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Insight

Market Overview • Sector Focus • Company Profiles

��2010

Published by Edison Investment Research

Edison Insight

December 2010 1

Table of contents

Market overview 2

Sector focus 15

Company profiles 19

Events diary 123

Stock coverage 125

Prices as at 26 November 2010 Published 2 December 2010

US$/£ exchange rate: 0.62570

€/£ exchange rate: 0.85778

C$/£ exchange rate: 0.61795

A$/£ exchange rate: 0.61904

TRY/£ exchange rate: 0.43493

ZAR/£ exchange rate: 0.09003

DKK/£ exchange rate: 0.11504

NOK/£ exchange rate: 0.10538

JPY/£ exchange rate: 0.00760

SG$/£ exchange rate: 0.48235

Welcome to the December edition of the Edison Insight. We now have over 250 companies under coverage, of which 208 are profiled in this edition. The book opens with a market overview from Alex Gunz, where we discuss prospects for 2011. We believe many of the problems that have characterised the past year (ongoing deleveraging, moribund growth, rising inflation) look set to persist at least for the coming months. As a result, equities are likely to continue to experience volatile movements. Against this background, our equity allocation process remains unchanged for now, favouring diversified growth and high cash returns. In this month’s sector focus section, Elaine Reynolds talks about little victories in oil & gas and Katherine Thompson gives a summary of our cloud computing report. 4SC, Endace and Evolva have been added to the Edison Insight this month. Readers wishing greater detail should visit our website (www.edisoninvestmentresearch.co.uk), where reports are available for download. Edison is Europe’s leading investment research company. It has won industry recognition, with awards in both the UK and internationally. The team of more than 50 includes over 30 analysts supported by a department of supervisory analysts, editors and assistants. Edison writes on more than 250 companies across every sector and works directly with corporates, investment banks, brokers and fund managers. Edison’s research is read by major institutional investors in the UK and abroad, as well as by the private client broker and international investor communities. Edison was founded in 2003 and is authorised and regulated by the Financial Services Authority. We welcome any comments/suggestions our readers may have. Neil Shah Director of Research

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2 2 December 2010

Equity market overview and strategy Events from the last month constitute a familiar pattern to the extent that equities continue to exhibit profound

swings both to the upside and downside as investor psychology appears to be overruling fundamentals. A

review of the latter suggests the same familiar problems beset the global economy, namely a lack of suitable

policy instruments to manage the ongoing painful process of deleveraging across the developed world.

Stagnating growth and rising inflation represent other concerns. These factors have somewhat masked a

recent improvement in corporate earnings, but as fundamentals move back to dominate, there is a risk that

these encouraging results patterns may not prove sustainable. Looking ahead to 2011 we consequently see

no reason to change our current equity strategy, favouring diversified growth (basic materials) and high cash

returns (telcos, utilities) principally at the expense of the consumer and financials sectors. Gold also remains

highly attractive in our view.

Set for a repeat One year ago in our December 2009 Equity market overview and strategy, we forecast that markets in 2010

would exhibit none of the synchronicity they showed in 2008 and 2009 (downwards and upwards respectively)

and that 2010 would be characterised mostly by volatility, where investors would “most likely gain distinction

through differentiation”. Inconsistent macro and micro data, exogenous shocks (from eurozone sovereign debt

crises to agricultural product price hikes via hints of war in Korea) and the resort to tired, tried and tested

policies (QE II) have all seen our thesis broadly borne out. With but a month of the year remaining, the All-Share

has oscillated in a range of 2485-3033, and finds itself up just 6.2%, a particularly disappointing performance

when one considers the positive effect that should have been accorded by interest rates being effectively at

zero. A broadly similar pattern has been repeated in other global indices.

Exhibit 1: A volatile year for equities

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All-Share VIX Source: Bloomberg, Edison Investment Research

Looking ahead, it is hard to see how the next 12 months will be markedly different. We continue to expect

equities to trade within a relatively narrow band, with pronounced swings both to the downside and upside. As

we have written previously, volatility (measured by the VIX index), while down almost fourfold from its Lehman

spike, is still more than double where it has traded for much of the mid-2000s. Until we see a consistent and

coherent approach to debt reduction (excess leverage is still the biggest issue plaguing the financial system)

and/or sustainable top-line growth from corporates, it may be difficult for equities to break out of their relatively

range-bound trading patterns. In reality, what this may imply is more pain: fiscal austerity needs to be

combined with monetary loosening, labour markets need more structural reform and the euro probably needs

to go. Further volatile dislocations may have to come before confidence can return fully.

How long such a process may take remains fully to be seen, and surprises/disappointments along the way will

undoubtedly create investment opportunities. At present, the auguries are not good: GDP growth is slowing in

Edison Insight

2 December 2010 3

Germany and France, the main engines of the eurozone; industrial output has shown signs of stalling in China

and India; and inflation seems to be on the rise almost everywhere.

However, the biggest issue (which matters particularly in markets that are being driven more by psychology

than fundamentals) is simply one of confidence: investors do not seem to believe either in the potentially

restorative powers of further quantitative easing or in the EU’s latest bail-out – more may be needed of both.

Furthermore, concern over these matters has also clearly overlaid emerging signs of slowly improving

corporate earnings.

Trading patterns in the last month demonstrate just how quickly sentiment can change. The day after

America’s second round of quantitative easing was announced (4 November), the All-Share crossed the 3,000

mark, a level last seen before the collapse of Lehman Brothers in September 2008. Optimists asserted that the

path to recovery was clearer and the UK market hence moved to a peak of 3033 on 9 November, up 22%

from its July low and with a rise of c 10% from the start of the year. However, there has been no consolidation

of these gains, with the All-Share having since declined by 2.6% and November having seen more ‘down’

trading days than the inverse.

These oscillations (a repetition of the trends seen for most of 2010) have been a function of several factors, but

most crucially relate to sentiment/ reality centred on quantitative easing and the future of the Eurozone. After

the initial excitement of QE II, the gloss seems to have worn off remarkably quickly, as evidenced not only by

investors’ reactions, but also by the high degrees of scepticism voiced by central bankers from a number of

nations. Not only is QE II an untried policy that “smacks of desperation” (according to the Lex column in The

Financial Times, 2 November), but also most economists appear in agreement that they have little idea whether

a second round of quantitative easing will actually work.

At the most basic level, the Fed alone cannot do everything to turn around the global economy and a notable

lack of consensual support (more the opposite) from other nations suggests the challenge will be significant.

Putting this factor to one side, our more specific concerns relate to the fact that the Fed may be over-

estimating by how much and how fast unemployment can fall, a risk that will only be exacerbated by

unresponsive policy-making from other recalcitrant nations. According to economic analysis by the IMF, it may

take as long as four years following the end of a recession for unemployment to return to pre-recession levels,

suggesting that the US (and much of Western Europe) is still on a long and painful journey. Given the

challenges that QE II may face combined with the possible stagnation of the global economy, we do not

discount the possible launch of QE III at some stage in 2011. As we have written previously, increasing policy

(re)application also runs the inevitable risk of suffering from diminishing returns.

With regard to the eurozone, it has taken just over six months for all (and more) of the vociferous concerns over

its stability cited at the time of Greece’s bail-out to resurface. An eventual IMF/EU €85bn bail-out for Ireland

combined with at least €15bn of domestic spending cuts and tax rises is unlikely to mark the end of the

eurozone saga. It is interesting to note how little investor euphoria has been apparent over the conclusion of

Ireland’s rescue – in stark contrast to the reaction following the confirmation of the Greek support package –

and movements in bond yields (see Exhibit 2) suggest that more bail-outs may now been an unfortunate

inevitability. Spanish (as well as Italian, and even Belgian) spreads relative to the Bund have continued to

widen.

At heart is the question of for how long German voters (even with unemployment at a 20-year low and

business confidence at a 20-year high) remain willing to support failing peripheral eurozone nations. Recent

history suggests there is a strong element of moral hazard attached to failing-nation behaviour and the

eurozone’s problems are arguably increasing rather than diminishing. Greece recently announced that its

Edison Insight

4 2 December 2010

public debt (at 15.4% of GDP) was higher than previously disclosed (13.6%) and it has already begun to fall

behind with its repayments to the EU/IMF. The stark reality is that at present only two of the eurozone’s states

(Luxembourg and Finland) meet both the deficit (not more than 3% of GDP) and debt (no more than 60% of

GDP) criteria for EU membership.

While it is hard to predict how events will ultimately play out, it is fair to contend that investors will likely have to

endure further bouts of substantial volatility. There remains a clear confusion between the political and

economic ends of the EU and there is a clear risk not only of contagion (from Greece and Ireland), but also that

failure becomes a self-fulfilling prophecy. In the interim, spreads on bond yields continue to rise and the euro

weakens.

Exhibit 2: Eurozone crisis as ‘periphery’ nation bond spreads widen and the euro weakens

0

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4

6

8

10

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Feb/

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Per

cent

age

poin

ts

10-year govt bond spreads over German bunds

Spain Portugal Ireland Greece

1.151.201.251.301.351.401.451.501.55

Jan/

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EUR/USD rate

Source: Bloomberg, Edison Investment Research

If a second round of quantitative easing and the bail-out of Ireland both have their antecedents in events of the

previous 18 months – and so ought not to have constituted a major ‘surprise’ to investors given the challenges

facing the global economy – one source of revelation, particularly in the face of weak growth, has been the

strength in recent corporate earnings. Over 75% of US companies reporting in Q3 exceeded consensus

expectations, while the gap between those firms raising guidance relative to those cutting stands at its highest

since 1999 according to Bloomberg. In the UK, a similar picture has occurred with firms as diverse as

Barclays, Burberry and BT all having recently surpassed expectations when reporting results. As positive as

this trend is surprising, we are forced to question the sustainability of such recent strength. Even if we are

incorrect in this thesis, it appears that investors have had some tendency to overlook better performance amid

macroeconomic tumult.

Our strategy pertains to one of stock selection, favouring undervalued growth with emerging markets exposure

and/or highly cash generative (and shareholder-returning) businesses and against this background it is possible

to identify a strong range of candidates – in the UK, for example, Aggreko, Compass Group, GSK, Reckitt

Benckiser and Vodafone to name but a few. Investors in these five names have been rewarded by an average

share price return of 20.2% year-to-date (some 14 points ahead of the All-Share), combined with a mean

dividend yield of 3.4%.

Beyond such best-in-class businesses, as mentioned previously, our concerns relate to sustainability. There is

only a finite amount of cost-cutting and leverage gains companies can bring to bear in the absence of top-line

growth. Revenue improvement, such as it is, may also be likely further undermined going forward by rising

inflation. A number of consumer-facing businesses in particular (e.g. Marks & Spencer, Next) as well as some

global industrial players (e.g. ArcelorMittal) are already warning of this risk and whether cash-constrained

consumers and corporates will accept input-cost pass-through and continue to spend remains highly

uncertain.

Edison Insight

2 December 2010 5

After the robustness of the Q3 reporting season, we are also concerned that there may perhaps be undue

optimism levels ahead of the impending fourth-quarter reporting season. With internal planning and budgeting

likely to complete soon, the next two months will also likely see companies issuing guidance for 2011 for the

first time. Again, we see here some risk for disappointment.

As a result, we see limited reason for changing our theoretical asset allocation strategy, particularly since our

central thesis is for further volatility, at least for the early part of 2011. We therefore continue to advocate the

adoption of a ‘bar-bell’ approach, combining some sectors/stocks that would benefit from any move towards

the risk trade, while also continuing to keep a high focus on defensives. Put simply, we favour emerging over

domestic growth and place a high emphasis on free cashflow/dividend generation. As we discuss in more

detail below, this leads us to an overweight stance in basic materials, telcos, utilities and healthcare, balanced

with underweights in the consumer and financial space.

Additionally, at the risk of repetition (from previous editions of Insight), we continue to stress the merits of gold.

We reiterate our view that this remains an attractive asset class with no counterparty risk, inherent scarcity

value and a hedge against either inflationary or deflationary scenarios. World Bank President, Robert Zoellick,

has also recently suggested the return to a modified gold standard, further stoking positive sentiment. The

precious metal hit a 52-week high on 9 November while it has outperformed the MSCI Global equity index by

20.9% on a year-to-date basis. On a three-year view, we believe it could reach $2,000/oz, some 40% above

current levels.

Exhibit 3: Gold has been a significantly better investment than equities in the last 12 months Note: Rebased to 100.

8 0

90

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Gold MSCI World Source: Bloomberg, Edison Investment Research

Market review: Still stumbling The story of 2010 for UK (and global) equities has been one of pronounced swings as Exhibit 1 amply

demonstrates. Trading patterns from the last month have served only to reinforce this thesis, with the All-Share

having traded down 0.8% despite having hit a 52-week high on 9 November. As in previous months, the

number of positive and negative trading days have been roughly equal (down days have won out slightly), while

an equal number of the market sectors we track have gained relative to declined in value (see Exhibit 8 below).

While the UK’s performance can hardly be described as satisfying, domestic investors can at least take

comfort from the fact that the FTSE-100 and the All-Share have comfortably outperformed their European

counterparts, with the relative gains between these indices having widened in the last month. On a year-to-

date basis, the All-Share has outperformed the Euro Stoxx by 8.7 percentage points, up from 6.5 points a

month ago, with a similar pattern repeated between the FTSE-100 and the Euro Stoxx 50.

In the last month, the disparity in index performance has, however, been most notable between perceived

‘safe’ and ‘failing’ eurozone nations, with the German market (DAX30) having outperformed the Spanish

Edison Insight

6 2 December 2010

bourse (IBEX35) by over 15 percentage points. On a 12-month basis, the spread between these two indices

has exceeded 40 points. We see good reason for such trends to continue and, were it not for the strength of

the DAX, then the Euro Stoxx’s performance would likely be notably worse.

The robustness of the DAX is notable, having gained 15.0% year-to-date, over 10 points better than the All-

Share. This has been helped by a favourable macro picture in Germany (discussed earlier) and stimulated by a

large number of well-performing export-led businesses. Returning to the UK, it is also clear to see that those

sectors that have delivered the most impressive gains year-to-date – namely industrials and basic materials –

have a strong non-domestic bias. As we discuss in more detail below, the health of the global economy will be

crucial to these gains being maintained going into 2011.

Exhibit 4: Relative performance of major European indices (in percentage points) YTD Las t month Las t three

monthsLas t s ix months

Las t 12 months

FTSE 100 4.7 (0.7) 10.0 12.5 9.1

FTSE All-Share 6.2 (0.8 ) 10.2 12.8 10.7

DJ EURO STOXX 50 (7.7) (4.2) 5.0 8 .2 (2.2)

DJ EURO STOXX (2.5) (2.8 ) 7.3 10.7 2.8

France CAC40 (5.3) (3.2) 7.3 9.4 1.3

Germany DAX30 15.0 3.6 15.8 19.0 22.0

Spain IBEX35 (20.0) (11.6) (4.6) 5.6 (18 .1)

Italy MIBTEL30 (14.6) (7.1) 0.6 5.7 (9.5)

UK re la tive to Europe

FTSE 100 vs EURO SROXX 50 12.4 3.5 5.0 4.3 11.3

FTSE All-Share vs EURO STOXX 8 .7 2.0 2.9 2.1 7.9 Source: Datastream, Edison Investment Research

Outlook: Six key questions for 2011 As inevitable as it is topical, December constitutes the moment when it seems appropriate to look ahead to the

coming year and consider what factors may influence equity markets and what may be the sector/stock

implications from our observations. Below is a (non-exhaustive) list of considerations we feel important.

When does the world start growing again?

Policymakers and investors in 2011 will have to contend with a world where GDP growth in almost every nation

– both developed and emerging – will decelerate relative to 2010. While this does not suggest that the global

economy will return to recession any time soon, we remain sceptical about whether a slowing growth scenario

is fully discounted; and with output set to decelerate, risks logically seem weighted on the downside. Current

data points from around the world are also far from encouraging.

In the US (still the world’s largest economy, and where The Economist forecasts a slowdown in 2011 GDP to

2.3% relative to the estimated 2.6% for 2010), durable goods orders have declined for two of the last three

months, with October’s 3.3% drop comparing to a 5.5% rise the previous month. The ISM index remains

above 50, but has fallen in the last month, with inventories rising faster than new orders, a negative indicator.

Meanwhile, the unemployment rate remains stuck at 9.6% despite 151,000 jobs having been created in the

last month, the largest increase since May. Moreover, recently rising consumer confidence (up in November for

the first time in three months) masks the fact that the US Conference Board’s gauge is still almost 20 points

below its five-year average.

The picture is little different elsewhere in the developed world. Data released by Eurostat since the last edition

of Insight highlighted a slowdown in eurozone GDP growth in Q3 to 0.4% (against a 1.0% reading for Q2).

Despite record post-reunification confidence levels and employment rates in Germany, the rate of GDP growth

Edison Insight

2 December 2010 7

over the last quarter shrank by more than threefold (2.3% to 0.7%) and Germany’s relative success cannot

mask the broader challenges besetting the eurozone. Industrial new orders are dropping (September’s 3.8%

decline compares to a 5.1% rise for the previous month) and, most notably, unemployment stands at over

10.1%, higher than it has been in 12 years and also above levels in either the US or the UK. It is still rising in 19

of the EU’s member states and stands at above 20% in Spain.

Despite robust manufacturing growth (at its fastest in the last 16 years according to figures released on 1

December), the UK can draw little comfort from its 7.7% unemployment rate. The current rate of growth in

manufacturing may not be sustained, a view endorsed by the Bank of England’s latest report (10 November)

which states that “growth may slow in the near-term”. The OBR has also recently (29 November) trimmed its

UK GDP estimates both for 2011 and 2012.

Optimists premise their better-growth outlook on two factors: first, that significant unused capacity exists in the

economies of the developed world (see output gap data in Exhibit 5 below); and second, that deteriorating

western world growth trends may be offset by robust emerging market patterns. Both assumptions may be

called into question. With regard to the output gap, closing it requires efficient and coordinated policy stimulus.

Even if QE II in the US does bring better growth (the expectation), then it will also likely result in higher inflation,

which would logically eat-away at improved production. Furthermore, QE II alone may not deliver an improved

performance; it needs to be combined with fiscal reform. How this can be enacted in the US, with a now

divided legislature, remains to be seen.

More broadly, even if there will likely be political stability in the world’s major developed economies in 2011 (no

general elections are scheduled), it seems unlikely that a consensus will emerge regarding coordinated fiscal

and monetary policy, combined with an absence of aggressive exchange rate devaluations. With

unemployment rates still stubbornly high, there is also a strong case for labour market reform. The developing

world may be able to help the western world through some of its transition, but assuming that growth rates

here will continue at their current pace also seems debatable – and hence implies some additional risks – as

we discuss in more detail below.

Exhibit 5: 2011 GDP estimates point to a slowdown; the developed world’s output gap remains significant

0 2 4 6 8 10 12

ChinaIndia

RussiaBrazil

FranceGermany

EUJapan

UKUS

GDP estimates: for 2010 and 2011

2010 2011

0 2 4 6 8

Japan

Germany

France

US

OECD

UK

Output gap as a % of GDP

2011 2010

Source: IMF, OECD, The Economist, Edison Investment Research

When does the BRIC bubble burst?

Few doubt the structural case, as the economies of Brazil, Russia, India and China necessarily continue to

industrialise and modernise. However, the reality is more complicated: first, there is the issue of timing – how

quickly will it happen; next, will all countries benefit equally; and, finally what comes after BRIC? Investors also

need to be selective in how they seek to gain exposure to this theme either through domestically listed plays or

Edison Insight

8 2 December 2010

with, for example, the Shanghai Composite Index down 13.2% year-to-date, but the Sensex Index in India up

14.3% since 1 January.

In the near-term, growth rates will likely slow, but remain significantly above developed market levels (see

Exhibit 5 above) and, in India, industrial output has now shrunk for two consecutive months. More significantly,

inflation has emerged as an incipient threat, both here and in China. The challenge is how to manage robust

growth without the risk of over-heating and how to implement interest rate rises without choking growth.

Visibility on these factors is low.

We do not expect the BRIC bubble to burst any time soon, but investors should be mindful of assuming that

these economies alone can drive the world back to prosperity, especially with growth also currently slowing in

a number of peripheral Asian economies such as the Philippines and Thailand. Analysis from the IMF

(reproduced in The Economist, 30 October) suggests that every percentage point of incremental GDP growth

in China takes at least five years to feed through to a 0.4 point rise in global GDP.

A relative slowdown in growth (China should see its c 10% GDP rate come down to close 7%) combined with

rising inflation remain near-term risks. Diversified basic materials stocks remain our favoured strategy for

gaining exposure to emerging economies (and investors following this approach have gained >25% in the last

year). However, we would also advocate thinking beyond this tactic, considering other geographies (especially

Africa) and also sectors.

Will we be best by inflation or deflation?

The question of global growth is inextricably bound up with that of inflation, which we see as an additional risk

for investors. Beyond Japan, which has seen structural downward pricing pressures for the last 20 years, the

US economy seems an exception in being preoccupied with deflationary concerns, with consumer price

inflation currently at its lowest level (0.6% for October) since 1957. Critics of Chairman Bernanke’s policies are

wide of the mark in asserting that QE II can both not work and that it will result in inflation. The concomitant of

one is the other, but even putting this to one side, we believe inflation is more likely than not to grow in force

during 2011, eating into already slowing growth. Stagflation is a plausible scenario in our view; gold a clear

beneficiary.

Inflation is emerging in two distinct areas. First, the UN Food & Agriculture Organisation is already warning that

the world should “be prepared” for higher food prices next year. Its index is close to peak levels witnessed

during early 2008 and has risen by five percentage points in the last month. According to the UN, levels are

“dangerously close” to creating a crisis. This view has been reiterated by a number of industry bellwethers, with

the CEO of Unilever, for example, stating on 4 November than food inflation is “returning in force”. The other

concern relates to Chinese (and other BRIC) demands for raw materials combined with the growing power of

the consumer in these economies. In China, inflation hit a two-year high in October of 4.4%, up 0.8 points

relative to the previous month.

Some steps have been taken to cool inflation, with interest rate rises implemented over the last month in

China, India (for the sixth time in 2010), South Korea and Australia. However, the bigger concern relates to the

rate at which rising input prices will feed into the economies of the developed world, where the rhetoric also

currently and firmly remains one of keeping interest rates in check.

The UK constitutes an interesting (and potentially worrying) case study. Here, the inflation rate stands at 3.2%

for October, up slightly relative to the previous month and still rising on a 12-month rolling basis. The Bank of

England warns that it is likely to “remain elevated throughout 2011” and cites a “highly uncertain” outlook

(comments from 16 November Inflation Report). Factory gate inflation – ie producer prices – rose 4.0% in the

last month and input price inflation is running at 8.0%, its highest in two years according to the Office for

Edison Insight

2 December 2010 9

National Statistics. VAT rises on 1 January will also only likely exacerbate matters. Among the retailers, Marks &

Spencer, Next and Sainsbury’s are already warning of the consequences.

Stagflation remains the worst of all possible worlds, rising prices and high unemployment, with the output gap

failing to close. A more optimistic consideration would suggest that judicious policy-making (via interest rate

rises) can help ward off inflation, but it will take time for the evidence on this to become clear. In the meantime

– and also, even of a scenario where deflation were to come to pass – then we reiterate our view that investors

can benefit most through retaining their exposure to gold.

Exhibit 6: UK inflation and unemployment trends suggest stagflation may be coming

0.0%

1.0%

2.0%

3.0%

4.0%

Dec

/08

Feb/

09

Apr

/09

Jun/

09

Aug

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Oct

/09

Dec

/09

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Apr

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Jun/

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Aug

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Oct

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Inflation

Value 12M rolling

5.0%5.5%6.0%6.5%7.0%7.5%8 .0%8 .5%

Dec

/08

Feb/

09

Apr

/09

Jun/

09

Aug

/09

Oct

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Dec

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Aug

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Unemployment

Value 12M rolling

Source: Office for National Statistics, Edison Investment Research

Wither the consumer?

The consumer matters, being responsible for more than 60% of GDP in the UK and over 70% in the US. How

the economy performs is, therefore, highly contingent on the strength of domestic consumption. In the UK

specifically, with the full impact of October’s spending cuts (and job losses) still to come combined with

January’s increase in VAT, risks seem heavily weighted towards the downside. The indicators are negative,

with retail sales growth currently slowing (according to the ONS), and the Nationwide’s consumer confidence

index at 53 for October, its lowest in 18 months and down from a recent peak of 120 in February.

From an investment perspective, domestically-oriented consumer plays would logically be the biggest potential

losers from a moribund consumer, reinforcing our negative stance on these sectors. Additionally, we see

negative implications for other sectors under the consumer umbrella, particularly airlines and media. With

regard to the former, our concerns relate not only to consumer exposure, but also to the effect from a high oil

price combined with ongoing capital intensity requirements. Turning to media, 2011 will be see the negative

impact of a lack of super-quadrennial events and therefore limited scope for upside potential to estimates.

Will there be light at the end of the tunnel for the financial sector?

Our other major negative sector stance for the past year (in contrast to our consistently positive stance on

basic materials, discussed earlier) has been the financial sector. In this respect, and in common with the

consumer space, we find it hard to construct a positive case for the year ahead. Our concerns relate to excess

leverage and insufficient liquidity within the financial system, both factors that will likely be compounded by the

still-unknown consequences on ongoing eurozone sovereign debt exposure. The implementation of Basel III

regulation is another risk factor. We find little cause for comfort within the financial sector.

Could M&A help restore investor confidence?

Investors faced with a slowing growth-rising inflation scenario may be able to find some scope for optimism

from potential deal-making. Even if the current environment does favour M&A (companies might logically look

to ‘buy’ growth if they are unable to generate it organically), it is unlikely to be a panacea for equity markets in

our view.

Edison Insight

10 2 December 2010

Deals have happened for much of the last year, but at a noticeably slower rate than in the past. Risk aversion

levels remain high and not all companies have the requisite balance sheet strength. As we have written in

previous editions of Insight, the current distressed debt cycle still has much further to run (estimates suggest

that $450-500bn of debt will need to be refinanced in the next three years).

Moreover, present appetite for M&A is low, perhaps unsurprising, given an uncertain macro environment.

According to a recent survey by Ernst & Young fewer than 25% of global companies say they are now seeking

acquisition targets, relative to 38% six months ago. The IPO market is also subdued. With more than 150

transactions cancelled this year (note the recent postponements of the proposed floats of First Wind in the US

and Bluestar Adiesso Nutrition in Hong Kong), equivalent to a combined total of $55bn, risk aversion levels

clearly remain high. Market volatility/ uncertainty have been typically cited as the reason for deferral. We

therefore suggest choosing carefully. Mid-cap UK equities may provide fertile ground for stock-picking, with

over 20 FTSE-250 companies having succumbed to deals in the past year, but we expect this to be a selective

rather than broad trend for 2011.

Towards a sector ranking: Key considerations

We review our theoretical sector allocations monthly and we see few reasons to change our stance for

December and looking ahead into 2011. Against a backdrop of ongoing uncertainty and likely rising risk levels,

we believe that the ‘bar bell’ approach makes most logical sense. In other words, our core overweight sectors

(in order) of basic materials, telecoms, utilities and healthcare allow us to gain exposure to both the ‘risk on’

and ‘risk off’ mentalities that could drive performance through until the year-end and beyond. These sectors

also have the benefit of high emerging markets exposure (basic materials) and substantial cash returns (the

defensives) both themes we believe currently matter.

Exhibit 7: Edison sector rankings and rationale for December; and how they compare to a year ago

Pos ition Dec- 10 R ationa le Dec- 09

B es t Basic materials M-term fundamentals, global exposure, valuation Telecoms

Telecoms Valuation, cash returns; some global exposure, M&A potential Basic materials

Utilities Valuation, cash returns; some global exposure, M&A potential Healthcare

Healthcare Defensive profile; underperformance creates opportunity Utilities

Industrials Earnings momentum positive but slowing; risks emerging Industrials

Oil & gas Poor macro prognosis; recent gains unjustified Technology

Technology M&A potential, but valuation demanding; US trends also negative Oil & gas

Financials Risk aversion levels rising; valuation not supportive Consumer services

Consumer services Structural concerns given outlook; heavy domestic bias Consumer goods

Wors t Consumer goods Structural concerns given outlook; heavy domestic bias Financials Source: Edison Investment Research

As exhibits 7 and 8 highlight, our views have remained highly consistent over the last 12 months. While there

have clearly been variations, the basic materials sector has persistently sat in either first or second place within

our conceptual framework of sector rankings, while the consumer sectors have also been among our least

favoured for all of 2010.

Our conviction in basic materials has been vindicated by a 27.2% gain in the last 12 months, a performance

bettered among the UK sectors only by technology (29.8%), although this latter sector has a but 1.5%

weighting in the All-Share relative to 13.4% for the former. On telecoms, which began 2010 as our most

favoured sector and has been our second most preferred (after basic materials) for the last three months, we

have also been rewarded with a market-beating gain. The sector us up 17.7% in the last 12 months, some

seven points ahead of the All-Share benchmark.

Edison Insight

2 December 2010 11

On the negative side, we began 2010 being most cautious on the financial sector, and while we turned more

optimistic during the summer (July through to September, which coincided with a brief period of

outperformance), we downgraded the sector again in October and have been cautious since. This strategy has

worked, with financials having been the second worst performing sector (up just 2.5%) in the last 12 months.

Only oil and gas – compounded by BP – has performed worse. Despite our caution on the consumer, the

performance of these sectors has been somewhat more robust, with consumer services performing in line with

the market and consumer goods gaining 680 basis points on a market relative basis. This performance,

however, only serves to reinforce our negative conviction for the year ahead.

Exhibit 8: How our rankings have changed in the last 12 months; consistency in core sector calls Note: sectors ranked from 10 to 1, with 10 being the most preferred and 1 the least.

0

2

4

6

8

10

Dec

/09

Jan/

10

Feb/

10

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/10

Telecoms Basic materials Healthcare UtilitiesIndustrials Technology Oil & gas Consumer servicesConsumer goods Financials

Source: Edison Investment Research

Exhibit 9 below shows our current sector strategy, which we caution is strictly illustrative since it only relates to

hypothetical positioning across UK equities whereas, in reality, investors will likely take into consideration a

much broader range of factors. We have made no changes relative to the previous month.

Exhibit 9: Edison sector rankings, key valuation and performance data Note: * All Share benchmark weight.

Pos ition S ector We ight* P/E Y ie ld YTD Las t month

Las t three

Las t s ix months

Las t 12 months

Best Basic materials 13.4% 10.9 1.5% 16.6% 1.4% 26.9% 25.2% 27.2%

Telecoms 6.3% 8 .1 4.9% 14.5% 0.2% 12.2% 23.2% 17.7%

Utilities 3.8 % 10.2 5.2% 8 .1% 0.3% 4.8 % 20.5% 14.4%

Healthcare 7.2% 13.4 4.4% 0.9% (1.7%) 2.0% 10.9% 6.0%

Industrials 7.1% 18 .5 2.6% 18 .0% (2.5%) 13.5% 13.6% 25.4%

Oil & gas 16.4% 12.9 2.9% (5.0%) 1.0% 13.8 % 6.7% (1.2%)

Technology 1.5% 22.4 1.3% 23.2% (2.3%) 8 .2% 15.5% 29.8 %

Financials 23.6% 18 .4 2.9% 1.9% (3.1%) 2.9% 8 .7% 2.5%

Consumer services 9.6% 13.5 2.8 % 8 .4% (1.8 %) 8 .7% 9.8 % 17.5%

Worst Consumer goods 11.1% 14.7 3.4% 9.6% 0.8 % 9.9% 13.2% 11.0%

Average 100.0% 14.3 3 .0% 6 .2% (0.8 %) 10.2% 12.8 % 10.7% Source: Datastream, Edison Investment Research

Basic materials: Momentum, growth and value

As discussed earlier, we have been encouraged by positive recent and more medium-term (one year)

performance and believe there is substantially more to go for given structural long-term growth trends and also

Edison Insight

12 2 December 2010

currently supportive (c 11x 2011 P/E) valuation. We favour this sector owing to its global characteristics, and

particularly its exposure to the BRIC economies.

Telco, utilities and pharma: Attractive on yield and other factors

The appeals of defensive sectors are broadly understood; in particular, their combination of attractive dividend

yield and value, combined with relatively low economic risk. Despite strong performances over the last six

months – particularly from the telco and utility sectors – we see substantial valuation attractions (reinforced by

recent strong results, for example, from BT, National Grid and Vodafone) and also upside potential from

possible M&A. All three sectors currently trade on sub-market multiples with above-average dividend yields.

Some of the larger sector names also offer global exposure (especially in the form of Vodafone, GSK and

Astra).

Our relative preference for telco over utility and pharma is a function of valuation (8.1x 2011 P/E), and cash

returns (4.9% sector yield). Relatively, healthcare looks the most expensive of the three defensive sectors and

offers less scope for near-term M&A potential, hence its relative undperformance. Elsewhere, Vodafone is in

the process of disposing of assets and unlocking value, while Cable & Wireless, United Utilities and

Northumbrian Water have all attracted bid speculation in the past months.

Exhibit 10: Defensives screen well on value and yield

0 5 10 15 20 25

Telecom Utilities

Basic materialsOil & gas

HealthcareConsumer services

FTSE All ShareConsumer goods

FinancialsIndustrials

Technology

2011 P/E multiples (x)

0 2 4 6

TechnologyBasic materials

IndustrialsConsumer services

FinancialsOil & gas

FTSE All ShareConsumer goods

HealthcareTelecom

Utilities

2011dividend yields (%)

Source: Datastream, Edison Investment Research

Industrials: Risks to rise

The performance of the industrial sector has been robust year-to-date (up 18.0% since 1 January) and investors

may also welcome some of the increased clarity that was provided by the Strategic Defence & Security Review

and Comprehensive Spending Review. However, we believe that a headline P/E of more than 18x and a

premium of greater than 20% relative to the UK market implies that much future upside potential has already

been discounted. Meanwhile, cost-cutting and operating leverage benefits may have begun to run their course;

the Q3 reporting season may represent an apogee for the sector.

Looking ahead, we have concerns about potentially deteriorating earnings momentum and rising input costs

(see, for example, Arcelor’s last earnings release) may constitute an additional risk. Other UK industrials that

have also referenced greater caution regarding the outlook in their recent releases include Cobham, Hill & Smith,

Rolls Royce and Smiths Industries. Given the heterogeneous nature of the sector, within industrials we favour

those stocks that offer global, and particularly emerging market exposure.

Oil and gas: Near-term gains may not prove sustainable

With the oil price close to a six-month high, and BP’s well-documented problems now seemingly having

passed, the sector has rallied 13.8% in the last three months, a performance only bettered by the basic

Edison Insight

2 December 2010 13

materials sector. That the sector remains in negative territory (down 1.2%) on a 12-month view appears to

create an opportunity, while valuation (c 13x 2011 earnings) is also supportive.

While these factors may help drive some further near-term performance (and the Saudi Oil Minister has said on

record that he sees oil in a “comfort zone” of $70-90/barrel), we are concerned that the macro prognosis

appears to be deteriorating. Our team discussed the outlook in a recent note (see “The market remains well

supplied”, 15 October), but supply and demand remain imbalanced, while inventories stand at close to record

levels.

Technology: More downside potential to come

As discussed earlier, the tech sector’s weighting in the UK market (at 1.5%) is small, but it remains the best

performer in the All-Share since 1 January. As a result, we see its market relative underperformance on both a

one- and three-month view as being as welcome as it is overdue, especially given the sector’s rating of more

than 22x forward earnings.

Beyond valuation and performance, fundamentals give us cause for concern. Despite recent rises to guidance

from Dell and HP, Apple and Cisco have recently warned. Moreover, October’s US durable goods figures were

particularly weak for electronics (down 7.7%) and communications equipment (down 12.3%), while chip

industry forecasts (from SIA, iSuppli) have also recently been trimmed. On the positive side, for UK investors

some further M&A activity may materialise, but we expect this to be concentrated towards the lower end of the

market cap spectrum.

Financials: Performance disappointing, outlook uncertain

With bank exposure to Irish (and Portuguese) debt at the forefront of many investors’ minds, the performance

of the UK financial sector – down 3.1% in the last month, worse than any sector – is unsurprising. The sector

has also lagged over every time period we analyse (see Exhibit 9 above) and we expect this to continue for the

near-term for several reasons, Eurozone uncertainty notwithstanding.

First, new Basel regulations may force banks (in particular) into another round of capital rising. Standard

Chartered, BBVA, BNP Paribas and Société Generale have all recently come to the market; more may follow.

Next, results from the recent reporting season have been highly mixed with Barclays citing a subdued

economic environment and slowing new business growth, Lloyds citing weak mortgage demand and RBS

highlighting increasing losses. Among the UK majors, only HSBC sounded an upbeat note, and one driven

largely by overseas exposure. Finally, sector valuation, on a headline multiple of more than 18x forward P/E is

not supportive in our view.

Consumer goods and services: underweight on fundamentals

Both the consumer services and consumer goods sectors have underperformed on a market relative basis in

the last three months, but have gained more than the All-Share on a one-year view. As discussed earlier, we

see risks weighted to the downside and expect recent underperformance to continue into 2011. Our concerns

are driven by poor consumer confidence and declining retail growth, both which may likely be compounded by

VAT hikes and potentially higher unemployment.

Companies including Debenhams, Home Retail, Kingfisher, Next, Marks & Spencer and Sainsbury’s have all

highlighted increasing notes of caution in recent releases and interviews (Next, for example, sees “a very

sluggish, low to no-growth consumer environment for some time to come”). Even if sales do receive a

temporary fillip in the run-up to Christmas and ahead of January’s VAT increase, 2011 looks set to be a

considerably more difficult year, an outcome not fully reflected in current valuation levels in our view.

