Hybridan's Small Cap Wrap

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This article is an edited extract from a non-independent research note issued by Hybridan; please click here for an explanation.

This article is focused on firms with a smaller market capitalisation; please click here for a description of the risks of investing in "small cap" stocks.

3D Diagnostics Imaging (3DD) [5.25p/£8.95 million]

3D Diagnostics, which owns the protected rights to a technology platform with a number of significant potential commercial products, has announced a distribution agreement with Wisdom International Medical Science and Technology for China.

The company expects Wisdom to complete the regulatory approval process for sale of the CarieScan PRO later this year, with Wisdom having considerable experience in handling such a process - it is a subsidiary of Beijing Focus, which is one of the top five dental distributors in China, focusing on imported technology products.

Prospectively, this is a significant agreement, since dental practitioners have increased more than tenfold in the last 25 years to 60,000, with growth expected to continue in line with the development of the Chinese economy.

AFC Energy (AFC) [57.25p/£99.24 million]

AFC Energy, a developer of alkaline fuel cells, has announced the signing of a commercial memorandum of understanding with John Lewis Partnership (JLP) to evaluate the economic potential of using its fuel cell system to generate low-carbon-emission electricity for Waitrose supermarkets and John Lewis stores.

Following the evaluation, JLP intends to order and demonstrate AFC's fuel cell system as part of an integrated low-carbon energy generation system at a Waitrose store.

Arian Silver Corporation (AGQ) [43.25p/£130.18 million]

Arian Silver Corporation, a silver exploration, development and production company with a focus on projects in the silver belt of Mexico, reported an update on operational activities at its 100%-owned San Jose Property in Zacatecas State, Mexico.

Highlights include a laboratory installed and operational at San Jose which will significantly speed up the analysis of exploration samples; and an increase in milling efficiency due to the addition of impact crushers. Approximately 200 tonnes of silver-bearing concentrate has been produced so far.

Much progress is occurring at Arian, and we can look forward to future signs of growth.

Designcapital (DESC) [14p/£9.46 million]

The AIM-listed Investment company dedicated to high-end contemporary furniture design, has announced the appointment of Helen Kennedy Lambert as an independent non-executive director of the company.

Lambert has considerable experience in the luxury and fashion design industry, having been managing director of the AGA Group, an international buying offices group focused on the luxury sector, before purchasing and rebranding it in 2005 as Lambert + Associates.

The rebranded company services all fashion categories of the luxury market, through the complementary activities of buying, sourcing and consulting.

It brings a number of strong opportunities to the table including its network of operations across Europe and the US - markets in which Designcapital is seeking to become more established. Lambert's commitment is further demonstrated by the subscription for two million new ordinary shares of the company by Lambert + Associates for a consideration of £200,000.

EnCore Oil (EO.) [125.5p/£367.33 million]

EnCore has given an update on the Cladhan appraisal well that confirms the presence of a large oil column of over 1,200 feet in the main reservoir, with the oil water contact yet to be found.

The plan is now to drill a number of side-track wells: the first to evaluate the upper Jurassic sandstones in order to define the oil water contacts; and a second to confirm the presence of oil in the central channel.

Faroe Petroleum (FPM) [183.25p/£389.20 million]

The AIM-listed independent oil and gas company, principally focused on exploration, appraisal and undeveloped field opportunities in the Atlantic margin, has signed an agreement with Petoro AS to swap its interest in the Maria discovery for interests in a number of oil and gas production assets in Norway.

The deal is a pure asset transaction, with no cash consideration being involved, and should result in Faroe gaining 7,300 barrels of oil equivalent per day (boepd) to its estimated 2011 average production.

Senergy, an independent reserve engineering firm, estimates that the Petoro assets contain proven plus probable (2P) reserves of 14 million barrels of oil equivalent (mmboe) in the producing oil fields and 1.2 mmboe of contingent resource in the undeveloped Gygrid field overall.

Faroe's 30% holding in the Maria project, which is being used as consideration, is currently undergoing concept screening studies by the Wintershall operator, and Faroe has invested close to £0.5 million in the project to date. The company's share price closed 3p higher on the day.

Immunodiagnostics Systems Holdings (IDH) [847p/£236.91 million]

The immuno-assay developer provided a trading update for the year to 31 March 2011. Revenue is expected to increase by 35% to £50.1 million, which is most impressive, and sales in all territories have increased year-on-year.

The FDA-cleared IDS-iSYS immuno-assayer system developed by the company also made demonstrable improvements in sales terms, with average revenue per instrument at £102,000, some 32% ahead of the previous year, and representing some 21% of total revenue for the period.

Another significant development during the period included has been the signing of a licensing agreement for the IDS-iSYS assayer with Omega Diagnostics (ODX), the AIM-listed developer of medical diagnostics products, which will provide IDS with a licence fee, a royalty on Omega automated product sales and revenues from both instrument and consumable sales.

A strong update; we look forward to the final results at the end of June.

