Hybridan Small Cap Wrap: Jubilee’s delightful new venture, Eden offers rich pickings and ValiRx validates

This week: Jubilee’s delightful new venture, Eden offers rich pickings and ValiRx validates

Angel Biotechnology Hldgs (LON:ABH) (ABH 0.24p/£5.10m)

Specialist contract manufacturer of advanced biologics has announced its interim results for the six month period ended June 30th, 2010. The Company made a net profit in H1 2010 of £106,737 and expects this trend to continue and looks forward to announcing a net profit for the full year 2010. Net liabilities have reduced from £1.6m (Dec 09) to £100,000. Eight new contracts were signed and two contracts were extended in the period, with a total value of more than £3.3m. More than 92 per cent of 2010 budgeted business has been signed and almost 40 per cent of the business budgeted for 2011. Three of the new contracts signed were specifically to provide regulatory support. Angel successfully raised £1.425m in the period to provide working capital and to facilitate an expansion of the companies resource and appointed Lorna Peers as Group Financial Controller and Company Secretary. Angel is actively assessing its options to increase its manufacturing capacity. Whilst the share price has moved up with this announcement of profitability, it had fallen below the placing price that institutional investors were willing to pay for access to Angel’s wings, although is currently back at the placing price.

Cubus Lux (CBX 16.5p/£3.56m) 

The Croatia-focused leisure resort operator and developer announced the raising of £325,000 through the issue of 2.32 million shares at 14 pence per share. Gerhard Huber (Executive Chairman), Christian Kaiser (Director) and Steve McCann (CFO) have all participated in the placing. Management investment is usually seen as a good sign and we see this as a positive move for a company that continues to develop its operations in Croatia. The Company’s uncapped casino operator’s licence in Croatia was extended for a further 5 years at the end of 2009, and allows for expansion opportunities given that it now permits online gaming. With continued development in Croatia and Montenegro, Cubus Lux looks to have good fortune, although unfortunately the Company's share price will be held back by the City until bank finance can be secured.

Edenville Energy (LON:EDE) (EDE 13.5p/£8.33m) 

The Technology Strategy Board recently ran the competition “New Approaches to Crop Protection” where £13.5 million of funding was allocated to several firms including two projects incorporating Eden Research’s technology.  Eden, an agrochemical development company, contributed its nematicidal formulations to Certis Europe, and its patented encapsulation technology with biocidal terpenes to a project led by Berry Garden Growers.  Other project partners include McCain Foods, PepsiCo International and Sainsbury’s.  We believe this further validates Eden’s technologies and products.

Jubilee Platinum (LON:JLP) (JLP 27.5p/£69.98m) 

Jubilee Platinum plc, an AIM listed company engaged in the exploration of natural resources in South Africa (focusing on platinum group elements and nickel/copper), recently announced that they have entered into a Memorandum of Understanding to establish a joint venture with Northam Platinum Limited. Northam is the only fully independent and controlled integrated platinum group metals producer listed on the JSE. Together they want to evaluate the construction of a furnace incorporating Jubilee's ConRoast smelting technology.

ConRoast is a robust, clean and safe DC-arc smelting process for treating high chrome-bearing platinum concentrates from UG2 reef ore and has established itself as an environmentally friendly smelting solution for PGM containing concentrates. Further, Jubilee is looking to explore nickel/copper in Madagascar which is held in a deferred joint venture with Impala Platinum Holdings, the second largest PGM producer in the world. Jubilee announced some interesting news this year and we will definitely continue to watch this company.  

Judges Capital (LON:JDG) (JDG 226p/£9.43m) 

Judges, another specialist Company in the scientific instrument space like SDI, has issued a very positive trading update covering the half year to 30 June 2010. The healthy order book at the beginning of the year has grown further due to a strong order intake and favourable exchange rates. The order intake during the period was materially higher than in the corresponding period last year, resulting in a higher overall level than at the half year end in June 2009.

The results for the period, when published, will include contributions from Quorum (acquired in June 2009) and Sircal (acquired March 2010) and expect noticeable earnings upgrades by analysts to follow immediately afterwards.

The management appear to be able to balance the acquisition of additional businesses as well keeping their hand firmly on the tiller with regard to existing customers – an uncommon talent in the small quoted arena. We continue to recommend the shares. 

Omega Diagnostics Group Plc (LON:ODX) (ODX 20p/£4.13m) 

This is our first time of writing on Omega, a medical diagnostics company. The recently published results for the year ended 31 march 2010 included a 14 percent rise in turnover to £6.2m (2009: £5.4m) with gross profit up only 8 percent to £3.6m (2009: £3.3m), adjusted profit before tax of £0.59m (2009: £0.54m) and a decline in pre exceptional earnings per share to 1.0p (2009: 2.0p) which is disappointing. Net cash was essentially flat.

We would question some of the management’s strategies – for example the recent acquisition of Co-Tek (South West) Ltd, which in our view decreases the overall quality of the Group’s operations and increases its exposure to business risks. We regard this acquisition as unnecessary and not in the long-term interests of shareholders.

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However, to a discerning eye the Company commands attention. The key products are Food Detective™ and the increasingly important Generrayt™ (sales of £1.04m in the year, up 44 percent). In addition, Omega has a host of other high quality products and diagnostic systems that have the potential to accelerate growth in the top line and correspondingly in earnings per share. The logical question is whether the current management have the ability and experience to deliver in this regard and whether investors have sufficient patience with them.