Edison Insight

14 2 December 2010

Conclusions Equities may have risen more than 15% from their July lows, but events from the last month serve as a more

appropriate indicator of current sentiment. Global indices continue to exhibit profound swings both to the

upside and downside as investor psychology appears to be gaining the upper hand over fundamentals. An

assessment of the latter suggests that the same familiar problems beset the global economy, namely a lack of

suitable policy instruments to manage the ongoing painful process of deleveraging across the developed

world. Stagnating growth and rising inflation represent other concerns.

Looking ahead to 2011, we believe that until there is a consistent and coordinated approach to monetary and

fiscal policy, equities may likely remain volatile. Lack of future visibility may also cloud the outlook for corporate

earnings growth, which has shown a recent improvement, but may not prove sustainable in our view. It is

against this background that our strategy for equities stays centred around favouring diversified growth (basic

materials) and high cash returns (telcos, utilities) principally at the expense of the consumer sectors. Gold also

remains highly attractive in our view.

Edison Insight

2 December 2010 15

Focus on:

Technology

Oil & gas

Edison Insight

16 2 December 2010

Sector focus: Technology

Analyst

Katherine Thompson

Cloud computing: Managing the transition The emergence of cloud computing will reshape the software industry; at a disruptive

pace in some areas and evolutionary one in others. This presents significant

opportunities for companies and investors alike but threats and pitfalls also lie on the

transition path ahead. We offer advice to investors and corporates on how to manage

this transition.

Sales from US-listed software-as-a-service (SaaS) pure-plays alone are expected to

be $4.2bn in 2010 and estimates call for 18% annual growth over the next two years

versus c 7% for the rest of the software sector. Given the predominant subscription

model of SaaS businesses versus upfront licensing in software, it is possible these

figures underestimate the extent to which SaaS businesses are winning share. M&A in

the sector is also rife, with 36 SaaS businesses acquired in Q310 alone, and cloud-

related take-out values averaging 5.4x trailing revenues over the last year.

Fundamental technology shifts are usually presented as an opportunity with the

threats being underestimated – SaaS is no exception. It is not clear to us whether

SaaS will be value-creative or erosive for the software sector as a whole. The

emergence of platform-as-a-service (PaaS) offerings from the likes of Salesforce.com

and Google could reduce barriers to entry for specialist applications while

concentrating value around the first movers. Just like any other business model, there

will be good SaaS companies and bad ones, successes and failures.

We believe it is vital that software companies consider their approaches to cloud

computing and define their strategies, disclosing development milestones and metrics

for the new business in order to give investors the tools to assess performance and

valuation.

For more information, see our sector report “Cloud computing: Managing the

transition” available on the Edison website.

Sector performance

SSector P/E FY1 17.8x FY2 13.1x Significant price changes one month ((%) Nasstar 54 Focus Solutions 34 Endace 33 Belgravium Technologies 32 Scotty Group (24)

KKey sector data Number of constituents 102 Average market cap. £2.3m No of profitable companies 89 Significant deall flow/catalysts Holiday season trading

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FTSE ALL SHARE - PRICE INDEX

FTSE ALL SHARE S/W &COMP SVS £ - PRICE INDEX

Edison Insight

2 December 2010 17

Sector focus: Oil & gas

Analyst

Elaine Reynolds

Little victories At the start of the decade, activity in the UK sector of the North Sea had slumped.

The oil price collapse in 1998 had resulted in a massive reduction in capital spending

on the UKCS, and the UK government was looking for ways to stimulate investment

in the sector. Looking at the Gulf of Mexico, it could see from experience that a rapid

turnover of leases was very effective in stimulating exploration and appraisal activity,

and from this observation the Promote Licences were born. With terms designed to

attract independent oil companies and niche specialists, Promote gave the North Sea

the kick-start it needed and helped to deliver increased activity.

Fast-forward 10 years and the industry is grappling with a different set of lessons from

the Gulf of Mexico. This time round, the jury is out as to how this will affect small

companies in the North Sea. In the Gulf, the requirement to meet a worst-case

scenario – with the equipment and significant resources that entails – risks restricting

deepwater drilling in the area to the big players. Could the same thing happen here?

The immediate threat of a suspension of EU Oil & Gas licences has been avoided for

now, with the proposal being voted down in October and Europe-wide oil and gas

safety regulations being strongly resisted, with UK energy minister Charles Hendry

stating that the UK sets the gold standard for safety in the EU. Clearly the issue of

how small companies can handle a Macondo-style blowout needs to be addressed,

however. The main concerns regard high-pressure wells and deepwater drilling on the

Atlantic Margin – where such a blowout is most likely to occur – and ensuring that

smaller operators have both the technical backup facilities and access to funding to

cover an extended operation, as seen on Macondo. There are suggestions that the

government is looking to change the qualification criteria to become an operator in the

North Sea, which could significantly affect small companies. Here we arrive at a

serious dilemma: how to allow the smaller players to continue the activities that have

been so crucial in the revival of fortunes in the North Sea and still maintain the ability

to respond to a worst-case scenario? Without their involvement, the government will

not be able to extract as much as possible of the estimated 20mmboe left in the

North Sea.

Whatever solution is found, let’s make sure we don’t throw the baby out with the

bathwater.

Sector performance

SSector P/E FY1 19.1x FY2 14.1x Significant price changes one month ((%) Haike Chemical GP 214 Bahamas Ptl. Co. 137 Bowleven 92 Woburn Energy 83 Xcite Energy 71

KKey sector data Number of constituents 100 Average market cap. £2.9bn No of profitable companies 75 Significant deal flow/catalysts Bentley well results for Xcite December Commence drilling at Catcher discovery

December

Rachel well results for Desire December Cairn completion of sale of Indian blocks to Vedanta

December

0

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FTSE ALL SHARE - PRICE INDEX FTSE ALL SHARE OIL &GAS £ - PRICE INDEX

Edison Insight

18 2 December 2010

Forecast changes

The table below details stocks where we have changed our forecasts to 2 December.

Stock Year eend Movement FY1 chhange in EPS FY22 change in EPS FFrom To From To Ablynx Dec � N/A N/A (93.9) (94.9) Alliance Pharma Jun �� 5.5 5.7 4.0 4.3 Antisoma Jun �� (4.7) (3.9) (4.7) (4.3) Arian Silver Dec �� 0.0 0.3 1.7 2.9 Armour Group Aug �� 1.0 0.32 1.3 0.74 Aurizon Mines Sep �� 19.6 10.2 22.5 33.0 Avon Rubber Sep � 22.5 27.0 N/A N/A Bezant Jun � (2.9) (1.8) N/A N/A Byotrol Mar �� (0.8) (1.9) 0.4 0.0 Chemring Oct �� 251.7 245.8 304.2 308.0 Clearstream Technologies Group Jul �� 6.5 3.1 9.1 5.4 Daisy Group Mar �� 10.0 9.5 11.7 12.3 Eastern Platinum Dec � 1.0 0.6 N/A N/A Entertainment One Mar �� 12.2 12.1 13.5 13.2 Fronteer Gold Dec �� (17.5) (41.8) (18.1) (17.5) GMA Resources Dec �� (0.1) 0.0 0.6 0.9 Gold One Dec �� 0.6 0.7 5.8 6.1 Gold One Dec � N/A N/A 5.8 3.6 Goldplat Jun �� 1.94 2.35 4.83 5.92 Hogg Robinson Group Mar �� 6.2 6.72 6.7 7.15 Ithaca Energy Dec � 10.3 13.0 N/A N/A K3 Business Technology Group Jun �� 22.4 23.2 23.9 26.1 KCOM Mar �� 7.5 5.5 8.2 6.2 Landkom Oct � N/A N/A (0.8) (0.7) LSL Property Services Dec � N/A N/A 24.5 23.5 MDM Engineering Mar � N/A N/A 15.5 16.1 Medcom Tech Dec �� 21.0 27.0 27.8 32.1 MedicX Fund Sep � N/A N/A 3.5 3.1 Merrion Pharma Dec � (0.2) (0.1) N/A N/A Monitise Jun �� (1.9) (2.1) (1.3) (1.4) Nevsun Resources Dec �� (4.3) (3.9) 73.0 108.8 Petropavlovsk Dec � 162.2 55.7 N/A N/A Psion Dec � 1.4 1.5 N/A N/A QinetiQ Mar � 12.6 13.9 N/A N/A Rolls-Royce Group Dec �� 39.6 38.4 44.4 43.7 Sosei Mar � (2184.0) (2266.8) N/A N/A Supergen Dec �� 10.2 22.9 11.2 14.9 Trifast Mar �� 2.52 2.93 3.17 3.40 Umeco Mar �� 38.2 39.3 44.2 46.3 Volex Mar �� 17.9 18.3 21.9 22.4 WILEX Nov �� (177.1) (133.5) (155.8) (137.1)

Edison Insight

Sector: Pharma & Healthcare

Price: €3.17Market cap: €122mForecast net cash (€m) 16.9Forecast gearing ratio (%) N/AMarket AIM, FRA

Share price graph (€)

Company description

4SC is a drug discovery/developmentcompany with four compounds inclinical trials. These include vidofludimusfor rheumatoid arthritis and inflammatorybowel disease and resminostat for livercancer and Hodgkin’s lymphoma.

Price performance

% 1m 3m 12mActual 16.0 15.2 (2.0)Relative* 12.0 (3.2) (19.6)* % Relative to local index

AnalystRobin Davison

4SC (VSC)

INVESTMENT SUMMARY

4SC’s investment proposition will be driven by the outcomes of four clinical trials – two each

with vidofludimus and resminostat. The first of these, the ENTRANCE study of vidofludimus in

IBD, has just rendered a positive result and the other three are all due to read-out by

mid-2011. The most important will be the COMPONENT study of vidofludimus in rheumatoid

arthritis (RA), which, if successful, would confirm blockbuster potential for this product. Positive

results from these trials should enable 4SC to secure development partnerships with major

pharmaceutical groups.

INDUSTRY OUTLOOK

The RA and IBD markets are expected to be worth $14bn and $5bn respectively by around

2017-18. The major TNF inhibitors already generate sales already in aggregate of c

$18bn across all indications (RA and other autoimmune diseases), with three products Enbrel

(etanercept, Pfizer/Amgen), Humira (adalimumab, Abbott) and Remicade (infliximab,

J&J/Merck & Co) all achieving sales of over $5bn/year.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(€m) (€m) (€m) (c) (x) (x)

2008A 3.0 (10.8) (10.7) (45.87) N/A N/A

2009A 1.9 (15.0) (15.2) (51.17) N/A N/A

2010E 1.0 (18.6) (18.9) (48.89) N/A N/A

2011E 1.0 (22.0) (22.3) (58.01) N/A N/A

Sector: General Retailers

Price: 334.3pMarket cap: £603mForecast net debt (£m) N/AForecast gearing ratio (%) N/AMarket AIM

Share price graph (p)

Company description

Abcam is focused on making, sourcing,and selling antibodies online forresearch use. Its main operations are inthe UK, the US and Japan, with a globalcustomer base.

Price performance

% 1m 3m 12mActual (0.3) 8.7 82.7Relative* 0.4 17.6 65.1* % Relative to local index


Abcam (ABC)

INVESTMENT SUMMARY

Demand for Abcam's products will be driven by a combination of factors including the

availability of grant funding in core market North America, under pressure as a result of

government deficits. Abcam is focusing on medium-term geographic expansion and intends to

develop market share in the Far East. Its product mix is a vital driver of future demand, since

the company relies on added value from characterisation data to enhance long-term turnover

from its products. It must balance the proportion of newly added proteins and reagents (which

have less potential as data-rich products) with new antibodies in niche areas to drive and

sustain future growth.

INDUSTRY OUTLOOK

Antibodies are an essential and fundamental tool of life sciences research. There are millions of

such antibodies and the market is fragmented, providing Abcam enough growth potential.

Abcam and Santa Cruz Biotechnology are market leaders, although Abcam is a smaller niche

supplier compared with wider peer group.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 56.8 17.7 17.0 36.9 9.1 8.0

2010A 71.1 28.0 26.8 56.6 5.9 6.1

2011E N/A N/A N/A N/A N/A N/A


192 December 2010

Edison Insight

Sector: Property

Price: 60.5pMarket cap: £66mForecast net debt (€m) 231.0Forecast gearing ratio (%) 113.0Market AIM


Company description

Ablon Group is a leading developer andinvestor in commercial and residentialproperty in Central and Eastern Europe.It holds a portfolio of 33 assets, 14income producing investments and 19development projects.

Price performance

% 1m 3m 12mActual (10.4) 15.2 (12.9)Relative* (9.7) (14.2) (21.3)* % Relative to local index

AnalystRoger Leboff

Ablon Group (ABL)

INVESTMENT SUMMARY

The interims provided a few signs that Ablon's CE European markets may be bottoming out.

Asset values were steady during the first half: NAV/share €2.69 vs €2.68 six months earlier,

despite weak tenant demand. Gross sales income, up 56% to €14.4m, included €5.3m from

37 units at its Viva Residence in Prague. A further 12 units are due for delivery in H2, but the

local housing market remains weak. Gross commercial rents fell 5.6% y-o-y to €8.7m after

tenant departures in central Budapest. At c 73% below NAV, the shares fully discount the

issues facing the group over the next 18 months.

INDUSTRY OUTLOOK

Ablon holds 14 completed schemes and 19 development projects, well diversified by sector.

These were built to meet an identified need for modern commercial space, but local recession

cut demand and increased competition for tenants, so key markets face oversupply. A

shortage of debt finance and lack of well-developed investment markets may delay recovery,

but a diminishing development pipeline will help.


2008A 23.9 7.0 (17.1) (9.2) N/A 27.2

2009A 25.3 12.1 (2.1) 2.5 28.2 14.8

2010E 28.0 12.2 (4.4) (1.1) N/A 8.8



Price: €8.00Market cap: €349mForecast net cash (€m) 108.7Forecast gearing ratio (%) N/AMarket Euronext Brussels


Company description

Ablynx is a drug discovery companywith a proprietary technology platform. Itis developing a novel class oftherapeutic proteins called Nanobodiesto treat a range of indications. It has fourproducts in clinical development.

Price performance

% 1m 3m 12mActual (3.0) 10.3 5.3Relative* 1.2 (6.7) (1.0)* % Relative to local index

AnalystMick Cooper

Ablynx (ABLX)

INVESTMENT SUMMARY

Ablynx has developed a broad pipeline of products using its Nanobody technology in several

disease areas. These novel therapeutic proteins have the specificity of monoclonal antibodies

but with many of the benefits of small molecules. It has sufficient capital to operate into 2013,

by which time up to five Nanobody programmes could have achieved significant value

inflection points, if proof-of-concept clinical trials are successful. Its most valuable product is

ATN-103 (a potential successor to Enbrel, which generated FY09 sales of $5.6bn) and it could

enter Phase III development in 2011. Other Nanobodies of significant value include the fast

followers of Prolia (ALX-0141) and Actemra (ALX-0061).

INDUSTRY OUTLOOK

There is a strong demand for novel pharmaceutical products for either unmet medical needs or

to improve on current treatments. The characteristics of Ablynx's Nanobodies, together with

the initial results from clinical trials, mean they have considerable commercial potential across

many indications.


2008A 16.8 (18.5) (15.0) (41.3) N/A N/A

2009A 29.7 (19.6) (19.8) (53.7) N/A N/A

2010E 29.6 (30.2) (29.3) (69.2) N/A N/A

2011E 32.0 (43.1) (41.4) (94.9) N/A N/A

20 2 December 2010

Edison Insight

Sector: Financials

Price: 222.0pMarket cap: £43mForecast net cash (£m) 5.4Forecast gearing ratio (%) N/AMarket AIM


Company description

ACM is a shipbroker with a focus on theglobal oil tanker market. It arranges spotand time charters, and also handlesship sale and purchase to aninternational customer base.

Price performance

% 1m 3m 12mActual 3.3 23.3 7.8Relative* 4.1 0.9 (2.6)* % Relative to local index

AnalystNigel Harrison

ACM Shipping Group (ACMG)

INVESTMENT SUMMARY

The manner in which ACM has come through the global recession reflects highly on the

business model and the teamwork ethic established by management. Investment in future

growth and weakening shipping rates continue to undermine margins, but as demonstrated

this week with the interim figures, underlying growth is being sustained. A major investment in

developing a presence in the dry cargo market may slow down growth in the short term.

However, the emphasis on broking, steady cash generation and the clear medium-term

strategy ought to encourage a higher rating.

INDUSTRY OUTLOOK

The shift in manufacturing capacity towards lower-cost areas has irreversibly transformed the

underlying potential for shipping. The global recession has created volatility in freight rates, but

rising oil consumption is stabilising wet freight rates. The larger shipbrokers are better

equipped to provide advice to customers which, combined with the cash-generative nature of

the businesses, suggests a quality of earnings that is not recognised in the City.

Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 30.1 8.9 8.7 36.7 6.0 4.3

2010A 25.9 6.9 6.6 26.8 8.3 15.1

2011E 31.0 7.1 6.8 25.9 8.6 6.7

2012E 35.0 8.3 8.0 29.8 7.4 5.4

Sector: Technology



Company description

Active Energy's origins are in supplyingvarious components to manufacturersof gas appliances. The investment caseis now centred around a UK-basedsubsidiary that designs and sells poweroptimising transformers under the brandVoltageMaster.

Price performance

% 1m 3m 12mActual (32.5) (41.3) (69.2)Relative* (32.0) (72.1) (72.2)* % Relative to local index

AnalystDan Ridsdale

Active Energy (AEG)

INVESTMENT SUMMARY

Active Energy has disposed of its Gasignition and Derlite businesses, leaving the company

focused on its 72.8%-owned voltage optimising unit, Active Energy Ltd. While the disposal

proceeds are modest, the legacy businesses had limited growth prospects and were

challenging to manage. The disposal will enable management to focus on driving the voltage

optimising business, where the opportunity still benefits from the green agenda and

cost-saving promises.

INDUSTRY OUTLOOK

The demand outlook for voltage optimisation equipment looks compelling, with rising electricity

prices likely to speed the return on investment, and carbon reduction initiatives also boosting

demand. Current market penetration is estimated at c 0.5% in the UK, and overseas markets

are even more nascent. Competition is present, however, and Active Energy's success will

hinge on its ability to further establish itself as one of the UK's leading suppliers while finding

appropriate channels to exploit opportunities overseas.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 2.0 (0.3) (0.3) (1.03) N/A N/A

2009A 2.9 (0.9) (1.0) (1.52) N/A N/A

2010E 5.1 (1.3) (1.3) (1.34) N/A N/A

2011E 6.4 0.2 0.2 0.19 17.9 N/A

212 December 2010

Edison Insight


Price: CHF11.15Market cap: CHF72mForecast net cash (CHFm) 73.9Forecast gearing ratio (%) N/AMarket Swiss Stock Exchange

Share price graph (CHF)

Company description

Addex is engaged in the adaptation andexpansion of its allosteric modulatordiscovery platform for targets in centralnervous system (CNS), metabolicdisorders and inflammation.

Price performance

% 1m 3m 12mActual 1.4 25.3 (71.1)Relative* 1.3 1.0 (72.0)* % Relative to local index


Addex Pharma (ADXN)

INVESTMENT SUMMARY

Addex will shortly start its Phase II study of the mGluR5 NAM, ADX48621 in Parkinson’s

disease levodopa-induced dyskinesia (PD-LID). The company is also planning a small Phase II

trial in focal dystonia and is considering exploring the potential of ADX48621 in Fragile X

syndrome and autism. Meanwhile, Addex's partner J&J has confirmed plans to start Phase II

studies with ADX71149 in schizophrenia and anxiety in early 2011. By early/mid-2011, Addex

should have two programmes in Phase II studies. Recent presentations to the Society for

Neuroscience served to reinforce the strength of the allosteric modulation technology.

INDUSTRY OUTLOOK

Addex has established a world-leading position in the identification of allosteric modulators,

compounds which offer significant potential advantages over classical agonist/antagonists.

Novartis's decision to undertake pivotal/Phase III studies of its mGluR5 NAM, AFQ056, in

Fragile X and PD-LID further endorses the potential of the platform.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(CHFm) (CHFm) (CHFm) (CHFc) (x) (x)

2008A 26.9 (21.5) (22.0) N/A N/A N/A

2009A 4.5 (39.0) (42.4) N/A N/A N/A

2010E 4.4 (25.2) (28.8) N/A N/A N/A

2011E 0.3 (38.4) (40.9) N/A N/A N/A

Sector: Oil & Gas

Price: A$0.10Market cap: A$34mForecast net cash (A$m) 0.8Forecast gearing ratio (%) N/AMarket ASX

Share price graph (A$)

Company description

ADX Energy (formerly AuDAXResources) is an oil and gas explorationbusiness listed in Australia withexploration activities in Tunisia, offshoreItaly, Romania and Australia. The groupalso has mining interests which are inthe process of being demerged.

Price performance

% 1m 3m 12mActual (1.0) (34.0) 4.5Relative* 0.5 (39.1) 5.3* % Relative to local index

AnalystIan McLelland

ADX Energy (ADX)

INVESTMENT SUMMARY

In early November ADX Energy announced a resource upgrade at Dougga following the

completion of 3D seismic processing. The announcement confirms the understanding of

geology and the larger resource makes the possibility of commercialising the combined

Lambouka and Dougga prospect more likely, none of which is currently in the share price.

Elsewhere the company launched the expected IPO of its Australian mining assets, which we

expect to close in December. The next share price catalyst is drilling of the Sidi Daher prospect

on the Chorbane block onshore Tunisia that is due to begin late 2010 or early 2011.

INDUSTRY OUTLOOK

With oil prices remaining in the $70/bbl to $80/bbl range, the economics of a number of

exploration plays remain attractive. Along with strong farm-in partners and stable operating

regimes, ADX has every chance of success if it finds commercial quantities of hydrocarbons in

its prospects.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(A$m) (A$m) (A$m) (c) (x) (x)

2009A 0.0 (2.7) (2.7) (1.4) N/A N/A

2010A 0.0 (2.2) (2.1) (0.9) N/A N/A

2011E 0.0 (4.1) (9.9) (2.7) N/A N/A


22 2 December 2010

Edison Insight


Price: €3.66Market cap: €152mForecast net cash (€m) 50.5Forecast gearing ratio (%) N/AMarket FRA


Company description

Agennix is a drug developmentcompany based in Germany and theUS. Its lead product talactoferrin isbeing developed for the treatment ofcancer and sepsis.

Price performance


AnalystMick Cooper

Agennix (AGX)

INVESTMENT SUMMARY

Agennix is developing talactoferrin for two major indications, cancer and sepsis; the drug could

generate peak sales of $2.5bn. There are two Phase III trials for the treatment of non-small cell

lung cancer (NSCLC) under way for third-line and first-line treatment, the former remains on

track to report at the end of 2011. It is now planning to start a Phase II/III trial in severe sepsis

at the end of Q111, having recently amended its development programme. Agennix raised

€76m in equity in October, which should be sufficient obtain top-line data from the first NSCLC

trial and the initial part of the severe sepsis trial.

INDUSTRY OUTLOOK

Efficacious oncology and sepsis products can enjoy premium pricing and be sold by relatively

small sales forces, but there is significant competition in oncology and sepsis is difficult to

treat. Talactoferrin has the potential to become a complementary treatment in oncology to the

current treatments without competing directly against other drugs, and to be widely used in

the treatment of sepsis.


2008A 12.4 (19.6) (18.8) (254.7) N/A N/A

2009A 7.7 (10.8) (9.5) (91.9) N/A N/A

2010E 0.0 (29.4) (30.3) (109.6) N/A N/A

2011E 0.0 (48.5) (48.9) (132.3) N/A N/A

Sector: Financials

Price: 22.0pMarket cap: £13mForecast net debt (£m) 24.3Forecast gearing ratio (%) 131.0Market AIM


Company description

Ai Claims Solutions provides credit hireand credit repair as well as otheraccident management solutionsnationally. It represents non-fault driversand insurers of at-fault drivers.

Price performance

% 1m 3m 12mActual (6.4) (4.3) 44.3Relative* (5.7) (7.1) 30.4* % Relative to local index

AnalystMartyn King

Ai Claims Solutions (ACS)

INVESTMENT SUMMARY

Ai Claims provides accident management solutions, built around credit hire and credit repair,

to 'non-fault' drivers and the insurance companies of 'at fault' drivers. Its product set and

low-cost strategy align it better with the motor insurers than many peers. New distribution is

driving strong growth. For the year to June 2010 revenue grew 65% and adjusted PBT 35%,

both better than expected. For now we maintain our revenue expectations, with further strong

39% growth this year, but increase our PBT expectation by 6% and EPS by 8%. Net debt is

higher than we expected but we foresee sufficient resources to fund expected growth.

INDUSTRY OUTLOOK

The industry remains in considerable turmoil as motor insurers seek ways to control claims

costs and restore their own profitability. Typically, the insurers have been slow to pay and have

challenged claims, starving the industry of cash. In this environment, Ai Claims' lower cost,

more insurer-aligned offering is serving it well.


2009A 55.7 3.2 2.0 2.4 9.2 N/A

2010A 91.9 4.2 2.7 3.3 6.7 N/A

2011E 127.6 5.6 3.7 4.4 5.0 N/A

2012E 144.5 6.7 4.3 5.1 4.3 2.8

232 December 2010

Edison Insight


Price: NOK124.00Market cap: NOK4900mForecast net cash (NOKm) 502.1Forecast gearing ratio (%) N/AMarket OSE

Share price graph (NOK)

Company description

Algeta is a Norwegian listed biotechcompany.

Price performance

% 1m 3m 12mActual 25.3 45.0 75.9Relative* 26.6 31.0 57.7* % Relative to local index


Algeta (ALGETA)

INVESTMENT SUMMARY

Algeta's investment case firmly centres on Alpharadin, its alpha-emitting drug for the treatment

of bone metastases. The drug is partnered globally with BayerSchering, although Algeta

intends to co-commericalise in the US. Alpharadin is in three clinical studies including the

pivotal ALSYMPCA Phase III monotherapy trial in prostate cancer bone metastases. This study

is expected to complete enrolment around the end of the year and should render initial results

in the first half of 2012. The next data is likely to be from the Phase II study in breast cancer

bone metastases in H111, which should open the way for a Phase III trial start in this indication

in 2011.

INDUSTRY OUTLOOK

Algeta is the world leader in the development of alpha-pharmaceuticals for cancer. Alpharadin

is enjoying good visibility, helped by growing interest in potential new therapeutics for prostate

cancer following the approvals of Dendreon's Provenge and Sanofi-Aventis's Jevtana and the

positive results in Phase III for J&J/BTG's abiraterone.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(NOKm) (NOKm) (NOKm) (øre) (x) (x)

2008A 0.1 (180.9) (170.8) (1034.7) N/A N/A

2009A 30.7 (154.9) (164.3) (475.1) N/A 30.1

2010E 202.3 6.5 16.9 42.9 289.0 N/A

2011E 202.3 0.6 8.4 21.4 579.4 N/A

Sector: Mining



Company description

Alkane is a multi-commodity explorer,with projects located in the central westregion of New South Wales in Australia.

Price performance

% 1m 3m 12mActual (0.6) 87.8 103.6Relative* 0.9 189.0 105.2* % Relative to local index

AnalystCharles Gibson

Alkane Resources (ALK)

INVESTMENT SUMMARY

Alkane is a diversified explorer with interests in REEs and gold. It recently recovered its first

yttrium heavy rare earth product and a light rare earth sample from its DZP Pilot Plant. The

YHREE sample will undergo further testing to develop a marketable product, with the LREE

sample process being tested before it is added to the production circuit. A definitive feasibility

study for the Tomingley Gold Project is being finalised, with studies showing 400koz Au

recovered over six to eight years. Alkane intends to use TGP revenues to re-invest into the

DZP. Three deep drill holes were also announced for the McPhillamys project, held with JV

partner Newmont, supporting the initial 2.96Moz resource estimate. We value Alkane's assets

collectively at A$0.91 per share.

INDUSTRY OUTLOOK

Recent increases in the price of REEs point to potential annual revenues of between US$135m

and US$196m (company announcement). We have used a long-term gold price of

US$1,177/oz for valuing the gold assets.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(A$m) (A$m) (A$m) (c) (x) (x)

2008A 2.4 (0.6) 0.1 0.04 2100.0 N/A

2009A 4.7 2.2 2.4 0.99 84.8 N/A

2010E 9.8 7.6 6.9 1.94 43.3 N/A

2011E 0.2 (2.1) (6.8) (2.71) N/A N/A

24 2 December 2010

Edison Insight




Company description

Allergy Therapeutics is aEuropean-based specialitypharmaceutical company focused onthe treatment and prevention of allergy.

Price performance


AnalystLala Gregorek

Allergy Therapeutics (AGY)

INVESTMENT SUMMARY

Allergy Therapeutics’ investment case is geared to M&A and to German regulatory approval of

Pollinex Quattro Grass, due in early 2011. It aims to be among the top three global players in

allergy immunotherapy, by exploiting the evolving commercial opportunity for registered

finished products over the next five to 10 years. Allergy is moving from single-product

promotion to a product portfolio in Europe, smoothing seasonal revenue fluctuations. It is now

on a stronger financial footing, having posted its maiden operating profit in FY10, and should

be able to take advantage of M&A opportunities for further revenue growth.

INDUSTRY OUTLOOK

Pollinex Quattro (representing roughly 50% of Allergy's revenues) is an ultra-short course

allergy vaccine given as four shots over three weeks. This compares favourably with existing

vaccines (typically requiring 16-50 injections under specialist supervision pre-hay fever season)

and with comparable efficacy.


2009A 37.8 (3.5) (10.9) (13.7) N/A N/A

2010A 40.8 3.0 0.3 0.3 31.0 26.0

2011E 40.6 2.0 (0.3) 0.0 N/A N/A

2012E 45.0 3.5 1.3 0.4 23.3 10.4




Company description

Alliance Pharma is a specialitypharmaceutical company that develops,markets and distributes pharmaceuticalproducts.

Price performance



Alliance Pharma (APH)

INVESTMENT SUMMARY

Alliance's renegotiation of financing indicates that an acquisition is possible. The financing is

around 5% lower rate of interest than previously and at present, the level of debt appears to be

well within the expected covenants, since the company has drawn down just £2m of the

revolving credit facility. If Alliance exercises the full £20m RCF, any potential product

acquisition would need to enhance earnings so that debt/EBITDA ratio would not fall below

2.5x. The entrance of a competitor to Deltacortril has now been confirmed, however we had

factored this in to our 2011 revenue well in advance.

INDUSTRY OUTLOOK

Alliance Pharma markets and distributes a range of branded pharmaceuticals with

well-established, off-patent sales. Its products usually have few direct competitors and are low

priced to encourage high prescription take-up. The company achieves growth by a

combination of product in-licensing and organic sales.


2008A 21.8 6.5 2.5 1.6 21.7 10.8

2009A 31.2 11.4 8.6 4.0 8.7 5.7

2010E 50.2 18.3 16.0 5.7 6.1 5.2

2011E 43.1 14.8 13.6 4.3 8.1 5.1

252 December 2010

Edison Insight

Sector: Mining

Price: 33.8pMarket cap: £351mForecast net debt (A$m) 38.2Forecast gearing ratio (%) 10.0Market AIM, ASX, TSX


Company description

Allied Gold is a gold explorer-producerwith its main assets the Simberi OxideGold mine in Papua New Guinea andthe Gold Ridge mine in the SolomonIslands.

Price performance



Allied Gold (AGLD)

INVESTMENT SUMMARY

Allied has finalised its decision to upgrade the Simberi oxide plant from its current 2.2Mtpa to

3.5Mtpa, lifting production from around 73koz to 100koz during 2011. A PFS on the sulphide

ore at Simberi identified that a further 100koz pa could be added mid-decade. Allied intends to

proceed to BFS-stage with an investment decision regarding the sulphides in 2012. The Gold

Ridge mine is still on-track to produce its first gold in Q211, adding 120koz pa after ramp-up

to Allied's annual production. Both the expanded plant at Simberi and Gold Ridge should

produce a total of approximately 220koz pa from 2012, reaching a potential 330koz in 2015 if

the sulphides are mined. Ten- and nine-year mine lives currently exist for Simberi and Gold

Ridge respectively. Further, extensive resource drilling is planned for 2011.

INDUSTRY OUTLOOK

On an EV per resource basis Allied Gold is trading at a value that equates to US$68/oz. This is

a 44% discount to the industry average for AIM-listed gold companies (US$121/oz).

Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF(A$m) (A$m) (A$m) (c) (x) (x)

2009A 77.5 18.7 (2.9) (0.3) N/A 10.5

2010A 67.6 (2.0) (19.4) (1.2) N/A N/A

2011E 127.2 46.2 31.7 1.1 49.6 N/A


Sector: Technology



Company description

Allocate Software is the leading providerof software applications designed forworkforce optimisation within globalorganisations employing large,multi-skilled workforces.

Price performance

% 1m 3m 12mActual 3.0 5.5 31.9Relative* 3.8 (1.0) 19.2* % Relative to local index

AnalystDan Ridsdale

Allocate Software (ALL)

INVESTMENT SUMMARY

The recent investor day demonstrated how powerful Allocate's solutions are for organisations

with complex staffing needs but also how strategically important these solutions have become

to the customer base. Within the UK, Healthroster's headroom for growth is starting to reduce,

but Allocate has built a very solid platform for expansion through product diversification and

progress overseas. The recent oppointment of a Director of International Marketing signals

increased confidence in the ability to expand overseas. A Q2 update is due mid-December

following a positive Q1, which reported good deal flow across the portfolio. We consider both

estimates and valuation to be undemanding.

INDUSTRY OUTLOOK

UK public sector spending concerns still cannot be ignored, but the CSR was about as

positive as it could be and projects that generate nearer-term financial savings should be more

shielded from cuts. A growing proportion of international and SaaS revenues also adds

robustness to Allocate’s revenue profile.

Y/E May Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 15.8 2.7 2.6 5.4 14.2 18.9

2010A 22.0 3.7 3.5 6.3 12.1 8.1

2011E 28.6 5.3 5.0 5.9 13.0 8.8


26 2 December 2010

Edison Insight

Sector: Financials



Company description

Alpha Strategic plans to pool a portionof the revenue streams from severalsingle strategy hedge funds.

Price performance

% 1m 3m 12mActual 0.0 (1.5) (30.3)Relative* 0.8 (15.3) (37.0)* % Relative to local index

AnalystNeil Shah

Alpha Strategic (APS)

INVESTMENT SUMMARY

On 28 October Alpha amended a management agreement held by its 100% subsidiary ACME

Advisors Limited, which will result in a minimum of $800k of revenues being paid to Alpha in

the year to 9 July 2011. This, coupled with the strong performance of the Winton and IKOS

funds, led us to raise our forecasts marginally last month. Since then there has been little

movement in the share price, although the Winton Futures Funds continues to grow assets

under management based on newsflow we have seen.

INDUSTRY OUTLOOK

The hedge-fund industry has nearly recovered from all its investment losses sustained during

the credit crunch. The HFN Hedge Fund Aggregate Index was +2.1% in October 2010 and

+7.9% year to date at the end of October 2010.

Y/E Mar Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 0.3 (0.2) (0.1) (4.9) N/A 71.0

2010A 0.4 (0.5) (0.5) (9.4) N/A N/A

2011E 0.8 (0.1) (0.1) (1.1) N/A 11.5

2012E 1.0 0.1 0.1 2.3 28.0 151.4

Sector: Mining



Company description

Altona holds a 49% interest in threeexploration licences covering 2,500kmsquare in the north of the PermianArckaringa Basin, South Australia. Itsimmediate focus is completing abankable feasibility study for a coal toliquids plus co-generation facility.

Price performance


AnalystMichael Starke

Altona Energy (ANR)

INVESTMENT SUMMARY

In early November, energy companies Solena and Rentech agreed to establish a commercial

scale sustainable jet fuel facility in the UK using Rentech's Fischer-Tropsch synthetic fuel

technology. The deal is important for Altona Energy as it highlights the growing importance of

syngas in the production of various synthetic fuel types (including aviation fuels). Altona Energy

plans to use this technology to produce liquid fuels from its flagship Arckaringa coal deposit in

South Australia where it has signed a joint venture deal with CNOOC. The third-largest

state-owned oil company in China, CNOOC, has agreed to provide $40m for a bankable

feasibility study (BFS), which commenced in October this year.

INDUSTRY OUTLOOK

In addition to supplying local demand for fuel and power (including potentially BHP Billiton’s

nearby Olympic Dam project), the JV is also looking to export fuel and possibly coal to the

Asian markets. The BFS commenced last month and is expected to take around two years.


2009A 0.0 (1.3) (1.3) (0.31) N/A N/A

2010A 0.0 (2.6) (2.6) (0.64) N/A N/A

2011E 0.0 (1.6) (1.5) (0.38) N/A N/A

2012E 0.0 (1.7) (1.7) (0.41) N/A N/A

272 December 2010

Edison Insight

Sector: Mining

Price: 45.3pMarket cap: £69mForecast net cash (£m) 0.6Forecast gearing ratio (%) N/AMarket FULL


Company description

Anglesey has a 41% interest inTSX-listed Labrador Iron Mines, whichhas resources of 150 Mt ofdirect-shipping hematite iron ore. It isabout to commence production. It alsoowns 100% of the Parys Mountainzinc-copper-lead deposit, Wales.

Price performance


AnalystAnthony Wagg

Anglesey Mining (AYM)

INVESTMENT SUMMARY

Anglesey has a 41% interest in Labrador Iron Mines Holdings, TSX LIM, which has resources

of 150Mt of direct-shipping hematite iron ore. On 25 November Anglesey announced that the

work on the plant and the accommodation camp continues to be on track for completion by

end of 2010. The company remains confident that commercial production should begin in

April, when spring arrives. The company believes there is significant value in its 100% owned

Parys Mountain zinc/copper/lead property, and are talking with interested parties.

INDUSTRY OUTLOOK

The most important factor is variation in the price of iron ore. A 10% rise in the ore price from

$68/t 65%Fe fines would result in a 21% rise in net earnings from C$42m to C$50m and a

25% rise in earnings for Anglesey from 6.3p per share to 7.9p per share. A 10% fall would see

a drop of around 27%. Current comparable spot prices are strong at U$160/t (62% fines CFR

Chinese ports). With shipping rates at $40/t, this equates to around U$120/t FOB.


