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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.

Altona Energy (ANR) [11.12p/£46.89 million]

Altona Energy, the Australia-based energy company, announced it has entered into a co-operation agreement with US-based clean energy company Rentech (), owner of proprietary technologies for the Fischer-Tropsch process** (FT) and the gasification of biomass to produce synthesis gas.

The agreement includes working together to evaluate coal and biomass gasification projects for the application of Rentech's technologies in South Australia, where the Arckaringa project is located. The Arckaringa project is a joint venture between Altona and CNOOC-NEIA (a subsidiary of Chinese oil major CNOOC) to evaluate the development of the estimated 7.8 billion ton Arckaringa resource (of which 1.287 bn tons is JORC compliant).

The current base case for the Arckaringa bankable feasibility study is a 10 million barrel per year coal-to-liquids plant (applying the FT process) and 560 million co-generation export power facility.

**The Fischer–Tropsch process (or Fischer–Tropsch Synthesis) is a set of chemical reactions that convert a mixtureof carbon monoxide and hydrogen into liquid hydrocarbons. The process, a key component of gas to liquids technology, produces a petroleum substitute, typically from coal, natural gas, or biomass for use as synthetic lubrication oil and as synthetic fuel.

Bglobal () [22.5p/£22.43 million]

The AIM-listed provider of smart energy solutions and services to the UK energy market provided a trading update for the 12 months to 31 March 2011.

The company has been profitable and cash generative and has performed slightly ahead of market expectations during the period, though it is revising its meter installations expectations for the current financial year downwards, which is believed could impact the contribution to group performance in fiscal 2012.

In recognition of this, steps have been taken to reduce the cost base within Bglobal Metering and changes have been made that are estimated to generate annual savings of £1 million.

While meter installations are anticipated to be lower in the next financial year, Utiligroup, the supplier of software and services to the utility sector in Europe and Australia, traded ahead of expectations during the period, which is hoped will continue going forwards, having identified a number of opportunities in data services and which it is actively marketing towards.

Cove Energy (COV) [89p/£436.99 million]

The upstream oil and gas company announced the extensive conventional coring programme of the three gas-bearing reservoirs was successfully completed at the Windjammer discovery well site at the Rovuma Offshore Area 1, Mozambique.

The company also reported:

  • The Belford Dolphin drillship is now at the Lagosta discovery well site to continue the coring programme, after which the rig will drill the Barquentine 2 appraisal well;
  • The deployment of a second drillship, the Deepwater Millennium, scheduled to commence operations in the fourth quarter of 2011;
  • 1,600 square kilometres of 3D seismic survey completed over a potential "oil source kitchen" in the southern licence area, with initial results expected in the third quarter of 2011;
  • Additional 3D seismic survey ongoing over the northern licence area between the Barquentine discovery and the Tanzania border;
  • Acceleration of the exploration programme for Kenya offshore deepwater blocks, with 3,517 square kilometres of 3D seismic acquisition to commence in mid-May.

Equatorial Palm Oil (PAL) [22.38p/£27.91 million]

The AIM-listed palm oil development company with operations in Liberia announced this week the inauguration of Liberia's first palm oil mill by the President of Liberia together with commencement of crude palm oil sales.

The $3 million (£1.83 million) mill was opened following eight months of construction and testing. The chairman commented that these represent: "two important milestones for the company as it continues with its development plans to become a significant palm oil producer in the West African region."

The company will provide a further update in its statement of results for the year ended 31 December 2010, expected to be announced at the end of this month.

ImmuPharma (IMM) [85p/£69.3 million]

The specialist discovery and development pharmaceutical company announced the publication of its paper entitled A Simple Approach to Cancer Therapy Afforded by Multivalent Pseudopeptides That Target Cell-Surface Nucleoproteins as the cover story of Cancer Research, the medical journal of the American Association for Cancer Research.

The compound IPP-204106 (referred to in the paper as "N6L") has been found to inhibit growth of several tumour cell lines, xenograft models and blocks angiogenesis. It rapidly localises selectively in tumour tissue and promotes apoptosis. It also has a novel mechanism of action, acting on nucleophosmin and nucleolin.

The drug candidate is currently in a phase I/II clinical trial in cancer patients in France.

Network Group Holdings (NGH) [24.5p/£17.77 million]

Network Group Holdings, the recruitment business operating in a number of niche industry sectors, last week announced its preliminary results for the year ended 31 December 2010 together with details of three acquisitions it has made over recent weeks.

The company experienced improved market conditions, resulting in increased profit before tax before other items for the year of £1.9 million, compared to £0.8 million in the previous year.

The cost reductions implemented during 2009 were largely maintained through 2010 and, together with the improvement in the business environment, this has resulted in a much improved operating profit performance for the year. Group revenue was steady at £50 million.

All three acquisitions have been funded from internal resources. The CEO commented that the acquisitions demonstrate the continued focus on delivering growth for the company by acquisition as well as investing in organic growth.

The three companies operate in markets that complement the company's existing operations and have a presence in sectors that the company has identified as offering exciting opportunities.

Plethora Solutions Holdings () [7.38p/£4.85 million]*

This AIM-listed, UK-based speciality pharmaceutical company recently announced that its subsidiary, The Urology Company, has entered into an agreement with North-51 Limited for the provision of a contract sales force.