We would not be surprised to wake up one morning to find that the Company is on the receiving end of a bid. A share for bid an aficionados and acquisitive companies in the same space.

Scancell Holdings (SCLP 72.5p/£11.55)

The developer of therapeutic cancer vaccines announced its results for the 12 months to the end of April 2010. The Company posted an increase in losses for the year of £1.7m (2009: loss of £0.8m), much of which is due to increased costs of development, whilst nil revenue continues to be recorded for the company. Interestingly Scancell holds £2.8m in cash (2009: £1.5m), with the increase being due to a fund-raising made during the year- much of which is to be used to facilitate the continuing development of SCIB1. During the period the Company announced a series of development deals that has resulted in significant costs being categorised within cost of sales- a deal was signed with Ichor Medical Systems in July 2009 for the use of its electroporation device during pre-clinical studies of SCIB1, another was signed with PharmaNet Development Group in November 2009 to run SCIB1 clinical trials, whilst the Company also manufactured SCIB1 to GMP standards during the period which also impacted.

Scancell also announced its intention to move from PLUS to AIM by 30 July 2010. This represents a bold move for the company, and one that we thoroughly endorse given the progress being made by the Company in its development of SCIB1. With such a committed approach to development, this is perhaps one to hold on to.

Scientific Digital Imagin (LON:SDI) (SDI 22p/£3.96m)

SDI, a specialist Company in the scientific instrument space (similar to Judges), recently announced its results for the year to 30 April 2010. The salient details were Revenue up 6.4 percent to £7.2m (£6.8m); Gross Profit percentage of 59.7 percent, up from 56.4 percent; Profit before Tax of £258k (£57k); and fully diluted EPS of 1.46p (0.04p). The foreign exchange impact was negative in the year to the tune of £23k, which when compared to the positive impact last year of £183k, puts the profit before tax improvement in an even more impressive light.

It is interesting to note that although profits were up, the year-end cash balance was virtually unchanged – this is reflected by an increase in administration expenses and probably included an increase in sales & marketing costs, which would be welcomed if it is the case.

Over 90% of the Group’s revenues are generated by the Synoptics subsidiary whose customers are generally involved in long term projects and where funding is allocated on a long-term basis. Whilst this provides a buffer during the earlier phases of an economic decline, it can hamper performance in the following upswing. For this reason and the fact that government agencies have often been a source of such research contracts, we would expect the Company to redouble its efforts to identify and secure additional businesses to augment the Group’s operations and mitigate any potential revenue declines going forward. We believe that the Company will not suffer the pitfall that has befallen many companies that have embarked on a “buy and build” strategy – that of concentrating on acquiring new customers and businesses rather than maximising efforts on their existing customer base. We expect the Company to deliver positive news on this front in the near future and are therefore buyers of the shares now and on any such acquisition moves.

Surgical Innovations Group (LON:SUN) (SUN 3.52p/£13.18m)

Surgical Innovations, who develops minimally invasive surgery tools and devices, has received a Court approval for offsetting accumulated losses against the share premium account.  This allows the company to create a new reserve of approximately £3 million which, if desired, could be distributed as dividends.  Until now Surgical has been unable to pay a dividend.  While the company is experiencing strong growth and is likely to reinvest cash into the business or take advantage of acquisition opportunities, this is nevertheless an attractive option to have available and could attract additional shareholders to the register.

Tyratech Inc (LON:TYR) (TYR 15p/£7.03m)

Trading in TyraTech shares has been somewhat cumbersome due to their Regulation S status which restricts their marketability and requires physical settlement.  There is now good news for current and prospective owners of TyraTech as the company is creating a second line of stock that will be unrestricted with trading symbol TYRU.  All eligible shareholders will be contacted and invited to convert their holding to the new line which should start trading around the end of August with settlement through the CREST system.  One less irritation should help increase liquidity in TyraTech’s shares.

Valirx Plc (LON:VAL) (VAL 0.28p/£0.93m)

AIM listed cancer diagnostic biotech company announced that its human papilloma virus (HPV) smear test to detect the onset of cervical cancer in women has now begun clinical sample validation. To date, this molecular diagnostic test has been developed and analytically validated or proven to work in the laboratory.  A clinical study has now started to validate its diagnostic capability and reproducibility of results in women. Thereafter the process will start for regulatory approval and marketing.  There are about 20,000 new HPV cases a year within the EU and ValiRx is developing a user-friendly HPV test for screening HPV infection.   The ValiRx test has been developed to give a clear positive or negative result as to the presence of high risk HPV subtypes which are likely to cause cervical cancer and it is testing the high risk subtypes that are the major issue for predicting the risk of cervical cancer. The virus has been shown to be present in more than 99% of cervical cancers and has been shown to be the primary cause of this condition. In contrast to the conventional Pap smear testing, the HPV test is inexpensive, and its results are both speedy and give an easy to read indication of how developed the cervical cancer might be.   Pre-clinical studies indicate that the combination of the HPV test with the Pap smear test provides close to 100 per cent accuracy of diagnosis. We have written on ValiRx recently and remain keen on the stock.  It seems an anomaly that the price remains static considering the recent good news and we think this is a key opportunity to buy before the rest of the market realises the well diversified potential of the Company.