2009A 0.0 (0.5) (0.8) (0.5) N/A N/A

2010A 0.0 (0.3) (0.6) (0.4) N/A N/A

2011E 0.0 (0.3) (0.6) (0.4) N/A N/A

2012E 0.0 (0.3) 4.4 2.9 15.6 26.2




Company description

Animalcare markets and sells licensedveterinary pharmaceuticals, animalidentification products and animalwelfare goods for the companion animalmarket across the UK. Its products aresold in Europe through distributors.

Price performance


AnalystMick Cooper

Animalcare Group (ANCR)

INVESTMENT SUMMARY

Animalcare reported revenue growth of 12.9% to £19.9m for the year to June 2010, with EPS

before exceptionals up 56% to 11.2p. The main growth driver was the companion animal

division, which saw revenues grow 15.7% and generated 83% of EBITDA. This was part of the

rationale for disposing of the livestock divisions (Ritchey and Fearing) to Tru-Test for £3.25m in

cash, and subsequent sale of Travik to Aquajet for an undisclosed sum. Animalcare is now

focused solely on the companion animal market, with the money from the disposals being

used primarily to pay down its outstanding debt. It is aiming to launch five new products per

year, all with potential peak sales of over £100,000 to sustain its growth.

INDUSTRY OUTLOOK

The companion animal market in the UK grew by 8.2% in 2009, which highlights its resilience.

The growth is being sustained by the public continuing to care deeply for their pets, and the

increasing numbers of new treatments and products.


2009A 17.6 2.6 2.0 6.5 19.0 7.5

2010A 19.9 3.6 3.2 13.4 9.2 8.9

2011E 12.3 3.4 3.2 11.5 10.7 7.6

2012E 13.5 3.9 3.8 13.9 8.9 6.8

28 2 December 2010

Edison Insight




Company description

Antisoma is a UK biotech companyspecialising in the development of drugsfor the treatment of cancer. It has abroad R&D pipeline with a lead productlicensed to Novartis. It has ambitions toestablish a US sales franchise inoncology products.

Price performance



Antisoma (ASM)

INVESTMENT SUMMARY

Antisoma faces the dilemma of when, and if, it should partner AS1413 in relation to read-out of

the Phase III ACCEDE study. A pre-data deal in H111 would be worth less than one

afterwards, presuming a positive result, but would be negotiated against the tight deadline

imposed by the cash runway (FY10 cash of £32.1m should last to mid-/late 2011). Negative

ACCEDE data would leave Antisoma with limited options other than a distressed trade sale.

Management remains confident that a post-positive data deal represents the best risk/reward

trade-off for shareholders. ATTRACT-2 data revealed as expected that ASA404 provides little

benefit in NSCLC.

INDUSTRY OUTLOOK

The investment case is heavily geared to success of the AS1413 Phase III ACCEDE study and

the partnering of this programme, which could bring in a substantial sum. Market research

indicates global AS1413 sales potential of $440-580m in secondary AML, or up to $670m

including de novo AML. Positive ASA404 news from Novartis would represent upside.


2009A 25.2 (22.6) (18.2) (2.5) N/A N/A

2010A 20.3 (19.4) (18.4) (2.5) N/A N/A

2011E 0.6 (28.3) (28.1) (3.9) N/A N/A

2012E 0.6 (28.3) (29.6) (4.3) N/A N/A

Sector: Mining

Price: 329.1pMarket cap: £1521mForecast net cash (US$m) 152.1Forecast gearing ratio (%) N/AMarket FULL


Company description

Aquarius is the world's fourth largestPGM producer, with five mines insouthern Africa: Kroondal (50%),Marikana (50%), Blue Ridge (50%)Everest (100%) and Mimosa (50%) aswell as tailings retreatment operationsand exploration projects.

Price performance



Aquarius Platinum (AQP)

INVESTMENT SUMMARY

Aquarius has now closed its Blue Ridge mine until mid-next year to implement a

redevelopment plan. Including capitalised net operating costs (of R50m), remaining capex from

previous development (of R70m) and new capex of US$40m, we estimate total Blue Ridge

capex for FY11 of US$56m. While Aquarius will have no problem funding its share (US$20m)

of the new capex, its BEE partner (Imbani Platinum) may struggle. One option is for Aquarius to

provide additional funding and dilute the BEE partners. We expect Aquarius's valuation to

continue to improve on the back of the operational turnaround at Everest and Blue Ridge as

well as recent positive automotive sales data from the US.

INDUSTRY OUTLOOK

We remain cautiously optimistic about the current outlook following recent positive US

automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to

mid-2011 as auto producers restock ahead of forecast increases in vehicle production in

2012.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 298.9 (0.2) (34.7) (1.0) N/A 65.2

2010A 457.9 135.9 110.9 16.8 31.3 19.8

2011E 592.3 141.5 111.6 17.5 30.1 16.7

2012E 683.0 133.2 101.1 15.5 33.9 19.9

292 December 2010

Edison Insight

Sector: Financials

Price: 391.0pMarket cap: £57mForecast net cash (£m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Arbuthnot Banking Group is engaged inretail, investment and private bankingand other financial services.

Price performance

% 1m 3m 12mActual (1.6) (5.2) 2.9Relative* (0.9) (12.8) (7.0)* % Relative to local index

AnalystMark Thomas

Arbuthnot Banking Group (ARBB)

INVESTMENT SUMMARY

Arbuthnot Banking Group has diversified financial earnings, a risk-averse but innovative

management, and a high dividend yield (6% on our 2010e) covered by earnings. It is strongly

capitalised, arguably over-liquid (2010 margin strain led to estimate cuts) and tightly controls

costs. Management has sold non-core assets, invested in new businesses and controlled

liquidity, market and credit risk well. Paul Lynam, ex-MD of small businesses for RBS retail,

was appointed CEO of Secure Trust on 13 September, bringing further experience and

breadth to this key division.

INDUSTRY OUTLOOK

Retail lending margins continue to benefit from competitors having limited appetite to lend, and

credit conditions appear to have stabilised. For those with good funding, it is an excellent time

to lend. Market conditions for investment banking remained tough through the summer and

into Q3, which will adversely affect the results. Private banking remains competitive with low

interest rates limiting the value of deposits.


2008A 41.9 N/A (2.2) 3.5 111.7 N/A

2009A 52.1 N/A 5.1 23.4 16.7 N/A

2010E 55.7 N/A 6.4 30.2 12.9 N/A

2011E 60.4 N/A 8.7 38.0 10.3 N/A


Price: US$1.41Market cap: US$171mForecast net cash (US$m) 110.7Forecast gearing ratio (%) N/AMarket NASDAQ

Share price graph (US$)

Company description

Arena's lead project, lorcaserin(partnered with Eisai), is pending FDAapproval for the treatment of obesity. Ithas a development pipeline of latepreclinical and early clinicalprogrammes, including one partneredwith Ortho-McNeil-Janssen (J&J).

Price performance



Arena Pharmaceuticals (ARNA)

INVESTMENT SUMMARY

Arena’s investment case hinges on FDA approval of lorcaserin in obesity. The FDA issued a

Complete Response Letter, following the negative Ad-Com, outlining the deficiencies of the

NDA application. The CRL highlighted non-clinical (rat cancer signal and read-through to

humans) and clinical issues. The likely way forward is to re-file the NDA with additional

preclinical analysis and Phase III BLOOM-DM data (top-line data indicates all three co-primary

efficacy endpoints were met), seeking a more restricted label (especially as lorcaserin is likely

to be scheduled). Management has requested a Type A meeting, which should occur before

year-end and should give more clarity on the approval path and time-line.

INDUSTRY OUTLOOK

Lorcaserin is one of three FDA-filed obesity drugs. In Phase III it showed the least impressive

efficacy (placebo-adjusted weight loss of 3.6% vs 9.4% for Vivus’s Qnexa and 5.2% for

Orexigen’s Contrave) but had the best cardiovascular and CNS safety profile. Qnexa also

received a negative 10-6 AdCom vote in July and a Complete Response Letter.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2008A 9.8 (213.5) (226.8) (309.69) N/A N/A

2009A 10.4 (113.4) (139.2) (165.07) N/A N/A

2010E 15.5 (78.7) (95.1) (309.69) N/A N/A

2011E 7.0 (60.7) (74.4) (309.69) N/A N/A

30 2 December 2010

Edison Insight

Sector: Mining

Price: 31.3pMarket cap: £85mForecast net cash (US$m) 11.6Forecast gearing ratio (%) N/AMarket AIM


Company description

Arian Silver, listed on AIM and TSX,specialises in Mexican silver depositexploration and development. Its SanJose mine is expected to enterproduction soon. Its other three projectsare Calicanto and San Celso, located inZacatecas, and Tepal in Michoacan.

Price performance



Arian Silver (AGQ)

INVESTMENT SUMMARY

Arian has announced that it has commenced commercial production at its 100%-owned San

José mine, Zacatecas, Mexico, with ore being stockpiled for delivery to the mill from around

mid-November. In the short term, we see Arian turning cash-flow positive by year-end. At a

silver price of US$27.19/oz, Arian has the ability to generate revenue of up to US$18.0m per

year at a gross cash cost of US$6.7m, to yield a profit before tax of c US$8.5m per year and

earnings between 2.7c and 3.0c per share over the mine's official four-and-a-half year life. To

this must then be added the likely value of exploration success. Assuming that Arian delineates

new resources at the same rate per km of exploration drilling as in the past, we estimate a

US$10m exploration programme should delineate a resource valued at 88-195p per AGQ

share in current money terms.

INDUSTRY OUTLOOK

Often know as 'poor man's gold', during bull markets silver nevertheless tends to outperform

its yellow companion.


2008A 0.0 (3.7) (3.7) (2.5) N/A N/A

2009A 0.0 (2.0) (2.1) (0.9) N/A N/A

2010E 3.6 1.0 0.8 0.3 166.7 38.9

2011E 16.2 7.8 7.9 2.9 17.2 18.1

Sector: Mining



Company description

Ariana is a gold exploration companyfocused on exploration anddevelopment projects in the Republic ofTurkey.

Price performance

% 1m 3m 12mActual (5.7) 37.5 17.9Relative* (5.0) 46.3 6.5* % Relative to local index


Ariana Resources (AAU)

INVESTMENT SUMMARY

Ariana has recently announced that it has subscribed to 2.7m shares in Tigris Resources for a

total consideration of C$115,000, giving Ariana 15% of the total shares issued in the company.

Tigris is a exploration stage company with interests in south-east Turkey. As part of the

arrangement Ariana is entitled to appoint one non-executive director to the board, currently

MD Dr Kerim Sener. Ariana is continuing with its BFS and EIA on its flagship Kiziltepe Sector,

part of the Red Rabbit JV with partner Proccea. The JV agreement has seen Ariana, through

its wholly-owned Turkish subsidiary Galata Madencilik San Ve Tic, and Proccea incorporate a

Turkish joint stock company named Zenit Madencilik San Ve Tic AS, in which each may own a

50% interest. The company has resources of 448koz gold equivalent across all categories and

sectors. We currently value Ariana's assets at 5.57pps.

INDUSTRY OUTLOOK

Our valuation uses a long-term gold price of US1,177/oz.


2008A 0.0 (0.6) (0.6) (0.7) N/A N/A

2009A 0.0 (0.4) (0.4) (0.3) N/A N/A

2010E 0.0 (0.4) (0.4) (0.1) N/A N/A

2011E 0.0 (0.4) (2.3) (0.5) N/A N/A

312 December 2010

Edison Insight




Company description

Ark Therapeutics specialises indeveloping products for treatingvascular disease, cancer and woundcare. The company is a leader in thefield of gene-based therapies, and hasin-house manufacturing capabilities.

Price performance



Ark Therapeutics (AKT)

INVESTMENT SUMMARY

Ark Therapeutics’ Q3 IMS provided additional detail on the progress and timelines for its

strategic restructuring aims. Ark is seeking to bolster its cash position through cost

containment (including now suspension of the Trinam Phase IIb trial) and business

development deals (wound care disposal, manufacturing collaborations and pipeline licensing).

Further updates on the core pipeline, as well as potential wound care and manufacturing

deals, are expected over the next six months. Deal execution that releases value from the

pipeline should ensure end-June cash of £14.1m is sufficient into 2013.

INDUSTRY OUTLOOK

Important clinical validation of NRP-1 antagonism (EG014) may come from Genentech’s

human IgG1 antibody, MNRP1685A. Competitor therapies to EG011 for refractory angina are

mainly stem cell therapies, while EG016 is a novel approach in peripheral vascular disease.

Large pharma interest in foetal growth restriction (EG013) is evidenced by Pfizer's Phase II/III

sildenafil trial.


2008A 0.9 (18.0) N/A (6.9) N/A N/A

2009A 3.0 (18.3) N/A (9.0) N/A N/A

2010E 3.0 (15.3) N/A (7.6) N/A N/A

2011E 6.1 (8.2) N/A (4.4) N/A N/A

Sector: Electrical Equipment



Company description

Armour Home designs and distributes acomprehensive upmarket range ofhome entertainment products, andArmour Auto supplies in-carcommunications and entertainmentcomponents and systems.

Price performance



Armour Group (AMR)

INVESTMENT SUMMARY

Trading conditions remain challenging, as reinforced by last month's results announcement.

The focus remains on product development and tight internal controls as key factors in driving

the business forward. Net borrowings are still under control, with gearing maintained below

20%. The adverse share price reaction reflects natural caution about UK consumer trends and,

despite positive action by management, profits remain under pressure. However, there is an

asset value of 44p per share, reflecting the consistent investment in the group's brands.

INDUSTRY OUTLOOK

There has been some improvement in the macro environment, although the situation remains

fragile; more significantly, confidence seems likely to remain low following the government

spending review. However, experience shows that businesses which invest in innovation and

quality consistently outperform their peers. Estimates have been lowered across the sector,

but we remain optimistic that Armour can deliver meaningful recovery over the medium term.

Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 51.6 3.0 1.2 1.44 5.9 0.8

2010A 56.6 2.8 1.0 1.38 6.2 3.0

2011E 57.0 2.5 0.3 0.32 26.6 3.1

2012E 59.0 3.0 0.6 0.74 11.5 2.1

32 2 December 2010

Edison Insight

Sector: Construction & Blding Mat.



Company description

Ashley House supplies projectmanagement and consultancy services.These are primarily allied to the deliveryof new medical facilities for NHS-ledprimary care, the management of assetsand clinical services.

Price performance


AnalystRoger Leboff

Ashley House (ASH)

INVESTMENT SUMMARY

Completion of the acquisition of Strategic Property Solutions, originally announced in May, fits

with a strategy to reduce dependence on NHS revenues. It adds delivery of community mental

health and associated infrastructure, often a component of large integrated developments. An

existing pipeline delivered the first scheme, a £5m development of 28 assisted living units for

adults with learning disabilities. The recent trading update showed operational progress, but an

emphasis on cash preservation saw October’s final dividend delayed. Resolution of the latest,

ongoing bid for property partner AHMP should help investors to re-evaluate Ashley House's

inherent value.

INDUSTRY OUTLOOK

There is no shortage of demand for modern healthcare facilities, but clients have been more

reticent to commit to new projects until the government's NHS spending plans are clearer. In

that respect, more detail on budgets and responsibility for investment decisions awaits

publication of the healthcare bill.

Y/E Apr Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 23.8 5.5 5.5 10.0 3.0 N/A

2010A 24.9 4.2 4.1 7.0 4.3 N/A

2011E 29.0 5.4 5.0 6.7 4.5 3.0


Sector: Property

Price: 25.5pMarket cap: £226mForecast net debt (HK$m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Asian Growth Properties is an investorand developer of commercial andresidential property in Hong Kong andmainland China, ie Chengdu, Nanjingand Guangzhou.

Price performance


AnalystRoger Leboff

Asian Growth Properties (AGP)

INVESTMENT SUMMARY

H1 saw 15% y-o-y revenue growth to HK$306m, with stable gross rents from investment

properties in Hong Kong and China. Occupancy remained high at the Dah Sing Financial

Centre in Hong Kong and AGP received a first contribution from the new Crowne Plaza Hong

Kong Causeway Bay hotel and sale of one of the remaining units at The Forest Hills

development. The valuation, at c 68% below NAV, is at odds with conservatively financed

growth plans, well balanced portfolio of investment and development assets in mature and

emerging markets and a measured and affordable approach to new development.

INDUSTRY OUTLOOK

AGP's developments aim to capitalise on the growing demand for residential property in

mainland China. The drivers for the group's schemes remain sound, despite recent moves by

the PRC government to discourage speculation in residential property and similarly motivated

moves in Hong Kong. Each project is phased and budgeted to achieve satisfactory returns at

prices supported by occupational demand.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(HK$m) (HK$m) (HK$m) (c) (x) (x)

2008A 1508.0 303.0 247.0 0.0 N/A 3.0

2009A 517.0 151.0 89.0 0.0 N/A 39.7



332 December 2010

Edison Insight

Sector: Support Services



Company description

Augean is a United Kingdom-basedwaste and resource managementcompany. It provides a range ofservices to the hazardous waste sector,including hazardous landfill andtreatment services.

Price performance


AnalystRoger Johnston

Augean (AUG)

INVESTMENT SUMMARY

The most significant short-term driver for Augean will be the outcome of the LLW appeal, the

decision of which is expected in the new year. Meanwhile, we see 2010 as a year of

consolidation as demonstrated by the interims. Despite the impact of the poor weather in early

2010, Q2 landfill signals turned positive, while treatment was flat and the progress in

developing the asset base and success in new target markets was important. Although these

will open up significant opportunities, we do not expect a meaningful contribution until 2011.

INDUSTRY OUTLOOK

There is an increasing trend towards treatment, recovery and recycling within the waste

hierarchy as highlighted in the government's Strategy for Hazardous Waste Management.

While new regulations since 2004 initially caused confusion, we believe that as the industry

understands what is required and enforcement improves, volumes will become increasingly

predictable.


2008A 40.1 10.4 4.0 7.1 3.7 1.5

2009A 31.5 6.0 1.3 1.8 14.7 4.8

2010E 31.4 5.0 0.0 0.0 N/A 5.5

2011E 32.9 5.6 1.0 1.0 26.5 4.6

Sector: Mining

Price: C$7.44Market cap: C$1202mForecast net cash (C$m) 145.2Forecast gearing ratio (%) N/AMarket TSX

Share price graph (C$)

Company description

Aurizon is a Canadian gold companywith three major assets in Canada'sAbitibi region. Its aims to become anintermediate producer focused onfavourable geological trends, close toinfrastructure, in politically stable,pro-mining jurisdictions.

Price performance



Aurizon Mines (ARZ)

INVESTMENT SUMMARY

Despite its first disappointing quarter in Q310, we have upgraded our forecasts for Aurizon for

FY10 on account of the consistently high gold price and also the expiration of all of the

company's gold hedge positions. Operationally, the tribulations of Q310 were temporary and

we anticipate a full recovery in Q410, with the result that earnings have the potential to rise by

almost 100%, quarter-on-quarter. Longer term, we estimate that annual EPS of C$0.35 is

possible at the current gold price. Meanwhile, exploration drilling has increased in-pit

measured and indicated resources at Casa Berardi's Principal Area by 690,000oz (or 94%);

elsewhere intersections as high as 112g/t have been recorded.

INDUSTRY OUTLOOK

The current gold price of US$1,350/oz is consistent with the US's additional QE2 stimulus,

while upward pressure on prices will continue to be exerted by geopolitical (eg Korea) and

economic (eg Ireland, Spain, Portugal) tensions.

Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF(C$m) (C$m) (C$m) (c) (x) (x)

2008A 144.5 59.3 21.1 9.8 75.9 15.4

2009A 175.6 91.9 54.9 20.8 35.8 11.8

2010E 182.6 68.6 31.1 10.2 72.9 17.9

2011E 234.9 134.5 92.6 33.0 22.5 9.2

34 2 December 2010

Edison Insight

Sector: Aerospace & Defence

Price: 200.0pMarket cap: £61mForecast net debt (£m) 9.7Forecast gearing ratio (%) 61.0Market FULL


Company description

Avon Rubber designs, develops andmanufactures products in therespiratory protection, defence anddairy sectors. Its major contractpartners are defence and nationalsecurity and safety organisations.

Price performance



Avon Rubber (AVON)

INVESTMENT SUMMARY

Results from Avon Rubber were ahead of expectations, with contributions from both Dairy and

Protection & Defence (P&D). We feel that management has cast off the shadow of the ‘old

Avon’ and created a thriving business that is developing a track record of outperformance,

which caused us to progressively upgrade throughout the year. With operational performance

consistently improving, new banking facilities in place and the pension issue under control, we

believe Avon is set to benefit from a period of sustained growth.

INDUSTRY OUTLOOK

Despite the pressures on defence budgets, the protective nature of Avon's products provides

resilience. In addition, the US DoD contract supports demand over the long term, providing a

base to target buyers including other security and safety agencies and international militaries.

While the timing of such inroads is difficult to predict, the emerging portfolio effect should

enable continued growth.

Y/E Sep Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 100.9 9.7 6.2 14.5 13.8 18.1

2010A 117.6 13.6 9.0 21.9 9.1 4.8

2011E 125.9 15.0 10.8 27.0 7.4 4.1

2012E 134.8 16.4 12.3 31.0 6.5 3.9




Company description

Babcock is a primarily UK-basedsupport service company withoperations in Marine (34%),Defence(18%), Support Services (33%)and International (15%).

Price performance



Babcock (BAB)

INVESTMENT SUMMARY

Babcock's interims highlighted the continued strong performance across the business with

revenues up 31%, underlying operating profit up 38%, PBT up 27% and EPS up 24%. It is our

belief that the company will weather the storm in terms of CSR/SDSR and indeed this will

create many opportunities for Babcock to extend its reach in defence outsourcing. With the

integration of VT well on track and synergies starting to come through, combined with a

significant order book and expanding pipeline, we feel the rating is being unduly discounted for

general government spending fears.

INDUSTRY OUTLOOK

The UK defence market is set to undergo a period of pressure with budget cuts and a strict

focus on supporting operations. However, this provides opportunities for outsourcing and,

when combined with growth in international and recovery in non-defence markets, leaves

Babcock well placed to benefit in a cost down environment.


2009A 1901.9 169.0 121.1 41.9 12.6 7.8

2010A 1895.5 186.5 145.8 51.4 10.3 7.1

2011E 2998.6 327.9 224.9 52.7 10.0 7.8

2012E 3502.0 402.1 295.8 63.3 8.3 7.7

352 December 2010

Edison Insight




Company description

BAE Systems is a global defencecompany with activities spanningproduction and support across air, land,sea and security markets. The grouphas operations in the UK, US, Kingdomof Saudi Arabia, Sweden, Australia andnow India.

Price performance

% 1m 3m 12mActual (2.2) 13.3 3.8Relative* (1.4) (4.4) (6.2)* % Relative to local index


BAE Systems (BA.)

INVESTMENT SUMMARY

BAE Systems' 9 November investor day highlighted the benefits of its international focus and

home markets strategy. In addition, the balance across air, land and sea in both original

equipment and support provides an inherent robustness, underestimated by investors. This

was demonstrated with the post-SDSR IMS highlighting the impact on EPS growth due to

programme cuts would be c 2%. With negotiations still to be conducted, we believe the

business is capable of delivering sustained growth over the short, medium and long term. The

current rating still appears to apply an arbitrary 'defence cuts' mentality, in our view.

INDUSTRY OUTLOOK

The UK's Strategic Defence and Security Review re-prioritised BAE's programmes, including

the cancellation of Nimrod MRA4, retirement of the Harrier fleet and the decommissioning of

HMS Ark Royal. However, this has been offset to a large extent by the positives of the

confirmation of the aircraft carrier build and the full complement of seven Astute submarines.


2008A 18543.0 2096.0 1795.0 37.1 9.2 6.0

2009A 21990.0 2328.0 2004.0 40.1 8.5 5.4

2010E 22929.0 2467.0 2077.0 42.8 7.9 6.4

2011E 23119.0 2509.0 2179.0 45.4 7.5 5.9

Sector: Mining



Company description

Baobab Resources is focused ondeveloping its Teteiron-vanadium-titanium open-pit projectin central-western Mozambique. Apre-feasibility study is expected in mid2011.

Price performance



Baobab Resources (BAO)

INVESTMENT SUMMARY

Baobab's focus is the Tete Fe-Vn-Ti project close to Cahora Bassa in Mozambique. The

company’s currently declared JORC resource is 47.7Mt at 25.3% Fe, which we estimate

should rise to c 340Mt at 27.3% in due course. Baobab does not intend to develop its mine

alone and is looking to take on a partner before completing a BFS. Its announcement of a £5m

equity facility leaves it funded until c FY14. Recent initiatives include negotiating a boundary

change to give it access to an area (never previously explored) showing both prominent

magnetite ridges and lower Karoo (ie coal) sediments. A recent joint venture makes it the

operator on ground that was previously very well explored indicating massive magnetite

mineralisation with no associated deleterious elements.

INDUSTRY OUTLOOK

Baobab has an EV equivalent to c US$2/t JORC iron (cf an industry average of US$3.53/t).

Pro-rata the higher resource estimate implies a share price of c 65p (49p after dilution), rising

to over £1 at the industry average rating.


2009A 0.3 (1.5) (1.6) (1.9) N/A N/A

2010A 0.0 (2.0) (2.0) (1.4) N/A N/A

2011E 0.0 (2.1) (2.1) (1.3) N/A N/A


36 2 December 2010

Edison Insight

Sector: Mining



Company description

BZM is focused on developing its Kaliairon ore deposit in Guinea, West Africa.Its estimates suggest Kalia hosts anattributable iron ore resource of 10.0btof magnetite and 2.55bt of oxide. It wasfounded in November 2007 and listedon AIM in April 2010.

Price performance

% 1m 3m 12mActual (0.8) 22.0 N/ARelative* 0.0 25.4 N/A* % Relative to local index


Bellzone Mining (BZM)

INVESTMENT SUMMARY

We anticipate that in early 2011 Bellzone could announce a total maiden oxide resource of up

to 420Mt compared to company estimates of between 150Mt to 350Mt (and an estimated

attributable oxide resource potential of 2.55bt). Assuming recent drill holes were stopped once

they had drilled through the oxide (which outcrops at surface), we estimate an average

thickness of 70m (based on 309 holes for 21,530m). We derive an approximate resource by

applying this thickness to an area of 2km squared, assuming the ore body is tabular with a

density of 3kg per cubic metre. Meanwhile, isolated incidents of election-related unrest have

not affected the company’s ongoing operations in Guinea.

INDUSTRY OUTLOOK

In recent days, benchmark prices of iron ore have hit six-month highs (of around US$170/t) on

the back of healthy demand from Asian steel mills and lower iron ore exports from India.

Meanwhile, the outlook for 2011 remains positive.


2008A 0.0 (14.5) (15.1) (3.6) N/A N/A

2009A 0.0 (14.4) (16.5) (3.9) N/A N/A

2010E 0.0 (21.7) (22.4) (4.2) N/A N/A

2011E 0.0 (21.7) (24.5) (4.7) N/A N/A

Sector: Mining



Company description

BZT has a 40% stake in the Mankayancopper-gold project on the Philippineisland of Luzon and an option to acquirethe remaining 60% for ~US$40,000. InTanzania, it has a 46% stake in a jointventure with AngloGold Ashanti, andother exploration tenements.

Price performance



Bezant Resources (BZT)

INVESTMENT SUMMARY

Bezant Resources has released its annual report for the year to 30 June 2010. As of that date,

the company had a net cash position of £1.9m. Looking ahead, the Mankayan scoping study

remains on track with results expected before the end of the year. Also expected before the

end of the year is a potential maiden JORC probable reserve at Mankayan. The company's

strategic review of this project, including discussions with various third parties, is ongoing.

Meanwhile, in Tanzania Bezant has fully earned-in a 50% interest in nine early stage but highly

prospective gold tenements covering a total of 2,116 square kilometres.

INDUSTRY OUTLOOK

Declining Chinese copper imports and lower global inventories of the metal highlight the

impact of higher prices on restocking. Nevertheless, we believe the longer-term fundamentals

remain robust.


2009A 0.0 (1.2) (1.1) (2.8) N/A N/A

2010A 0.0 (1.4) (1.4) (3.2) N/A N/A

2011E 0.0 (0.9) (0.8) (1.8) N/A N/A

2012E 0.0 (0.9) (0.9) (1.8) N/A N/A

372 December 2010

Edison Insight


Price: 370.0pMarket cap: £146mForecast net debt (£m) N/AForecast gearing ratio (%) N/AMarket FULL


Company description

Biocompatibles is a leading medicaltechnology company in the field ofdrug-device combination products,operating via two divisions: OncologyProducts, including Bead Products andBrachySciences; and Licensing,including CellMed and PC Licensing.

Price performance


AnalystJohn Savin

Biocompatibles (BII)

INVESTMENT SUMMARY

An agreed Class 1 bid from BTG was announced on 19 November. This is structured as a

scheme of arrangement for 1.6733 BTG shares per Biocompatibles share (41m fully diluted),

plus either 10p cash or €0.56 (50p) if the AstraZeneca license option on CM3 is taken up. A

BTG circular will be published by 18 December and an offer document by 21 January 2011.

The parties aim to complete the offer by 24 March 2011. It is expected that the actual timtable

will be that documentation is posted by mid December, shareholder meetings in early January

and completion by early February.

INDUSTRY OUTLOOK

Market reaction has generally been negative, with Biocompatibles' shares trading at 370p

compared to a theoretical bid price of 430p (based on the BTG share price prior to the

bid).Edison is a connected party in the transaction.


2008A 17.7 (2.1) (0.4) 0.9 411.1 N/A

2009A 26.6 (3.2) (3.1) (4.7) N/A 1079.2



Sector: Engineering



Company description

Biome Technologies (previouslyStanelco) is focused on two areas:bioplastics and radio frequency (RF).The bioplastics division produces anorganic-based resin (rather than oilbased) for use in the production ofplastics.

Price performance


AnalystToby Thorrington

Biome Technologies (BIOM)

INVESTMENT SUMMARY

A Q3 trading update highlighted ongoing business development. The updates on identified

trials seem positive so far and we await news on further new major account wins. The

conversion of these prospects into orders and revenues would provide a strong validation of

Biome’s product and technology offering. Encouragingly, net cash at the end of Q3 was

unchanged from the end of H1, at c £4.4m.

INDUSTRY OUTLOOK

Around Europe, plants with capacities between 5-60mt are now in place as the consumer and

regulatory drive to move away from petroleum-based plastics gathers momentum. Bioplastics

are still more expensive than petroleum-based products. However, growth is being achieved

by targeting niches where packaging is a small proportion of the overall cost of a product, and

the consumer appeal of being eco-friendly adds enough differentiation. A range of third-party

estimates indicates CAGRs of 12% to 20% in the coming years for the industry.


2008A 14.8 (2.4) (2.5) (0.1) N/A N/A

2009A 17.9 (1.7) (2.7) (0.1) N/A N/A

2010E 12.5 (1.8) (2.3) (0.1) N/A N/A

2011E 16.2 (1.0) (1.5) 0.0 N/A N/A

38 2 December 2010

Edison Insight


Price: A$0.32Market cap: A$104mForecast net cash (A$m) 3.4Forecast gearing ratio (%) N/AMarket ASX, NASDAQ


Company description

Bionomics is an Australian biotechcompany focused on developing smallmolecule products for cancer, anxiety,epilepsy and multiple sclerosis. Its leadprogrammes are a VDA and ananxiolytic compound.

Price performance



Bionomics (BNO)

INVESTMENT SUMMARY

In the short term Bionomics’s investment case will be determined by the outcome of Start-up

Australia Ventures’ efforts to find a trade buyer for its 27.8% stake, which, if successful, would

trigger an offer for the company. Bionomics is approaching interim analyses in its Phase II trials

of BNC105 in renal cell carcinoma (due in Q111) and mesothelioma (in H111). The outcome of

these will coincide around the same time as results from two Phase Ib studies of its

anti-anxiety compound BNC210. These data are all likely to be important in Bionomics's

efforts to establish a development/marketing partnerships for the drugs.

INDUSTRY OUTLOOK

BNC105 is one of the leading agents in the putative vascular disrupting agent class and has an

attractive profile with a possible direct anti-tumour effect as a single agent. The anti-anxiety

drug BNC210 could have a competitive advantage over existing anxiety treatments in terms of

speed of onset, the absence of sedative, memory or motor impairment and risk of habituation.


2009A 4.3 (5.6) (6.2) (2.5) N/A N/A

2010A 3.4 (7.2) (7.4) (2.5) N/A N/A

2011E 3.8 (6.1) (6.5) (2.0) N/A N/A

2012E 3.8 (6.1) (6.7) (2.1) N/A N/A


Price: €0.37Market cap: €65mForecast net debt (€m) 21.4Forecast gearing ratio (%) 99.0Market OMX


Company description

Biotie Therapies is a Finnish biotechcompany with a focus on clinicalprogrammes in CNS and inflammatorydisease. Its lead project, nalmefene, forthe treatment of alcohol dependency, ispartnered with Lundbeck.

Price performance



Biotie Therapies (BTH1V)

INVESTMENT SUMMARY

The results for the first of three Phase III studies of nalmefene for the treatment of alcoholism

are due imminently and are central to the investment case. Positive results would trigger up to

€72m in milestones from partner Lundbeck (presumably on approval and launch - potentially in

2012). A restructuring has reduced costs by >€4m pa and positioned Biotie to exploit its two

un-partnered Phase II-ready assets, ronomilast and BTT-1023. The company is funded into

2011 and can raise further sums under its Yorkville SEDA (equity line).

INDUSTRY OUTLOOK

If Phase III trials are successful, nalmefene would enter a potentially large, although almost

completely undeveloped, market with little competition on the horizon. There are >50m alcohol

misusers in the major markets, of which only a very small proportion is currently treated with

the available treatment options. The product could become a very significant advance in this

area.


2008A 5.1 (4.9) (5.6) (5.6) N/A N/A

2009A 5.6 (12.2) (12.5) (7.3) N/A N/A

2010E 3.2 (12.5) (13.4) (8.1) N/A N/A

2011E 1.4 (7.9) (8.8) (5.0) N/A N/A

392 December 2010

Edison Insight

Sector: Mining



Company description

Blackthorn Resources is an Australianexploration company with projects inBurkina Faso, Zambia and South Africa.By focusing on priority projects, thecompany aims to become a self-fundingexploration and mining company.

Price performance


AnalystWarren Johnstone

Blackthorn Resources (BTR)

INVESTMENT SUMMARY

On 23 November 2010 Blackthorn Resources concluded an agreement with Glencore to form

a JV for the Perkoa zinc project. As a result, construction and development has commenced

and production of zinc concentrate is expected by the second half of 2012. Glencore will

provide US$50m for 50.1% of the project and a further US$30m in project finance. Also in

Burkina Faso, Blackthorn Resources has announced a JORC code-compliant mineral resource

of 139koz of gold at their Guido prospect. In Zambia the fourth phase of drilling has confirmed

additional copper and significant gold mineralisation at the company's Mumbwa JV copper

and gold project. The company held its AGM on 25 November and all resolutions were

passed.

INDUSTRY OUTLOOK

The zinc price lost ground in November falling to US$2,093/t but the long-term price outlook

remains positive. After rising to almost US$9,000/t in mid-November, copper fell sharply and is

trading at US$8,254/t. Gold remains at record levels above US$1,300/oz.


2009A 0.0 (2.6) (0.1) (0.05) N/A N/A

2010A 0.0 (2.5) (2.0) (1.89) N/A N/A

2011E 0.0 (4.3) (4.0) (3.72) N/A N/A

2012E 0.0 (4.3) (10.3) (9.72) N/A N/A

Sector: Financials



Company description

Blue Star Capital invests primarily inunquoted homeland security companieswith significant dual-use commercialmarket opportunities.

Price performance



Blue Star Capital (BLU)

INVESTMENT SUMMARY

The October announcement that Zimiti has secured an ongoing contract with BP highlights the

potential of Blue Star's homeland security-focused investment strategy. The contract is to

develop a low-cost, effective and rapidly deployable system to protect mobile and fixed assets

with initial deployment in 2011. Overall, while the economic backdrop is challenging,

management believes the benefits of the company’s growing US relationships, including

revenue and operational opportunities, will become increasingly visible over the next six to 12

months. Note, forecast net cash excludes liquid investments.

INDUSTRY OUTLOOK

Homeland security is a large but highly fragmented market, where contacts within end-users

are vital. With constantly developing technology and a growth profile that is expected to

continue, this provides unique investment opportunities. This was highlighted within the UK's

National Security Strategy and the SDSR with £650m of additional funding in the area.


2008A 0.0 (2.0) (1.8) (1.5) N/A N/A

2009A 0.0 0.1 (0.6) (0.5) N/A N/A

2010E 0.0 (0.7) (0.5) (0.3) N/A N/A


40 2 December 2010

Edison Insight

Sector: Technology



Company description

Brady plc provides trading and riskmanagement software for globalcommodity markets. It has more than20 years of expertise and more than500 users worldwide, including some ofthe largest financial institutions andmining corporations.

Price performance


AnalystRichard Jeans

Brady (BRY)

INVESTMENT SUMMARY

Brady has announced the conditional acquisition of Viz Risk Management Services AS for

£9.9m, which will boost the group's revenues by more than 50%. Further, it has raised £15m

(before expenses) through a share placement to fund the acquisition and position the group for

further bolt-ons. We view the acquisition as another excellent fit, strengthening the group’s

position in Europe, further broadening the solutions it can offer clients into the energy vertical,

and lifting recurring revenues to more than 50% of the total. Brady's shares trade below its

peers, on 1.4x enterprise value to our FY11 sales forecasts and 7.4x EBITDA.

