterchem to its recently restructured business portfolio which now primarily consists of consulting services but it is not yet clear how the company will integrate this and its other recent acquisitions to return to profitability and grow the business.

Hydrodec Group (HYR 10.5p/ £29.92m)

Hydrodec has announced it is in talks with its larger shareholders with a view to additional funding, without it  - or improved credit terms, the group has just 4 -6 weeks of cash. The shares fell 12 per cent on the news.

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Judges Capital (JDG 1625p/ £6.57m)

Judges, the specialist manufacturer of scientific instruments, has announced the acquisition of Sircal Instruments (UK) for £1m in cash.  Sircal designs, manufactures and distributes rare gas purifiers – used in qualitative and quantitative analysis of metals.  To September Sircal had sales of £0.785m, operating profits of £0.337m and NAV of £0.423m. However, Judges believe that Sircal’s adjusted operating profits if it had been operating the company would have been £0.27m and at that level the acquisition will be EPS enhancing.  The acquisition is being funded with an additional £1m borrowing from RBS. Projected forecast for next year of around £1.6m with 27p EPS puts the group on a 5.7x prospective P/E ratio making this Judge a very sober proposition.

Lighthouse Group (LGT 10.25p/ £13.09m)

Lighthouse, the IFA business, reported its full year numbers to 31 December 2009 which saw revenues increase by 12 per cent to £60.7m (08: £54.4m), recurring revenues rose by 7 per cent to £16.4m, adjusted EBITDA increase by 95 per cent to £1.1m 9 (08: £0.6m), a profit of £217k (08: £7.7m loss) and EPS of 0.12p. A 100 per cent increase in DPS to 0.4p illustrates the strong cash position with net cash of £13.4m at the end of the year. The business is debt free, with net cash exceeding the current market capitalisation and its focus on recurring revenues would steer us towards this stock.

Medicsight Plc (MDST 5.55p / £8.94m)

AIM listed industry leader in the development of Computer-Aided Detection (CAD) and image analysis software which assists in the early detection and diagnosis of disease, last week announced that Mr Troy Robinson has been appointed to the Board as CFO. Troy joined Medicsight in February 2007 as Group Financial Controller after a successful career with IVAX pharmaceuticals and HP foods. During his tenure with Medicsight, Troy has played a pivotal role in both the Medicsight IPO and the subsequent global expansion of the finance function. Troy was appointed CFO in February 2009, as a non Board position.

Medicsight’s CAD software automatically highlights suspicious areas on computerised tomography (CT) scans of the colon and lung, helping radiologists to identify, measure and analyse potential disease and early indicators of disease. Medicsight's ColonCAD and LungCAD software products are seamlessly integrated with the advanced 3D visualisation workstations of several industry-leading imaging equipment partners. Its ColonCAD and LungCAD software use an advanced CAD algorithm to analyse CT scans of the colon and lung and automatically highlight suspicious areas that may be indicators of disease. CAD may highlight areas easily overlooked by the reviewing radiologist, such as small lesions or regions that are hidden from view behind folds in the colon or normal structures and surrounding tissue in the lung.

The technology enables a level playing field to be created and a gold standard to be established amongst clinicians, in our opinion; and looking at the share price and listening to management, they could do with a bit of luck. When we have met with management of Medicsight, we have been impressed. It’s all about approvals now, notably in Japan and the US, and until some approval news is announced, the share price is likely to languish at these levels, although the brave could see a buying opportunity. Management, from hearing the presentation are unlikely to be sitting still waiting for approvals to drop though and we imagine that they may be looking, as similar technology based companies do, to plug near term revenue gaps with a complimentary product or two, and / or are also looking beyond the approvals on ColonCAD to further versions of it, LungCAD and other blue sky complimentary technologies. Fingers crossed, the approvals may be in sight….

