Hybridan Small Cap Wrap featuring Sea Energy, Synairgen and African Copper

This week: A sea energy company turns the tide, a sound improvement from a radio business and lots of good news for Synairgen

African Copper (ACU 8.50p/£59.7m)

We try and bring you, dear reader, small cap stories of companies whose market capitalisations are less than £50m. However, sometimes a news story is so good and the share price rise so strong that what started out within our universe of coverage soon shoots through it. African Copper is a case in point, with a 20 per cent share price jump. It announced that its copper mine based in Botswana has recommenced operations after a period in care and maintenance following the collapse and now rebound of the price of copper.    The teething problems encountered during the re-start of the plant were quickly identified and remedied and management now believe the operation is well positioned to advance to full production through the coming quarters. We know many of our most respected investors maintain a bullish stance on commodity prices generally and this one in particular looks copper bottomed.

Crimson Tide (TIDE 1.48p/£4.91m)

The „no guts no glory‟ oil and gas exploration company, which looks for opportunities where others don‟t dare, is raising £3.7n in a placing to continue its development programmes in the country of Georgia. The people behind Frontera are no chickens and entities controlled by some of the board directors have agreed to underwrite the whole issue at a significant premium. The private placement consists of 35.8m units priced at 10.3p each, which is comprised of one common share and one common share purchase warrant exercisable for two years at 15p per common share. The proceeds will be used to facilitate efforts that will boost cost-effective, short-term production and cash flow and thereafter larger-scale production and further exploration of the company‟s prospects.

Herencia Resources plc (HER 0.62p/£3.04m)

The prospects for Herencia, the junior exploration company that is developing the Paguanta zinc-lead-silver project in northern Chile, look a lot more promising than they did six months ago, thanks to improving commodity prices and a determined management team. The company has been granted the remaining 10 of 14 exploitation tenements, covering a total of 39 square kilometres, enabling it to move towards the project development phase. The company‟s share price rose 30 per cent on the news, which follows an earlier solution to worries about a share overhang. Building on last year‟s achievements that included an upgrade of the mineral resource, a completed scoping study and confirmation of high ore grades at depth, Herencia now needs to test the potential and move the project forward towards a feasibility study. This will require more capital, but with the company‟s situation improving, this should not be too hard to overcome.

Immedia Group (IME 7.75p/£1.13m)

This market tiddler is the UK‟s leading provider of live radio stations used in retail locations. Go into any Ikea or branch of HSBC and the soothing sounds of HSBC Live! and IKEA Live! will have been produced by Immedia. The company is steeped in radio, being headed by former Radio 1 DJ, Bruno Brookes. In its half-year results, published this week, it reported a reduced loss of £41,000 (£115,000 last year) on turnover up to £1.7m (from £1.6m). The group has a decent roster of retailers signed up to its subscription services, including Game, Lloyds Pharmacies and most recently Top Shop and Top Man. Interestingly, Immedia also offers a product called 'RadioVision', which combines in-store radio with synchronised bespoke video content. Through this technology, radio works in unison with plasma and LCD screens to engage consumers and staff. The specially consolidated video content can be instantly triggered by presenters when explaining products and services. Immedia provides the radio service together with bespoke audio and visual content, all hardware, network delivery and maintenance support for the store network. While the microcap media space is littered with smart ideas that never take off, Immedia‟s tight control of costs, a balance sheet with £700,000 cash and a compelling product offering mean this could be a winner. Nice one Bruno.

Monitise (MONI 15.75p / £65.1m)

If Monitise has not quite started to, erm, monetise its technology, it has certainly started to commercialise it. The group provides an end-to-end solution enabling banks and their customers to undertake banking transactions via mobile phones, and results for the year to 30 June 2009 saw revenues rise by 80 per cent, to £2.7m, as the group increased its
professional services fees and licence revenue. But losses were a heady £12m (2008: £12.8m). This should, however, be seen in context. In a meeting with Hybridan, chief financial officer Tom Spurgeon said the group‟s strategy is to secure revenues on a per consumer basis, rather than from licensing its platform. As such, growth will be driven by the increasing take-up of mobile banking services. And this suggests there could plenty of dough to Monitise as the group looks poised to take a slice of a cake that is rising rapidly. Indeed, it could take several slices, as it is targeting not just the UK market (where 60 per cent of the retail banking market is on its platform) but the US, Asia and Africa. Small wonder, then, that the group recently raised £17.9m of equity – and some might call that smart money.

Pixel Interactive Media (PIXL 16p / £6.4m)

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Given the impact of the downturn on display advertising – online and offline – Pixel‟s 1.5 per cent rise in revenue in the six months to 30 June, to $9.3m, is creditable. The group provides online advertising services and an online ad network in several regions of Asia. And growth would have been significantly higher had its business in Hong Kong (which accounts for 60 per cent of revenues) not benefited from the Beijing Olympics in the first half of 2008. Pixel did, however, register a loss per share of 0.35p (against positive earnings per share of 2.58p in the first half of 2008) as it invested in staff for its expansion plans. But rises in turnover of 58 per cent in Singapore and 27 per cent in Malaysia suggest the wind has not gone out of this particular growth story. Chief executive Kevin Huang told Hybridan he would now focus on increasing „depth‟ in its existing markets, rather than seeking greater „breadth‟ in new markets. And with $4.4m net cash on the balance sheet at 30 June, it does not lack the firepower to pursue further growth. Indeed, the group announced last week that it would buyback up to 4m of its own shares. This was received very positively by the markets, and Pixel‟s share price rose by 45 per cent as a result.