INDUSTRY OUTLOOK

Brady provides trading, risk and connectivity software solutions to the global commodity

market – miners, fabricators, banks etc. Volatile commodity prices and potential general delays

in clients’ decision making add some short-term uncertainty to the sales cycle. However, the

target market is underinvested in IT and auditors, and regulators are seeking increased

reporting and accountability across the industry.


2008A 6.2 0.9 1.1 3.1 19.7 7.1

2009A 8.2 1.5 1.3 4.8 12.7 18.5

2010E 10.6 1.9 1.8 4.7 13.0 39.7

2011E 18.7 3.6 3.2 4.7 13.0 8.9

Sector: Media & Entertainment



Company description

BrainJuicer carries out quantitativeonline research using innovative,bespoke software to produce insightfulmarket research for large, multinationalcompanies.

Price performance


AnalystFiona Orford-Williams

BrainJuicer (BJU)

INVESTMENT SUMMARY

BrainJuicer’s interim figures confirmed the growing US contribution, a greater proportion of

revenues derived from the innovative ‘Juicy’ products, recovery in the UK and strong cash

flow. Industry techniques are evolving rapidly and the group is at the forefront of developments

harnessing emotional as well as rational response, enabling far richer and more valuable insight

for corporate customers. Unilever UK Holdings has been scaling back its initial investment,

selling 2.8m shares, leaving it with a holding of 14.2%, improving liquidity and broadening the

shareholder base. COO Alex Batchelor has now been appointed to the Board.

INDUSTRY OUTLOOK

Trading updates from industry majors have had a more positive tone lately, helped by

comparatives being poor. GfK and Synovate's Q3 revenues both made double-figure gains.

BrainJuicer continues to differentiate itself and to challenge traditional market research

approaches and methodologies, particularly with its tools designed to garner emotional as well

as rational reactions.

Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 9.3 1.4 1.4 7.4 26.9 22.0

2009A 11.8 1.9 1.7 9.0 22.1 15.6

2010E 15.9 2.1 1.9 10.1 19.7 11.8

2011E 20.0 2.5 2.3 12.5 15.9 9.7

412 December 2010

Edison Insight

Sector: Financials

Price: 139.5pMarket cap: £321mForecast net cash (£m) N/AForecast gearing ratio (%) N/AMarket FULL


Company description

Brewin Dolphin is one of the largestindependent private client investmentmanagers in the UK and managesaround £23bn. It provides a completeservice for private investors, charitiesand pensions and has an investmentbanking division.

Price performance


AnalystMark Thomas

Brewin Dolphin (BRW)

INVESTMENT SUMMARY

Brewin Dolphin (BD) offers geared equity-market exposure in high-growth wealth

management. It has consistently grown FUM faster than benchmark indices and margins are

helped by an improving product mix. BD's results on 1 December confirmed positive business

trends with total FUM up 13% v benchmark 8%, discretionary funds up 3x advisory, income

up 18%, costs 14% and pre-tax profits up 43%. The 2010 dividend yield is around 5% and

well covered by normalised earnings.

INDUSTRY OUTLOOK

Tax increases in the post-election budget are likely to help move customers to higher-margin,

advice-rich products, especially with an announcement of a review of pension contributions.

Equity markets remain volatile with sovereign risk concerns on top of stock-specific issues

such as BP. Investors may be more cautious on high-margin equity-related products as a

result, although it could also stimulate greater demand for advice.


2009A 212.3 N/A 32.1 10.9 12.8 N/A

2010A 250.9 N/A 37.7 12.6 11.1 N/A

2011E 276.2 N/A 50.9 16.5 8.5 N/A


Sector: Financials



Company description

Brightside Group’s principal activitiesare insurance broking; the provision ofpremium finance and medical reports;lead generation; and the provision ofdebt management solutions.

Price performance


AnalystMartyn King

Brightside Group (BRT)

INVESTMENT SUMMARY

Brightside reported interim 2010 results in September. Strong growth continues with a 24%

increase in revenue and 33% increase in PBT. The purchase of eBike and eCar completed in

June, on an attractive valuation, and will be accretive to our estimates for 2010 and 2011. The

group is expanding its panel of underwriters to allow for further growth. The outlook for the

premium finance business is likely to be enhanced at least in line with the growth in the

insurance broking business. Our forecasts are under review.

INDUSTRY OUTLOOK

Motor industry premiums continue to rise, with underwriters becoming more selective in their

risk profiles and some withdrawing from specific lines of business. Online competition remains

fierce, although Brightside continues to expand market share, due to its widening product

range and competitive pricing. Rising premium rates translate directly into higher commission

levels in cash terms.


2008A 33.2 7.7 7.5 2.0 14.3 10.9

2009A 44.7 9.7 9.0 2.1 13.6 9.9

2010E 60.6 14.1 13.4 2.3 12.4 475.6

2011E 74.2 18.4 17.7 3.0 9.5 6.3

42 2 December 2010

Edison Insight

Sector: Basic Industries



Company description

BPI is the largest manufacturer ofpolythene film products in Europe. It isalso Europe's largest recycler of wastepolythene film.

Price performance



British Polythene Industries (BPI)

INVESTMENT SUMMARY

The November IMS showed that business conditions have yet to improve materially for BPI.

However, management continues to exercise tight operational control supplemented by

strategic actions taken in the UK, leaving our FY estimates intact. Limited polymer price

visibility is likely to inhibit significant share price progress for now. Yield attractions remain.

INDUSTRY OUTLOOK

Market polymer prices (input costs) rose sharply in H1, representing a sustained (near peak)

level. The weight of supply-side evidence suggests this should reverse but slower

commissioning of new capacity together with outages at European producers has prevented

this widely anticipated re-tracement from occurring. That said, plateauing/softening was been

seen in some resin grades in the early part of H2, with small increases more recently.


2008A 480.7 27.2 8.4 22.1 11.3 2.3

2009A 424.7 32.5 16.3 43.7 5.7 1.5

2010E 456.4 31.7 15.5 42.6 5.8 3.2

2011E 470.2 34.2 16.5 44.6 5.6 2.0


Price: 219.9pMarket cap: £567mForecast net debt (£m) N/AForecast gearing ratio (%) N/AMarket FULL


Company description

BTG is a UK company specialising indeveloping and commercialisingpharmaceutical products, particularly inthe areas of neuroscience andoncology.

Price performance



BTG (BGC)

INVESTMENT SUMMARY

BTG has made an offer for Biocompatibles, which has been recommended. If consummated,

the acquisition will create a UK-based speciality pharmaceutical company with a marketing

presence in US acute care medicine and interventional oncology sectors. The enlarged

company would have a pro-forma market capitalisation of more than £700m and should have

at least £63m cash. The merger, which remains subject to shareholder approval, is expected

to complete in February 2011.

INDUSTRY OUTLOOK

BTG has a mixed speciality pharma/biotech model with direct sales and internal R&D

programmes. It also has a number of partnered programmes, including Campath for MS

(Genzyme), abiraterone (J&J), CytoFab (AstraZeneca), otelixizumab (Tolerx/GlaxoSmithKline)

and ONYX-0801 (Onyx Pharmaceuticals).


2009A 84.8 8.7 5.1 1.8 122.2 N/A

2010A 98.5 15.3 20.1 8.7 25.3 73.1



432 December 2010 432 December 2010

Edison Insight




Company description

Burst is a global provider of media,technology and professional services toonline advertisers, publishers and adnetworks.

Price performance



Burst Media (BRST)

INVESTMENT SUMMARY

Burst continues to put clear water between itself and commodity ad networks, under pressure

from rapidly-developing Demand-Side Platforms (DSPs). September's interim statement

indicated that trading had improved since the half-year but we have not made any substantive

changes to our forecasts since. The group is concentrating on growing the top line while

protecting margins. Revenues above $50m would give a very different scenario on profits and

rating.

INDUSTRY OUTLOOK

Audience fragmentation underpins the need for ad networks to deliver the reach sought by

advertisers with varying needs, budgets and timescales. Publishers, meanwhile, need to

maximise revenues while ensuring they display no inappropriate content. DSPs and real-time

bidding have emerged to provide a less ‘clunky’ mechanism for placing inventory, leaving less

unsold and driving up publishers' revenues. Good technology and exclusive relationships are

the 'must haves' for ad networks, otherwise threatened by the market changes.


2008A 27.3 0.1 (0.2) (0.3) N/A N/A

2009A 31.4 (0.2) (0.6) (0.9) N/A N/A

2010E 41.4 0.2 (0.3) (0.3) N/A N/A

2011E 44.6 0.6 0.1 0.1 84.7 N/A




Company description

Byotrol has developed and patentedspecialist technology for the safeeradication of harmful microbes. Theseinclude a variety of bacteria, algae, fungiand virulent diseases such as MRSAand C-difficile.

Price performance



Byotrol (BYOT)

INVESTMENT SUMMARY

Byotrol is ready for take-off. The recent interim results showed relatively modest underlying

revenue growth, but the more coordinated response to the series of successful trials in the

consumer products, food processing, healthcare and agricultural sectors all point to an

exciting next two to three years. The appointment of an experienced and motivated new chief

executive and the subsequent £3.7m fund raising point to a rapid rise in revenues, as the

various relationships are translated into revenue-generating products.

INDUSTRY OUTLOOK

The global market for specialist antimicrobial technology is enormous, as awareness of new

infections and diseases continues to increase. While many products tend to promise chemical

solutions (sometimes solving one problem to create another), a product that can damage the

reproductive capacity of various types of bacteria offers considerable attractions to the user.

The main challenge for such innovators is to convince major industry players of the efficacy of

their technology.


2009A 0.9 (2.7) (2.7) (4.4) N/A N/A

2010A 3.1 (1.5) (1.5) (1.8) N/A N/A

2011E 2.3 (1.9) (2.0) (1.9) N/A N/A

2012E 5.0 0.1 (0.1) 0.0 N/A N/A

44 2 December 2010

Edison Insight




Company description

Chemring Group is a global leader inaircraft and naval countermeasures andother energetic materials for military usein training, peacekeeping and conflict. Ithas activities in the US, UK, Italy andAustralia, primarily supplying homegovernments and NATO forces.

Price performance



Chemring Group (CHG)

INVESTMENT SUMMARY

Despite the difficult defence contracting environment, Chemring's pre-close statement

highlighted that it generated 18% top line growth. It is a testament to management that this is

only described as satisfactory. While incidents at Kilgore and Mecar have slipped £7m of

revenues and £3m of profit from FY10 to FY11, this accounts for less than 2% of our previous

forecasts. More important, in our view, is that new safety measures are in place and the

£803m order book, up 44%, supports our fundamental investment case for growth.

INDUSTRY OUTLOOK

Many investors still view Chemring as a pure war stock and that, as hostilities in the Middle

East wind down, revenues will simply plummet. We believe there are some counters to such

an argument: timescales of withdrawal are difficult to predict; the group’s balance between

front-line and training; and acquisitions provide new opportunities (Mecar – non NATO and

Roke – counter-terrorism and electronics, which completed on 30 September).

Y/E Oct Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 354.2 94.6 74.2 160.1 18.4 11.9

2009A 503.9 128.0 102.6 212.7 13.8 9.7

2010E 597.0 153.1 119.1 245.8 12.0 8.8

2011E 804.0 190.9 151.4 308.0 9.5 6.4




Company description

ClearStream Technologies is adeveloper, manufacturer and supplier ofmedical devices.

Price performance


AnalystJohn Savin

ClearStream Technologies Group (CTN)

INVESTMENT SUMMARY

ClearStream has changed significantly as its underlying business mix is now dominated by

higher-margin, more innovative peripheral catheters, generating overall 18% volume growth. In

FY10, €15.1m revenue was achieved despite an H1 manufacturing reorganisation; co-labelled

peripheral products grew 65% in H2 and this should continue with a further product launch in

H111. Peripheral products, now 63% of sales, are expected to boost gross margins to c 40%

in FY11. ClearStream now has four production lines running two shifts. Manufacturing capacity

is being further expanded. Net margins should rise to the low 40% range due to a more

profitable mix and lean production.

INDUSTRY OUTLOOK

Co-labelled peripheral products are sold by Cordis (SLEEK and Savvy range and Bard

(UltraVerse range, launched March 2010). Co-labelling growth in H2 was 65% and this is

expected to continue. Cardiac products are also doing well; the SatinFlex alloy stent saw good

growth in Brazil.

Y/E Jul Revenue EBITDA PBT EPS P/E P/CF(€m) (€m) (€m) (c) (x) (x)

2009A 13.9 2.6 1.9 6.5 4.8 8.2

2010A 15.1 1.1 0.5 1.1 28.6 24.3

2011E 19.1 2.0 1.4 3.1 10.2 13.7

2012E 24.3 3.1 2.5 5.4 5.8 5.0

452 December 2010

Edison Insight

Sector: Mining

Price: 73.8pMarket cap: £391mForecast net cash (A$m) 46.9Forecast gearing ratio (%) N/AMarket AIM, ASX, JSE


Company description

CZA's Mooiplaats Mine beganproduction in 2008. Earlier in 2010, CZAacquired NuCoal’s producing mines forZAR650m. It is also developing its Veleand Makhado coking coal projects,which should start production in H111and H113, respectively.

Price performance



Coal of Africa (CZA)

INVESTMENT SUMMARY

Earlier this week, CoAL announced plans to acquire Chapudi and a number of other thermal

and coking coal projects for US$75m from the Rio Tinto/Kwezi joint venture. Chapudi has a

JORC resource of 1,040Mt and is contiguous with Makhado where the results of a Definitive

Feasibility Study are due in early 2011. The company plans to apply for a New Order Mining

Right at Makhado before the end of the year. Meanwhile, Coal of Africa’s Mooiplaats Colliery

has continued to operate unaffected by the issuance and subsequent withdrawal of a

pre-compliance notice in October. At Vele, the company is awaiting regulatory approval before

it recommences development.

INDUSTRY OUTLOOK

The steel and power generation industries are driving M&A in the sector as both look to secure

supply of key raw materials. Thanks to robust demand from Asia's steel mills, coking coal

prices are expected to increase c 10% in Q111 from current levels of around US$210/t.

Meanwhile, thermal coal leaving Richard Bay is currently priced at c US$100/t.


2009A 23.1 (20.5) (12.0) (3.0) N/A N/A

2010A 111.0 (12.7) (113.8) (22.2) N/A N/A

2011E 350.8 113.8 82.3 11.2 10.6 11.6

2012E 417.2 151.5 118.0 15.3 7.8 4.6




Company description

Cobham is an international aerospace &defence equipment supplier withbusinesses across avionics &surveillance, defence systems, missionsystems and aviation services.

Price performance



Cobham (COB)

INVESTMENT SUMMARY

The 30 November investor seminar provided greater clarity over the structure, phasing and

financial impact of the Excellence In Delivery (EID) programme. £65m of annual benefits will be

accrued by the end of 2013 at a total cost of £131m. In addition, Cobham also indicated that

order delays have to a large extent continued, which is masking some good underlying growth.

We feel the clarity over the EID programme will aid the business and remove some uncertainty

but concerns around growth will remain for the foreseeable future. We are reviewing our

forecasts.

INDUSTRY OUTLOOK

With 78% of Cobham’s business related to defence and over 60% derived from the US, we

feel the business will remain resilient to slowing defence spend, although the timing of orders

has been slower than anticipated. In other areas underlying growth is expected to be slower.

Where this is the case, management has indicated active portfolio management relating to c

10-15% of the technology division's revenues.


2008A 1467.0 283.0 244.0 15.4 12.9 7.2

2009A 1880.0 389.0 295.0 18.8 10.6 6.1

2010E 1982.0 423.0 311.0 19.9 10.0 5.8

2011E 2108.0 453.0 338.0 21.6 9.2 5.4

46 2 December 2010

Edison Insight




Company description

Cohort is a UK-based provider ofservices and products into the defenceindustry. The business operates throughthree divisions: SCS (34% of FY10sales); Mass (27%); and SEA (39%).

Price performance



Cohort (CHRT)

INVESTMENT SUMMARY

We feel that Cohort is in a difficult position with the business founded on a buy-and-build

strategy that, through a lack of financial control, now finds it difficult to follow that strategy and

needs time to demonstrate it can deliver consistent results. However, there are good parts to

the business and, if management can steer the group through the current difficult market

unscathed, the embedded value should become apparent. Although the recent trading

statement and contract announcement have helped ease some concerns, the issues at SEA

highlight there is further rehabilitation to occur.

INDUSTRY OUTLOOK

With 73% of revenues derived from the UK MoD, we are concerned by the eventual impact of

cuts. While management has indicated 40% of its MoD revenue is not subject to spending

constraints, that still leaves 60% under pressure. With a growing focus on export and

non-defence opportunities across space and transportation, there are signs of hope.


2009A 76.7 6.6 5.8 12.3 6.8 4.3

2010A 78.1 4.7 4.0 8.1 10.4 7.8

2011E 77.8 6.4 5.6 10.8 7.8 5.2

2012E 79.8 7.5 6.1 11.6 7.2 5.2




Company description

Consort Medical is an internationalmedical devices company. It operatesthrough two divisions: Bespak(inhalation and injection technologies)and King Systems (airway managementproducts).

Price performance



Consort Medical (CSRT)

INVESTMENT SUMMARY

King Systems unveiled the King Vision video laryngoscope at the American Society of

Anesthesiologists’ annual meeting. This is Consort Medical’s most recent product launch,

although more are anticipated over 2010-13. New product launches (from Bespak and King)

plus new auto-injector device contracts, improved margins and synergistic acquisitions should

support Consort’s target of double-digit profit growth. Consort offers a defensive,

dividend-paying growth opportunity for investors and, despite solid share price performance,

pipeline clarity could prompt upgrades. Anticipated near-term newsflow includes US launch of

the VAL410 MDI valve and FDA approval of Dr Reddy’s Autoinjector INJ300. Interims are due

2 December.

INDUSTRY OUTLOOK

Consort designs, develops and manufactures high-margin disposable medical devices through

its Bespak (inhalation/injection technologies) and King Systems (airway management) divisions.

These have leading positions in strong defensive, but relatively fragmented, markets.


2009A 120.3 25.4 17.9 45.1 10.5 5.9

2010A 118.6 25.4 16.9 42.5 11.1 6.5

2011E 120.1 25.9 16.9 44.5 10.6 7.0

2012E 127.1 28.3 19.6 48.6 9.7 5.8

472 December 2010

Edison Insight

Sector: Technology



Company description

Cyan is a fabless semiconductorcompany delivering flexible wirelesssolutions for lighting control, utilitymetering and industrial telemetry.

Price performance


AnalystKatherine Thompson

Cyan Holdings (CYAN)

INVESTMENT SUMMARY

H1 results showed margin improvement and tight cost control - future revenue growth

depends on Cyan winning significant volume orders in the AMR and lighting control markets.

On 11 November Cyan announced it had won a 10,000 unit production order for its wireless

lighting control solution for use in the Indian outdoor lighting market. The order should start to

ship this year and represents c 10% of the customer's installation programme. As sole source,

we expect that Cyan will receive orders for the rest of the programme, most likely from FY11.

INDUSTRY OUTLOOK

The MCU market is dominated by large players. However, the growth and profitability

dynamics of the market, stable market shares and often low performance requirements mean

R&D investment in the industry is relatively low. Cyan's solutions offer very high performance.

Importantly, they also offer a configuration and software tool set and a module strategy that

enables the rapid development of customer applications.


2008A 0.1 (4.2) (4.2) (1.6) N/A N/A

2009A 0.1 (3.0) (3.0) (0.5) N/A N/A

2010E 0.1 (2.6) (2.6) (0.3) N/A N/A


Sector: Technology



Company description

Daisy provides unified communicationsto the SME and mid-market sectors andoffers a full suite of network services,mobile, systems services and datasolutions. It does not own any networkinfrastructure and resells services overother operators’ networks.

Price performance


AnalystNeil K Shah

Daisy Group (DAY)

INVESTMENT SUMMARY

Daisy is proving itself adept as a consolidator in the SME telecoms space, and a successful

integration of the just-announced £33m SpiriTel deal (its second-largest ever) would go some

way to reassuring investors further. The upcoming H1 interim statement is likely to show a

seasonal weighting of the FY11 results towards H2, although the £40m EBITDA expectation in

the market is still very much within reach. Any progress on cross-selling into FY12 will be key

to reducing the c 40% discount we see currently to fair value.

INDUSTRY OUTLOOK

Ofcom estimates that SMEs spent £4bn on telecoms services in 2008; although admittedly the

industry is highly fragmented with not only low entry barriers but also ongoing price deflation. In

the SME space, there are over 600 voice product resellers and over 1,800 data resellers - a

key opportunity for Daisy as consolidator. Furthermore, Daisy itself sees an incremental £500m

opportunity to cross-sell additional services to its existing base. Opportunities abound.


2009A N/A N/A N/A N/A N/A N/A

2010A 134.4 11.0 9.8 4.1 22.9 8.4

2011E 272.0 39.7 34.9 9.5 9.9 5.5

2012E 313.7 49.1 44.6 12.3 7.6 N/A

48 2 December 2010

Edison Insight

Sector: Technology



Company description

DDD develops and sells software andservices for the generation ofthree-dimensional (3D) pictures andvideo for PC, TV and mobile handsetscreens.

Price performance


AnalystMartin Lister

DDD (DDD)

INVESTMENT SUMMARY

DDD’s FY10 interims were as expected. However, an availability delay of third-party graphics

hardware in its PC segment is likely to result in licensed product missing important PC launch

windows, prompting a reduction in our FY10 estimate from break-even to a £1.2m loss. While

we expect good growth in the 3D TV market and sizeable 3D PC shipments to commence, we

estimate break-even for FY11. DDD has good growth possibilities in the 3D TV, PC, mobile

and content markets. Last month, DDD announced that the license agreement with Quartics

has been extended to include a range of prospective customers beyond those who already

have direct licences with DDD.

INDUSTRY OUTLOOK

IMS Research estimates that over 218m 3D TVs will ship by 2015. In October Toshiba

unveiled a range of glasses-free 3D TV models at CEATEC 2010, scheduled for launch by

year-end, while Movidius launched a video processing chip in its Myriad 3D range, which has

real time 2D to 3D capability.


2008A 0.6 (1.4) (1.4) (1.9) N/A N/A

2009A 1.4 (0.8) (0.9) (1.0) N/A N/A

2010E 1.4 (1.2) (1.2) (1.0) N/A N/A

2011E 3.5 0.0 0.0 0.0 N/A 71.8




Company description

Deltex Medical manufactures and sellsmedical monitors that are used bydoctors and nurses to help patientsrecover more fully and more quicklyfrom the effects of major surgery.

Price performance


AnalystJohn Savin

Deltex Medical Group (DEMG)

INVESTMENT SUMMARY

Deltex’s interim results show steady growth at 13%, with operating losses cut by 46% to

£0.6m. Cash outflow was £0.6m before a deliberate building up of probe stocks by £0.3m to

£0.8m. This is needed to meet increasing demand, as the NHS National Technology Adoption

Centre pushes hospitals to use Deltex’s technology in major surgery for optimal fluid

management and patient recovery. NICE guidance now supports this.

INDUSTRY OUTLOOK

There is solid evidence, confirmed by NICE, that doppler monitoring improves recovery from

major surgery. This supports NHS adoption. However, purchasing is subject to budget factors.

Competing devices have not been fully clinically proven in surgery and could cause

sub-optimal intra-operative fluid management. Evidence is emerging that competing arterial

pulse pressure monitors may not reliably track the haemodynamic status of patients in surgery.

The 3 November R&D day showed impressive results from the combined arterial pressure and

doppler monitor in initial Beta testing.


2008A 5.2 (1.5) (1.5) (1.6) N/A N/A

2009A 5.6 (0.4) (0.6) (0.4) N/A N/A

2010E 6.2 (0.1) (0.3) (0.2) N/A N/A

2011E 7.0 0.5 0.4 0.3 53.3 494.9

492 December 2010

Edison Insight

Sector: Technology



Company description

Dillistone’s core product is‘FILEFINDER’, an integrated clientmanagement tool that delivers majorproductivity gains. It is used by 12 of theworld’s 20 largest executive searchpractices.

Price performance


AnalystNeil K Shah

Dillistone Group (DSG)

INVESTMENT SUMMARY

Dillistone's H110 interims were reassuring and provide evidence that momentum in the

business is continuing. Selling into the global recruitment market, the business is clearly

economically linked but we are encouraged that the order momentum is being maintained and

has been translated into positive revenue growth. Dillistone is demonstrably outperforming its

peers and has an impressive return on capital and cash generation. Stripping out the cash on

the balance sheet, a c 7x ex-cash P/E and a 7% yield seem far too cheap.

INDUSTRY OUTLOOK

Dillistone is a developer and vendor of software to the executive recruitment sector. It is a

single-product company but its FILEFINDER software – now in its ninth revision – has a very

strong following among the largest executive recruitment firms across the globe. We note that

Bond International's recent acquisition of VCG is likely to mark a trend of further consolidation

in the space.


2008A 4.6 1.5 1.4 17.5 10.0 4.9

2009A 3.7 1.2 1.1 14.7 11.9 11.2

2010E 4.0 1.3 1.2 15.1 11.6 7.9

2011E 4.1 1.5 1.2 16.4 10.7 6.8




Company description

DouglasBay Capital (formerly LIT) is aholding company for investments inquoted and unquoted small tomedium-sized businesses.

Price performance


AnalystRoger Leboff

DouglasBay Capital (DBAY)

INVESTMENT SUMMARY

The group has announced the disposal of its largest investment, logistics business TDG, to

France’s Norbert Dentressangle. DBAY should receive £205m on completion of the sale in

mid-January or February, equivalent to a c 34% IRR over the two-year period since its

acquisition. Further acquisitions are under consideration and the intention remains to create a

standalone investment fund and drive returns through the application of a hands-on,

value-driven growth strategy to acquired businesses. Post sale it will have over £185m of

equity, or 16p/share in liquid assets, well above the current share price, and there is potential

for some distribution to shareholders.

INDUSTRY OUTLOOK

We have removed forecasts after the current year. The bulk of DBAY assets will shortly be

turned into cash and there is no visibility regarding contribution from new operating

companies. TDG has demonstrated management’s skills and provided a platform for future

fundraisings and gradual dilution of Laxey’s dominant shareholding.


2008A 176.1 10.2 6.7 0.3 26.7 8.1

2009A 662.1 39.0 13.7 1.0 8.0 11.8

2010E 690.0 37.0 19.0 1.2 6.7 2.9


50 2 December 2010

Edison Insight

Sector: Mining

Price: 99.3pMarket cap: £678mForecast net cash (US$m) 25.0Forecast gearing ratio (%) N/AMarket AIM, JSE, TSX


Company description

Eastplats is a mid-tier producer ofplatinum group metals. It has an 87.5%interest in the Crocodile River Mine inSouth Africa. It also has fourdevelopment projects, Mareesburg(75.5%), Spitzkop (93.4%), DGV(87.5%) and Kennedy’s Vale (87.5%).

Price performance



Eastern Platinum (ELR)

INVESTMENT SUMMARY

Eastern Platinum plans to raise c C$300m to fund the first phase of the company’s Eastern

Limb development plan and provide general working capital. The placement, the company’s

first since March 2007, has been priced at C$1.55 (approximately 97p) per share and is

expected to raise gross proceeds of C$302.25m (£190m) through the issuance of 195m new

shares (excluding a 15% over-allotment option). The deal is expected to close by 8 December.

INDUSTRY OUTLOOK

We remain 'cautiously optimistic' about the current outlook following recent positive US



2012.


2008A 114.7 (286.6) (298.2) (30.9) N/A N/A

2009A 111.4 17.4 (0.4) 0.8 198.4 N/A

2010E 152.1 29.2 8.7 0.6 264.5 26.0

2011E 232.9 72.3 53.0 3.5 45.3 15.6




Company description

Ebiquity is the leading provider of arange of business-critical data, analysisand consulting services to advertisers,media owners and PR professionals inthe UK and is growing these services inboth Europe and the US.

Price performance



Ebiquity (EBQ)

INVESTMENT SUMMARY

Ebiquity announced its FY10 prelims in July. Underlying diluted EPS at 5.6p came in ahead of

our 4.8p estimate, primarily due to better than-expected operating profitability. The critical

mass that the recent large acquisition of Xtreme brings to the group makes Ebiquity’s

marketing and media monitoring and analytics businesses attractive to companies that are

intensifying their focus on value and effectiveness of their media spend. We raised FY11 EPS

to 5.6p from 5.4p to reflect higher operating profitability for the enlarged group offset by more

shares outstanding.

INDUSTRY OUTLOOK

Advertisers continue to increase their focus on achieving better returns on their marketing

investment. Warc has recently increased its international adspend forecast for the 12 major

markets to 4.8% in 2010 and 4.5% in 2011. IDC estimates that business analytics could see

compound annual growth of 7% between 2009 and 2014.

Y/E Apr Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 18.4 2.3 2.1 5.3 16.0 N/A

2010A 21.2 1.2 2.5 5.6 15.2 N/A

2011E 42.0 2.2 4.2 5.6 15.2 N/A


512 December 2010

Edison Insight




Company description

Eco City Vehicles has exclusivedistribution rights to the Mercedes Vitoin the London market. The groupprovides a one-stop new car, used carand after sales service through itssubsidiary KPM Taxis in the Londonmarket.

Price performance

% 1m 3m 12mActual (13.0) 14.6 (14.6)Relative* (12.3) 6.8 (22.8)* % Relative to local index


Eco City Vehicles (ECV)

INVESTMENT SUMMARY

The autumn interim results announcement confirmed progress in the face of a challenging

trading climate, with sales of the Mercedes Benz Vito taxi continuing to increase. This growth

in sales and the extension of the group's aftermarket business into Mercedes Benz light

commercial vehicles aftermarket point to a useful lift in margins. Last month's fund raising and

concurrent purchase of a controlling interest in One80, which owns key engineering patent

related to the Vito taxi, point to a strengthened business into the future.

INDUSTRY OUTLOOK

London's 22,000 licensed taxis carry 1.8 million people every week. While the recession

continues to undermine the market for new vehicles in the short term, there is a growing

pent-up medium-term demand related to environmental/political pressures and preparation for

the 2012 Olympics. Plans for strategic group moves into adjacent markets will involve a

combination of accurately assessing market needs and sustaining relationships with OEM

partners.


2008A 19.0 (0.4) (0.7) (0.23) N/A N/A

2009A 24.7 0.2 (0.2) (0.06) N/A 13.6

2010E 26.5 0.5 0.2 0.06 98.3 N/A

2011E 30.0 1.1 0.8 0.26 22.7 20.2

Sector: Mining



Company description

Electrum Resources is a mineraldevelopment company with asubstantial interest in THEMACResources Group, which is developingthe Copper Flat copper project in NewMexico, and holdings in Silver SwanGroup, ACS Asia and Paniai Gold.

Price performance



Electrum Resources (ECR)

INVESTMENT SUMMARY

Electrum's principal asset is an interest in TSX-V listed THEMAC Resources, the operator of

the Copper Flat project in southern USA. It also has a majority shareholding in Thai

metal-products company ACS Asia, and interests in Paniai Gold, Silver Swan and gold

exploration projects in Argentina. The value of its holding in THEMAC is c £5.5m, to which an

additional £3.2m can then be added for its warrants. Considering all other assets and liabilities,

we estimate ECR's market cap of £6.3m stands at a 52% discount to a sum of the parts

valuation of £13.3m. Assuming THEMAC re-rates to the NPV of the discounted dividend flows

available from the Copper Flat project, we calculate that ECR’s net asset value could almost

double to £23m or 6.0p per share (4.1p if its convertible bond is converted, but excluding any

further equity dilution).

INDUSTRY OUTLOOK

Our discounted dividend valuation assumes a long-term copper price of US$6,151/t

(US$2.79/lb) compared to a current price of US$8,289/t (US$3.76/lb).

Y/E Jun / Sep Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 0.0 (1.7) (1.9) (3.3) N/A N/A

2009A 4.1 (1.4) (2.0) (3.0) N/A N/A

2010E 5.3 (3.1) (3.5) (1.1) N/A N/A

2011E 4.3 (3.4) (3.6) (0.8) N/A N/A

52 2 December 2010

Edison Insight

Sector: Mining



Company description

EMED Mining aims to restart copperproduction at its 100% owned Rio TintoMine (PRT) in Spain. In Slovakia, thecompany has discovered a 1.1Moz(JORC) gold deposit. The company alsohas a 20% stake in Kefi Minerals plc.

Price performance



EMED Mining (EMED)

INVESTMENT SUMMARY

At an EGM held on 22 November, EMED obtained shareholder approval to go ahead with a

second listing on the TSX and to issue shares at a price of not less than 8p per share to raise

up to C$35m. This is expected to fully fund the equity component of the cost to restart the Rio

Tinto Copper Mine. In Spain, it expects to be producing copper concentrate from its Rio Tinto

mine in late 2011, and it is progressing through permitting and feasibility of its 1.1Moz Detva

Gold Project in Slovakia. The company recently acquired an option over an exploration permit

covering a known tungsten deposit in Portugal; it plans to evaluate the property before

considering its option to purchase the asset for shares or cash. Shareholders approved an

issue of shares for this purpose at the EGM.

INDUSTRY OUTLOOK

After rising to almost US$9,000/t in mid-November, the copper price fell sharply to

US$8,254/t. The current spot prices far exceed the life-of-mine price of US$6,063/t

(US$2.75/lb) used in our valuation. Gold is trading at record levels of over US$1,300/oz.


2008A 0.0 (4.9) (5.2) (3.7) N/A N/A

2009A 0.0 (8.9) (9.9) (3.4) N/A N/A

2010E 0.0 (8.9) (9.8) (2.6) N/A N/A





Company description

Empresaria is a multi-disciplinedinternational specialist staffing group,operating in 16 countries.

Price performance



Empresaria (EMR)

INVESTMENT SUMMARY

Empresaria's September interims showed strong performances in each of its geographic

regions (UK, Europe, ROW). The momentum continued into Q310 and we raised our

expectations for the full year and for 2011, although with the earnings number restrained by a

higher assumed tax rate. The group bought in 28% of the minority in Fastrack, its UK

construction and engineering subsidiary, for £1.79m cash (+£163k deferred), taking its holding

to 94%.

INDUSTRY OUTLOOK

Larger staffers are seeing the benefits of operational gearing on a reduced cost base driving

their renewed profitability. Empresaria’s improving performance is driven by different factors

across its operations: UK, with a pick-up in permanent recruitment, driven by some pockets of

real recovery in the economy; Germany, with a strong rebound on top of continuing structural

changes increasing the penetration of temporary recruitment; and South-East Asia (the main

element of ROW) benefiting from the maturing of start-ups initiated over the last few years.


2008A 207.7 8.3 6.4 8.6 6.6 3.4

2009A 195.2 4.9 3.2 3.1 18.4 5.6

2010E 221.5 7.9 6.2 6.2 9.2 4.2

2011E 234.8 8.7 7.3 7.2 7.9 3.9

532 December 2010

Edison Insight

Sector: Technology



Company description

Endace supplies high-end networktraffic monitoring and analysistechnology, with a fundamentalcompetence and ability to capture all ofthe packets flowing through high-speeddata networks.

Price performance


AnalystDan Ridsdale

Endace (EDA)

INVESTMENT SUMMARY

Endace is a leader in the market for network traffic capture equipment with a core competency

in capturing 100% of packets flowing over high-speed networks. Our research indicates that

the technology is set to be deployed in a much broader range of applications - a view that was

reinforced by the multi-million dollar order with a global financial services firm, deploying

Probes in 15 data centres and at all levels throughout the bank. The recent launch of a

Latency Monitoring Service is early stage but could help reduce barriers to deployment and

add recurring revenue streams, although the cost implications are as yet unclear.

INDUSTRY OUTLOOK

There is a disruption in the market as network speeds migrate to 10Gbs and legacy

architectures start to fall down. This is bringing Endace to the fore and our research suggests

that major customers are deploying Endace’s technology on a much broader basis. The

broader network security market is also one of the most corporately active globally.

Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 30.4 7.5 5.4 20.0 27.6 21.7

2010A 31.0 5.5 1.7 13.7 40.2 16.8

2011E 35.1 6.0 2.0 10.8 51.1 17.4

2012E 41.8 7.1 3.0 15.6 35.3 15.0




Company description

eOne is a leading internationalentertainment company specialising inthe acquisition, production anddistribution of film and television contentacross all media. It is incorporated inCanada and moved from AIM to theMain Market on 15 July 2010.

Price performance


AnalystJane Anscombe

Entertainment One (ETO)

INVESTMENT SUMMARY

eOne released an excellent set of interims on 17 November, with EBITDA up 34% to £12.5m.

The strong slate of film and TV titles bodes well for future growth and our estimates are

unchanged (aside for minor adjustments for the conversion of exchangeable notes) as we

move into the seasonally stronger trading period. eOne's balance sheet is strong and year-end

debt should be below £80m; the library was recently valued at $250m (14% up on 2009). We

expect above-average organic growth to be augmented by acquisitions at some stage.

INDUSTRY OUTLOOK

Our Review of 13 October included a feature on the implications of the shift to digital in the film

industry. Hollywood has historically profited from technological change and, assuming piracy

issues can be overcome, the availability of reasonably priced on-demand entertainment

through a variety of new channels should continue to drive market growth and library values.

Meanwhile, the box office has remained strong in 2010, helped by the popularity of new 3D

films.


2009A 342.6 25.3 16.4 8.6 13.2 4.1

2010A 444.2 34.3 22.1 11.5 9.9 1.9

2011E 480.0 39.5 30.6 12.1 9.4 1.8

2012E 490.0 42.0 34.1 13.2 8.6 1.7

54 2 December 2010

Edison Insight




Company description

Founded in 2000, Epistem has acontracts services operation, anemerging clinical biomarker technologyand a therapeutics discovery unit.

Price performance


AnalystJohn Savin

Epistem Holdings (EHP)

INVESTMENT SUMMARY

The final results showed contract revenues up 10% to £5.2m but with higher margins, due to a

better product mix. The Novartis deal will proceed as planned until February 2011. However,

work is behind the original research plan so any deals are unlikely until H211; Novartis has until

February 2013 to use its exclusive option. Partnering revenues will fall from March 2011.

