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HB Markets Daily Smallcap Newsflash including: Advanced Medical Solutions, Electric Word, Nexus Management ,Publishing Technology and others

Published: 05:46 15 Dec 2010 EST

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Advanced Medical Solutions (AMS, 66p, £102.13m) has announced strong trading continued in H2 and as a result the full year outcome will be at the top end of market expectations (some £5.1m or even higher – EPS of 3.5p+) – putting the group on an about to be historic 18.9x falling to less than 14x. As a result we continue our Buy recommendation with a year price target of 89p. BUY (Julian Tolley)

Electric Word (ELE, 4.75p, £14.19m) Trading for the year is in-line with expectations and the group continues to expect good performance from the November acquisition of Radcliffe Publishing (though there is a deferred consideration based on profitability).  Sitting on just over 9x for this year and next the group is cheap and has the ability to bounce, we rate the group a SPECULATIVE BUY. (Julian Tolley)

Group NBT (NBT, 365.75p, £94.67m) has acquired Indom SA of France, the leading French domain name provider, for a total consideration of €16.9m cash (though that will have €2.3m on the balance sheet – consideration thus €14.6m net). Financing will be from existing cash reserves and some £4.5m of debt. To December 2009 Indom had sales of €6.6m with adjusted PBT of €0.5m - with progress in the current year helped in part by one-off consultancy fees. The acquisition is expected to enhance EPS in the current year to June 2011. We see forecasts for this year and next moving thus – 2011 PBT £8.9m to £9.1m, EPS from 24.8p to 25.3p, 2012 £9.5m to £9.9m with EPS 26.9p to 28p, putting the group on prospective PERs of 14.1, falling to 13.1. We see this as fairly rated to cheap – with an upside to some 16x or higher next year - so BUY to the 446p level on a year view. (Julian Tolley)

Infoserve (INFS, 3.25p, £1.9m), the online UK search specialist, reports interims to 30 September 2010. Revenues declined by 2% to £2.9m (£3.0m), but stronger gross margins and lower overheads pushed the group into break-even point with adjusted PBT of £0.017m (H109: -£0.20m). Net debt increased to £2.0m (2009: £1.5m). The JV with INML and the agreement with Web Business Power offers combined internet/printed marketing campaigns to its SME base and provide the group to access a new client base respectively. The weak market conditions and the high gearings encourage us to reduce our recommendation to a SELL. (Amisha Chohan)

ITM Power (ITM, 51p, £56.36m)
has announced the trials of its HFlame, an electrolyser that produces a pre-mixed oxy-hydrogen flame, with Ametek Airtechnology Group and will be used to braze components within aircraft refrigeration systems. Investors should note the electrolyte still has to be added (25% KOH) solution and requires treated water to ASTM Type 2 levels – so it is not quite as convenient as hooking up to the water supply and plugging in. Given this competes with the established supply route of bottled gasses we see this as a useful but not monetarily significant announcement.  HOLD (Julian Tolley)

Modern Water (MWG, 62.5p, £36.79m) Trading update for the year to December is in-line with expectations. The group has confirmed further orders from China for its Cymtox Continuous Toxicity Monitor following existing units gained acceptance by the Chinese Environmental Protection Department at the Chinese National Monitoring Station. The initial trials of the evaporative cooling system in Oman has delivered significant power savings - resulting in some 50% reduction in operating expenditure. We maintain the SPECULATIVE BUY recommendation, noting water and energy are the key decade long buys. (Julian Tolley)

Nexus Management (NXS, 0.21p, £2.31m) A contract that fell over the year end, causing the 4th October profit warning,  has now been signed. The multi-year contract with a UK blue chip will see some 150 units provided with associated support and maintenance over a 3 year period, and is expected to be worth some $1m over the 36 months. The first order has already been received with further expected in the next few months. We repeat our SPECULATIVE BUY recommendation (Julian Tolley)

Patsystems (PTS, 25.5p, £47.60m)
Trading update for the year has confirmed receipt of orders as hoped, and so the group will meet expectations. EPs expectations are 1.3p this year - followed by 1.5p next – putting the group on 19.6x falling to 17x – still high enough, so we maintain the HOLD. (Julian Tolley)

Portmeirion Group (PMP, 435.0p, £43.47m) reports a strong H2 performance has driven the group to materially exceed current adjusted PBT expectations of £4.5m for the year ending 31 December 2010. We believe the launch of250 new products including the Royal Worcester items to commemorate the Royal Wedding will enhance revenues in2011. The market forecasts 2011 PBT of £5.0m and EPS of 34.9p. The stock is rated at 12.5x 2011 earnings, a premium to the general retail sector on 9.3x. We continue to warrant a premium given the earnings growth and the 3.6% prospective yield. We are impressed by the group’s progress, but we believe the stock is fairly valued. HOLD (Amisha Chohan)

Publishing Technology (PTO, 63.5p, £5.34m) has warned that results will be in-line with last year’s (PBT £0.51m) – and so below market expectations (Arbuthnot £0.96m) which will broadly be an even H1:H2 of PBT for the year.  Customers deferrals in the latter months is being blamed, though some recovery is hoped for following the appointment of a head of global sales with the USA and Brazil seen as the prime countries, Brazil benefitting from a local sales office that opened in November. With EPS expectations falling to 6.1p or so, a forward PER of 10.6x, and discussions with convertible holders to convert £1.5m into equity which would be some 25%dilution we rate the shares a short term Sell to the 50p. SELL (Julian Tolley)

Sceptre Leisure (SCEL, 25.5p, £14.53m)
reports interims for the 6 months to 31 October 2010. A reduction in pub closures coupled with the sale of the fixed-odds betting terminal (FOBT) led to a 7% decline in revenues to £19.7m (H109: £21.2m) and a 33% reduction in PBT to £0.6m (H109: £0.9m). Net debt fell to £15.8m (FY09: £15.9m). The outlook statement is weak, given the uncertainty in the short-term. However, the Board believe they can grow organically and via acquisitions. We believe the market will downgrade 2011 estimates from PBT of £2.5m and EPS of 3.4p. Even if the current bullish estimates are achieved, the stock trades on 7.5x 2011 earnings. We believe the group is overvalued given the high gearing. The latter combined with the scope for a fundraising for acquisitions and the weak outlook encourages us to reduce our recommendation to a SELL. (Amisha Chohan)

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