Burst Media Corporation (BRST, 7.75p, £5.47m) has acquired The Phone Media Limited, trading as OTP Media a premium advertising network in the UK. Burst is paying an initial cash consideration of £1.575m and 1m new shares - so an initial consideration total around £1.6525m with up to £1.1m cash and 2m new shares dependent on performance till December 2011 with the maximum triggered by revenues of £2.5m and PBT £0.205m to December 2010 from the date of acquisition and £4.035m revs and £0.375m in the year ending December 2011. The additional consideration is adjusted pro-rata but none is paid should the group achieve less than 75% of the targeted levels. We maintain the SPECULATIVE BUY recommendation.
Focus Solutions Group (FSG, 40.5p, £12.00m) has secured a contract with Mastek, a high-end IT solutions player, valued at a minimum of £2.75m over five years. The group will receive £0.5m per annum for the license and £0.05m per annum for support services. The contract expands the groups geographical spread into Asia Pacific, Europe and North America – beyond the traditional UK and Irish markets. This contract is good news and highlights the long term order book visibility and quality of earning. The share price has risen 25% since our Speculative Buy recommendation in early March 2010. We continue to believe the group is trading at a discount to its peers on 2011 rating of 7.0x versus the sector on 9.6x. We retain our SPECULATIVE BUY recommendation with our target price of 45p.
Innovise (INNO, 27.5p, £10.77m) has acquired a small software business, Indentifile based on Welwyn Garden City, Hertfordshire. Indentifile a designs and suppliers of identity card systems and tracking and control software for staff, contractors and visitor management to customers throughout the UK, Europe and Africa. Indentifile’s current annual turnover is c. £0.55m, reporting a small operating loss. The value of the acquisition has not disclosed, which suggests it is small. The broadening of the product portfolio should provide cross selling opportunities. The bolt on acquisition is expected to be earnings enhancing. We reiterate our BUY recommendation.
Intelek (ITK, 14.75p, £12.89m) Trading statement for the year ending March 2010 highlights better performance in government and defence businesses leading to result slightly ahead of management’s expectations. Forecasts are likely to increase from some £3.3m to around £3.4m PBT for the year with 2.9p EPS – putting the group on a 5.1x prospective PER. With the group benefitting from Sterling weakness we see some further progress in profits next year – albeit with the risks associated with any form of government spend. We maintain our BUY stance with the 20p price target.
Kea Petroleum (KEA, 18p, £82.74m) announced that on 16 March the Wingrove-2 well had reached depth of 262 metres of the planned 1500. Wingrove-2 is a relatively low risk appraisal well targeting a site that that flowed waxy oil at an uneconomic 50 bopd back in 1993 and on which new technology will be brought to bear. The well will be cased to 320 metres this weekend and drilling will recommence with a larger rig in around a week, with completion expected before the end of April. The company has surpassed our 14p target price and we are takers of some profits over that level but we maintain our HOLD while drilling is in progress.
Shed Media (SHDP, 80.5p, £69.20m) Final results to December 2009 saw revenues up to £92.6m (£81.9m) with underlying PBT of £12m (£11.9m) and adjusted diluted EPS of 9.89p (10.58p) with a held 1.25p final dividend. Margins came under pressure during the year but the group did see a number of its titles receive additional commissions. In total the group delivered some 250 hours of programming, up from 215 in 2008, with the US growing from 64 hours to 100 hours. The group has started the year well with 64% of targeted production revenues and 68% of targeted IP gross profit committed already. The results were slightly below our earlier expectations of £12.6m and we reduce our BUY price target to 109p, still sufficient to ignore any bid till investors see at least that level offered.
ViaLogy (VIY, 6.125p, £44.9m) The trading update confirms the good progress in terms of pipeline for the FY ending March 31 2010 with 12 clients under contract (suggesting over 60 probable future wells at the discretion of its clients). The period saw 5 successfully completed wells which attested to the validity of QuantumRD though the company reminds that it is not expecting 100% success. The coming months should see drilling of 4-5 new ViaLogy-positioned wells, some with new and established clients and it expects that number to increase over the year. It remains difficult to value Vialogy amongst a plethora of seismic technologies and we have felt that at times the valuation has run ahead of events with profitability still looking some way off and the economic model unproven. Reasonable progress but this update does not give cause for revaluation. HOLD