Biomarkers had £0.9m of sales, with some use in clinical trials. A novel desktop Point-of-Care

DNA test system, GeneDrive, is being prepared for Beta testing. This could prove very versatile

in the market but needs validation. We are currently reviewing our forecasts.

INDUSTRY OUTLOOK

Biomarker sales are did well but have not yet broken through into mainstream clinical use. The

prototype GeneDrive testing instrument may create new growth expectations but the initial

markets, particularly sexually transmitted disease testing, are competitive with Roche. The

company is seeking an acquisition to help GeneDrive commercialisation.


2009A 4.0 (0.6) (0.7) 1.2 329.2 16.6

2010A 5.7 0.5 0.4 3.79 104.2 N/A

2011E 5.2 0.2 0.0 0.38 1039.5 N/A



Price: CHF2.02Market cap: CHF282mForecast net cash (CHFm) 30.1Forecast gearing ratio (%) N/AMarket Swiss Stock Exchange

Share price graph (CHF)

Company description

Evolva is a Swiss synthetic biologycompany. It has developed atechnology platform, which it uses todevelop novel drugs and new methodsof making nutritional and consumerhealth products.

Price performance


AnalystMick Cooper

Evolva (EVE)

INVESTMENT SUMMARY

Evolva has developed an innovative platfrom using synthetic biology to make novel drugs and

new production methods for nutritional and consumer health products. The platform's

potential has been validated by several partners including Roche; there is also one product in

Phase I development. The nutritional products strategy means that Evolva has a lower risk

profile than it would if it was a pure drug discovery company. For liquidity reasons, the shares

have performed very strongly so that Evolva appears to be fully valued. However, there is likely

to be increased share price volatility as a lock-up agreement lapses on 14 December 2010.

INDUSTRY OUTLOOK

The pharmaceutical industry is continually searching for novel treatments, and manufacturers

of nutritional products for cheaper production methods. Evolva's platform has already created

several first-in-class drug candidates. The recent expansion of the collaboration with Abunda

Nutrition suggests that Evolva will be able to reduce manufacturing costs for its partners in

health and nutrition.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(CHFm) (CHFm) (CHFm) (CHFc) (x) (x)

2008A 11.9 (6.8) (8.4) (38.4) N/A N/A

2009A 18.9 (6.8) (9.4) (14.7) N/A N/A

2010E 18.8 (25.5) (27.3) (19.7) N/A N/A

2011E 19.8 (29.0) (31.2) (22.3) N/A N/A

552 December 2010

Edison Insight




Company description

Evotec is a drug discovery business thatprovides outsourcing solutions to thepharmaceutical industry and developsits own proprietary drugs.

Price performance


AnalystMick Cooper

Evotec (EVT)

INVESTMENT SUMMARY

Evotec continues to make significant progress to becoming a sustainably profitable business

by 2012. Revenues increased 33% during the first nine months of 2010 and Evotec has been

profitable for the last two quarters. It is benefiting from the continued expansion of its drug

alliance business (it entered a major alliance with Genentech in May 2010) and tight control of

costs. The strategic acquisition of DeveloGen in September added a late Phase III product to

the pipeline and expertise in the field of metabolism and diabetes. The outlook remains

promising with the order book 31% higher in October than it was last year.

INDUSTRY OUTLOOK

Pharmaceutical companies are outsourcing their drug discovery activities as they look to

improve their productivity and decrease the fixed costs associated with them, which is driving

the growth of companies that can provide these services. However, Evotec's growth depends

on it being able to provide a high quality integrated service that cheaper service providers are

unable to deliver.


2008A 39.6 (40.7) (47.7) (52.1) N/A N/A

2009A 42.7 (15.5) (21.7) (20.6) N/A N/A

2010E 53.4 0.1 (1.4) (1.7) N/A N/A

2011E 59.2 2.6 (0.5) (0.9) N/A 44.2

Sector: Mining

Price: 369.1pMarket cap: £2173mForecast net debt (US$m) 154.0Forecast gearing ratio (%) 19.0Market FULL


Company description

Ferrexpo is involved in producing andexporting iron ore pellets to the globalsteel industry. Backed by one of thelargest iron ore resources in the world, itaims to realise the potential of its uniqueresource and to be a globallyrecognised iron ore pellet supplier.

Price performance



Ferrexpo (FXPO)

INVESTMENT SUMMARY

In its interim management statement, Ferrexpo mapped out a route for increasing output to

12Mtpa of 65% Fe pellets from 38Mtpa of iron ore by 2013 and then 20Mtpa of pellets from

60Mtpa of iron ore by 2018 'at the latest'. Management has approved a budget of $647m to

achieve the first phase of this development. The second phase will cost an additional c $1.2bn.

At present, management is testing the plant's ability to produce concentrate at its 1Mtpa

nameplate capacity before instigating the northern pushback at its Poltava mine and the

development of Yeristovskoye. In the meantime, the company is on course to report a record

full-year set of numbers, surpassing FY08. On the basis of a long-term pellet price of $100/t,

we estimate that the successful development of Yeristovskoye will support a future share price

of c 644pps.

INDUSTRY OUTLOOK

Ferrexpo achieved a price of US$131/t for its pellets in Q210. Prices rose 5% in Q3 and look

likely to fall c 10% in Q4 for an average for the year of c US$118/t.


2008A 1116.9 494.7 442.2 47.6 12.4 7.8

2009A 648.7 133.4 81.4 12.2 48.4 29.3

2010E 1096.2 501.7 443.2 63.1 9.3 9.0

2011E 970.9 482.0 436.0 61.5 9.6 6.8

56 2 December 2010

Edison Insight

Sector: Technology



Company description

FFastFill provides SaaS solutions fortrading and risk management onelectronic markets. These servicesprovide full application functionality,saving institutions the cost of investingin and maintaining their own technologyinfrastructure and staff department.

Price performance



FFastFill (FFA)

INVESTMENT SUMMARY

FFastFill reported a 4% increase in H1 revenues to £7.3m, with SaaS revenue growing 8% to

£5.5m. Operating profit (prior to a small asset sale and share-based payments) rose 13% to

£0.6m. The group achieved growth despite losing its biggest customer last year. FFastFill had

10 contract wins in H1 and the SaaS order book jumped 12% to £11.8m. Working capital

expanded due to lower upfront payments on some contracts, and net cash slipped to £1.4m;

we expect working capital to normalise in H2. The shares trade on c 12x our FY12 earnings.

INDUSTRY OUTLOOK

FFastFill’s software enables banks and other financial organisations to trade exchange-traded

derivatives across a number of exchanges, with the potential to add a range of asset classes.

The SaaS offering and the straight-through processing capability enable customers to achieve

significant cost savings. In addition, industry trends towards electronic trading, higher volumes

and a growing number of exchanges all contribute to a resilient outlook for the group against a

tough economic backdrop.


2009A 14.4 0.9 0.2 0.1 86.0 35.4

2010A 14.3 1.7 1.2 0.3 28.7 10.2

2011E 15.5 2.8 2.2 0.5 17.2 15.4

2012E 16.8 3.5 2.9 0.7 12.3 7.0




Company description

Fiberweb is engaged in thedevelopment, manufacturing and supplyof nonwoven fabrics. Nonwovens areused in a range of products, such asbaby nappies, fabric softeners, filters,construction products and protectiveclothing.

Price performance



Fiberweb (FWEB)

INVESTMENT SUMMARY

Building on progress made in the first half, Fiberweb’s trading update for 1 July to 25 October

2010 points to continued improvement in underlying profit margins driven by ongoing growth

in industrials, a strong performance in the FitesaFiberweb joint venture, and stabilisation in raw

material costs. Fiberweb has been substantially re-shaped and reorganised and now

operational performance improvements are coming through. Additionally, expansionary

investment within the JV in both the Americas and Asia is reinforcing the company's global

consumer credentials.

INDUSTRY OUTLOOK

We continue to expect robust volume growth within the industrials business, helped by

improving global industrial activity. Hygiene business will benefit from a solid performance in

the consumer markets. P&G, Fiberweb's principal customer, continues to see good volume

growth in its end markets. Margins have been affected by higher raw material (polypropylene)

costs, although this has relented more recently.


2008A 512.8 48.6 10.5 8.6 9.1 1.6

2009A 454.2 50.2 14.2 12.2 6.4 1.8

2010E 468.0 49.2 14.4 11.9 6.6 2.4

2011E 506.0 56.5 16.0 12.1 6.4 1.7

572 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Forum Energy, focused exclusively onthe Philippines, is an AIM-quotedcompany developing oil and gas assets.

Price performance

% 1m 3m 12mActual 24.6 (8.1) 71.3Relative* 25.5 (25.5) 54.8* % Relative to local index


Forum Energy (FEP)

INVESTMENT SUMMARY

Forum's main play is the development of the potentially world-class Sampaguita gas field in

the South China Sea. With mean GIP of 3.4tcf and 20tcf upside, assuming a normal 60%

recovery rate this would imply a world-class resource. The company announced in November

a $10m facility to fund its share of a first phase work programme over SC72 (containing

Sampaguita). The $7.4m programme net to Forum will cover all pre-drill commitments,

including shooting 3D seismic over and around Sampaguita and 2D seismic over existing

leads.

INDUSTRY OUTLOOK

The Sampaguita field is a potential company maker for Forum. In the context of the UK sector

of the North Sea, a 3tcf find would be one of the largest in the last 25 years. Similar to Shell's

adjacent Malampaya field, such a find would be the foundations of an LNG project.


2008A 0.7 (4.7) (4.8) (16.1) N/A N/A

2009A 1.8 (1.7) (2.6) (8.3) N/A N/A

2010E 2.8 (2.7) (3.5) (10.1) N/A N/A

2011E 2.3 (2.4) (3.2) (8.6) N/A 7991.8

Sector: Mining



Company description

Fronteer Gold is a multi project gold anduranium developer with a core ofnear-term producing assets in Nevada,US, with gold-copper projects in Turkeyand a uranium project in Canada.

Price performance



Fronteer Gold (FRG)

INVESTMENT SUMMARY

Fronteer recently released its highest-ever drill result at its Long Canyon project, registering

12.3g/t Au over 50.4m with indications that the deposit is starting to thicken to the north,

where current step-out drilling is taking place. Along with Long Canyon, FRG is developing its

Northumberland gold project in Nevada USA, and is in JV with Newmont and Agnico Eagle on

another two promising projects. Long Canyon is a high grade, high quality gold deposit that

FRG hopes to have in production in the next two years using existing cash sources, and has a

total gold resource base of 4.71Moz gold. FRG is also experiencing success with drilling at its

Halilaga project, a high sulphidation copper-gold project in Turkey. Our total valuation for

FRG's assets is US$6.0ps rising to US$8.0ps in 2016 as Nevadan production increases. We

see a positive re-rating once a revised economic assessment on Long Canyon is published in

2011.

INDUSTRY OUTLOOK

Our valuation uses a long-term gold price of US$1,177/oz.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(C$m) (C$m) (C$m) (c) (x) (x)

2008A 0.0 (26.2) (23.6) (23.8) N/A N/A

2009A 0.0 (26.9) (23.0) (11.4) N/A N/A

2010E 0.0 (58.2) (56.5) (41.8) N/A N/A

2011E 0.0 (23.6) (26.3) (17.5) N/A N/A

58 2 December 2010

Edison Insight

Sector: Mining

Price: 6.1pMarket cap: £56mForecast net debt (US$m) 28.4Forecast gearing ratio (%) 1171.0Market AIM


Company description

Frontier Mining, incorporated inDelaware, is a development stagemining concern with two licences inKazakhstan.

Price performance



Frontier Mining (FML)

INVESTMENT SUMMARY

While awaiting certain permits and waivers to be signed by the Kazakh government in relation

to its merger and re-domicile to the Cayman Islands (announced October), FML has signed a

US$4m loan facility with HSBC Kazakhstan for a three-year period with an indicative

agreement for an additional US$15m on satisfying certain conditions of HSBC. The company

intends to use the loan to purchase equipment for its Benkala project. FML plans to extract the

smaller (<10% of total resource) secondary oxide copper resource first (NPV estimated by WAI

at US$191m using a copper price of US$6,000/t and after capex of US$55m), with cathode

capacity planned of over 20,000tpa at a cash cost under US$1/Ib. Mining at Benkala is

planned to start H211. Gold production at the Koskuduk heap leach plant is ongoing with a

revised 6koz of gold produced, and at least 10koz on the leach pads by end 2010. We value

FML on an EV/resource multiple at 12pps.

INDUSTRY OUTLOOK

Copper currently trades at an LME spot price of around US$8,300/t.

Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2008A 0.0 (4.4) (4.8) (2.3) N/A N/A

2009A 2.9 (2.9) (5.3) (0.6) N/A N/A

2010E 7.2 1.4 (2.9) (0.3) N/A 562.4

2011E 48.8 29.0 22.2 1.6 6.1 5.2




Company description

Futura Medical is engaged inresearching and developingpharmaceutical products and medicaldevices, and their commercialexploitation through out-licensing.

Price performance



Futura Medical (FUM)

INVESTMENT SUMMARY

Futura's investment case centres on the EU launch of its CSD500 Durex-branded condom by

partner SSL International (recently acquired by Reckitt Benckiser). Given positive EU regulatory

opinion for the constituent drug (2008) and submission of the updated regulatory dossier, the

CE mark issuance is expected in Q410. Commercial launch preparations are under way at

SSL. With mass-market appeal, premium pricing potential and Reckitt's marketing muscle,

CSD500 has a good chance of generating significant revenues: Futura's high-teen royalties

should push it into profit from 2011.

INDUSTRY OUTLOOK

Futura's development pipeline of products based on its proprietary DermaSys delivery platform

addresses potentially large but underdeveloped OTC markets (eg, erectile dysfunction and

topical pain relief). Further development has been constrained by its cash position, but with a

commercial deal on TPR100 (GSK) and potentially PET500 in H210, Futura should unlock

value through accelerating their development and launch.


2008A 0.2 (2.2) (2.1) (3.4) N/A N/A

2009A 0.1 (1.5) (1.6) (2.2) N/A N/A

2010E 0.5 (0.8) (0.9) (1.1) N/A N/A

2011E 0.5 (0.9) (1.0) (1.2) N/A N/A

592 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Gasol is an African-focused gasindependent. The company’s primefocus is on the monetisation of gasreserves in Sub-Sahara Africa by itsaggregation, liquefaction and shipmentto high-value markets worldwide.

Price performance



Gasol (GAS)

INVESTMENT SUMMARY

Gasol's strategy is to continue pursuing liquefaction projects for stranded gas in West Africa

and to investigate gas-to-power opportunities regionally. The rationale for the latter reflects the

ready availability of gas supplies in the Gulf of Guinea, relatively low power generating capacity

per capita in the region and the widespread use of high-cost oil products in power generation

in West Africa. Gasol is developing a business plan to pursue the gas-to-power strategy. We

intend to update our valuation and investment summary once this has been agreed.

INDUSTRY OUTLOOK

Gasol's original strategy of basing LNG projects around stranded gas assets in the Gulf of

Guinea has been reconsidered in light of weak LNG prices and natural gas prices in mature

markets. Weakness reflects a combination of soft economic activity, the coming on-stream of

major LNG projects and the surge in shale gas availability in the US.

Y/E Feb / Mar Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 0.0 (6.4) (6.4) (1.0) N/A N/A

2010A 0.0 (4.5) (5.1) (0.5) N/A N/A

2011E 0.0 (4.9) (5.3) (0.5) N/A N/A


Sector: Technology



Company description

GB Group has complementary identitymanagement offerings of verification,capture, maintenance and analysisenabling companies to identify andunderstand their customers.

Price performance



GB Group (GBG)

INVESTMENT SUMMARY

Last month, GB announced its FY11 interim results were in line with our increased estimate on

the back of the October trading update. DataSolutions is seeing good repeat revenues and

increasing demand for its services, resulting in revenue up 20% y-o-y and improved

profitability. DataAuthentication is showing a good recovery from the recession-linked loss of

clients last year, and is continuing to win new business as clients move from manual to

electronic methods of ID verification. We initiated a (untaxed) 2.7p FY12 EPS estimate, which

reflects significant economies of scale.

INDUSTRY OUTLOOK

Growth in internet trading, regulatory pressure and the need for money-laundering checks, age

checks and anti-fraud checks are behind growing interest in increasingly complex and

comprehensive verification of personal data. The encouragement of the FSA and the cost and

payback attractions mean the shift to making these checks electronically is accelerating.


2009A 23.8 2.0 1.8 2.2 15.2 27.1

2010A 22.2 1.8 1.3 1.8 18.6 11.4

2011E 24.4 2.2 1.6 1.9 17.6 16.9

2012E 26.8 2.9 2.4 2.8 12.0 10.0

60 2 December 2010

Edison Insight

Sector: Mining



Company description

GMA Resources is involved in goldmining, exploration and minedevelopment in Algeria.

Price performance



GMA Resources (GMA)

INVESTMENT SUMMARY

Output of 7,259oz Au in Q310 represented a strong turnaround at GMA, after the successful

re-commissioning of the Tirek CIL plant at Amesmessa. Production of 1,933oz from the CIL

plant in September alone contributed to overall output of 3,059oz - 2% above management's

target. Future forecasts are predicated on production of 3,000oz pm at an average cost of

US$535/oz in H210, falling to US$425/oz thereafter and at a gold price of US$1,223/oz in

FY10, followed by US$1,350/oz thereafter. The installation of an additional 600-800ktpa CIL

plant is also under consideration.

INDUSTRY OUTLOOK

Of the 76 anomalies identified by Earthscan as being prospective in H110, seven will be

pursued with a drilling campaign, while results from GMA's 162 hole RC drilling campaign are

expected in December. Given the density, grade and continuity of its veins, it is conceivable

that GMA’s land position represents a new world-class gold camp akin to Kirkland Lake or

Ashanti, with which it shares many characteristics.


2008A 7.8 (0.9) (6.5) (1.8) N/A N/A

2009A 20.4 1.4 (5.6) (0.5) N/A 138.6

2010E 22.2 7.6 0.4 0.0 N/A 1.5

2011E 30.4 19.1 11.7 0.9 4.6 1.2

Sector: Mining

Price: A$0.34Market cap: A$270mForecast net debt (A$m) 94.1Forecast gearing ratio (%) 113.0Market ASX


Company description

Formed from the takeover of Aflease byBMA Gold in 2009, Gold One is anemerging mid-tier gold producer withsignificant assets in the Witwatersrandbasin and growing ones outside.

Price performance



Gold One (GDO)

INVESTMENT SUMMARY

After processing 86kt at Modder East (ME) in Q310, GDO is ramping up production at a rate of

c +20kt per quarter to reach 150koz pa in FY12. GDO is spinning off its Megamine asset into

Goliath Gold while, at Ventersburg, a scoping study indicates an operation producing 157koz

per year at a cost of US$379/oz over 11 years for capex of ZAR1.9bn. PFSs at Ventersburg

and Megamine are scheduled in Q111 and 2012. Meanwhile, drilling at ME has confirmed the

extension of the high grade shoreline. Updated resource statements at ME and Ventersburg

are due in December 2010.

INDUSTRY OUTLOOK

FY11 estimates assume US$1,350/oz Au and ZAR7.20/USD. At US$1,177/oz and

ZAR7.3114/US$ a sum of the parts analysis values GDO at 63.99pps (inc Ventersburg) to

which an immediate 3.82Acps needs to be added for GDO's interest in Goliath Gold

(potentially rising 11-fold).

Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF(A$m) (A$m) (A$m) (c) (x) (x)

2008A 9.3 1.8 (6.0) (1.2) N/A N/A

2009A 8.9 (18.3) (30.8) (4.0) N/A N/A

2010E 91.2 27.1 9.6 0.6 56.7 8.9

2011E 168.0 86.7 59.9 3.6 9.4 3.4

612 December 2010

Edison Insight

Sector: Mining



Company description

Goldplat is a gold producer focused onAfrica with three primary assets:Goldplat Recovery (Pty) - South Africangold recovery plant; Gold RecoveryGhana – Ghanaian gold recovery plant;and Kilimapesa Gold - mining project inKenya.

Price performance

% 1m 3m 12mActual (7.3) 34.2 4.1Relative* (6.5) 13.0 (5.9)* % Relative to local index


Goldplat (GDP)

INVESTMENT SUMMARY

Having built a profitable base recovering 21koz Au pa at less than US$800/oz from other

companies' residual mining materials, Goldplat is now in the process of acquiring conventional,

high-grade assets to increase its production to 100koz pa. Most recently, this has involved it

buying a 90% interest in the 29 sq km Banka Lease in Ghana (containing 200koz non-JORC

resources) for US$1.5m. It has also announced a deal whereby Golden Star (Wassa) will

process c 4,000t of its Ghanaian material to produce c 3-4,000oz Au pa. In the meantime, the

company continues to progress its application for Kilimapesa to enter commercial production.

INDUSTRY OUTLOOK

In Burkina Faso, drilling at Nyieme has returned grades up to 19.1g/t and confirmed the

extension of the quartz payshoots in accordance with the company's geological model.

Nyieme will now be the subject of an extensive exploration programme. NB, our forecasts are

conducted at a long-term gold price of US$1,350/oz and a cable rate of US$1.65/£.


2009A 11.1 2.0 2.0 1.32 9.7 9.2

2010A 10.7 2.4 2.3 1.40 9.1 10.0

2011E 18.8 4.3 4.0 2.35 5.4 4.4

2012E 23.9 8.3 7.9 5.92 2.2 2.4

Sector: Oil & Gas



Company description

Gulfsands Petroleum is involved in theproduction, exploration anddevelopment of oil and gas reserves inthe US, Syria and Iraq. It recentlyagreed to acquire working interestpositions in two exploration permits inTunisia and Southern Italy.

Price performance



Gulfsands Petroleum (GPX)

INVESTMENT SUMMARY

Gulfsands continues to offer the investor upside through its extensive drilling programme in

Syria. October brought news of the KHE-18 delineation well, indicating its large Khurbet East

field extends in a more northerly direction than previously thought. It is now drilling Zahraa-1 on

a sole-risk basis, while the Twaiba-1 well is temporarily delayed due to rig damage (not on

GPX's account). Tunisia remains a longer-term focus where the Chorbane prospect is GPX's

key foothold. The Lambouka-1 well drilled in August has proven inconclusive and has been

suspended pending a future sidetrack.

INDUSTRY OUTLOOK

The recent analyst visit to Syria gave us an opportunity to get an update on Gulfsands’ key

Syrian operations. Low-cost production continues to provide strong cash flow and, with

management confirming better well performance than expected, a reserves review in early

2011 points to a potential reserves upgrade.


2008A 53.6 7.9 (0.9) 0.9 651.7 40.1

2009A 84.4 47.3 33.7 28.3 20.7 16.8

2010E 115.5 69.6 50.4 41.3 14.2 9.7

2011E 138.4 94.7 73.1 60.0 9.8 7.6

62 2 December 2010

Edison Insight




Company description

GWP is a UK pharmaceutical companyfocused on development ofcannabinoids. Its lead product, Sativex,has been approved in some countriesfor the treatment of neuropathic painand spasticity associated with MS, andis in development for cancer pain.

Price performance



GW Pharmaceuticals (GWP)

INVESTMENT SUMMARY

GW Pharmaceuticals' FY10 results marked an important transition with the investment case

now centred on: 1) the roll out of Sativex in Europe; 2) the execution of Phase III studies in

cancer pain; and 3) the expansion of its R&D pipeline. Sativex's UK commercial launch

appears to be going well and the launch in Spain is on track for early 2011. The first of two

Phase III studies in cancer pain is now under way and GW plans to initiate four Phase II studies

with new, oral cannabinoids next year. These will be in ulcerative colitis, fatty liver disease,

anti-psychotic-induced dyslipidaemia and a yet-to-be-determined inflammatory indication.

INDUSTRY OUTLOOK

GW Pharmaceuticals is a leader in the field of cannabinoids (there are >70 in cannabis), which

have the potential to treat a broad range of indications and to become novel pharmaceutical

products. We estimate that Sativex will achieve 5-10% in the indications that it has been

approved (spasticity in MS [UK, Spain, Canada, New Zealand] and neuropathic pain in MS

[Canada only]).


2009A 24.1 2.1 1.8 125.0 0.8 N/A

2010A 30.7 5.9 5.2 129.5 0.8 N/A

2011E 26.0 (1.8) (2.4) 129.6 0.8 N/A

2012E 26.7 (3.7) (4.4) 129.6 0.8 N/A




Company description

Following major restructuring, HR Owenprincipally comprises its luxury carsbusiness involving franchises forBentley, Rolls-Royce, Ferrari, Maserati,Lamborghini, Bugatti and Alfa Romeo. Italso operates aftersales franchises forAudi, BMW/Mini and Lotus.

Price performance



HR Owen (HRO)

INVESTMENT SUMMARY

October's cautiously optimistic IMS reinforced the growing optimism about profits recovery.

More significantly, the appointment of a new high-profile CEO from outside the industry

suggests a potentially exciting immediate future. H R Owen is conducting a strategic business

review, including the possible investment of the substantial liquid funds. This review should be

completed early next year and, hopefully, published with the preliminary results announcement

in spring 2011.

INDUSTRY OUTLOOK

City sentiment towards the motor distribution sector remains cautious, as fears about

recession are seen to have greater prominence than the positive action taken by retailers to

build their downstream activities. SMMT forecasts on new vehicle registrations are still looking

optimistic, but used car values have recently started to drift downwards. Nevertheless,

indications from most leading groups suggest they will deliver profits progress in both 2010

and 2011.


2008A 144.5 2.3 0.6 2.5 36.8 N/A

2009A 125.4 0.1 (1.3) (4.4) N/A 1.2

2010E 148.0 3.0 1.4 4.1 22.4 10.0

2011E 155.0 3.4 1.8 5.3 17.4 6.9

632 December 2010

Edison Insight




Company description

Hampson is the largest manufacturer ofcomposite tooling and assemblysystems for global aerospace. Itmanufactures highly engineeredcomponents and assemblies forairframe and engine applications usingadvanced lightweight materials.

Price performance



Hampson Industries (HAMP)

INVESTMENT SUMMARY

Hampson's interims were affected by the later than-anticipated recovery in demand for

composites tooling at its largest tooling facility, Odyssey. While revenues increased by 4%,

these operational difficulties resulted in trading profit declining by 50%, PBT down 64% and

EPS down 78%, largely as expected following the earlier profit warning. With the debt

covenants amended, new CEO Norman Jordan's task is to focus on shaping the business for

the opportunities ahead and in creating a performance culture.

INDUSTRY OUTLOOK

Since 2004, Hampson has built up the leading player in the fragmented composite tooling

market through acquisitions. This market is set to grow significantly once production of the

B787 and A350 truly start and we believe that Hampson was unlucky with timing rather than

strategic direction. The acquisitions, however, left the group over-exposed to the high debt

levels and delays in this high value capital spend once the financial crisis hit and programmes

moved to the right.


2009A 256.6 53.5 37.6 18.5 1.5 1.8

2010A 178.3 37.2 24.9 10.6 2.7 2.0

2011E 170.4 28.4 12.9 3.4 8.4 3.2

2012E 189.5 36.5 20.5 5.4 5.3 2.6

Sector: Alternative Energy



Company description

Helius Energy identifies, develops, ownsand builds biomass generation projectsin the UK.

Price performance


AnalystGraeme Moyse

Helius Energy (HEGY)

INVESTMENT SUMMARY

We expect Helius to be able to capitalise on the significant growth in the market for biomass

generation. The experienced management team has shown that it can create value for

shareholders by developing biomass projects as demonstrated by the sale of its

Stallingborough project to RWE in 2008 for £41m (£28m cash + £13m earn-out). Helius

currently has three other announced projects in its pipeline and we believe the market has

failed to reflect this in the company's current valuation. We believe at current levels the market

is valuing only the cash on the balance sheet and the Stallingborough earn-out. Our base case

valuation of Helius suggests the company could be worth 74p/share.

INDUSTRY OUTLOOK

The UK has a significant requirement for renewable energy to meet the twin challenges of

reducing greenhouse gas emissions and ensuring security of energy supply. As a proven

technology, we expect biomass generation to play a significant role in helping the UK meet

these challenges.


2008A 0.0 31.4 30.7 42.6 0.6 0.5

2009A 0.6 (4.4) (3.7) (4.4) N/A N/A

2010E 0.0 (2.4) (2.4) (2.8) N/A N/A

2011E 0.0 (2.5) (3.1) (3.7) N/A N/A

64 2 December 2010

Edison Insight


Price: 7.4pMarket cap: £14mForecast net cash (€m) 6.2Forecast gearing ratio (%) N/AMarket AIM


Company description

Hightex, operating worldwide, designsand installs large area architecturaltensile polymer membrane structures forroofs and facades.

Price performance



Hightex (HTIG)

INVESTMENT SUMMARY

Group revenue and operating profit both increased materially in H1 as Hightex moved forward

on its three high-profile sport stadium projects. This increased level of activity was achieved

without putting undue strain on working capital and the period-end net cash position was

effectively unchanged at €4.4m. Hightex is also positioning itself to secure the next wave of

contract wins and management has flagged the prospect newsflow here before the year end,

which is fast approaching.

INDUSTRY OUTLOOK

Management estimates that the target membrane market (excluding China) is currently worth

€150-200m, split 28% US, 22% Europe and 50% ROW. The key market sectors are sporting

stadia/arenas; transportation; retail; commercial; governmental; entertainment and leisure. We

estimate that the stadia/arenas segment is the largest, with a market share of around 30%.


2008A 16.2 (2.3) (2.5) (2.46) N/A N/A

2009A 20.0 1.5 1.1 0.50 17.3 N/A

2010E 30.0 3.1 2.6 0.95 9.1 6.5

2011E 40.3 4.5 4.0 1.48 5.8 9.1




Company description

Hogg Robinson is a major global playerin corporate travel services.

Price performance


AnalystRichard Finch

Hogg Robinson Group (HRG)

INVESTMENT SUMMARY

Bumper interim results confirmed HRG’s ability to leverage off its much-reduced cost base as

activity recovered. While investment in growth is set to curb H2 profit, increasingly favourable

market conditions should still underpin full-year returns ahead of expectations (we are raising

our PBT forecast by c 10%). Successful re-negotiation of long-term bank facilities is a

welcome complement to continued effective cash management (reduced seasonal H1

outflow), as is the resumption of dividend growth.

INDUSTRY OUTLOOK

Although HRG’s mainly managed travel income prevents close correlation with air travel

volumes, the strong pick-up on economic recovery in key markets continues to be broadly

encouraging. According to IATA, a 10% year-on-year rise in international traffic in October

sustained the trend rate of growth since the low point of mid-2009, while a 12% gain in

business travel in September shows August weakness to have been a blip. It would seem that

this recovery can be maintained during Q4.


2009A 351.3 42.3 24.7 4.67 7.3 1.6

2010A 326.8 44.5 28.4 6.33 5.4 2.9

2011E 352.0 51.0 31.0 6.72 5.1 2.4

2012E 370.0 55.8 33.0 7.15 4.8 2.2

652 December 2010

Edison Insight




Company description

i-design is a specialist provider of selfservice devices, primarily ATM, softwareand services.

Price performance



i-design (IDG)

INVESTMENT SUMMARY

i-design's FY10 year-end trading update was positive - revenues in H2 were significantly

higher than H1 and the loss for the year was better than our estimates. We are encouraged by

the expansion of the group’s atmAd licence estate (most recently c 500 YourCash ATMs in the

UK and Holland). The company’s atmAd ‘available for third-party advertising’ estate (once the

recent additions are implemented) totals c 9,900, up from 5,600 at FY09 year-end; as this

expands further, there is high media sales growth potential for i-design to move into

sustainable profitability. FY10 year-end cash is expected to be c £0.75m. Prelims are

scheduled to be reported this month.

INDUSTRY OUTLOOK

Although the banking sector remains under the spotlight both politically and economically,

network owners are increasingly looking for alternative ways to generate revenues from their

ATMs and advertisers are always searching for new avenues to reach customers for the most

effective impact.


2008A 2.1 (0.6) (0.5) (3.8) N/A N/A

2009A 2.4 (1.1) (1.1) (7.9) N/A N/A

2010E 2.2 (0.9) (1.0) (5.7) N/A N/A





Company description

IdaTech develops fuel cells technologiesand related applications. Through itstechnology, IdaTech seeks to addressthe growing demand for clean,convenient, dependable and scalablesources of power.

Price performance


AnalystGraeme Moyse

IdaTech (IDA)

INVESTMENT SUMMARY

IdaTech's recent acquisition of the GenSys LPG fuel cell system, from Plug Power, extends

the company's capabilities into the prime power market. However, the key to validating

Idatech's commercial offering will be the launch of its methanol-based product due in

December. With lower costs, the new fuel cell system should be able to compete with back-up

diesel generators and batteries on a first-cost basis. In our view, a successful launch of the

new methanol-based product will provide not only validation of IdaTech's product range, but

could help clarify the company's financial position and augment efforts to raise fresh equity

capital in the coming 12 months.

INDUSTRY OUTLOOK

IdaTech has patented fuel reforming and processing technology that is market leading. It has

integrated this capability with fuel cell stacks to make a working system for use in stationary

and portable electric power generation.


2008A 5.9 (19.3) (19.6) (38.0) N/A N/A

2009A 6.6 (19.2) (21.1) (36.0) N/A N/A

2010E 5.1 (21.4) (24.2) (46.0) N/A N/A


66 2 December 2010

Edison Insight

Sector: Financials

Price: €1.32Market cap: €164mForecast net debt (€m) 22.4Forecast gearing ratio (%) 23.0Market FULL, Irish Stock Exchange


Company description

IFG provides financial servicescomprising a pension administrationand personal advisory businessoperating in Ireland and the UK, andinternational corporate and trusteeadministration services.

Price performance


AnalystMark Thomas

IFG Group (IFG)

INVESTMENT SUMMARY

IFG has re-focused a disparate group of financial services companies into a business centred

in double-digit growth markets. It is the largest provider of UK bespoke SIPPs and has a

profitable fee-based UK IFA operation. Material earnings growth will come from the James Hay

integration (positive management presentation on 17 November), and IFG expects to take

market share. International operations offer trustee and corporate services where CAGR

growth for 2000-09 was 21%. A residual Irish operation offers some potential as that economy

recovers, but is unlikely to be material in group terms.

INDUSTRY OUTLOOK

The UK SIPP market should have mid-teens growth with an ageing population, greater

self-provision, and higher tax rates encouraging tax-efficient saving. There is a possible drag

on growth of tax restraint on the highest earners affecting bespoke SIPPs. The trustee and

savings is driven by regulatory and tax management opportunities and some competition is

reducing as they face conflicts of interest.


2008A 105.1 20.6 13.2 24.29 5.4 7.6

2009A 94.4 15.9 7.5 19.25 6.9 6.0

2010E 126.5 17.2 8.2 18.75 7.0 10.1

2011E 141.3 29.5 21.1 21.28 6.2 5.6




Company description

ImmuPharma is a UK drug developmentcompany, with a pipeline of productstargeting immune system disorders,cancer and pain. Its lead product,Lupuzor, is licensed to Cephalon and isin Phase IIb development for treatingsystemic lupus erythematosus.

Price performance


AnalystJohn Savin

ImmuPharma (IMM)

INVESTMENT SUMMARY

H1 results showed minimal revenues with expenses of £2.5m and cash of £20m, largely held

as US dollars. Cash outflow was £2.5m. An update on the cancer product IPP-204106 (N6L)

shows steady Phase IIa development progress with six enrolled patients and a move to the

second dose level. An interesting, possibly very valuable, observation is that nanoparticles

formed from N6L and glycosaminoglycan are potentially ten-fold more effective in killing cancer

cells. Phase IIb trials in four cancers may start in 2011. Lupuzor may have Phase IIb data in

2011. Cephalon hopes to start a Phase III on the basis of a 12-week interim analysis of the

Phase IIb. This indicates a possible Phase III start Q411-H112 depending on trial outcomes.

An NDA is projected for 2014.

INDUSTRY OUTLOOK

Lupuzor addresses a market that could be worth over $1bn. The 9 December Benlysta

PDUFA date could allow sales from early 2011; the advisory meeting is 16 November. A Lilly

drug, LY2127399 is about to start a 1,140 patient Phase II study.


2008A 0.1 (4.4) 5.0 6.4 13.5 11.2

2009A 22.1 10.6 9.4 10.8 8.0 4.9

2010E 0.0 (4.8) (4.8) (5.9) N/A N/A

2011E 0.0 (5.5) (5.4) (6.7) N/A N/A

672 December 2010

Edison Insight

Sector: Technology



Company description

Innovation Group is one of the leadingsolution providers to the globalinsurance industry through thedevelopment of a flexible combination ofbusiness process outsourcing, supplychain management and technologysolutions.

Price performance


AnalystDan Ridsdale

Innovation Group (TIG)

INVESTMENT SUMMARY

The major outsourcing deal with Enterprise Rent-A-Car is expected to generate £25m over five

years and adds a good level of underpinning to our 2012 estimates. Further conversion of

proof of concept trials into contracts could prompt upgrades. The shift towards a BPO model

is nearing completion and should make for a much more robust financial profile than in days

gone by. With both estimates and valuation looking undemanding, we feel that Innovation is an

becoming increasingly interesting turnaround play.

INDUSTRY OUTLOOK

While growth of the global insurance industry is marginal, the entry of consumer brands and

comparison engines is supporting the shift towards BPO, through driving the need to improve

flexibility and efficiency. Innovation's revenue model is predominantly tied to claims volumes so

financial performance is influenced by economic activity levels.

Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 139.9 12.8 10.1 0.5 27.0 5.3

2009A 155.9 15.8 11.3 1.0 13.5 7.2

2010E 160.9 16.6 9.4 0.4 33.8 16.3

2011E 173.2 24.4 15.9 0.9 15.0 5.2

Sector: Technology



Company description

IQE has established itself as a one-stopshop for the compound semiconductorwafer needs of the world’s leadingsemiconductor device manufacturers.

