Techmark Report


Sent this from tonight. In case anyone interested, though its a day late...


Growth Company Investor Market Report
November 20th 2001

The following techMARK Report is reproduced courtesy of Growth Company Investor Ltd (a subsidiary of Vitesse Media plc).

It seems that the bottom was hit on 21 September, when the benchmark techMARK 100 index hit 1110.98. Now the index has rebounded to 1653.83, and has risen 20 per cent in the shorter period since late October.

Smallcap broker Beeson Gregory's Head of Research Alan Matthews reckons that what we have seen is the end of the viewpoint that 'the market has no horizon to it'. Now, he says, 'private clients are coming back in' and institutions are of the view that even if there is a downgrade, they are happy with the valuations they are investing at. He adds though, that it is 'dangerous' to predict where the market is going to go, although a 12 to 18 month forward view posits the UK as 'a positive environment' for equities.

Indiscriminate buying
Beeson reckon that technology sectors are going to take longer to recover than the wider economy and the research team there favour 'the less volatile end of the technology spectrum' - firms that have good fundamentals combined with 'valuation nomalies'. Amongst those favoured, ICM Computer has risen 9 per cent to 295p over the past month, Pace Micro Systems has moved up 44 per cent to 428p, Planit is up 17 per cent to 45p and SurfControl is ahead by 30 per cent to 557.5p.

In contrast, telecoms equipment companies like Telemetrix (up 53 per cent to 168.5p), Chloride (up 89 per cent to 87p), Volex (up 78 per cent to 405p) 'have gone too far' says Matthews, and should be shunned. He also puts the likes of Autonomy (up 41 per cent to 423p) and ARM (29 per cent to 443p) in this bracket.

Eyretel impresses again
Customer relationship management solutions firm Eyretel is not one of the more high profile tech plays but keeps on making steady progress. It followed up October's positive trading statement with its first profit of £100,000 before tax at the interim stage. Gross margins were up and sales were ahead by 28 per cent to £24.2 million. The shares gained 20 per cent to 91.5p.

Supply chain software firm Kewill Systems meanwhile saw its shares rise 27 per cent to 66.5p after a mixed set of interims, showing turnover down on last year and a loss of £4.9 million.

Drug developments
The biotech scene has been busy, with Provalis receiving glowing approval for its Glycosal drug from the US FDA, which boosted the shares 55 per cent to 19.75p.

Phytopharm has started trials of its anti-Alzheimer's drug P58, helping it to surge 41 per cent to 437.5p, while Profile Therapeutics signed an agreement with Pfizer to licence out its 'intelligent inhaler' technology, contributing to a 25 per cent share price rise to 68.5p.

CeNeS Pharmaceuticals, a firm currently in the throes of cost-cutting, has won a contract with a US research firm, but has also been forced to terminate an agreement with debt laden Bioglan Pharma, which has in turn admitted that it is up for sale. It shares are down 10p to 12p; CeNeS is up a touch at 10.5p. Antisoma is down at 45p, having made a loss of £2.3 million in the three months to 30 September, leaving only £602,000 in the bank. Unsurprisingly, it is seeking further funding.

Meanwhile Galen reported final results showing pre-exceptional pre-tax profits up 71 per cent to £40.5 million for the 12 months to the end of September. Though its shares receded slightly (to 722p).

Coming soon
Single figure prospective p/e ratios don't grow on techMARK trees, especially after the recent share price rises. But broadband telecoms equipment maker Advanced Power Components, whose results for the year to the end of August are due any day now, is such a company. Unsurprisingly, given the markets that it operates in, APC released a profit warning in August and has decided to write down stock and cut its staff numbers, resulting in
costs totalling £2.5 million.

The market expects the company to report a pre-tax profit of about £1.2 million, converting into earnings of 5.4p, leaving APC (at 50p) trading at just over nine times earnings for the past year. Though profits will be down in 2001-2, Eaglet Investment Trust felt confident enough to increase the size of its stake by eight times since the warning, for an eight per cent holding. Investors might like to follow.