PLUS Markets Group (PMK 7.75p/£24.5m)

PLUS operates the eponymous market in London and this week has announced a number of initiatives to steal market share from the London Stock Exchange. First, as part of the litigation settlement with the LSE since 1 September, all AIM stocks are now automatically traded on PLUS (previously a company had to apply to have its shares PLUS-traded). Second, PLUS announced this week a liquidity scheme under which PLUS will share with market makers the revenues it receives from data sales. And third, and possibly most significantly, a placing of shares to Amara Dhari Investments, a special purpose vehicle set up by a syndicate of investors from the Middle East to raise up to £5.5m. PLUS believes the placing is the first stage of a wider mutual commercial venture with Amara Dhari, with the aim of promoting PLUS in the Middle East and introducing business to PLUS, including but not limited to issuers on PLUS's primary markets and trading members. Our experience is that PLUS is able to attract much of the liquidity in smaller, less liquid AIM stocks and these initiatives look sensible. The markets reacted well (shares up about 10 per cent), which is also a plus.

Ramco (ROS 51.5p/£26.28m)*

This week has proved to be an important one for the British energy investment company Ramco, which made the strategic decision to move away from oil and gas interests and to concentrate solely on its offshore wind operations. The Aim-listed company‟s pioneering move makes it the stock market‟s first company to purely focus on offshore wind, and it has subsequently moved to rename itself SeaEnergy. Ramco, which announced a successful fundraise of £7.5m from Landstead this week, can also expect the strategic change to open doors to future investment from green-focused funds that up to now have tended to steer clear of investment due to the oil and gas focus of the group. With the government predicting a „new North Sea‟ investment boom, which they have incentivised by adjusting the current „Renewable Obligations‟ subsidy system , Ramco could be sitting on the crest of a large wave of future offshore wind investment. Executive chairman Stephen Remp said „the offshore wind opportunity is truly enormous, with over £130 billion of investment envisaged over the next 11 years through the Scottish and UK Offshore Rounds‟. Exciting times lie ahead for the Aberdeen-based offshore wind boys.

Sareum (SAR 0.3p/£2.62m)*

Sareum, the specialist cancer drug discovery company, announced this week the successful fundraising of £315,000 by way of a placing of 157,500,000 new ordinary shares of 0.025p each in the capital of the Company at 0.2p per share. Following the admission of these shares onto the AIM market, the company has a total of 975,598,000 shares in issue. Tim Mitchell, founder and chief executive, said: „We are pleased to have been able to raise these funds despite the difficult economic climate. The placing will provide additional funds to progress our pipeline of cancer research programmes.‟ This cash injection should indeed help progress Sareum‟s cancer research programme and will also offer extra general working capital for the company.

Synairgen (SNG 18.5 pence / £11.05m)

The Aim-listed respiratory drug discovery and development company had a run of announcements last week. First, its preliminary results for the year ended 30 June 2009. In June it completed a fundraise of £6.4m at 17p per share, only a 4 per cent discount to the mid price, reflecting the demand and confidence in this biotech stock, to finance two planned Phase II proof-of-concept studies. Not that numbers are particularly of interest when looking at biotechs (aside from cash, that is, which this one is awash with), but the post-tax loss for the year was £2.5m and cash at period end of £7.9m. More significant than the numbers, in the period in question, the lead inhaled Interferon-beta programme entered into its second Phase I study and will show final results in the late autumn. Also on 4 September, Synairgen announced that the patent for inhaled interferon beta to treat rhinovirus infections in asthma and COPD (Chronic Obstructive Pulmonary Disease) – that‟s smoker‟s cough to me and you – has been granted in the US, which is crucial as Synairgen enters the commercial phase of its compounds.

Synairgen‟s compounds are potentially going into truly enormous markets. There are around 23m asthmatics in the US and the cost of emergency department visits and inpatient care in relation to asthma in the US is $4.7bn. COPD includes chronic bronchitis and emphysema and the economic cost to the US of COPD is a whopping $42.6bn a year. Synairgen is aiming to tackle the cold and flu viruses that make asthmatics and COPD sufferers‟ lives particularly miserable and which cost health systems a huge amount. Adults get an average of two to four colds per year, young children suffer from an average of six to eight colds per year, and these often rhinovirus infections are the major cause of asthma exacerbations, accounting for 50-80 per cent of all such attacks in both children and adults. Around 80-85 per cent of COPD exacerbations are associated with viral or bacterial respiratory tract infections.

The final piece of news for this stock last week was the appointment of Phillip David Monk as chief scientific officer and Paul Hugh Anthony Clegg as a non-executive director to the board. Synairgen has tracked up a little since these announcements, but the good stuff is yet to come: results from a safety study in the fourth quarter of this year, the start of various virus trials, ongoing patent news, start of pII proof of concept trials and the ensuing updates and results, pilot studies, and of course an outlicensing deal could always be round the corner! We recently met management and were impressed. Prepare to be blown away by news of this one, which we don‟t think will catch a cold anytime soon.

* Corporate Clients of Hybridan LLP