Price performance


AnalystDan Ridsdale

IQE (IQE)

INVESTMENT SUMMARY

The acquisition of Galaxy should open up new opportunities in defence while further cementing

IQE's position as the leading and most diverse supplier of compound semiconductor wafers

globally. The raising of £20m will align IQE’s balance sheet with industry demands and could

help open up further growth and market share opportunities. The shares have moved to a

premium rating but upgrade potential still remains and the model is geared. Broader

recognition of IQE’s market-leader position and growth opportunities should now support a

premium valuation.

INDUSTRY OUTLOOK

We are cautious over semiconductor demand into Q4 and 2011, but the strength of the smart

phone and tablet adoption cycles are undeniable. The opportunity in optical networking (eg

Lightpeak) looks significant and is drawing closer. Developments in CPV solar cells and solid

state lighting are earlier stage but could also yield significant incremental revenue streams.


2008A 60.5 8.9 3.4 0.8 58.1 26.9

2009A 52.7 8.1 3.0 0.6 77.5 26.3

2010E 68.1 11.6 6.1 1.2 38.8 25.2

2011E 73.3 13.6 8.5 1.5 31.0 20.7

68 2 December 201068 2 December 2010

Edison Insight

Sector: Mining

Price: US$0.07Market cap: US$6mForecast net debt (US$m) 3.1Forecast gearing ratio (%) 127.0Market OTC


Company description

Ironwood Gold is a US-listed goldexploration company with three projectsin Nevada, US. Together the projectshave the potential to host between2.3Moz and 10.7Moz of gold.

Price performance



Ironwood Gold (IROG)

INVESTMENT SUMMARY

Ironwood Gold has entered into a Letter of Intent to acquire 100% of 20 unpatented lode

claims that make up the 36-mile square Cherry Creek property, located ~90 miles south of

Wells, Nevada. Historically, the Cherry Creek District has produced 32,450oz of gold, 1.6moz

of silver, 144,000lbs of copper and 832,000lbs of lead. The Cherry Creek project is an

underground, hardrock target focused on exploring extensions of known veins. At surface,

these average about 2ft wide. The project appears to have strong anomalous gold and silver

mineralization. Samples from the veins have returned assays of up to 0.7oz/t Ag and 1.18oz/t

Au. Ironwood Gold has plans to undertake a programme of mapping, sampling and drilling.

INDUSTRY OUTLOOK

Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier

this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by

demand-side concerns.

Y/E Aug Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2008A 0.0 (0.1) (0.1) (0.1) N/A N/A

2009A 0.0 0.0 0.0 (0.1) N/A N/A

2010E 0.0 (3.6) (3.6) (5.3) N/A N/A

2011E 0.0 (3.6) (3.6) (4.4) N/A N/A




Company description

IS Pharma is a speciality pharmaceuticaland medical devices firm focused on thespecialist hospital sector. It aims togrow organically and through productand company acquisitions.

Price performance


AnalystJohn Savin

IS Pharma (ISPH)

INVESTMENT SUMMARY

Two successive capital raisings totalling £16m give IS Pharma a strengthened and simplified

balance sheet, with the capacity and intention to make focused acquisitions. The portfolio

showed a sales decline in H111 vs H210, probably due to stocking effects in the last FY.

Expected H2 sales growth is driven by Variquel in new EU markets. Episil is now launched in

the UK and EU roll out will occur over 2011, leading to anticipated high growth in FY12. A

dividend will be paid mid-2011. With £6.3m of contingent liabilities paid off, cash flows will be

strong and freed to invest in growth. We expect a low initial dividend of 0.8p/share paid in

mid-2011, making a 1% yield and costing c £400k.

INDUSTRY OUTLOOK

The cash pile, estimated at c £15m, is available for growth-enhancing acquisitions as indicated

by management. The bank loan is £4.5m and could be extended by £2.5m if an acquisition

needed additional cash.


2009A 12.2 3.8 3.2 13.3 6.3 7.9

2010A 14.2 4.5 3.7 10.8 7.7 6.6

2011E 14.7 4.3 3.8 9.1 9.2 7.0

2012E 17.1 4.8 4.1 9.3 9.0 5.3

692 December 2010

Edison Insight

Sector: Investment Companies

Price: TRY2.40Market cap: TRY480mForecast net debt (TRYm) 0Forecast gearing ratio (%) 0.0Market IS

Share price graph (TRY)

Company description

Is Yatirim Menkul Degerler offersbrokerage, corporate finance,investment advisory services andportfolio management services. Thecompany also advises on IPOs.

Price performance


AnalystMaana Ruia

Is Yatirim (ISMEN)

INVESTMENT SUMMARY

ISY has reported Q3 results, with net profit of TRY46.2m YTD and shareholders' equity up

12% y-o-y. Interest and trading income improved from the weak Q2 levels and brokerage and

asset management progressed steadily. Although corporate finance had a seasonally weak

Q3, we expect a record-breaking year for this division as pipeline deals complete before year

end. With the prospects for Q4 looking positive, we think the stock is attractively valued, on a

2010 P/E of 5.4x, 2010 P/BV of 1.3x and a yield of 5.5%.

INDUSTRY OUTLOOK

Ratings agency Fitch revised its outlook on Turkey long-term from stable to positive, affirming it

as BB+ and saying "the revision... reflects Turkey’s strong economic recovery, improving

public finances and increasing confidence that a lasting transformation in the country's

economic prospects". However, it noted the key issue was whether Turkey could grow without

excessive deficits. Fitch forecast a current account deficit of $44bn (5.9% of GDP) by year end.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(TRYm) (TRYm) (TRYm) (Kr) (x) (x)

2008A N/A N/A 52.9 37.4 6.4 N/A

2009A N/A N/A 127.1 57.4 4.2 N/A

2010E N/A N/A 102.3 44.1 5.4 N/A

2011E N/A N/A 116.4 40.6 5.9 N/A

Sector: Oil & Gas



Company description

Ithaca Energy is a Canadianindependent oil and gas company withexploration, development andproduction assets in the UK North Sea.

Price performance



Ithaca Energy (IAE)

INVESTMENT SUMMARY

Ithaca announced its Q310 financial results in November. Operational and financial

performance remains firmly on track with no surprises from previous announcements. The

2011 work programme is now key to determining share price potential. With significant funds

available we await details of an extensive programme that will include incremental production

upgrades from Beatrice, first oil from Athena, appraisal of the enhanced Stella area and

development of the UK gas basin assets. Shares currently trade in line with CoreNAV at 138p

that we expect has 30p of additional upside as IAE derisks its development portfolio. This does

not include exploration upside available from Garnet, Opal and Polly. We expect to update our

forecasts once we get sight of the 2011 work programme.

INDUSTRY OUTLOOK

IAE is building a reputation in the North Sea as a cost-efficient marginal field E&P operator.

Shrewd acquisitions coupled with an exciting portfolio under development point to a positive

outlook.


2008A 2.5 (6.9) (12.7) (20.3) N/A N/A

2009A 101.3 50.4 (6.0) 4.8 47.6 12.4

2010E 157.5 101.8 37.5 13.0 17.6 3.7

2011E 164.3 98.2 42.2 11.6 19.7 5.5

70 2 December 2010

Edison Insight

Sector: Technology



Company description

K3 provides Microsoft-based supplychain management solutions to SMEs inthe retail and manufacturing sectors.

Price performance



K3 Business Technology Group (KBT)

INVESTMENT SUMMARY

K3 has acquired Panacea, a UK managed services and IT solutions provider (revenues split

roughly 50/50 between the two businesses). The deal effectively doubles the size of K3’s

Managed Services business and adds c 260 customers (mainly using Microsoft Dynamics and

Sage) to its existing 1,500 customer base. We see significant potential for K3 to sell its

application-hosting services into Panacea’s customer base. K3 has paid £2.2m in cash,

funded by the company's revolving credit facility. We estimate that the deal will be earnings

enhancing, adding 3% to FY11 and 9% to FY12 normalised EPS, and will drive growth in

recurring revenues. 2010 data shown here is for 18 months.

INDUSTRY OUTLOOK

The enterprise resource planning market for SMEs is consolidating, and evidence suggests MS

Dynamics is growing market share during the current downturn. K3 has become MS's biggest

Dynamics partner in the UK and the provision of solutions with a growing proportion of K3's

own IP differentiates it from other IT service companies and resellers.

Y/E Dec / Jun Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 39.5 7.8 6.0 18.2 8.1 4.0

2010A 59.8 10.3 7.6 23.4 6.3 5.0

2011E 53.8 9.5 8.0 23.2 6.4 5.3

2012E 58.9 10.4 9.0 26.1 5.7 4.3

Sector: Technology



Company description

KBC is a leading independentconsulting and technology groupdelivering competitive advantage toowners and operators in the oil refining,petrochemical, and other processingindustries worldwide.

Price performance


AnalystDan Ridsdale

KBC Advanced Technologies (KBC)

INVESTMENT SUMMARY

Overall trading conditions appear to have improved since H1, although the FY10 result will

hinge upon the timing of new business coming in, particularly licensing deals for Petro-SIM V4.

Looking towards next year, the major profit improvement project with Mexican refinery group

Pemex Refinancion (worth $42m over 30 months) should add substantial underpinning to our

2011 estimates. On 2011 estimates the rating still looks very undemanding.

INDUSTRY OUTLOOK

KBC is an independent provider of consultancy services and software tools to the energy and

refining industry. While the current uncertain economic environment will result in a decline in

capital investment work, to some degree this will be offset by a swing towards an operational

focus as clients seek improvements in flat or negative refining margins.

Y/E Dec / Jun Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 52.8 6.6 5.9 7.0 8.1 4.7

2009A 52.6 6.8 5.8 6.8 8.4 12.5

2010E 52.7 6.3 5.2 5.5 10.3 6.1

2011E 56.7 7.8 6.3 6.9 8.2 5.2

712 December 2010

Edison Insight

Sector: Technology



Company description

KCOM Group provides a range ofintegrated IT and communicationsservices to businesses, and internet andtelecommunications services toselected consumer markets, within theUK.

Price performance


AnalystAlex Gunz

KCOM Group (KCOM)

INVESTMENT SUMMARY

With KCOM’s two-year transformation plan complete, pension issues clarified and debt

refinanced, management can now focus its attention increasingly on delivering organic growth

to the business. Confidence in the outlook is shown by the company’s dividend policy. Our

revised estimates imply a DCF valuation for KCOM of 64p, suggesting comfortable upside

potential, supported by a 6.4% dividend yield.

INDUSTRY OUTLOOK

Two trends are occurring within the UK fixed-line telecoms industry. First, call volumes among

domestic customers continue their secular decline, driven by a range of competing services.

Second, there remains strong growth potential on the corporate side, as the managed

services market continues to expand. Growth is being driven by corporate cost-savings plans

and an increasing appetite for simple and flexible solutions.


2009A 472.3 65.1 32.7 7.3 7.0 4.2

2010A 412.8 69.8 42.3 7.8 6.5 4.1

2011E 396.1 74.2 40.5 5.5 9.3 3.6

2012E 405.2 75.8 44.8 6.2 8.2 3.3


Price: €0.06Market cap: €13mForecast net debt (€m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Kedco is a leading bioscience energycompany taking a professionalapproach to green energy production. Ithelps companies throughout the UKand Ireland to convert waste into cleanenergy.

Price performance


AnalystNeil Shah

Kedco (KED)

INVESTMENT SUMMARY

On 3 November 2010 Kedco announced it had secured £9.9m of project finance facilities from

Ulster Bank for the Newry project; this is the first of many such announcements we expect to

see. Kedco hopes to be able to complete work on certain pre-conditions and sign terms for

the facility in early 2011. The next update is expected at the AGM on 17 December.

INDUSTRY OUTLOOK

Kedco is using two tried-and-tested technologies for converting biomass into energy:

gasification and anaerobic digestion (AD) in the form of dry fermentation. Both receive high

support from the UK and Irish regulatory regimes. Disposal of waste also entails a cost under

the EU Landfill directive, which encourages waste producers to seek alternative methods of

disposal. The October 2010 approval of the Renewable Heat Incentive (similar to a feed-in

tariff) is a further sign of commitment to the sector.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(€m) (€m) (€m) (c) (x) (x)

2009A 5.9 (4.1) (5.3) N/A N/A N/A

2010A 9.0 (1.6) (3.2) N/A N/A N/A



72 2 December 2010

Edison Insight

Sector: Mining

Price: 23.3pMarket cap: £89mForecast net cash (SEKm) 12.2Forecast gearing ratio (%) N/AMarket NASDAQ OMX First North


Company description

Kopylovskoye is a gold explorationcompany focused on the developmentof its six licences in Russia. Togetherthese cover 225km2 and have C1, C2and P1 reserves/resources of 2.0Moz.Currently listed in Stockholm, it is alsoconsidering a secondary listing.

Price performance

% 1m 3m 12mActual (17.6) N/A N/ARelative* (17.8) N/A N/A* % Relative to local index


Kopylovskoye (KOPY)

INVESTMENT SUMMARY

In mid-November, Kopylovskoye announced plans to raise up to SEK64.8m (c US$9.3m), by

way of a rights issue comprising four new shares at SEK22 for every five shares held.

Shareholders taking up their rights will also be entitled to a warrant (exercisable at SEK25 in

May next year) for every two new shares. Gross proceeds of the warrant are expected to raise

up to SEK36.8m (c US$5.3m). The funds raised will be applied to the company’s portfolio of

exploration projects in the Bodaibo region of Russia, where it is currently focused on

converting its Russian reserves and resources into JORC. The first results of this are expected

in early 2011.

INDUSTRY OUTLOOK

Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier

this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by

demand-side concerns.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(SEKm) (SEKm) (SEKm) (öre) (x) (x)

2008A 0.4 (11.8) (13.6) (2.2) N/A 1633.7

2009A 0.5 (4.5) (5.6) (16.2) N/A N/A

2010E 0.4 (9.5) (10.8) (442.7) N/A N/A

2011E 0.4 (9.5) (10.4) (281.9) N/A N/A

Sector: Food & Drink



Company description

Landkom International is involved inarable farming in Ukraine.

Price performance


AnalystGuy Bell

Landkom (LKI)

INVESTMENT SUMMARY

The first interim results announcement under the new management team confirms that its

changes are beginning to have an effect – costs are being contained and solid prices have

already been achieved for the majority of the winter rapeseed crop. Rapeseed yields were in

line with expectations, outperforming the rain-damaged yields of much of the Ukrainian arable

sector. As expected, the Landkom wheat harvest was badly affected. However, indications

from the Crimea suggest that a satisfactory price is feasible and the combination of this and

the final harvest numbers mean the full-year number should be achievable. Winter planting has

also been in line with the expected expansion during the current year.

INDUSTRY OUTLOOK

The rich arable land in Ukraine combined with low local costs offer the opportunity to produce

crops to satisfy the expanding demands of the worlds food and bio-fuels industries.

Y/E Oct Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2008A 10.6 (56.1) (57.4) (29.1) N/A N/A

2009A 14.6 (20.9) (27.5) (11.9) N/A N/A

2010E 28.6 0.6 (5.8) (1.4) N/A N/A

2011E 35.0 3.9 (3.1) (0.7) N/A 18.2

732 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Leni Gas & Oil is an E&P junior focusedon development opportunities in lowpolitical risk countries. There areproducing assets in Spain, Trinidad andthe US GoM and an exploration projectoffshore Malta.

Price performance

% 1m 3m 12mActual (15.0) 48.8 (16.7)Relative* (14.3) 35.1 (24.7)* % Relative to local index

AnalystPeter Dupont

Leni Gas & Oil (LGO)

INVESTMENT SUMMARY

LGO has a very active field development and rehabilitation programme. We believe this is very

much on track and that production is gathering momentum in the closing months of 2010. The

trend should strengthen markedly in 2011/12. The deep plays identified earlier in the year offer

possible exciting exploration upside medium term. A potential joint-venture has recently been

announced to appraise the shale gas play at Ayoluengo, Spain. Appraisal drilling of the

potential deep oil formation at the same location is a possibility by late 2011. The stock

remains low valued selling on about $1/boe of the potential resources in the shallow plays.

INDUSTRY OUTLOOK

Leni's strategy emphasises low-risk development opportunities in proven production provinces

rather than frontier exploration. The strategy applied by Leni can perhaps be best described as

a 'vulture' approach and is broadly analogous to that applied by a number of E&P concerns

such as Apache in the North Sea.


2008A 2.1 0.2 0.1 0.0 N/A N/A

2009A 2.1 0.2 (0.2) 0.0 N/A 16.0

2010E 6.0 3.3 2.3 0.4 7.8 6.7

2011E 43.9 30.9 24.1 3.2 1.0 0.9


Price: 227.5pMarket cap: £17mForecast net debt (US$m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Lifeline is a Chicago-based globalmedical technology company. It hasdeveloped innovative proprietarytechnologies to improve the quality, andincrease the availability, of vital organs,tissues and cells for transplantation andmedical research.

Price performance


AnalystJohn Savin

Lifeline Scientific (LSI)

INVESTMENT SUMMARY

Lifeline’s interim results showed H1 revenue at $11.1m, with $10.4m in product sales. This is

up 44% on the comparable period. Lifeline experienced a major market shift in 2009 as it

moved to commercial pricing. H209 growth vs H110 was steadier at 5%, including 15 new

units sold. Further growth is expected from the EU (country by country) and from 2011 in Brazil

and China. A liver transplant transportation unit is under development.

INDUSTRY OUTLOOK

The 2009 clinical study showed improved clinical outcomes from use of LifePort. Other papers

have shown overall cost savings. LifePort units are already used by 45 of the 56 US organ

procurement organisations but for c 26% of US deceased donor kidneys. Higher use rates

should steadily boost growth; there may be up to $25m of additional US potential. EU

reimbursement is set at national levels and should generate higher sales levels from 2012.

Lifeline has a high share of the organ static preservation market with its SPS-1 solution.


2008A 8.3 (4.2) (4.6) (29.3) N/A N/A

2009A 18.3 3.3 3.0 18.2 20.0 38.6



74 2 December 2010

Edison Insight

Sector: Engineering



Company description

Lincat manufactures and suppliescommercial catering equipment forprofessional kitchens.

Price performance


AnalystGuy Bell

Lincat (LCT)

INVESTMENT SUMMARY

A good set of interim results compared to a depressed period shows the positive management

action that boosted the second half of 2009 has continued to bear fruit. The core business,

Lincat Ltd, continues to exploit its ‘value’ proposition but uncertainties remain in the economy

as a whole, particularly in the public sector. These will affect the other two subsidiaries most,

so we would expect to see slightly more volatile performances from them. The ongoing

weakness of the pound continues to be helpful, but any material boost is only likely to be seen

over the medium term. On the strength of the latest results we increased our estimates

marginally, but believe it prudent to remain reasonably cautious for now.

INDUSTRY OUTLOOK

Despite official figures that the UK is now out of the recession, the underlying reality is still

unclear. The scale of cuts by the new government is now in the open. However, the impact on

suppliers like Lincat is unclear and instability in the eurozone sustains uncertainty.


2008A 32.9 6.8 5.5 73.4 8.9 4.1

2009A 30.8 5.9 4.9 66.0 9.8 5.9

2010E 32.3 6.2 5.3 70.9 9.2 5.3

2011E 33.5 6.4 5.7 75.4 8.6 5.5




Company description

Lombard Medical Technologies isdeveloping a range of cardiovasculardevices, principally the Aorfix stent graftsystem for the treatment of abdominalaortic aneurysm (AAA).

Price performance

% 1m 3m 12mActual (0.5) 9.1 (15.1)Relative* 0.3 (17.4) (23.3)* % Relative to local index


Lombard Medical Technologies (LMT)

INVESTMENT SUMMARY

Near-term value at Lombard focuses on timely completion of the Aorfix PMA submission.

Module four was recently submitted according to schedule and the sixth and final module,

clinical data, is due in H111. Most recent reports showed that 111 out of 144 patients had

reached the 12-month follow-up stage. FDA approval would trigger the first $2.5m instalment

of a $5.0m loan facility payable through a recently signed Japanese distribution agreement for

the device. Lombard's commercialisation strategy is currently focused on growing the share in

five key European markets. Transfer of stent graft production from the Didcot to Prestwick

facility is expected to produce significant ongoing efficiencies.

INDUSTRY OUTLOOK

While Cook is the global market share leader, Medtronic is thought to control around 50% of

the US market and has been eroding Gore’s dominance there. Lombard will compete to

achieve further penetration in $1bn global AAA market on the basis of its high angle approval

for Aorfix.


2008A 2.0 (10.8) (11.0) (6.8) N/A N/A

2009A 2.4 (7.3) (7.6) (0.8) N/A N/A



752 December 2010

Edison Insight

Sector: Financials



Company description

Lonrho is a pan-African company with adiverse portfolio of investments. Itfocuses on servicing Westerninvestment and African business byinvesting in emerging sectors acrossAfrica, creating hubs of businessthrough key investments.

Price performance



Lonrho (LONR)

INVESTMENT SUMMARY

Lonrho announced its Q4 update on 2 November and provided a number of highlights that

show the progress the business has made. With FY revenues up 20% to £107.7m, EBITDA of

£9.4m and a reported PBT of £0.5m vs a loss of £4.5m, Lonrho has delivered not only growth,

but also profitably. In addition, with the proceeds of the successful $70m, five-year guaranteed

convertible bond to be used to repay existing debt, provide working capital and accelerate the

growth of the business, particularly in agriculture, we feel 2011 is set to signal further

substantial improvement.

INDUSTRY OUTLOOK

Lonrho is a play on African development. Operating in 17 countries, the company comprises

five divisions that spread both operational and geopolitical risk. With impressive recent revenue

growth, the group is moving towards profitability. Short-term growth drivers involve expansion

plans focusing on developing tried and proven businesses across the continent, although

capital will be required to meet these objectives.


2008A 43.1 (36.6) (36.9) (8.5) N/A N/A

2009A 90.9 (6.6) (7.1) (1.3) N/A N/A






Company description

Lookers is one of the leading UK motorvehicle distributors operating 111outlets covering 28 marques.Management is ambitious and thegroup is set to grow strongly over themedium term.

Price performance



Lookers (LOOK)

INVESTMENT SUMMARY

At a recent investor day, management reinforced the progress being achieved in the current

year. The Motor division continues to build after the setback in 2008, with investment in

downstream activities delivering volume gains at sustained margins. The group's specialist

aftermarket business, which provides a unique differentiation, continues to achieve impressive

results. Lookers has a clear strategy for earnings growth in a mature market and strong

balance sheet providing the funds to take the group forward.

INDUSTRY OUTLOOK






and 2011.


2008A 1776.0 42.9 14.0 4.7 12.6 5.2

2009A 1749.0 53.4 28.3 7.1 8.4 8.4

2010E 1770.0 49.0 31.0 5.9 10.1 4.8

2011E 1800.0 51.5 33.5 6.4 9.3 5.0

76 2 December 2010

Edison Insight




Company description

Low & Bonar produces yarns andfabrics for a variety of end markets ofend markets by combining polymerswith specialty additives and pigments. Itoperates as two divisions: PerformanceTechnical Textiles (70% FY09 revenues)and Technical Coated Fabrics (30%).

Price performance



Low & Bonar (LWB)

INVESTMENT SUMMARY

As the October IMS demonstrated, Low & Bonar has delivered a healthy recovery in revenue in

the year to date, with an improvement in operating margin expected to come through in due

course. We expect to see progress at all levels in future years, with revenue growth and margin

expansion feeding through to a decent earnings uplift and, having reinstated an interim

payment, a resumption of dividend growth.

INDUSTRY OUTLOOK

Management aims to double earnings within five years representing organic growth of c 15%

pa, derived from a flagged 10% return on sales and an implied revenue uplift in excess of GDP

growth. With sector diversity, some of this will come from the cycle and company initiatives

with new products and markets are also expected to be key drivers.

Y/E Nov Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 335.2 41.7 16.4 7.7 5.6 1.7

2009A 304.8 35.7 17.3 5.0 8.6 2.5

2010E 329.5 39.2 20.2 5.1 8.4 4.4

2011E 345.0 42.8 23.0 5.8 7.4 3.8

Sector: Property



Company description

LSL Property Services is one of theUK’s leading residential propertyservices companies and second biggestestate agency chain. It provides a broadrange of services to corporate(mortgage lenders) and retail clients.

Price performance


AnalystRoger Leboff

LSL Property Services (LSL)

INVESTMENT SUMMARY

A recent IMS, covering the four months to end October, confirmed that the group is on track

to meet full-year forecasts despite market weakness. Turnover was up 33% in the first 10

months of FY10, 17% like-for-like. Surveying and agency both increased market share, while

HEAL branches are expected to be profitable in H2. LSL has also built on market-leading

positions in counter cyclical areas such as asset management and lettings, while October's

acquisition of Advance Mortgage Funding adds to its mortgage and insurance distribution

capacity. These new contracted and counter-cyclical revenue streams enhance LSL's

resilience to a difficult market.

INDUSTRY OUTLOOK

The outlook for the UK housing market remains weak, with broad expectations of slippage in

house prices during 2011. The level of mortgage approvals hit a 19-month low in October,

reflecting tougher requirements for first-time buyers' deposits. Remortgages were however,

above their six-month average.


2008A 162.5 20.5 14.3 14.2 15.1 17.9

2009A 158.2 29.7 26.2 20.7 10.4 7.2

2010E 211.0 32.5 29.2 19.9 10.8 7.4

2011E 225.0 36.5 34.6 23.5 9.1 5.6

772 December 2010

Edison Insight




Company description

Matchtech Group has grown into one ofthe UK's leading technical, professionaland outsourcing recruitment groups.Split into four business units, each asolutions specialist in its area ofrecruitment in providing contract,temporary and permanent staff.

Price performance



Matchtech Group (MTEC)

INVESTMENT SUMMARY

Matchtech’s AGM statement indicated no change to full-year numbers, but reiterated that the

additional investment in headcount will lead to a greater H2 weighting to profits, with the full

benefits coming through in FY11. There has been good progress in expanding the group’s

horizons in professional services/ education. The key projects of the QE class aircraft carriers

and CrossRail all survived the government's CSR, removing an area of potential concern. The

valuation is at the bottom of the range of peers and the shares carry a premium, and covered,

yield.

INDUSTRY OUTLOOK

October's REC/KPMG Report on Jobs showed the weakest growth in 14 months for both

permanent staff appointments and temporary/contract staff billings. Vacancies are also on a

downward trend of weakening growth. Public sector redundancies are starting to step up and

confidence is fragile, but qualified candidates with scarcer skill sets, such as many of those

supplied by Matchtech, remain in good demand.

Y/E Jul Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 269.6 12.3 11.3 34.6 6.4 5.2

2010A 264.4 9.3 8.6 26.3 8.4 13.5

2011E 290.9 9.7 8.8 26.7 8.3 7.9

2012E 311.1 11.1 10.3 31.4 7.0 6.1

Sector: Technology



Company description

Maxima is an IT business systems andmanaged services company.

Price performance

% 1m 3m 12mActual 4.2 15.1 1.2Relative* 5.0 (24.3) (8.6)* % Relative to local index


Maxima Holdings (MXM)

INVESTMENT SUMMARY

Maxima has undergone substantial change over the last 18 months with the new management

team significantly refocusing the group, positioning for cloud computing, expanding its facilities

in India and renegotiating the group’s banking facilities. The company released an in-line AGM

trading update and also announced a significant contract win with Addison Lee - London's

largest minicab service - to implement a business intelligence solution based on SAP

BusinessObjects Edge technology. In spite of the significant operational improvements and

debt reduction, the shares continue to trade on a modest single-digit P/E.

INDUSTRY OUTLOOK

We expect overall IT spending in the UK to improve modestly in 2010, given the historic

relationship to GDP, political uncertainties and the likely ongoing deferral of investment

decisions in the short term. However, Maxima has a high bias to managed services

(maintenance and service revenues) rather than new IT spend, as well as a diverse customer

spread and a broad platform.

Y/E May Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 56.6 8.6 6.9 20.3 4.3 3.0

2010A 51.0 5.9 4.5 12.2 7.2 3.8

2011E 52.0 6.1 4.8 13.5 6.5 4.6

2012E 53.8 6.6 5.3 15.0 5.8 3.6

78 2 December 2010

Edison Insight

Sector: Mining



Company description

MDM Engineering is a metallurgicalengineering company established inFebruary 2006. It undertakes mineralresources projects of varying size andconcentrates on the gold, base metals,industrial metals and diamond sectors.

Price performance

% 1m 3m 12mActual (0.8) 22.1 (25.3)Relative* 0.0 (36.2) (32.5)* % Relative to local index


MDM Engineering (MDM)

INVESTMENT SUMMARY

Industry-wide project delays and deferments have resulted in an intensely competitive

environment among contractors. In addition, MDM has been hit by a strong rand. The

company is scheduled to announce its results on 3 December, when we estimate that it will

report a loss. Given its two project wins to date in FY11, however (Repsa and Kalagadi), we

estimate that it will recoup approximately half of its H1 loss in H2. In the meantime, it is

concluding studies on eight projects, including Goldfields’ giant ZAR8bn tailings re-treatment

project at Driefontein. In addition, it has entered into an alliance with GR Engineering Services

in Perth to target the c 400 projects in Africa controlled by Australian companies.

INDUSTRY OUTLOOK

Our forecasts assume the award of the Goldfields project from August 2011, on which basis

MDM's Y2 EV/EBITDA ratio of 7.6x is at a discount to the average of its three principal

international peers (Lycopodium, Ausenco and Outotec) of 7.8x.

Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 35.9 10.6 11.6 21.1 9.6 7.4

2010A 33.2 4.2 5.0 9.3 21.8 N/A

2011E 14.5 (3.0) (2.7) (7.2) N/A 130.1

2012E 35.3 8.4 8.8 16.1 12.6 11.0


Price: €3.20Market cap: €28mForecast net cash (€m) 1.0Forecast gearing ratio (%) N/AMarket MAB


Company description

Medcom Tech distributes a wide rangeof innovative orthopaedic productsacross Spain and Portugal. Its portfolioincludes knee and hip implants, platesand screws to repair bone and spinefractures, and advanced types of bonecement.

Price performance

% 1m 3m 12mActual N/A N/A N/ARelative* N/A N/A N/A* % Relative to local index

AnalystMick Cooper

Medcom Tech (MED)

INVESTMENT SUMMARY

Medcom Tech is a rapidly growing orthopaedic device distributor based in Iberia. Its portfolio

includes knee and hip implants, plates and screws to repair bone and spine fractures.

Revenues have increased at a CAGR of 49% since 2003 reaching €10.1m in 2009, and it has

accelerated its growth this year with sales up 60% during H110. This growth has been driven

primarily by the company hiring new sales reps across Iberia, more cross-selling, and

supplementing its portfolio with innovative orthopaedic products. Its most important product

range are the spinal devices from K2M. The Spanish government's austerity measures have

reduced Medcom Tech's rate of growth, although it should be able to sustain its momentum.

INDUSTRY OUTLOOK

The Spanish orthopaedic market was estimated to be worth €350m in 2008. We had been

expecting it to grow at c 5% pa, but it will now probably decline slightly because of austerity

measures. The growth drivers offsetting budget constraints are the ageing population, political

pressure and technical innovations.


2008A 6.8 1.1 0.7 7.0 45.7 N/A

2009A 10.1 2.8 2.1 24.1 13.3 N/A

2010E 14.7 4.0 3.3 27.0 11.9 N/A

2011E 20.5 4.7 4.0 32.1 10.0 15.6

792 December 2010

Edison Insight

Sector: Property



Company description

The MedicX Fund is a specialist investorin primary healthcare property in theUnited Kingdom.

Price performance


AnalystRoger Leboff

MedicX Fund Limited (MXF)

INVESTMENT SUMMARY

MedicX reported a £211m end Q4 portfolio valuation which, at a net initial yield of 5.88%, was

virtually unchanged over the quarter. All-in NAV per share at 71.4p reflected a fall in the

mark-to-market benefit of its £100m, 30-year fixed rate debt, in line with recent declines in

long-term interest rates. The Q4 DCF valuation was 91.5p and the dividend yield at 7.3% is

attractive, while the new scrip dividend option is also positive. Results for FY10 are due 8

December 2010.

INDUSTRY OUTLOOK

The government's Comprehensive Spending Review confirmed real increases in healthcare

spending in each year of the current parliament. The detail of new budget responsibility for

GPs should be clarified when the healthcare bill is published, but the outlook remains positive

for investment in primary care facilities, with a new focus on greater efficiency within the NHS.

A March 2010 BMA report stated that 60% of GPs still work from unsuitable premises, with

75% unhappy with their premises.

Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 8.2 4.3 1.1 1.4 51.6 24.0

2009A 9.4 6.1 1.4 1.5 48.2 12.0

2010E 11.3 7.8 2.8 2.3 31.4 17.3

2011E 13.3 10.0 4.4 3.1 23.3 10.6




Company description

Meggitt is a global manufacturer ofaerospace equipment, sensing anddefence systems. Its end markets arecivil aerospace (43%), military (43%) andenergy & other (14%).

Price performance



Meggitt (MGGT)

INVESTMENT SUMMARY

Meggitt's 19 November investor day highlighted the resilience of the business based on a

strategy to target markets in extreme environments, with high barriers to entry and high

aftermarket content to secure long-term profitable revenue streams. Management has also

used the recent downturn to accelerate its cost-reduction and transformation programme that

has seen savings of £24m pa so far and a run-rate of £55m set for the end of 2010. With R&D

maintained during the downturn and a number of new contracts that will support long-term

revenue growth, we believe Meggitt is well positioned to benefit from the upturn.

INDUSTRY OUTLOOK

In our view, the key to a resumption of growth is a return of the high margin civil aftermarket

business, which accounts for 30% of revenues. With Meggitt’s internal assumptions based on

1% air traffic growth, we feel there is room for upgrades with current traffic growth up 3.6%

year-to-date. H2 should also see improved military revenues with orders now released in the

US.


2008A 1163.0 341.0 243.0 26.5 12.7 8.0

2009A 1151.0 340.0 234.0 25.3 13.3 7.1

2010E 1156.0 326.0 238.0 25.3 13.3 7.3

2011E 1213.0 352.0 265.0 28.3 11.9 7.2

80 2 December 2010

Edison Insight


Price: €3.27Market cap: €56mForecast net cash (€m) 0.6Forecast gearing ratio (%) N/AMarket Irish Stock Exchange


Company description

Merrion is an Irish company that usestechnology acquired from Elan toreformulate injectable drugs into oralformulations. Its lead projects areOrazol, insulin and GLP-1 (incollaboration with Novo Nordisk).

Price performance

% 1m 3m 12mActual (6.6) (18.3) (4.4)Relative* (5.6) (9.0) 0.1* % Relative to local index

AnalystJohn Savin

Merrion Pharma (3MP)

INVESTMENT SUMMARY

An FDA review has switched Orazol’s development plan in the US from bone metastases, the

indication agreed with the CHMP, to adjuvant early-stage breast cancer therapy. This opens

the way to a serious Orazol deal, ideally by mid-2011, and an expected shift in EU indication

from bone to breast. This would be a new and unique indication and a better market position

than for only bone metastasis.

INDUSTRY OUTLOOK

ABCSG-12, a 1,800 patient study, showed that zoledronic acid (ZA) reduced risk of

progression by 36%. ZA might help immune attacks on cancer stem cells. The Z-FAST and

Zo-FAST studies showed that ZA plus hormone therapy increased bone density in cancer

patients. Markers (VEGF) show that low-dose weekly ZA impacts tumour growth. In 2009,

254,650 US women were diagnosed with breast cancer; some 40,170 women died. If

approved, many patients could use Orazol for five years; survival is over 98% with localised

disease which is c 60% of cases. Another adjuvant indication could be prostate cancer.


2008A 1.3 (5.1) (5.1) (0.3) N/A N/A

2009A 6.3 (1.3) (1.6) (0.1) N/A N/A

2010E 4.6 (1.5) (2.0) (0.1) N/A N/A

2011E 2.5 (3.1) (3.7) (0.2) N/A N/A

Sector: Engineering



Company description

Molins is a specialist engineering groupsupplying processing and packagingmachinery, and scientific services to theglobal tobacco, pharmaceutical andFMCG industries.

Price performance

% 1m 3m 12mActual 6.4 5.4 10.4Relative* 7.2 (22.6) (0.3)* % Relative to local index


Molins (MLIN)

INVESTMENT SUMMARY

Molins has raised the quality of its earnings by switching its business emphasis towards solving

customers' engineering problems and supplying spare parts and specialist services.

Management responded positively to difficulties encountered in early 2010, when several

orders were either cancelled or postponed and we have recently lifted our estimates. The

recent restructuring shows every sign of delivering improved returns over the medium term;

with a sound balance sheet showing net cash, we remain optimistic that management can

deliver recovery in 2011.

INDUSTRY OUTLOOK

The UK capital goods market has changed materially in recent years, with the more successful

businesses anticipating and responding to specific customer problems. Many companies,

including Molins, have transferred their manufacturing operations to lower-cost countries in an

attempt to maintain competitiveness. The tobacco products industry is under political pressure

in many developed markets, but worldwide consumption continues to rise.


2008A 91.5 6.2 2.3 10.3 5.7 N/A

2009A 83.8 6.6 3.4 10.6 5.5 1.4

2010E 85.0 6.0 2.5 8.4 7.0 1.8

2011E 88.0 6.5 3.0 9.9 5.9 1.5

812 December 2010

Edison Insight


Price: €5.10Market cap: €22mForecast net debt (€m) 9.0Forecast gearing ratio (%) 44.0Market Milan Stock Exchange


Company description

Mondo TV is a leading Italian producerand distributor of animated TV seriesand feature-length cartoons. It alsolicenses and merchandises its rightsthrough home video, music, multimediaproductions and publishing.

