Hybridan's Small Cap Wrap

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.

Access Intelligence (ACC) [3.5p/£9.00 million]

Access Intelligence, a leading supplier of compliance software-as-a-service solutions for the financial services, procurement and media sectors, this week announced the sale of its subsidiary, Solcara, to Thomson Reuters (TRI) for £2.5 million.

Solcara sells search technology to the legal profession and in-house legal teams, and in the year to 30 November 2010 had sales of approximately £750,000 on which it generated a small profit.

The company also updated the market on trading for the six months 30 May 2011. Most of the group has been trading in line with expectations, with Due North and AIMedia Communications in particular having had a successful first six months.

During the first six months the company has completed the restructuring of its capital base, creating positive revenue reserves in the parent company allowing it to pay dividends in the future.

The group cash balance at 30 May 2011 was approximately £2.7 million which will, following completion of the disposal of Solcara, increase to approximately £5 million.

AFC Energy (AFC) [44.5p/£77.14 million]

AFC Energy, a developer of low-cost alkaline fuel cells, announced that it continues to make good progress.

It has completed the first stage of its Beta alkaline fuel cell system, having made significant progress on completing the hazard and operability study (HAZOP) and has incorporated the emerging improvements from that study into its first system. Once the HAZOP study is successfully complete, AFC remains on track to deliver its commercial-scale Beta system.

Angel Biotechnology Holdings (ABH) [0.32p/£8.73 million]*

The AIM-listed biopharmaceutical contract manufacturer has signed a new contract with ReNeuron Group (RENE) to perform development and GMP manufacturing services in support of its development programme for its ReN001 stem cell therapy for stroke. The work programme is expected to continue through to mid-2012; the value of the contract was not disclosed.

The programme includes the GMP manufacture and related work for future cohorts of patients in ReNeuron's ongoing PISCES clinical trial with ReN001 in stroke.

The contract is structured in such a way that it allows much more flexibility for both parties in terms of work scheduling, thereby giving ReNeuron the ability to match the needs and opportunities of their growing development programmes in real time.

Beacon Hill Resources (BHR) [12.12p/£89.80 million]

Beacon Hill Resources, the AIM-listed coal producer, will engage in its first production of export-grade coal at Minas Moatize coal mine in Tete, Mozambique.

This large open-pit mine is expected to be mined in the first quarter of 2012. The total estimated JORC resources of the initial open-pit area is approximately 180,000 tonnes, which is expected to be gradually mined over the course of the next twelve months. Additionally, the trial trucking of coal to Beira by road, due to start in July, will enable the company to start stockpiling coal at the port pending a first export shipment.

In Tasmania, the group has recently completed phase 1 of a drilling programme at the Arthur River Project. The results will provide the company with information about the deposit including size, metallurgy and hydrology. These aspects will help confirm the economics of the project and the development of an initial conceptual mine plan. The latter is being finalised, and is expected to be completed before the end of 2011.

Corero (CNS) [42p/£20.04 million]

Corero, the provider of software solutions to the banking and securities and education markets, provided a trading update for the six months to 30 June 2011.

The company acquired Top Layer Networks in March 2011, which it intends to use to build a network security technology business, focused on delivering software and hardware solutions to mid-market commercial and enterprise customers and telecommunication service providers, through international channels.

The period saw a number of other crucial achievements including the launch of the DDoS Defence System (an industry-first network layer and application layer DDoS defence product); the recruitment of a sales team in France and Taiwan; and the appointment of twenty new channel partners.

Corero Business Systems, which operates as a stand-alone business, also saw the company perform strongly with sales orders in the period of £2.5 million (2010: £1.5 million).

Corero appears to be evolving as quickly as the market does, and in some ways even quicker - we will be keeping a close eye on how the company continues.

EnCore Oil () [61.50p/£180.01 million]

EnCore will acquire, together with its partners in Block 15/21g (Nautical (NPE) and Serica (SQZ)), a 70% interest in the adjacent Block 15/21a from DEO Petroleum (DEO), Faroe (FPM), Maersk and Atlantic Petroleum.

The primary target in the P218 licence is the Spaniards/Gamma discovery well, which was drilled by Amerada Hess in 1989 and which EnCore believes has significant upside potential and an attractive risk profile.

EnCore will be the operator and plans to commence drilling in the second quarter of 2012.