Lighthouse Group (LGT) [9.25p/£11.81 million]

Financial adviser Lighthouse Group has won an exclusive agreement with Prospect, a union in the UK representing engineers, scientists, managers and specialists in areas as diverse as agriculture, defence, energy, environment, heritage, shipbuilding and transport.

The contract runs for three years and under the terms of the contract, LGT will be the exclusive provider of financial advice to Prospect's members.

Lipoxen (LPX) [11p/£19.50 million]

The AIM-listed bio-pharmaceutical company specialising in the development of high-value differentiated biological, vaccines and siRNA delivery, announced that is has agreed an extension of the existing research agreement with the International AIDS Vaccine Initiative (IAVI), the world's leading AIDS vaccine organisation.

Based on data generated during the research phase of the original agreement, Lipoxen and IAVI have identified a vaccine formulation that, when used in a relevant preclinical model, induced antibodies which subsequently neutralised a number of different HIV strains when tested in the laboratory.

IAVI have extended the agreement, which will now run until 30 September 2011. This will allow Lipoxen to create advanced versions of the candidate formulation and IAVI to undertake a repeat of the immunisation study to assess the efficacy of the refined vaccine.

Subject to the final results, Lipoxen and IAVI will jointly negotiate terms for the further development of any promising vaccine candidate.

MediaZest (MDZ) [0.8p/£1.98 million]*

The AIM-listed creative digital out-of-home advertising company and audio-visual integrator announced further sales of its 'virtual assistant' product in conjunction with Tensator, global leaders in queue management.

Three new 'virtual mannequins' have been created for Birmingham Airport, again welcoming travellers and assisting with preparations for quick progress through security procedures.

Several more such projects are in the pipeline and expected to be completed during the course of 2011.

Next Fifteen (NFC) [84p/£46.61 million]

The global public relations consultancy Group, has announced growing results for the six months ended 31 January. Financial highlights include revenues increasing to £40.8 million from £34.2 million in 2010. Pre-tax profit increased by 19% to £2.49 million, while earnings per share increased by 8% to 2.79p.

In terms of corporate progress, Next Fifteen acquired 85% stake in US. These strong results reflect the opportunities the group is experiencing as a result of the market transition to digital. The company's background in technology and investments in digital have put it in a great position to grow both its core customer base and into adjacent markets.

Ovaca Gold (OVG) [33p/£29.2 million]

In an update the Russian gold mining company has announced a plan to drill 5,000 metres on the Podgorniy target and 2,000 metres on the Zet target during the 2011 exploration season.

Documentary and geophysical work will be done at Olcha and bulk sampling will be continued at Stakhanovsky. As the share price is still trading at a discount to the company's cash and investments, the board has authorised a share buyback programme for up to 10% of the company's issued share capital by the end of the year.

Plexus Holdings (POS) [64p/£51.32 million]

The oil services company has announced two more contract wins valued at a total of £700,000. One is with LLC Gazflot (a subsidiary of Gazprom) for TRT-S mudline suspension equipment for oil and gas exploration drilling activities of a well offshore West Kamchatka in the Magadan Basin.

The other is with BG Egypt (a division of BG Group (BG.)) for POS-GRIP wellhead system with mudline suspension system for exploration activities offshore Egypt.

Plexus, which also recently signed contracts with Centrica and Statoil, is clearly benefiting from an increased awareness and demand in the oil and gas exploration industry for safer and improved operating practices since the Gulf of Mexico incident.

Serabi Mining (SRB) [36.5p/£23.35 million]*

The AIM and TSX-listed gold exploration company recently released its audited results for the year ended 31 December 2010.

For the year ended 31 December 2010, the company recorded a net loss of $5,980,011 compared to a net loss of $9,990,502 for the comparative period last year.

The decrease in the loss in part reflects that no impairment provision was taken in the current year; there were no write-offs in respect of past exploration activities and no requirement to increase the provision for rehabilitation on mine closure.

The company had a working capital position of $2,793,046 at 31 December 2010 compared to $2,656,862 at 31 December 2009.

Excluding the accounting treatment of the net proceeds of the special warrant issue that was completed by the company on 2 December 2010, the working capital position at 31 December 2010 would have been $7,853,041. On 31 December 2010, the company's total assets amounted to $54,923,193 (31 December 2009: $49,238,168).

Total assets are mostly comprised of property, plant and equipment, and deferred exploration and development costs.

Serabi separately announced results from the first exploration diamond drill holes in the Piaui geophysical anomaly at their Jardim do Ouro Project in the Tapajos region of Brazil. In December 2010 the company commenced a 7,500 metre drilling programme designed to target nine high priority induced polarisation targets.

To date the company has completed seven drill holes at Piaui and received assays from the first five holes. The drilling has so far tested a 200 metre strike length of the 500-metre long geophysical model and has returned significant gold intercepts in all five drill holes.

The style of the mineralisation intersected to date appears to be broader width to mineral resources identified at JDO to date.