Price performance



Mondo TV (MTVI)

INVESTMENT SUMMARY

Mondo TV is making good operational progress, including a recent multi-territory broadcast

deal with Turner for 'Puppy in My Pocket'. However, new properties take time to build while

old library sales are suffering in weak TV markets. Q3 results (15 November) were behind

budget and the 2010 EBITDA target looks very demanding. Management has not yet

published revised budgets, so we have left our estimates unchanged ahead of any year-end

trading update. Mondo's story has always been about generating significant new licensing

revenue streams in 2011/12 and we remain optimistic that the group has significant growth

potential on a two-year view.

INDUSTRY OUTLOOK

The broadcast market remains very difficult, with programme budgets under considerable

pressure. However, successful animations and children's characters have long-lasting global

appeal and Mondo TV is now trying to grow its licensing and merchandising revenue streams,

working with established toy manufacturers as well as broadcasters.


2008A 38.0 0.8 (18.0) (265.1) N/A N/A

2009A 10.3 2.2 (1.1) (24.1) N/A 3.4

2010E 19.0 8.0 1.7 38.6 13.2 6.4

2011E 24.0 10.5 3.9 88.6 5.8 2.2

Sector: Technology



Company description

Monitise provides a mass markettechnology platform that enables banks,card schemes and other financialproviders to offer mobile banking andpayment services.

Price performance



Monitise (MONI)

INVESTMENT SUMMARY

Monitise announced the formation of the Mobile Money Network joint venture, in which it holds

a 40% stake, while Best Buy Europe and Charles Dunstone hold the remaining 60%. The

network will launch in 2011 and will enable mobile marketing and payments. US Bank has

started a trial contactless payment service, supported by Monitise's technology and

DeviceFidelity's NFC-based MicroSD card. Major milestones to watch for in FY11 are the

launch of the Monitise service in Hong Kong and India, a pilot launch in China, the UK reaching

cash break even and the launch of the first Monitise-enabled Visa service (and, consequently,

transaction revenues).

INDUSTRY OUTLOOK

With the number of mobile phone connections topping five billion globally, handset-based

services such as mobile banking continue to show strong growth. For example, mobile

banking in the UK is showing fast adoption, with over three million users. Further growth is

likely from the use of mobile phones for retail payments.


2009A 2.7 (11.8) (11.4) (3.5) N/A N/A

2010A 6.0 (13.2) (14.0) (3.0) N/A N/A

2011E 12.3 (13.8) (14.2) (2.1) N/A N/A

2012E 21.7 (9.4) (9.8) (1.4) N/A N/A

82 2 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Nautical Petroleum was established in2005 to secure, develop and add valueto heavy oil discoveries, initially on theUKCS and continental Europe.

Price performance



Nautical Petroleum (NPE)

INVESTMENT SUMMARY

NPE announced that Celtic Oil Limited who did not participate in the Kraken exploration side

track have opted to buy back into the Kraken side track by paying their share of their costs.

Exploration of the greater Cather area remains on hold with the Galaxy II jack up rig remaining

in Dundee harbour awaiting a weather window. Importantly, Nautical incurs no costs until the

rig moves to location.

INDUSTRY OUTLOOK

To reflect the strong start to Q4 and dollar weakness we have raised our 2010 and 2011 WTI

forecasts from $77.6/barrel to $78.0/barrel and $77.0/barrel to $79.3/barrel, respectively.


2009A 0.0 (1.1) (0.1) 1.0 347.8 N/A

2010A 0.1 (1.8) (1.8) (2.6) N/A N/A

2011E 0.1 (5.0) (4.9) (5.5) N/A N/A

2012E 0.1 (5.0) (5.0) (5.4) N/A N/A


Price: DKK88.00Market cap: DKK2161mForecast net cash (DKKm) 288.0Forecast gearing ratio (%) N/AMarket OMX

Share price graph (DKK)

Company description

NeuroSearch is a Scandinavianbiopharmaceutical company. Its corebusiness covers the development ofnovel drugs, based on a broad andwell-established drug discovery platformfocusing on ion channels and CNSdisorders.

Price performance



NeuroSearch (NEUR)

INVESTMENT SUMMARY

The Phase II HART study of Huntexil in Huntington’s disease showed some good evidence of

efficacy but only a trend, rather than statistical significance, on its primary endpoint. Since the

prior MermaiHD study produced a similar result, we presume regulators will require a second

Phase III study. The question is whether this has to be conducted pre- or post-approval.

Regulatory feedback should be known by Q111. NeuroSearch should be able to fund such a

Phase III study if it has to be conducted before filing, but this would delay approval by two

years, to late 2013.

INDUSTRY OUTLOOK

Lundbeck/Biovail’s Xenazine (tetrabenazine) is the only approved drug for Huntingdon's,

indicated for treatment of chorea (involuntary movement). Tesofensine licensing is interlinked

with the fate of three competing anti-obesity drugs, Vivus's Qnexa, Orexigen's Contrave and

Arena's lorcaserin, which are filed with the FDA.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(DKKm) (DKKm) (DKKm) (DKK) (x) (x)

2008A 66.8 (324.7) (390.8) (22.86) N/A N/A

2009A 84.6 (307.4) (298.4) (14.52) N/A N/A

2010E 70.0 (302.9) (328.4) (12.17) N/A N/A

2011E 49.2 (269.0) (294.5) (9.71) N/A N/A

832 December 2010

Edison Insight

Sector: Mining

Price: C$5.75Market cap: C$1123mForecast net cash (US$m) 4.3Forecast gearing ratio (%) N/AMarket TSX


Company description

Nevsun Resources is developing theBisha Au-Ag-Cu-Zn volcanic massivesulphide deposit in western Eritrea. Thecompany expects production from theproject in 2011. Nevsun is debt free.

Price performance



Nevsun Resources (NSU)

INVESTMENT SUMMARY

Nevsun's shares have risen from their C$3.75 price in July as the company has consistently

met milestone targets. It has now commenced commissioning (both within time and within

budget) with a view to pouring first gold in the current quarter and entering commercial

production in Q111. Initial mining will focus on an enriched gold-silver cap of the orebody at a

unit cost of c US$230/oz until 2012. Subsequent mining will see the inclusion of revenues from

copper and then zinc. Continued execution of the Bisha mine plan will, we estimate, result in

Nevsun's earning in excess of C$1 per share at long-term metals prices of US$1,177/oz Au,

US$17.36/oz Ag, US$6,500/t Cu and US$2,300/t Zn (and before allowing for a planned

20-40% increase in production during the copper phase from 2013).

INDUSTRY OUTLOOK

Nevsun has commenced an 8,000m drill programme to increase resources. Over the life of

Bisha's operations, the breakdown of Nevsun's revenue by metal is: gold (6%), silver (7%),

copper (27%) and zinc (60%).


2008A 0.0 (8.1) (7.2) (5.6) N/A N/A

2009A 0.0 (5.5) (5.0) (3.9) N/A N/A

2010E 0.0 (11.0) (9.4) (3.9) N/A N/A

2011E 559.6 389.1 375.4 108.8 5.2 3.2




Company description

Newmark Security is a leading providerof electronic and physical securitysystems that focus on personal securityand the safety of assets.

Price performance



Newmark Security (NWT)

INVESTMENT SUMMARY

Newmark reported in line FY10 results: Asset Protection had a strong year, while the Electronic

division was affected by the current economic climate. Fortunes are likely to reverse in FY11;

Asset Protection revenues are unlikely to grow, whereas Electronic should benefit from

renewed customer confidence. A stronger economy and the roll-out of SATEON should drive

growth in FY12. The recent move into the cash-in-transit business expands Safetell's product

line and could positively affect FY11/12 earnings if the Loomis trial is successful.

INDUSTRY OUTLOOK

The demand for Safetell’s security screens is typically driven by risk assessments or branch

remodelling. Public sector cost-cutting is likely to dampen demand for Safetell products in

FY11. Grosvenor benefits from the need for businesses and public sector organisations to

track assets and monitor employee time and attendance.


2009A 13.0 2.0 1.4 0.27 6.3 2.9

2010A 13.8 2.3 1.7 0.32 5.3 4.2



84 2 December 2010

Edison Insight




Company description

Next Fifteen Communications is aninternational PR consultancy group withworld-leading and autonomous PR andmarketing subsidiaries predominatelyaddressing the high-tech industry.

Price performance

% 1m 3m 12mActual (3.3) 15.6 14.3Relative* (2.5) (1.4) 3.3* % Relative to local index


Next Fifteen Communications (NFC)

INVESTMENT SUMMARY

Next Fifteen released its FY10 prelims in mid-October. Revenues came in higher than our

estimate and pre-tax profit was in line. Adjusted diluted EPS of 7.5p was 0.3p less than our

estimate due to higher than-expected dilutive shares. The group said it is seeing an

improvement in trading conditions, particularly in North America and Asia; we raised our FY11

estimate for revenue and pre-tax and maintained our diluted EPS estimate 8.4p. While tech

and consumer PR remains the backbone of the business, the acquisition of Blueshirt, a US

corporate and financial PR agency, and the recently formed digital consultancy, Beyond, are

likely to become important areas for the group’s future growth.

INDUSTRY OUTLOOK

The PR industry is ideally placed to protect and enhance clients’ products and businesses and

is benefiting from changing client demands, particularly in respect of social media. Chime

reported in November that its PR division is expected to show its strongest divisional organic

growth in H210.

Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 65.4 7.3 5.2 6.5 11.4 6.2

2010A 72.3 8.9 6.6 7.5 9.9 6.1

2011E 80.6 10.7 8.0 8.4 8.8 4.3





Company description

NextGen Group provides biomarkerservices to the pharma industry. It isusing advanced analysis techniques todevelop a portfolio of robust assays forbiomarkers to be used in testing clinicalsamples for drug development anddiagnostics.

Price performance



NextGen Sciences (NGG)

INVESTMENT SUMMARY

NextGen reported group interim revenue of $708,831 compared to $807,769 in 2009. The

core business remains its CRO offering of biomarker discovery, assay development and

biomarker qualification services; however, renewed strategy focuses on the introduction of

customised ‘assay panels’ in defined therapeutic areas. A cerebrospinal assay panel was

successfully produced earlier this year. NextGen is currently developing a plasma protein assay

panel targeting the Oncology market. Such assay panels allow NextGen more control over the

targeted proteins and potentially greater follow on revenue.

INDUSTRY OUTLOOK

Potential applications for biomarkers include the analysis of disease mechanisms and the

facilitation of a more cost-effective drug discovery process. Growth of the business is dictated

by pharmaceutical and biotech R&D budgets, likely to experience sustained near-term

pressure. The biomarker market's estimated value is $21bn by 2013.


2008A 1.2 (2.2) (2.8) (0.16) N/A N/A

2009A 1.2 (4.1) (4.5) (0.11) N/A N/A

2010E 1.2 (2.5) (2.8) (0.06) N/A N/A


852 December 2010

Edison Insight

Sector: Oil & Gas

Price: 13.3pMarket cap: £47mForecast net debt (US$m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Nighthawk Energy is involved in thedevelopment, appraisal and productionof hydrocarbons, with the area of focusbeing onshore US.

Price performance


AnalystPeter Dupont

Nighthawk Energy (HAWK)

INVESTMENT SUMMARY

Nighthawk has recently announced a £3.3m draw down from its £25m Equity Financing

Facility with Darwin Strategic. The funds will be focused on the Jolly Ranch shale oil project

and will be used mainly for well completion and re-completion work and ongoing technical

analysis. The challenge at Jolly Ranch remains to find the most effective method to unlock the

complex shale formations on the property. Near term, the key items of newsflow are likely to

surround the strategic business review currently under way and the Jolly Ranch reserves and

resource assessment. Nighthawk remains a unique AIM play on shale oil. The main issue now

is the time and cost required to commercialise Jolly Ranch.

INDUSTRY OUTLOOK

Nighthawk has referred to growing interest by oil companies in leasing land in the vicinity of the

Jolly Ranch property. Key companies recently moving into the area include Unit Corporation,

EOG Resources, Sundance Energy and McElvain Oil&Gas. Additionally, Newfield has

commenced drilling of late.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 0.5 (2.5) (2.1) (0.7) N/A N/A

2010A 2.1 (1.6) (1.4) (0.4) N/A N/A



Sector: Mining

Price: A$0.50Market cap: A$283mForecast net debt (A$m) 38.6Forecast gearing ratio (%) 7.0Market ASX


Company description

Nkwe Platinum is a platinum groupmetals (PGM) development companywith two main projects; Garatau (74%)and Tubatse (optioned stake of 74%)which have total resources of 68.9Moz(3PGM+Au). Xstrata has an option toacquire 50% of both projects.

Price performance



Nkwe Platinum (NKP)

INVESTMENT SUMMARY

Nkwe had cash of A$4.9m as of 30 September 2010 excluding US$5m in receivables and

Xstrata's US$10m option fee due before the end of the year. Before then, Xstrata's platinum

division is expected to make a recommendation to its board on whether to exercise its option

to acquire 50% of one or both of Nkwe’s projects. Xstrata’s decision will be based on the

viability of the projects, one of which is the subject of a detailed bankable feasibility study. Early

this year, Nkwe announced the preliminary feasibility of a 240-400ktpm underground mine with

operating costs between $435/oz and 535/oz and capex of R6.5bn to R8.3bn.

INDUSTRY OUTLOOK

We remain cautiously optimistic about the current outlook following recent positive US



2012.


2009A 1.7 (12.9) (12.9) (4.6) N/A N/A

2010A 0.6 (9.4) (9.4) (1.7) N/A N/A

2011E 0.0 (4.6) (37.2) (5.7) N/A 76.6

2012E 0.0 (4.3) (69.8) (10.3) N/A N/A

86 2 December 2010

Edison Insight

Sector: Oil & Gas

Price: 105.0pMarket cap: £97mForecast net debt (€m) N/AForecast gearing ratio (%) N/AMarket AIM


Company description

Northern Petroleum is an oil and gasproduction, development, explorationand asset trading company with apolitical exposure limited to countries inthe European Union.

Price performance



Northern Petroleum (NOP)

INVESTMENT SUMMARY

Northern continues to develop its core Netherlands and Italian portfolio of exploration,

development and production assets. In Italy, interpretation of West of Sicily seismic is ongoing,

as is preparation for drilling its next well in country at La Tosca, subject to farm-out. In the

Netherlands a fourth new gas field, Wijk en Aalburg, is due onstream in Q111, raising expected

production across the company to more than 2,250boepd. NOP also announced in November

the spudding of the Markwells Wood-1 well in the UK Weald Basin. This is a significant move

as it demonstrates its commitment to develop the UK assets unless it achieves fair value for

them through a sale.

INDUSTRY OUTLOOK

NOP operates in stable Western European countries where there is very low political risk. The

company is well funded with zero debt. Our forecasts are currently under review but with P2

reserves in excess of 100mmboe, the stock appears good value with an EV/2P of less than

$1/boe compared with European peers in the $10/boe range.


2008A 7.0 2.8 2.7 1.5 81.6 1150.6

2009A 5.1 (2.3) (3.0) (2.6) N/A 8.8






Company description

Omega is a UK-based companyfocused on developing and marketingin-vitro diagnostic products in infectiousand autoimmune diseases and for foodintolerance. Intolerance tests accountfor over 40% of revenues.

Price performance


AnalystJohn Savin

Omega Diagnostics (ODX)

INVESTMENT SUMMARY

Omega is undertaking a transforming acquisition of the IVD testing business of German allergy

specialist AllergoPharma for €6m (c £5m) (inc property); we will update our forecasts once it is

completed. The move into allergy testing from food intolerance allows entry to a £250m global

market. The new subsidiary will remain in Hamburg. Omega will invest £2.1m until March 2012

into automated systems, offset by management estimates of £475k in extra profits. Half-year

revenues were £3.3m, up 15% with adjusted profit at £403k, up 53%.

INDUSTRY OUTLOOK

AllergoPharma tests for IgE, the clinical basis of allergy, rather than IgG, the basis of presumed

food intolerance. Its tests are now manual and on semi-automated open systems. The major

benefit is its valuable, and tedious to replicate, 600 allergen range. Allergy will be based on

three products: an existing general IgE test, a new Genarryt allergy screen and detailed new

automated tests based on the Immunodiagnostic Systems iSys platform to find the exact

allergy.


2009A 5.4 0.9 0.5 3.2 5.3 3.9

2010A 6.2 0.7 0.6 2.9 5.9 15.5

2011E 8.0 1.0 0.7 1.7 10.0 20.9

2012E 12.5 2.2 1.8 1.6 10.6 73.5

872 December 2010

Edison Insight


Price: C$4.67Market cap: C$317mForecast net cash (C$m) 34.1Forecast gearing ratio (%) N/AMarket NASDAQ, TSX


Company description

Oncolytics Biotech is a Canadianbiotechnology company focused ondeveloping Reolysin, a pharmaceuticalformulation of oncolytic reovirus, for thetreatment of a wide variety of humancancers.

Price performance


AnalystWang Chong

Oncolytics Biotech (ONC)

INVESTMENT SUMMARY

Oncolytics has recently raised C$28.8m to maintain its clinical programme with its lead

product, Reolysin. The drug is in a pivotal FDA and MHRA Phase III head and neck cancer trial

in combination with paclitaxel and carboplatin, which will form the basis for regulatory

submissions in both US and European markets. Interim data from the trial is expected in Q111

and the final results in mid-2012. Promising interim data could also attract a major

pharmaceutical licensing partner. Reolysin is also being developed for a range of other

cancers, including in colorectal cancer where Reolysin has demonstrated anti-tumour activity

in a small open-label clinical trial.

INDUSTRY OUTLOOK

Oncolytics’ current rivals are the companies developing oncology products in the same

therapeutic areas, but there are some interesting viral oncolytic companies, including BioVex,

Jennerex, Genelux and Viralytics, suggesting a new era in cancer treatment.


2008A 0.0 (17.7) (18.2) (41.6) N/A N/A

2009A 0.0 (16.0) (16.1) (26.1) N/A N/A

2010E 0.0 (18.4) (18.4) (28.9) N/A N/A

2011E 0.0 (22.0) (22.1) (33.6) N/A N/A


Price: 131.0pMarket cap: £92mForecast net debt (US$m) N/AForecast gearing ratio (%) N/AMarket FULL


Company description

Optos uses a leasing model to place itswide-field laser retinal imaging systemswith optometrists. Instruments areleased at $24k per year and maygenerate additional per-use revenuesover a typical 36-month contract.Vendor finance provides capital.

Price performance


AnalystJohn Savin

Optos (OPTS)

INVESTMENT SUMMARY

Prelim 2010 results showed revenues rose to $106m from $97m, aided by a cosmetic $8.1m

accounting change in that c 130 systems are now treated as finance leases bringing forward

revenues; cashflows are unaltered. This will give a substantial but unpredictable boost to 2011

accounts. Distribution agreements and the acquisition of Opto (an Australian design and

distribution company) should yield good growth but probably not till H211 and into FY12.

Cashflow before vendor financing was -$13m, this gives a better EBITDA estimate that the

surface accounts and was much better than the -$23m in FY09.

INDUSTRY OUTLOOK

An Optomap scan can detect 44% more abnormalities than cheaper cameras. However, many

abnormalities are either benign or very rare. OptoMap had a 30% greater capability for

detecting retinal lesions than traditional exams in patients under 65. An Icelandic study on 573

patients aged 72 or older found 56% with AMD-related peripheral changes using OptoMap.

Optos is moving the right direction but accounting complexity remains.

Y/E Sep Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 97.2 43.9 2.5 0.6 348.9 3.9

2010A 106.3 50.3 13.3 21.7 9.6 3.2



88 2 December 2010

Edison Insight

Sector: Mining

Price: 6.9pMarket cap: £13mForecast net cash (£m) 1.2Forecast gearing ratio (%) N/AMarket PLUS


Company description

Oracle Coalfields plc is a coalexploration and development company.Block VI, its main project, has totalmeasured resources (JORC) of 1.4bntonnes of lignite coal and is located insouthern Pakistan’s Thar coalfield.

Price performance



Oracle Coalfields (ORCP)

INVESTMENT SUMMARY

Oracle Coalfields has entered into deals with the Karachi Electric Supply Company (KESC) and

Lucky Cement, which have the potential to unlock the value of its coal assets in Pakistan. The

company has raised a further £1m over and above the £1.1m raised in June, and plans to use

some of the proceeds to fund the BFS and ESIA at its Block VI lignite coal project for which its

license was recently extended. The money was raised through a share subscription at 5.5p per

share by Regency Mines, an AIM-listed mining investment company. Oracle has

commissioned a group of independent consulting companies to carry out the components of

the BFS, which is due to be completed in 2011. The August floods in Pakistan did not directly

affect the project area but the wider impacts of flood damage on the economy cannot yet be

quantified.

INDUSTRY OUTLOOK

The Pakistan government continues to support the development of the Thar coalfield as part of

its strategy to meet growing domestic demand for low-cost energy.


2008A 0.0 (0.2) (0.2) (0.2) N/A N/A

2009A 0.0 (0.2) (0.2) (0.2) N/A N/A

2010E 0.0 (0.1) (0.1) (0.1) N/A N/A





Company description

Orexigen Therapeutics is abiopharmaceutical company focused ondeveloping pharmaceutical productcandidates for treating obesity.

Price performance

% 1m 3m 12mActual 0.2 27.5 (17.7)Relative* (0.1) (1.7) (23.2)* % Relative to local index


Orexigen Therapeutics (OREX)

INVESTMENT SUMMARY

Orexigen essentially offers a pure-play investment geared to the success of Contrave

(naltrexone + bupropion), one of three late-stage obesity projects currently under regulatory

review in the US. Contrave is partnered with Takeda (US, Canada and Mexico), with Orexigen

retaining US co-promotion rights. Orexigen has a second anti-obesity fixed dose combination,

Empatic (zonisamide + bupropion; which is Phase III-ready but effectively on hold until

Contrave is approved). The FDA has announced that the Advisory Committee Review of

Orexigen's Contrave will take place on 7 December this year, with PDUFA date confirmed for

31 January 2011. The company remains focused on moving ahead with its NDA for Contrave.

INDUSTRY OUTLOOK

Obesity drugs have attracted increased scrutiny from regulators, particularly in view of the high

risk profile of the class. Side effects include high rate of birth defects, higher risk of kidney

stones and suicide.


2008A 0.1 (88.6) (87.5) (259.03) N/A N/A

2009A 0.1 (60.3) (61.8) (154.95) N/A N/A

2010E 0.1 (50.1) (51.0) (111.02) N/A N/A

2011E 0.1 (53.8) (54.0) (117.62) N/A N/A

892 December 2010

Edison Insight




Company description

Oxford BioMedica is a UK companywith a leading position in cancerimmunotherapy and gene-basedproducts. It is focusing its efforts on twoclinical programmes: ProSavin andTroVax.

Price performance



Oxford BioMedica (OXB)

INVESTMENT SUMMARY

Oxford BioMedica has started its Phase II TroVax prostate cancer trial; TroVax mesothelioma

and ovarian cancer trials, and first-in-man studies for two ocular programmes are due to start

in the next six months (Retinostat's IND has been approved, and StarGen's will be filed by

end-2010). The key near-term catalyst remains partnering of ProSavin; further clinical data may

trigger conclusion of this. Data from the third cohort (2x dose with new admin technique) is

due around year-end. An associated upfront payment should secure current funds (c £13.7m)

beyond Q112 to the next major catalyst, the potential exercise of Sanofi’s option to license one

or more ocular programmes, triggering double-digit million-dollar milestones.

INDUSTRY OUTLOOK

Gene therapy can correct dysfunctional cells and/or create endogenous therapeutic protein

factories. Neurologix's Phase II PD therapy NLX-101 uses a similar approach, but ocular

disease is an area of unmet need. US approval of Dendreon's prostate cancer vaccine

Provenge bodes well for cancer vaccines.


2008A 18.4 (7.6) (6.3) (0.8) N/A N/A

2009A 19.1 (0.5) (0.2) 0.3 31.7 56.7

2010E 12.8 (7.5) (7.2) (0.9) N/A N/A

2011E 10.1 (6.5) (6.4) (0.9) N/A N/A




Company description

Paion is a biopharmaceutical companybased in Germany, with a presence inthe UK. It develops drugs for diseasesor interventions for which there issubstantial unmet medical need.

Price performance



Paion (PA8)

INVESTMENT SUMMARY

Paion reported a positive outcome to its Phase IIb trial of ultra short-acting IV

anaesthetic/sedative remimazolam, putting it in an excellent position to secure an ex-Japan

licensing deal, possibly in H111. Paion is well funded, with cash into 2012 and €40m of

pre-commercialisation milestones payable from 2012 by Lundbeck in connection with

successful development of desmoteplase. Phase III studies of desmoeplase are due to read

out in Q311/mid-2012 and there is considerable upside associated with success, because of

the low hypothetical probability assumed in valuation models.

INDUSTRY OUTLOOK

Desmoteplase is one of very few R&D programmes addressing acute ischaemic stroke and

has the potential to widen the treatment window to up to nine hours (the current treatment

alteplase is only indicated for use up to three hours from symptom onset). Only 5% of patients

who experience a stroke are eligible for therapy by the time they reach hospital.


2008A 3.2 (12.7) (12.8) (59.3) N/A N/A

2009A 1.5 (12.7) (13.2) (52.5) N/A N/A

2010E 4.5 (8.8) (9.3) (36.4) N/A N/A

2011E 1.5 (9.3) (9.8) (38.1) N/A N/A

90 2 December 2010

Edison Insight

Sector: Technology



Company description

Patsystems delivers tailored solutions,built from modular components, toenhance derivatives tradingperformance and trade processing.Solutions range from plug-and-playmodules to complete high-performancetrading systems.

Price performance



Patsystems (PTS)

INVESTMENT SUMMARY

In a trading update, Patsytems said several Risk Solutions deals have been deferred to FY11

or cancelled. Hence, adjusted FY10 profits would be in line with FY09. We note Risk Solutions

is a lumpy business with long sales cycles and Patsystems other units are performing well. The

group has seen strong interest in its XConnect ASP hosting solution and, having recently

signed an exchange deal with MATba, the Argentinian commodities exchange, another is

expected to be concluded by year end. Further, Patsystems still expects to conclude a Risk

Informer deployment with a global investment bank in FY10. We are reviewing our forecasts.

INDUSTRY OUTLOOK

Demand in emerging markets is offsetting the subdued environment in western economies.

The outlook benefits from the expected launch of more exchanges and trading platforms, and

pressures to shift OTC derivatives to regulated exchanges may also boost the industry. The

ability to offer a one-stop solution for exchanges helped Patsystems win its latest two

exchange deals. Its risk solutions also benefit from strong drivers.


2008A 19.6 3.7 3.5 1.8 14.3 N/A

2009A 22.1 4.0 3.7 1.9 13.6 N/A

2010E 23.9 5.4 4.8 2.4 10.8 N/A

2011E 26.6 6.9 6.3 3.1 8.3 N/A

Sector: Mining

Price: 1058.0pMarket cap: £1988mForecast net debt (US$m) 207.6Forecast gearing ratio (%) 14.0Market FULL


Company description

Petropavlovsk's principal assets are inthe Amur region of Russia, comprisingthe Pokrovskiy mine and associatedoperations, Pioneer and Malomir. Thecompany was founded in 1994 andlisted on AIM in 2002.

Price performance



Petropavlovsk (POG)

INVESTMENT SUMMARY

After nine months of travails, POG's production guidance for the full year is now

510-530,000oz (vs 306,600oz at the nine-month stage). This is achievable as long as its

Pioneer mine can process ore at a grade of c 3.4g/t or above (vs 5.0g/t in Q409 and 1.3g/t in

Q310). POG reported an H1 loss of $55.4m (vs a profit $74.6m in H109), albeit after

US$35.4m of exceptional losses. Nevertheless, Pioneer's second and third lines ramp-ups

have exceeded expectations and Albyn will now be brought into operation in H211 at twice the

previously envisaged rate of production. Longer term, POG's output is projected to peak at c

1.15Moz in FY15, on which basis, we estimate that it should report EPS in excess of US$2

(£1.25). At a share price of HKD1.46, we estimate POG's interest in its non-gold division (IRC)

is worth c $2.11 (or £1.32 per POG share).

INDUSTRY OUTLOOK

Performance in H2 should be ameliorated by higher grades and lower unit costs. Our FY10

numbers currently assume a gold price of US$1,222/oz.


2008A 381.7 108.1 58.7 49.7 34.0 22.8

2009A 472.3 201.5 198.2 98.2 17.2 13.2

2010E 670.7 215.6 139.7 55.7 30.4 19.0


912 December 2010

Edison Insight


Price: €0.21Market cap: €75mForecast net cash (€m) 8.5Forecast gearing ratio (%) N/AMarket AMS


Company description

Pharming has focused onRuconest/Rhucin for angioedema, arare hereditary disease. Ruconest isnow EU approved and will be marketedby sobi and Esteve. Kidney transplanttrials could start soon. The DNage 51%owned subsidiary is being divested.

Price performance


AnalystJohn Savin

Pharming Group (PHARM)

INVESTMENT SUMMARY

Formal EU marketing authorisation for Ruconest finally arrived on 28 October. This makes

Pharming the first company with a commercially viable transgenic product to reach the market.

EU approval allows a 2010 launch by SOBi in the UK, Sweden, Finland and Germany. Some

stock orders and royalties should be received. Just as welcome is the €5m Swedish Orphan

Biovitrum (SOBi) milestone, especially as €10.9m of bonds have been repaid. The September

US deal with Santarus will provide a further $5m on BLA filing, expected in December. We

expect initial US trials of Rhucin in antibody-mediated rejection to start soon; Santarus will

co-fund them.

INDUSTRY OUTLOOK

Cinryze could be EU marketed from May 2011; there now seem to be c 550 US patients each

taking 1.7 doses per week, a £150m market. Kalbitor US sales in Q3 fell to $2.6m, indicating

stocking orders in Q2 but also showing low patient use: 246 patients have Kalbitor available.

Dyax filed an EU MAA for Kalbitor in July so could be EU marketed from H211.


2008A 0.7 (27.5) (25.6) (28.0) N/A N/A

2009A 1.1 (26.3) (31.1) (27.0) N/A N/A

2010E 7.3 (16.1) (18.5) (7.2) N/A N/A

2011E 10.7 (17.8) (20.2) (5.4) N/A N/A




Company description

Phytopharm is a UK pharmaceutical firmfocused on the development ofpharmaceuticals and functional foods,identified as a result of research intomedicinal plants.

Price performance



Phytopharm (PYM)

INVESTMENT SUMMARY

Phytopharm’s investment case critically depends on the success and timely execution of its

Parkinson's disease Phase II proof-of-concept study of Cogane. This study in c 400 patients

has been initiated and the company expects the results from the trial to be reported by the end

of 2012. Phytopharm intends to use the study results to secure a corporate partnership to

exploit Cogane in Parkinson’s and potentially other neurodegenerative conditions. The

company is reviewing the rest of its assets following the appointment of Tim Sharpington as

CEO in June, and will provide an update on its pipeline in due course.

INDUSTRY OUTLOOK

Cogane is an orally-active drug that crosses the blood-brain barrier (BBB) and modulates

expression of neurotrophic factors (ie GNDF and BNDF, respectively glial- and brain-derived

neurotrophic factors). GDNF is known to promote neurite out-growth but it has not been

successfully delivered to the brain to date (as a protein it cannot be given orally and also does

not readily cross the BBB).


2008A 2.6 (3.4) (3.2) (4.0) N/A N/A

2009A 0.9 (4.0) (3.9) (3.9) N/A N/A

2010E 0.1 (7.2) (7.0) (2.3) N/A N/A

2011E 0.0 (9.5) (9.3) (2.5) N/A N/A

92 2 December 2010

Edison Insight

Sector: Travel & Leisure



Company description

Praesepe's strategy is to build adiversified gaming group in the UK andEurope. It currently operates 84 adultgaming centres (AGCs) including theCrystal Rooms in London, six bingoclubs and four family entertainmentcentres (seaside arcades).

Price performance



Praesepe (PRA)

INVESTMENT SUMMARY

Praesepe is acquiring 14 more gaming centres from Nobles for £2.3m (28.5m new shares

issued to the vendors at 8.06p) subject to shareholder approval. The sites should deliver

economies of scale and the 4.6x EV/EBITDA looks very reasonable. Trading remains tough,

and higher VAT/NI from 1 January will be unhelpful, but Beacon cost savings (£2m annualised)

will increasingly flow through to margins. The long-awaited consultation to increase permitted

'B3' machine stakes and numbers is now underway and should, if implemented, materially

boost revenues from mid-2011.

INDUSTRY OUTLOOK

On 2 November the DCMS announced proposals to increase the stakes on 'B3' machines

(from £1 to £2, which will improve game play and provide greater differentiation from 'C'

machines) and to increase the number permitted (hopefully to 20% of the total, with various

possible alternatives). The consultation will run to 25 January and there may also be an EU

review period. Meanwhile, high street trading remains very tough.


2008A 4.5 (1.1) (1.6) (1.34) N/A N/A

2009A 11.9 1.1 (0.7) (0.36) N/A 32.3

2010E 37.5 6.4 1.1 0.26 32.3 9.2


Sector: Property



Company description

PHP invests in primary healthcareproperty, let to GPs, PCTs and otherNHS entities backed by the UKgovernment. This tenant profile providesan exceptionally secure revenueoutlook.

Price performance


AnalystRoger Leboff

Primary Health Properties (PHP)

INVESTMENT SUMMARY

There were no additions to the portfolio in Q3, but stable investment yields and rental growth

averaging 3.23% pa during the period, slightly ahead of the interims in August, will have

benefited underlying NAV. A new £25m 10-year facility adds firepower for acquisitions in line

with an investment-driven growth strategy, ie purchases in the open market, rather than via an

owned development pipeline. Management remains confident that it will continue to secure

suitable assets. The shares have performed well since the mid-year, but the yield remains

attractive with further dividend growth supported by rental growth.

INDUSTRY OUTLOOK

The government's Comprehensive Spending Review confirmed its commitment to maintained

healthcare spending. July's White Paper 'Equity and Excellence: Liberating the NHS' proposed

that GPs take an enhanced role in providing NHS services, which should underpin demand for

purpose-built premises. More detail should be available with publication of the healthcare bill.

Y/E Jun / Dec Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 19.7 15.1 4.6 13.3 24.0 6.8

2009A 21.3 18.0 7.9 19.3 16.5 8.1

2010E 27.4 23.2 11.1 17.8 17.9 5.4

2011E 29.5 25.2 12.0 19.2 16.6 7.7

932 December 2010 932 December 2010

Edison Insight


Price: C$0.10Market cap: C$37mForecast net debt (C$m) 9.7Forecast gearing ratio (%) 116.0Market TSX


Company description

ProMetic Life Sciences is abiopharmaceutical business, comprisedof a group of companies focused ondeveloping technologies, which bringpharmaceutical products to market.

Price performance



ProMetic Life Sciences (PLI)

INVESTMENT SUMMARY

ProMetic revised its 2010 financial guidance at its Q3 results, revealing that revenues would be

affected by a delay to an order for prion reduction resin by partner Octapharma into 2011. The

impact of this delay is a C$4m decrease in H210 revenues, increasing the expected FY net

loss to C$8m. ProMetic's Q3 cash of C$1.3m provides funding into 2011, and the company is

focused on cost control and progressing potential strategic deal discussions which should

bring in cash. Following its recent strategic regional partnering deal with Allist Pharmaceuticals

for development of novel drugs PBI-1402 and PBI-4419 for the Chinese market, ProMetic is

confident of securing further deals (in either its protein technologies or therapeutics

businesses) before the year-end.

INDUSTRY OUTLOOK

Competitive developments include suspension of commercialisation plans for Amorfix's vCJD

blood test, the Grifols acquisition of Talecris, and safety concerns with Affymax/Takeda's

Hematide.


2008A 10.2 (13.5) (16.9) (5.6) N/A N/A

2009A 13.6 (6.3) (8.9) (2.7) N/A N/A

2010E 20.4 (2.5) (3.7) (1.1) N/A N/A

2011E 24.1 (1.0) (2.1) (0.6) N/A N/A




Company description

ProStrakan Group plc is a Europeanspecialty pharmaceutical company, witha developing US franchise. It is engagedin the development andcommercialisation of prescriptionmedicines for the treatment of unmettherapeutic needs in major markets.

Price performance



ProStrakan (PSK)

INVESTMENT SUMMARY

ProStrakan shares started recovering after September's announcement of a further delay to

US Abstral approval, confirmation of a three-month Sancuso stock shortage and the CEO's

departure. They rose again sharply following the announcement in November that Norgine had

acquired 12.6% of the shares, which had an earlier approach rejected. It is unclear whether a

full bid for the company will eventually be made by Norgine or another company. In the

meantime, significant challenges remain for the US business, so 2010 is proving to be tougher

than expected. The Sancuso shortage will have a £5m negative impact on FY10 operating

profit and the FY11 impact is harder to assess.

INDUSTRY OUTLOOK

The FDA is taking a cautious view on abuse/misuse potential and off-label use of rapid-acting

fentanyl drugs. Marketed drugs Actiq and Fentora do not have a risk mitigation and evaluation

strategy (REMS) yet, but Onsolis was approved in 2009 on this basis.


2008A 56.1 (15.4) (19.8) (7.9) N/A N/A

2009A 79.0 (5.1) (10.6) (5.7) N/A N/A

2010E 91.3 (2.4) (6.1) (3.0) N/A 40.0

2011E 112.6 (3.9) (7.0) (3.5) N/A N/A

94 2 December 2010

Edison Insight




Company description

Proximagen is a UK biotech companyspecialising in the development oftreatments for central nervous systemdisorders.

Price performance



Proximagen Group (PRX)

INVESTMENT SUMMARY

Proximagen has partnered both clinical assets obtained via the February acquisition of Minster

Pharmaceuticals. These deals and the research agreement (CRADA) for naluzotan provide

evidence of execution on one aspect of Proximagen’s strategy – funding of clinical

development through collaborations where appropriate. A novation agreement with Ligand

Pharmaceuticals adds a preclinical CXCR4 receptor programme to the pipeline. With £51m of

cash at H110, Proximagen still has the means to continue building its pipeline through

additional M&A. The share price has significantly appreciated since lows of 60p in July.