For more, read: EnCore and Nautical acquire North Sea licence.

Lansdowne Oil and Gas (LOGP) [21.38p/£17.42 million]

Explorer Lansdowne Oil & Gas has started 3D seismic operations on its Amergin, Rosscarbery and Midleton Prospects in the North Celtic Sea, off the south coast of Ireland. The surveys are expected to take 20 days to complete.

This survey forms part of the planned pre-development drilling programme on the Barryroe oil discovery, in which the company holds a 20% interest. The drilling there is scheduled to start late this summer, with the belief that the 3D seismic data, along with the modern well completions in the current high oil price environment, will be key aspects that contribute to the value of Barryroe.

Medilink (MEDI) [9p/£10.70 million]

The electronic health card network service provider last week announced its final results for the year ended 31 December 2010.

Revenue increased by 44% to £1.79 million as the result of the overall increase in activities across South East Asia and its China operations. Loss before tax was reduced, but remained at £696,000 (2009: £942,000) because the increase in revenues was partly offset by a corresponding increase in operating costs for the China and Malaysian operations.

The financial year saw the company gain increased traction in China whilst the business activities in Malaysia continue to expand. Medilink won six additional third-party administrator contracts in China and offered a new service in Malaysia offering medical tourism programmes to foreigners travelling in the country.

The chairman reported that the company anticipates sustaining minor losses in 2011 as the expected increase in revenues in 2011 will not be sufficient to cover the group's operating costs. The board remains confident of being able to move into profitability during 2012.

OMG (OMG) [28.50p/£20.12 million]

The AIM-listed technology group, which provides image understanding products for the entertainment, defence, life science and engineering industries, announced that Yotta DCL, the company's highways surveying business, has won new contracts for business.

Newcastle City Consortium has awarded the company a three-year contract to conduct its entire road network surveying work, whilst Cumbria County Council has awarded the company a four-year contract to carry out all of its SCANNER and SCRIM surveys whereby vehicles are used to survey the roads with a number of synchronised measurement devices, such as laser profilers and cameras, to accurately determine the condition of the road surface, covering 4,784 miles of network highway.

In May, the company announced a loss for the six months to 31 March 2011, and whilst management were disappointed, these recent contract wins demonstrate the continued resilience of OMG.

SeaEnergy (SEA) [28p/£19.35 million]

AIM-listed SeaEnergy announced it has completed the disposal of its entire interest in SeaEnergy Renewables to Repsol Nuevas Energias SA. The company has used the cash from the disposal to repay loans due to LC Capital Master Fund and EDPR UK totalling £6.9 million.

SeaEnergy will now focus on its existing assets, in particular its offshore renewables marine services business SeaEnergy Marine, and to ensure shareholder value is protected with its existing oil and gas interests. The board expects the company to continue to be active in both the offshore renewables and oil & gas sectors.

SeaEnergy announced its audited results for the year ended 31 December 2010 at the same time. There was a loss for the year of £5.7 million (2009: loss of £6.5 million), the cash position at the end of 2010 was £100,000 (2009: £2.8 million), and the disposal of the company's interest in SeaEnergy Renewables resulted in a gain of £32 million and increased the cash balance to £28 million.

Sirius Minerals (SXX) [9.68p/£99.90 million]

Sirius Minerals, a globally diversified potash development group, has started a concept study on the York potash project.

During this study, various options and development alternatives for the project will be analysed and tested. A thorough innovation analysis phase will be incorporated to ensure the latest breakthroughs in mine and process development and sustainable design are incorporated into the project. The company expects this to be completed by the end of 2011.

The appointment of a team of consultants to deliver the concept study has been finalised via its subsidiary, York Potash.

Trap Oil (TRAP) [42p/£76.51 million]

Trap Oil recently acquired Reach Oil & Gas for approximately £30 million. This acquisition will bring 14 exploration licences governing 24 blocks and part blocks in the UK Continental Shelf. Reach's group portfolio consists largely of appraisal assets, along with the aforementioned exploration prospects (with a range of risk profiles).

This more than doubles the size of the company's existing exploration portfolio and near-term drilling activity, which also includes an increase to a 15% holding in the promising Orchid prospect scheduled to be drilled later in 2011.

The company will now focus on identifying and acquiring producing assets that will provide cash flows to support the prospective drilling programme with suitable tax synergies.

*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.