Park Group (PKG 19p / 31.36m)

Gift voucher business Park Group is launching a range of pre-paid cards to be known as Flexcash and redeemable at retailers such as Argos, BHS, Comet, Debenhams, HMV, Matalan and New Look. Park, which has increased its cash levels to £12.2 million in 2009 and has no long-term liabilities, has marked its entry into the pre-paid card market which has grown rapidly among established high street retailers. Further to this, the worth of the UK’s gift card, gift voucher and stored-value cards market is estimated at £3 billion per annum, and is thought to have much additional growth potential. Park Group achieved 11 per cent annual revenue growth in 2009 and a 24 per cent increase in profits which were £6.2 million in March 2009. The reported numbers for the half year to September 09 show revenues of £34.1 million and a net loss of £2.9 million.

Sareum Hldgs Plc (SAR 0.315p / £3.53m) *

Sareum last week announced that it and Physiomics plc, an Oxford, UK based systems biology company, signed an agreement in which Physiomics will provide in silico simulations to support Sareum’s cancer drug joint research program with The Institute of Cancer Research and Cancer Research Technology Limited. Physiomics will use its modelling expertise in biological processes to simulate the effects of cancer drugs in living systems. The research programme will focus on finalising dose schedules for a research program compound in combination with a marketed chemotherapeutic. This work will take approximately three months to complete, and will be funded from the proceeds of a commercial deal for the molecule. Physiomics expertise should provide Sareum with a superior drug dose schedule and therefore should add extra value to the CHK-1 programme licensing package. Sareum continues to progress its in-house cancer drug pipeline, whilst managing the research spend such that it can drive the most promising lines of development to build the asset value of its programmes. Sareum is developing seven early-stage cancer drug programmes, Chk-1 is ready for licensing and two are close to licensing. Major pharmaceuticals groups have a well-known need to build their cancer drug pipelines and to bring drugs to market quickly. We believe Sareum can be expected to react even more positively to any good news, particularly were the company to sign a deal.

Servicepower Technologies Plc (SVR 4.5p/ £8.53m)

Finals to December 2009 saw revenues £18.11m (08:£15.64m), gross profits of £6.30m (08:£5.40m), GP margin of 34.8 per cent (08:34.5 per cent) with growth in both Service Scheduling (09:£7.79m v 08:£6.54m) and Service Operations (09:£10.32m v 08:£9.10m). Underlying expenses fell to £7.2m (08: £7.89m) leading to reduced losses before tax of £1.10m (08:£2.50m) and the group ended the period with £2.31m net cash. Both divisions showed better performances on increased revenues with Service Scheduling where segment profits rose to £2.974m (08:£2.54m) while Service operations turned from losses of £0.04m to profits £0.28m. Although we expect the group to breakeven this year, we’ve believed for some time that the growth opportunities in the US will power the stock upwards.

Shepherd Neame Limited (SHEP. PL 770p / £91.09m)

Last week the PLUS listed Kent-based brewer and pub operator announced strong results for the six months ended 26 December 2009. Shepherd Neame is a regional brewer and pub owner based in Faversham, Kent. Established in 1698, it is Britain's oldest brewer and employs over 1,000 people. Its interim turnover was up 8.2 per cent to £60.8m (2008: £56.2m), its EPS was up 38.6 per cent to 28.7p (2008: 20.7p) and an interim dividend was declared and up 4.4 per cent to 4.75p (2008: 4.55p). Other KPI’s for this one appear to be beer volume, which was up 7.9 per cent and retail sales which were up 2.4 per cent.

All this analysis is making me thirsty, but do ponder on the fact that Shepherd Neame’s chairman, Miles Templeman, commented: "We remain cautious about the impact on consumer expenditure of further potential rises in excise duty, VAT and other taxes over the next year or two and by the impact of further potential regulation on the sector."

The Company retails its own beers, on draught and in bottles, under a range of highly successful and we think delightful brand names, including: Spitfire, Bishops Finger, Hürlimann and Canterbury Jack. The company also brews lagers under license or contract, such as Asahi Super Dry, Kingfisher, and Holsten Export. Bottoms up and cheers to Shepherd Neame, a good set of results and let’s hope it continues its upward trend of over the past year to recover to the mid 2007 highs in the 1900 pence range.

* A corporate client of Hybridan LLP