Sirius Minerals (SXX) [11.88p/£122.62 million]

Sirius Minerals, the potash development group, has signed a cultural heritage management agreement (CHMA) with the Bidjara people, the native title claimants over the area in Queensland containing the Adavale Project.

CHMA establishes a formal framework for the management and protection of Aboriginal cultural heritage sites and a basis for expediting exploration activities on the project.

smartFOCUS (STF) [24.5p/£23.39 million]

SmartFOCUS, the AIM-listed global provider of email and multi-channel marketing software and services, this week announced an agreement with Emailvision on the terms of a recommended cash acquisition by Emailvision for the company for approximately £25.3 million.

The acquisition price is 25p per smartFOCUS share and this represents a premium of 61% to the company's share price on the last dealing day immediately preceding the announcement.

Emailvision has the benefit of irrevocable undertakings to support the acquisition from holders of 51.7% of the company's share capital, together with a letter of intent from the holder of a further 14.6% of the company.

In deciding to recommend the proposed acquisition, the company's board noted the share price performance has been impaired by factors including the company's limited scale and low level of liquidity. The acquisition will give smartFOCUS significantly more financial and operational flexibility to grow and transition the business as part of a larger group.

Strategic Natural Resources () [26.5p/£28.91 million]

Strategic Natural Resources, which develops, owns and manages natural resource extraction enterprises in southern Africa, has signed an exclusive coal off-take agreement with Trasteel International SA, a global steel supplier and commodity trader, over 100% of the beneficiated coal to be mined at SNRP's Elitheni coal mine in the Eastern Cape of South Africa up to an initial two million tons, +/- 10% at Trasteel's option.

The first shipment will be loaded in June 2012, with 500,000 tons of coal (+/- 10%) scheduled to be shipped during the following twelve months.

The balance of the coal is scheduled to be shipped before the end of 2014. Trasteel has also been granted a right of first refusal, on terms to be mutually agreed between the parties, on any coal produced in excess of the initial two million tons covered under the agreement. The initial order represents less than 1% of the already proven Elitheni coal deposit.

Symphony Environmental Technologies (SYM) [18.25p/£21.42 million]

Symphony Environmental Technologies, the advanced plastics technologies group, has reported a 58% rise in full-year profit and says it will be devoting attention to the huge market in the USA in 2011.

The pre-tax profit in the year ended 31 December 2010 was £1.01 million (2009 £0.64 million) on revenues increased by 21% to £8.48 million (2009: £7.04 million).

Profit after tax increased by 29% to £1.19 million. The gross profit margin increased to 57% (2009: 55%). Michael Laurier, CEO of Symphony commented "we are delighted to be able to report our first £1 million profit".

The company continues to grow both its product portfolio and revenue streams and is well placed to benefit from continued growth in demand.

With the company's successes away from these shores, it seems slightly anomalous that the big UK supermarket chains show such reticence when it comes to embracing SYM's technology for plastic carrier bags, preferring to 'appear' green by variously banning the use of the bags altogether, making a charge for each bag (thereby transferring the 'guilt' to the consumer) or pushing the customer towards buying a 'bag for life'.

Were they to use bags containing SYM's additive, which makes them 100% biodegradable, it would enable them to return to free bags and they would be satisfying both customers and the green lobby simultaneously, perhaps providing any supermarket with the opportunity for some good PR in the current trend of wanting to save the planet.

ValiRx (VAL) [0.77p/£8.04 million]*

The AIM-listed life science company with a focus on cancer diagnostics and therapeutics for personalised medicine, noted the April 2011 publication of a report by www.which.co.uk on self-test health kits.

The company was pleased to see the report endorsed the principle behind individuals choosing to monitor their own health and ValiRx welcomes the suggestion that self-testing kit manufacturers work together to improve the provision of clear information on the kits.

ValiRx makes every effort to check that the information it supplies with all of its CE-marked SELFCheck branded products is concise and accurate. In light of the Which? report findings, the company have referred the issues raised to its scientific & clinical advisory board.

*A corporate client of Hybridan LLP

The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week. Our review will usually be of those companies whose market capitalisations are less than £50 million although we may occasionally cover larger companies. Our review is not intended to constitute research and is not to be taken as investment advice.

A non-independent research note:

(a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and

(b) is not subject to any prohibition on dealing ahead of the dissemination of investment research (although Hybridan does impose restrictions on personal account dealing in the run up to publishing research as set out in their Conflicts of Interest Policy).

The individuals who prepared this document may be involved in providing other financial services to the company or companies referenced in this document or to other companies who might be said to be competitors of the company or companies referenced in this document. As a result, both Hybridan LLP and the individual partners and/or employees who prepared this document may have responsibilities that conflict with the interests of the persons who receive this document.

It was not originally intended to be distributed to Retail Customers, and is included here for information and discussion purposes only. It does not form a recommendation to invest or otherwise. It is intended as a weekly review of some of the most interesting small cap stories of the past week. The content will usually review companies whose market capitalisations are less than £50 million although we may occasionally cover larger companies.

Our review is not intended to constitute research and is not to be taken as investment advice.