North-51 is a leading UK pharmaceutical consultancy with a contract sales division. Under the agreement North-51 will provide sales representatives to The Urology Company to complement its own sales force. North-51's representatives are available immediately to The Urology Company and will therefore be able to contribute to first-half sales and the results for the year as a whole.

Immediately following the contract becoming effective, The Urology Company will have the initial geographic reach to market its products to the majority of the UK prescribers in all the major conurbations. This strategy enables Plethora to expand on a flexible basis.

Plethora is well funded and we believe will continue to provide good news flow in the short and medium term.

Sirius Minerals (SXX) [10.75p/£111.0 million]

The globally diversified potash group has announced it is in receipt of the results of seismic interpretation work conducted by RPS Boyd PetroSearch (Boyd) in relation to its Canning Basin Project in Western Australia.

Data reviewed include existing and newly acquired 2D seismic data as well as original exploration data gathered by Rio Tinto Exploration (RIO) during 2008 and 2009.

The findings include: overall Mallowa Salts are continuous with minimal disturbance; salt mineralisation ranging from approximately 179 to 630 metres in thickness over a number of representative lines; salt mineralisation ranging from approximately 500 to 1,300 metres in depth; no evidence of major faulting within the tenements; and five potential drill targets identified overlying an estimated 379 to 610 metres of mineralised thickness.

In addition, the company has recently been notified that five exploration licences covering 1,236 square kilometres of its current project area have been officially granted.

Summit Corporation (SUMM) [3.75p/£6.31 million]*

UK AIM-listed drug discovery company, which has a portfolio of drug programmes and an innovative Seglin technology platform for the discovery of new medicines, last week announced that the efficacy data report on its drug candidate SMT C1100 for the treatment of Duchenne Muscular Dystrophy (DMD) has been accepted for publication in the leading peer-reviewed scientific journal PLoS ONE.

The publication highlights Summit's small molecule drug candidate as a potential disease modifying treatment that would benefit all DMD patients, regardless of their specific genetic mutation.

SMT C1100 boasts a compelling data package generated from a range of early studies, including those conducted in the 'gold standard' in vivo model. Summit is seeking a new partner to financially support the continued development of this compound for what is a terribly sad disease.

We look forward to Summit reporting results of ongoing studies involving the use of Seglin-based technologies.

Tristel (TSTL) [43p/£17.19 million]

This manufacturer of infection control, contamination control and hygiene products, announced that it now has regulatory approval for the Tristel Wipes System in Australia and Hong Kong.

Approval from the Therapeutic Goods Association (TGA), the body that regulates disinfectant use in Australia, and Hong Kong's Disinfectant & Sterilant Assessment Committee (DSAC), is a key step in growing the Tristel product range internationally, providing the organic growth the company has budgeted for.

Tristel expects to gain approval for use of the wipes in Germany and China over the coming months. The firm's chlorine dioxide-based wipes are a highly effective, cost efficient and safe decontamination product for the small flexible endoscopes commonly used in the ear, nose and throat departments found in all hospitals worldwide.

Tristel also announced the signing of an agreement with Tytex Ltd to distribute Tristel products to the New Zealand healthcare market, which is made up of 43 public and 35 private hospitals - currently, through its single-handed efforts, the company has sold into 21 of the smaller private hospitals and it is hoped the new distributor will help target the balance.

Discussions with an Australian distributor are likely to conclude shortly, which will help penetrate a market incorporating 750 public and 290 private hospitals.

Vatukoula Gold Mines () [133 p/£111.32 million]

The AIM-listed gold producer reported positive results from the recent reverse circulation and diamond drilling programme at the company's 100% owned Vatukoula Gold Mine in Fiji.

The share was up slightly in early trading on Tuesday following the news. The holes completed to date confirm the presence of multiple mineralised structures along strike from previously mined areas.

The results of this programme, in conjunction with the historical information, are to be compiled with the intention to produce an initial 43-101 compliant resource. Drilling has also commenced on the first of the prospecting lease targets, which is roughly four kilometres north east of the current mine workings.

David Paxton, CEO of Vatukoula Gold Mines, commented: "We are very encouraged by the initial results from the drilling programme, which show further mineralisation close to surface and possible down dip and along strike extensions of the Vatukoula ore bodies.

"Our focus remains on developing the exploration potential of the mine to expand current production and we look forward to reporting additional drill results... Vatukoula is a world class gold deposit, with over seven million ounces of gold produced to date, and a further 3.9 million ounces in resources."

Zeta Compliance Group (ZCGP) [50.5p/£4.43 million]*

PLUS-listed Zeta last week announced that its subsidiary, Zeta Compliance Services Ltd, has been awarded a follow-on project to provide water hygiene surveys for in excess of 700 branches for one of the four major high street banks via its managing contractor.

The value of the engagement is just over £200,000 and this should all fall in the year 2011 from an accounting perspective. Zeta also announced the continued investment in its sales and marketing resources via the employment of three new sales people who started last week to deliver the growth plans for 2011 and beyond.

We are impressed by Zeta's list of blue chip clients, which includes a host of high street chains, banks, universities, hospitals, and facilities management companies.

All businesses have to comply with health and safety laws, and there are a multitude of statutory regulations in the water, fire and gas space, to name but a few. We expect to see further news for Zeta as its client list grows and contracted revenues increase, and as the law surrounding this area, business productivity issues and brand protection drive clients to Zeta.

*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.