INDUSTRY OUTLOOK

Through acquisition, Proximagen's pipeline has diversified from five preclinical assets to 14

programmes across CNS, with the most advanced in Phase II. It seeks to create value through

consolidation and has a medium-term objective of becoming self funding, with a longer-term

goal of becoming a fully integrated company.

Y/E Nov Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 0.3 (3.3) (2.9) (11.1) N/A N/A

2009A 0.9 (3.8) (3.6) (8.4) N/A N/A

2010E 0.7 (10.1) (9.9) (16.1) N/A N/A

2011E 0.2 (12.7) (12.6) (19.3) N/A N/A




Company description

Psion designs and sells ruggedizedmobile computers, which are used byfield workers and in supply chain andlogistics functions.

Price performance


AnalystDan Ridsdale

Psion (PON)

INVESTMENT SUMMARY

The reconstruction of Psion now looks to have reached a stage whereby the company is well

placed to move forward. The first modular products are being brought to market, the channel

partner network has been significantly strengthened and the H1 uptick in order book and

pipeline suggests a change in momentum is due. Further evidence that the financial recovery is

coming through should be a catalyst for upside especially given the potential for margin

expansion beyond our 6.7% 2012 estimate. The dividend yield and lowly EV/sales ratio should

afford a reasonable amount of downside protection.

INDUSTRY OUTLOOK

The market for rugged mobile computers is estimated to be worth $2.1bn but is estimated by

VDC to be growing at 8-10% per year. Psion holds c 7% market share, but plans to expand

this substantially. These plans revolve around the move towards a modular product

architecture and leveraging a network of partners to drive product innovation.


2008A 199.4 11.1 7.2 3.6 27.2 124.5

2009A 170.0 12.3 4.1 2.0 49.0 7.6

2010E 174.3 15.1 3.0 1.5 65.3 17.0

2011E 185.2 20.7 8.4 4.1 23.9 9.4

952 December 2010

Edison Insight

Sector: Property



Company description

Public Service Properties InvestmentsLimited is a specialist real estateinvestment and financing company. Itsmain focus until recently has been onthe expansion of its UK portfolio of carehomes, which make up the majority ofthe value of its portfolio.

Price performance


AnalystRoger Leboff

Public Service Properties Invest. (PSPI)

INVESTMENT SUMMARY

The interims were typically steady. Cash rents increased by 4% to £8.7m, annual rent reviews

in the UK produced 3.8% average growth up to the end of June, with 4% in prospect for

FY10. April’s £24m open offer kick-started a programme to enlarge and upgrade specific

properties, for the benefit of both tenant operational performance and portfolio valuations. At

the mid-year the portfolio was 100% let with no voids and a 22-year weighted average

unexpired lease term. That stability and a covered 9.6% prospective yield justifies an improved

rating for the shares.

INDUSTRY OUTLOOK

The care sector outlook is underpinned by demographics and the October spending review

confirmed the government's commitment to healthcare spending. PSPI has planned and fully

funded investment to enhance the quality and defensive positioning of the portfolio, also

increasing its weighting in areas such as dementia care and mental illness. The UK portfolio is

let entirely to European Care, one of the industry's leading operators.


2008A 19.3 15.3 5.2 7.1 10.1 4.6

2009A 20.6 16.6 9.0 9.5 7.6 3.3

2010E 21.4 15.6 10.3 8.4 8.6 5.0

2011E 22.5 16.6 11.9 8.8 8.2 4.6




Company description

QinetiQ Group provides technicaladvice, services and solutions tocustomers in the aerospace, defenceand security markets, primarily in the UKand US.

Price performance



QinetiQ Group (QQ.)

INVESTMENT SUMMARY

QinetiQ’s interim results lived up to the UK government’s assertion that we live in an "age of

uncertainty". Revenues were ahead of our expectations, predominantly due to the rapid

delivery of Q-NET (vehicle survivability product), accounting for most of the 6% organic growth.

With the 'predictable' service revenues coming in beneath our expectations, we remain

concerned about visibility; however, we do recognise the progress made in restructuring and

the impressive focus on cash generation. We are moving to a more neutral stance on the

business with a revised SOTP fair value of 115p.

INDUSTRY OUTLOOK

44% of QinetiQ’s revenues come from the UK and is underpinned to some extent by some

good long-term contracts such as the LTPA. However, with MoD R&D in decline and now fully

competitive, QinetiQ has seen a rapid fall in profitability and order delays have plagued the

wider business. The US appears to have stabilised from last year's delays, although we

anticipate margins to remain subdued.


2009A 1617.3 185.1 130.2 15.9 7.3 4.3

2010A 1625.4 155.4 85.7 11.1 10.5 4.5

2011E 1737.4 171.4 110.4 13.9 8.4 3.4

2012E 1710.6 174.3 115.7 14.5 8.0 4.9

96 2 December 2010

Edison Insight




Company description

Quarto is an international book publisherspecialising in illustrated non-fictionbooks. It publishes under imprintsowned by the group in the US, UK andAustralia, and creates books that arelicensed to other publishers worldwide.

Price performance



Quarto (QRT)

INVESTMENT SUMMARY

Quarto’s Q3 update described a good performance, despite mixed trading conditions in its key

US and UK markets. Reports from the Frankfurt Book Fair, though, indicated it being one of

the most successful for publishers for several years, Quarto among them, giving us confidence

that profits are back on a growth trend. Worries about the balance sheet are over done and

management is indicating that deals are back on the agenda. Forecasts are conservative and,

despite the better performance, the rating remains miserly.

INDUSTRY OUTLOOK

Book sales in the US continued to be weak in September, down 12.1%, giving a running total

for the year-to-date of -9%, at $14.5bn. As ever, though, this covers a wide range of

experience and Amazon’s Q3 statement described print and digital sales both being ahead.

eBooks continue to gain share as penetration of reading devices builds. Barnes & Noble's

forecast is for consumer book sales to grow from $23bn in 2010 to $27bn in 2013. However,

this anticipates print sales falling by $2bn over the period and digital/e-books growing by $6bn.


2008A 112.7 22.0 7.7 26.5 5.2 1.2

2009A 106.6 22.8 6.9 26.0 5.3 1.5

2010E 107.9 22.8 7.0 26.0 5.3 1.2

2011E 110.4 23.0 7.3 27.2 5.0 1.2

Sector: Financials



Company description

RQIH is a holding and investmentcompany. It conducts business in theUK, Europe, US and Bermuda asowners and managers of insurancecompanies in run-off, as purchasers ofreinsurance receivables and asconsultants for the insurance market.

Price performance


AnalystMark Thomas

Randall & Quilter Investment Hld (RQIH)

INVESTMENT SUMMARY

Randall & Quilter Investment Holdings (R&Q) provides professional services to the insurance

market. Its proven success relies on its staff's skills in managing claims and re-insurance, not

on black box theory. R&Q has leveraged its intellectual capital by buying run-off portfolios and

servicing businesses building growth opportunities in assisting new entrants to the Lloyd’s

market, the live market and corporates’ self-insurance vehicles (captives). The deals completed

on 1 November should enhance full-year earnings by 10%. Approval for further syndicate and

servicing deals have also been announced. The total yield of around 8% is very attractive and

will be nearly twice covered by earnings in 2010.

INDUSTRY OUTLOOK

Run-off portfolio prices remain high, but there are some opportunities in niche markets and in

run-off debt. R&Q has developed a range of new income streams with opportunities for both

organic and acquisitive growth. Given its modest scale, these are available across market

conditions.


2008A 30.8 8.8 8.8 10.8 8.4 N/A

2009A 28.0 0.4 0.3 (0.3) N/A N/A

2010E 37.9 7.8 7.4 9.8 9.3 N/A

2011E 36.0 7.8 7.3 10.6 8.6 N/A

972 December 2010

Edison Insight

Sector: Oil & Gas

Price: 6.3pMarket cap: £74mForecast net cash (A$m) 7.4Forecast gearing ratio (%) N/AMarket AIM, ASX


Company description

Range Resources has a portfolio ofearly to advanced stage prospectiveexploration licences, located in theautonomous Puntland region of NorthEast Somalia, Georgia and West Texas.

Price performance


AnalystPeter Dupont

Range Resources (RRL)

INVESTMENT SUMMARY

Range has been one of the key junior E&P success stories of 2010. The stock has been driven

by some savvy investments in production and development assets in Texas and Trinidad, and

more recently by some highly positive news concerning the potential scale of the fold-thrust

play in Georgia. Based on an RPS study, the recoverable reserves here are put at 613mm

barrels gross. We believe the potential for further positive newsflow in the coming months is

excellent, reflecting the very active exploration and development programme. The share price

remains largely underpinned by the producing assets in Texas.

INDUSTRY OUTLOOK

Range has potentially high impact exploration interests in Puntland-Somalia. They comprise

20% stakes in two onshore basins, Nogal and Dharoor, which are believed to be analogues of

large hydrocarbon basins in the Yemen. The operator of the projects, TSX-V listed Africa Oil,

raised $25m in recent months and also farmed-out some of its equity to Lion Energy and Red

Emperor Resources.


2008A 0.5 (3.9) (3.9) (3.2) N/A N/A

2009A 0.2 (4.7) (4.8) (2.6) N/A N/A

2010E 0.7 (6.2) (6.4) (1.0) N/A N/A

2011E 5.9 (5.2) (6.2) (0.5) N/A N/A

Sector: Mining



Company description

Listed on AIM in July 2005, Red RockResources is now a combination of ajunior gold explorer and a mineralproperty investment company focusedon the discovery and development ofiron ore, manganese, uranium and gold,primarily in Australia and Africa.

Price performance



Red Rock Resources (RRR)

INVESTMENT SUMMARY

Red Rock continues to advance its lead projects - most recently by increasing its exposure to

MFP in Columbia, where the re-development of the El Limon mine is progressing ahead of

schedule, with full production expected from the end of this month (albeit at lower than

average grades). In the meantime, Jupiter Mines has confirmed its acquisition of a 49.9%

interest in the Tshipi manganese project as well as increasing its resources by 145Mt (at

31.75% Mn) and setting itself an exploration target of 400Mt of JORC resources at its Mt Ida

magnetite prospect by the year's end (ex an overall 1.1-1.3bn tonne target at 30-40% Fe). In

Kenya, Kansai has announced that it intends to sell its interest in Mid-Migori (plus other

assets), thereby generating a potential pre-tax dividend distribution to Red Rock of C$10.9m

from a C$0.5m investment. In the UK, RRR has made a £1.5m investment in Ascot Mining.

INDUSTRY OUTLOOK

Red Rock's principle commodity exposures are to gold, iron ore and uranium.


2008A 1.3 (0.2) (0.2) (0.12) N/A N/A

2009A 0.1 (0.8) (0.8) (0.24) N/A N/A

2010E 2.7 1.6 1.6 0.11 145.5 52.2

2011E 2.9 1.8 1.8 0.27 59.3 47.7

98 2 December 2010

Edison Insight

Sector: Engineering



Company description

Redhall Group operates seven nicheengineering service businesses. Its mainmarkets are: nuclear, oil and gas, food,defence, safety and security, andtransport infrastructure.

Price performance



Redhall Group (RHL)

INVESTMENT SUMMARY

With Redhall's attempted acquisition of Mount Engineering trumped by the surprise bid from

Cooper Industries, management will ensure the focus on the core business. The October

trading statement highlighted that performance remains in line with management expectations,

ahead of last year. Divisional trends remain as at the interims, with Energy & Defence strong

and continued volume and margin pressure in the Process division. While there is some

uncertainty surrounding government spending, we feel Redhall remains in a healthy position for

the future. Prelims are due 2 December.

INDUSTRY OUTLOOK

While recovery in process industries will be determined by the economy, newsflow in Redhall's

other end-markets remains positive, with the MoD committing to build all seven Astute boats in

the SDSR. We also feel that the UK's budget highlighted further emphasis on the green

agenda and the longer-term opportunity in nuclear aligns specifically with Redhall's core

business model.


2008A 86.7 5.0 4.6 15.4 8.7 4.9

2009A 129.0 6.9 6.5 16.0 8.3 8.1

2010E 141.3 7.7 7.0 16.6 8.0 7.6

2011E 148.5 8.4 7.6 17.9 7.5 5.0




Company description

ReGen Therapeutics is a UK biotechcompany focused on the developmentof products for the prevention andtreatment of diseases associated withageing, particularly neurodegenerativedisorders.

Price performance



ReGen Therapeutics (RGT)

INVESTMENT SUMMARY

ReGen reported half-year revenue of £134k compared with £9k in 2009, with gross margin of

66%. The company increased geographical penetration, launching Colostrinin in India (its

largest market to date) during the period. Commercialisation of the product is under way

through licensee Eczacibasi for the Turkish market. The outlook is dependent on the ability of

ReGen's US licensee Metagenics, which is working to cement the profile of Colostrinin in

potentially the most valuable market. No official timeline for the re-launch has been defined.

ReGen has also initiated market research in China to assess the potential there. The company

is still dependent on external fund-raising, although it targets profitability towards Q410.

INDUSTRY OUTLOOK

Colostrinin is a nutritional supplement used to support healthy brain ageing and cognition in

humans. It is currently marketed in UK, Poland, Turkey, Cyprus, Australia and India.


2008A 0.1 (1.2) (1.4) (11.5) N/A N/A

2009A 0.1 (0.4) (0.7) (2.4) N/A N/A

2010E 0.5 (0.5) (0.6) (1.1) N/A N/A


992 December 2010

Edison Insight




Company description

Renewable Energy Generation’s corebusiness is the development andoperation of onshore wind farms in theUK.

Price performance


AnalystGraeme Moyse

Renewable Energy (WIND)

INVESTMENT SUMMARY

REG has a strong balance sheet and is well placed to exploit the growth opportunities that we

see in the market for onshore wind. We forecast that REG will increase its operational wind

capacity to over 41MW in the current financial year (2010/11), and to almost 60MW in

2011/12. However, REG’s current market valuation appears to reflect only balance sheet cash

and operational assets at less than new build cost. We believe this approach undervalues

REG’s current assets. Based on our evaluation of its existing assets and project pipeline, we

believe REG could be worth c 78p/share.

INDUSTRY OUTLOOK

The UK is facing the twin challenges of reducing greenhouse gas emissions and ensuring

continuity of energy supply. As a proven technology, with stable long-term cash flows and

benefiting from attractive incentives, wind farms provide a financeable method of meeting

these challenges. We believe that, as a result, the market for UK wind energy will continue to

grow rapidly.


2009A 5.6 3.9 (1.9) (1.5) N/A N/A

2010A 6.2 (0.6) (2.4) (1.8) N/A N/A

2011E 13.7 4.0 0.7 0.7 64.7 6.4

2012E 15.7 5.3 (0.6) (0.5) N/A 18.9




Company description

Renovo is a biopharmaceutical productcompany and is a leader in thediscovery and development of drugs toimprove the appearance of scars andenhance wound healing.

Price performance


AnalystMick Cooper

Renovo (RNVO)

INVESTMENT SUMMARY

Renovo has successfully completed its first clinical trial with Juvista Paediatric and the best

dosing of adult Juvista has been confirmed. The former is important for the potential product

life-cycle management of Juvista; the latter should strengthen any regulatory submission.

However, the potential value of these results is totally dependent on a positive outcome to the

first European Phase III study, REVISE, the results of which are due in H111. We remain

optimistic about the REVISE study and believe that its results and subsequent potential

licensing deals will lead to a re-rating of the shares.

INDUSTRY OUTLOOK

Juvista is a first-in-class scar revision product. It will initially be targeted for use in the one

million scar revision procedures carried out in the US and Europe each year, with the aim of

being used more broadly in the estimated 42 million surgical procedures performed per year in

each of these regions. We estimate that it will achieve peak sales of $1.0bn.


2008A 7.6 (19.8) (15.2) (6.4) N/A N/A

2009A 5.1 (21.5) (19.7) (9.1) N/A N/A

2010E 14.7 (6.8) (6.5) (2.4) N/A N/A

2011E 14.3 (6.6) (6.5) (2.2) N/A N/A

100 2 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Rockhopper Exploration is an oil andgas exploration company focused onthe North Falkland Basin in the southernAtlantic.

Price performance



Rockhopper Exploration (RKH)

INVESTMENT SUMMARY

Rockhopper is currently participating in the drilling of the Rachel North prospect (RKH 7.5%

WI) to evaluate oil bearing sands encountered in the recent Rachel sidetrack well. The Rachel

wells are also critical in determining if there is a regional seal and indication that there is a

much bigger oil play than just Sea Lion. The Ocean Guardian rig is due to return to RKH in

early 2011 to drill an appraisal well on Sea Lion and a further two firm and five option wells.

The Sea Lion appraisal well is critical in resolving the complex sands that delayed RKH from

providing updated resource numbers for its Sea Lion discovery in October.

INDUSTRY OUTLOOK

The oil discovery in the Falklands is positive not only for the Falkland oil explorers, but the

industry as a whole. The £206m placing days after the CPR announcement is testament to

investors' trust in RKH management. Diligent financial management has also been

demonstrated with the sharing of 3D seismic costs recently announced with Desire.

Y/E Mar Revenue EBITDA PBT EPS P/E P/CF(US$m) (US$m) (US$m) (c) (x) (x)

2009A 0.0 (2.5) (2.7) (2.8) N/A N/A

2010A 0.0 (4.3) (5.1) (2.4) N/A N/A

2011E 0.0 (4.0) (4.7) (2.0) N/A N/A

2012E 0.0 (4.0) (4.7) (2.0) N/A N/A




Company description

Rolls-Royce is a global power systemsbusiness with activities in CivilAerospace, Defence, Marine andEnergy. The business supplies bothoriginal equipment (51%) andaftermarket services (49%).

Price performance



Rolls-Royce Group (RR.)

INVESTMENT SUMMARY

Following the Trent 900 incident on the Qantas A380, the last month has demonstrated that

Rolls-Royce can cope both operationally and financially with the potential fall-out from the

engine failure. Rolls has identified the failure method and, following a thorough inspection

process, has instigated a plan to replace the appropriate module on the necessary engines.

The IMS highlighted that this will affect operating profit and bring growth down from 4-5% in

2010, while average cash will be in line with previous guidance. We have adjusted our

forecasts accordingly, reducing them by 3% in 2010 and we have taken a slightly more

cautious view on 2011.

INDUSTRY OUTLOOK

With the business well balanced across civil aerospace, defence, marine and energy markets,

RR's long-term future is driven by the recovery in the economic climate. With civil air traffic

recovering, new aircraft build rates set to increase from 2011 and global defence expenditure

relatively stable, we view the outlook as encouraging.


2008A 9147.0 1127.0 880.0 36.7 16.8 9.7

2009A 10108.0 1177.0 915.0 39.7 15.5 10.9

2010E 10795.0 1226.0 946.0 38.4 16.1 9.3

2011E 11423.0 1367.0 1082.0 43.7 14.1 8.8

1012 December 2010

Edison Insight




Company description

RPC Group manufactures rigid plasticpackaging containers and relatedproducts for a diverse range ofindustries. It has manufacturing sitesacross Europe and is c 60% exposed tothe food industry and related sectors.

Price performance



RPC Group (RPC)

INVESTMENT SUMMARY

RPC is poised between the tail-end of its business improvement programme and a more

forceful growth profile to be defined by the cycle and/or the application of balance sheet

strength. An H1 update indicated that around a quarter of the product portfolio is enjoying

decent volume growth YTD, with the remainder flat. Despite material price increases,

profitability should be similar/modestly better than H2 last year, putting RPC well on the way to

achieving FY estimates. Good defensive growth story with financial strength to enhance the

rate of progress in due course. Interims due 30 November.

INDUSTRY OUTLOOK

Industry data suggests global polymer supply is coming online at the fastest rate in over five

years. With demand weakening, prices are expected to be depressed. Plastic as a packaging

material is the fastest growing of the high volume materials. This appears driven by plastic's

fundamental innovation potential and is a trend we expect to continue, with regulation the

biggest risk.


2009A 769.1 69.1 23.5 16.5 16.8 2.4

2010A 719.9 79.0 39.1 29.1 9.5 3.8

2011E 740.3 83.4 41.0 30.5 9.1 4.8

2012E 765.4 88.1 44.8 33.2 8.3 3.4




Company description

Sarantel develops and manufacturesminiature filtering antennas for mobile,wireless and handheld devices.

Price performance



Sarantel Group (SLG)

INVESTMENT SUMMARY

Sarantel reported FY10 results on 22 November: revenues came in below our forecast but net

losses were in line due to strong cost control. Sarantel has recently reported production orders

from military, mobile satellite communication and camera customers and announced a new

joint development project with a US defence contractor, highlighting its strengthening position

in the high-value military and satellite phone markets. The company is in ongoing discussions

to target the high-volume handset and camera markets.

INDUSTRY OUTLOOK

The recent antenna issues with the iPhone4 have focused attention on the impact of the

human body on radio and hence phone performance, and highlighted the need for

well-designed antennas in handsets. The wireless market is forecast to show volume growth in

CY10 and penetration of GPS in handsets is forecast to continue as smartphones continue to

gain share. Demand for consumer GPS applications is returning to normal levels after a period

of weakness.


2009A 2.8 (1.8) (2.8) (1.4) N/A N/A

2010A 2.9 (1.7) (2.8) (0.9) N/A N/A



102 2 December 2010

Edison Insight




Company description

Sceptre Leisure is the second largestsupplier of amusement machines to theUK pub sector. It also supplies lotteryvending machines and other gamingproducts to UK social clubs.

Price performance



Sceptre Leisure (SCEL)

INVESTMENT SUMMARY

Sceptre has just announced another bolt-on acquisition (for £1.2m cash and shares). The 925

amusement machines being acquired (in 277 leisure sites) should slot straight into its national

distribution network. Meanwhile, market conditions remain very tough and interims

(mid-December) are likely to be lower (World Cup and a dip in SWP rental rates), but H2 will

benefit from a major new contract with Punch Pub Company. Sceptre has successfully

increased market share in amusement machine supply, especially in pubs, despite asset

finance constraints. Its rental assets are now cash generative and debt is declining rapidly.

INDUSTRY OUTLOOK

The amusement machine industry continues to contract and government spending cuts and

the forthcoming VAT rise will not help consumer spending. The industry is fragmented with 570

small operators, many financially stretched, presenting earnings accretive acquisition

opportunities that can be easily integrated into Sceptre's national depot infrastructure.


2009A 39.2 13.0 1.9 3.7 7.2 0.7

2010A 42.8 13.1 2.5 3.4 7.8 1.6

2011E 41.0 12.8 2.5 3.4 7.8 1.3

2012E 42.1 13.0 2.8 3.7 7.2 1.2

Sector: Technology



Company description

SciSys provides a range of professionalservices in support of the planning,development and use of computersystems primarily in the space,government and media/ broadcastsectors.

Price performance



SciSys (SSY)

INVESTMENT SUMMARY

Following the governments spending review, Defra, which includes the Environment Agency

(one of SciSys's main customers), had its budget cut by 30%. However, the effect on SciSys'

business remains unclear. Likewise, the Warrior upgrade programme, for which SciSys is part

of a consortium bidding for the work, is facing lengthy delays. We believe the impact of the

spending cuts is more than reflected in the shares - the enterprise value of £8m looks modest

for an international IT services group generating more than £40m of annual revenues.

INDUSTRY OUTLOOK

SciSys is specialist provider of high value IT solutions with a focus on four vertical markets

(space, government & defence, environment and media & broadcast). Its fifth division provides

application support across these markets. Recent growth has been led by the government and

Media Broadcast divisions. SciSys now has a more balanced portfolio, with many of the

group’s public sector contracts in key priority areas where there is less scope for discretionary

spending cuts and roughly half of group revenues now in Europe.


2008A 38.1 1.5 0.8 3.9 9.6 7.5

2009A 41.7 2.3 1.6 5.0 7.5 4.1

2010E 42.8 2.4 1.7 4.9 7.7 5.4

2011E 44.3 3.1 2.2 6.2 6.0 3.9

1032 December 2010

Edison Insight




Company description

SeaEnergy, is a UK-based companywith a 25% stake in three of the largestscale offshore wind projects inScotland. The majority partners areScottish and Southern Energy andEDPR.

Price performance


AnalystGraeme Moyse

SeaEnergy (SEA)

INVESTMENT SUMMARY

The disposal of Sea Energy Renewables Limited (SERL) is said to be progressing well and is

expected to conclude by the year end. Extending the loan facility with LC Capital Master Fund

from £2m to £3.8m gives Sea Energy the financial flexibility to pursue this objective. Aside from

the sale, the underlying business continues to advance, with progress reported at its Inch

Cape, Moray Firth and Beatrice sites. Sea Energy also continues to develop its marine services

business with a Letter of Intent signed with Ulstein for vessels, an Exclusivity Agreement with

Amplemann for a bridging system, and an agreement with Nantong to develop and market

steel structures for the offshore wind industry. The marine services business, together with the

legacy oil and gas assets, will form the core of Sea Energy’s business after the sale.

INDUSTRY OUTLOOK

The Offshore Valuation Group estimates that the UK has offshore resources to support up to

116GW of fixed and a further 350GW of floating wind farms.


2008A 0.0 (3.0) (3.3) (8.0) N/A N/A

2009A 0.0 (4.0) (8.6) (15.6) N/A N/A

2010E 0.0 (4.5) (4.7) (6.9) N/A N/A

2011E 0.0 (4.6) (5.3) (7.6) N/A N/A

Sector: Technology

Price: 3.6pMarket cap: £15mForecast net cash (A$m) 4.8Forecast gearing ratio (%) N/AMarket AIM


Company description

Seeing Machines is a technologycompany focused on designingvision-based human machine interfaces.

Price performance



Seeing Machines (SEE)

INVESTMENT SUMMARY

In November, SM announced a contract to install the DSS driver monitoring equipment in the

haul truck fleet at a mine in Chile. The new contract, which is for an existing client, includes the

fit-out of 32 haul trucks. The latest deal takes the total publicly announced new DSS contracts

that generate revenue in FY11 to six, fitting out comfortably more than 200 haul trucks. We

note SM’s core technology has wide applications, including road transport, healthcare and

computer gaming, and we believe the current valuation can be justified by the mining

end-market alone. Hence, we regard the group's enterprise value of c £10m as modest.

INDUSTRY OUTLOOK

SM has exposure to a number of industry sectors, including automotive and mining (DSS),

healthcare (TrueField Analyzer), and computer gaming (faceAPI). While the automotive fleet

opportunity has been deferred by the weak US economy, the mining sector deals have

diversified the opportunity and we note the market size in both global road transport and

mining operations is substantial.


2009A 4.9 (0.5) (0.5) (0.2) N/A 70.4

2010A 4.2 (1.7) (1.7) (0.5) N/A N/A

2011E 8.7 1.4 1.3 0.3 19.4 12.7

2012E 10.8 2.0 1.9 0.4 14.5 12.1

104 2 December 2010

Edison Insight

Sector: Financials



Company description

Share plc owns The Share Centre andSharefunds. The Share Centre is aself-select retail stockbroker that alsooffers share services for corporates andemployees. A high proportion of incomeis derived from stable fee and interestbased revenues.

Price performance


AnalystMark Thomas

Share plc (SHRE)

INVESTMENT SUMMARY

Share plc has continued its multi-year market share gains and saw customer relationship

income up 20% (H110 on H109). Q3 market share data saw particularly big gains. Returning

confidence in equity markets and customer acquisitions have helped. The group has enhanced

earnings by c 10% through the tender offer/buyback - one of the multiple actions being taken

to mitigate the lost income when the superbly executed hedge matures in November.

Encouragingly, retail buyers outnumbered sellers by over two to one in the commission free

scheme. The shares trade on 19-21x 2010/11 P/E estimates.

INDUSTRY OUTLOOK

Share plc still has a modest market share (6% excluding the benefit of the hedge), allowing for

many more years of above market growth. Its record shows the model delivers strong

operational gearing. There should be long-term market growth from the demographics of an

ageing and higher net worth population. The retail market may also see a step change when

the government 'popularises' its holdings in banks.


2008A 12.0 1.4 2.4 1.07 25.7 33.3

2009A 14.1 2.2 2.7 1.28 21.5 20.5

2010E 15.0 2.8 3.2 1.52 18.1 16.1

2011E 14.7 2.4 2.7 1.42 19.4 17.8

Sector: Financials



Company description

Sigma Capital is a specialist assetmanagement and advisory group thatfocuses on three areas: venture capital(VC) fund management, propertyinvestment management and universityIP commercialisation (IPC).

Price performance



Sigma Capital (SGM)

INVESTMENT SUMMARY

Sigma’s FY10 interims showed that conditions in the group’s primary operations, venture

capital and property, continue to be difficult. The H1 revenues decline from services reflects

the absence of set-up fees from new property partnerships. The £1.1m loss before tax

included £0.7m of write downs. It is positive that the property division strategy is moving to

build a more recurring revenue base in FY11. At the half-year end, the group had £3.27m

cash, of which £2.02m is unencumbered.

INDUSTRY OUTLOOK

While the VC market is subject to the health of equity markets and the knock-on effect on exit

strategies, attractive early-stage companies are still able to complete funding rounds. The

sustainable/renewable energy sector is receiving considerable investor and government

support. The IPD monthly index of UK commercial property has risen in each of the past 12

months to October 2010 for a total return of 20.4%, although the rate of increase has begun

to slow.


2008A 4.7 (0.7) (0.5) (1.5) N/A N/A

2009A 2.4 0.9 0.9 3.7 2.4 2.4

2010E 1.8 (1.4) (1.4) (2.9) N/A N/A


1052 December 2010

Edison Insight




Company description

Sinclair Pharma is a UK-based specialitycompany with direct marketingoperations in France, Italy, Spain andGermany and distributors in c 85countries. It sells 45 products mostly indermatology, oral health and woundcare.

Price performance


AnalystMick Cooper

Sinclair Pharma (SPH)

INVESTMENT SUMMARY

Sinclair is at a turning point in its recovery, having made headway on gross margin

improvement as indicated by its November IMS. It has undergone radical change in the last 12

months, appointing new management, rationalisation of SKUs, product acquisitions and equity

placing to repay debt. The marketing effort is focused on growing sales in key European

markets. Further improvements in underlying margins could be made by gradual rationalisation

of production. The Flammazine acquisition enhances the wound-care franchise and provides a

foot in the door of European hospitals. There is also growth potential from line extensions,

more focused marketing and a greater investment in its direct sales force.

INDUSTRY OUTLOOK

The company aims to build European critical mass in the domains of dermatology and oral

health. Industry benefits from demographic growth trends and Sinclair has a mix of OTC and

other more specialised brands. However, it must align its costs with the industry average to

compete with peers.


2009A 30.4 2.8 1.0 1.5 20.5 N/A

2010A 27.6 (0.1) (1.8) (0.8) N/A N/A

2011E 32.8 (1.5) (1.9) (0.9) N/A N/A

2012E 36.6 0.5 0.4 0.4 77.0 N/A

Sector: Mining



Company description

Sirius Minerals is a diversified miningand exploration holding company withsalt and potash interests in NorthAmerica and Australia and initiatives inCompressed Air Energy Storage andCarbon Sequestration.

Price performance



Sirius Minerals (SXX)

INVESTMENT SUMMARY

Drilling commenced at the company's North Dakota project early last month. Drilling is

expected to be completed by end-December, by which time the company will know the extent

of any potash present. The result of the hole is critical to de-risking the development of any

future Sirius potash operation in North Dakota. Sirius has acquired a further 1,220 acres and

now controls over 8,645 net mineral acres of exploration leases in North Dakota. It has also

entered into a Memorandum of Understanding with Sino-Agri Mining Industry, which will allow

Sino-Agri to look into developing the Adavale project in Queensland, Australia. A further two

exploration application licences have also been acquired in Western Australia. We value Sirius

Minerals on the basis of its NAV at 8.0p.

INDUSTRY OUTLOOK

Vancouver FOB muriate of potash currently costs US$320/t.


2009A 0.0 (0.3) (0.3) (0.4) N/A N/A

2010A 0.0 (1.5) (1.5) (0.4) N/A N/A

2011E 0.0 (1.4) (1.4) (0.2) N/A N/A


106 2 December 2010

Edison Insight

Sector: Property

Price: €0.30Market cap: €91mForecast net debt (€m) 281.0Forecast gearing ratio (%) 134.0Market AIM


Company description

Sirius Real Estate is engaged in theinvestment in and development ofcommercial property to provide flexibleworkspace in Germany.

Price performance


AnalystRoger Leboff

Sirius Real Estate (SRE)

INVESTMENT SUMMARY

The trading update showed progress on targeted occupancy and efficiency improvements;

lower overheads, better cost recovery from tenants and reduced voids. Recent investment in

sales and marketing initiatives are gaining traction, with 87,000sqm of new leases in H1 signed

at average €4.17/sqm vs 45,000sqm in H109. Period-end occupancy was 73% vs 71% a year

earlier. We have cut our FY11e pre-tax profit forecast by £0.5m, with benefits from overhead

cuts and cost recovery offset by one-offs relating to the EGM and non-recurring write-downs

of tenant debts post last year’s economic conditions. The shares are at a c 60% discount to

NAV. Interim results are due on 6 December.

INDUSTRY OUTLOOK

Sirius's properties are aimed at Germany's SMEs. The local economy has produced the

strongest eurozone performance, ie 2.2% second quarter growth on the back of resurgent

export orders, assisted by domestic demand, leading to GDP growth forecasts of around 3%

for the current year.

Y/E Mar Revenue EBITDA PBT EPS P/E P/CF(€m) (€m) (€m) (c) (x) (x)

2009A 43.7 18.8 4.9 1.40 21.4 4.5

2010A 44.0 18.7 0.7 0.83 36.1 7.9

2011E 44.4 20.8 1.5 0.46 65.2 4.0

2012E 45.5 23.1 3.8 1.12 26.8 3.7




Company description

SkyePharma is a drug deliveryspecialist, using its technologies todevelop new formulations of establisheddrugs, bringing clinical and life cyclemanagement benefits.

Price performance



SkyePharma (SKP)

INVESTMENT SUMMARY

SkyePharma’s near-term investment case hinges on the EU commercialisation of Flutiform; the

MAA is under review and approval is possible in mid-2011. This is combined with its ability to

service and/or renegotiate/refinance certain debt obligations, probably in 2012/13.

SkyePharma is investigating whether there is a commercially-viable way of developing Flutiform

in the US, given a substantial requirement for pre-approval dosing studies and post-approval

safety studies. However, Abbott has now returned the US rights. There may be RoW

opportunities; Latin American negotiations are ongoing and its Japanese partner, Kyorin,

initiated two Phase III studies in November.

INDUSTRY OUTLOOK

Flutiform remains the possible fourth combination ICS/LABA to reach the market in asthma,

after GSK's Advair and AstraZeneca’s Symbicort. Merck & Co is due to launch Dulera after

receiving FDA approval in June.


2008A 62.2 17.1 1.9 11.2 3.2 0.8

2009A 55.9 20.0 1.9 6.0 5.9 0.5

2010E 55.7 16.9 0.7 0.6 59.2 0.5

2011E 60.3 22.6 7.6 27.2 1.3 0.4

1072 December 2010

Edison Insight


Price: ¥97000.00Market cap: ¥11438mForecast net cash (¥m) 1558.0Forecast gearing ratio (%) N/AMarket JSE

Share price graph (¥)

Company description

Sosei Group Corporation is aJapan-based biopharma focused onR&D and drug re-profiling. It is active inlicensing – both its proprietaryprogrammes, and external rights for theJapanese market.

Price performance



Sosei Group (4565:JP)

INVESTMENT SUMMARY

Partner Novartis has confirmed that key value drivers NVA237 and QVA149 are on track to

meet market expectations for launch (2012 and 2013 respectively), with first top-line results

from the NVA237 Phase III programme anticipated in calendar Q211. Japanese approval of

SOH-075 is also expected in a similar timeframe. Near term, Sosei’s investment case is reliant

on the successful development and registration of these assets. However, longer term, Sosei’s

acquisition of Activus Pharma in August has the potential to generate revenue via strategic

partnerships/collaborations based on the nanoparticle drug formulation technology (APNT) or

new pipeline candidates.

INDUSTRY OUTLOOK

Emergency contraceptive SOH-075 may provide further upside as Japanese approval is

possible in Q111 (NDA filed Sept 2009); Sosei currently generates over ¥130m pa from

Norlevo (SOH-075) sold by Sandoz in Australia.

Y/E Mar Revenue EBITDA PBT EPS P/E P/CF(¥m) (¥m) (¥m) (¥) (x) (x)

2009A 153.0 (2106.0) (2067.0) (19938.8) N/A N/A

2010A 919.0 (293.0) (262.0) (1530.8) N/A N/A

2011E 800.0 (294.0) (262.0) (2266.8) N/A N/A





Company description

Sportingbet is an online sports bettingand gaming operator. Its main marketsare in Europe and Australia. In October2006 it sold its US-facing business andstopped accepting bets from USresidents.

Price performance



Sportingbet (SBT)

INVESTMENT SUMMARY

Q1 results (24 November) showed further progress with EBITDA up 17% despite

unexceptional sports margins. Our full-year estimates are unchanged. Sportingbet continues to

diversify, including the Russian B2B deal with Liga Stavok announced mid-November, which

we believe has significant potential. The recent failure of preliminary talks with Unibet was a

disappointment but we expect Sportingbet to continue to look at suitable earnings enhancing

deals after its successful DoJ settlement.

INDUSTRY OUTLOOK

Online sports-betting revenues are continuing to grow on the back of rising broadband

penetration and greater consumer trust. An increasing number of countries are planning to

specifically regulate and license online gambling (including Denmark, Germany, Spain and

Greece) and while this may produce a temporary dip in profits (due to tax and marketing

costs), rapid market growth should soon offset this, as in Australia. Economies of scale also

suggest the sector is likely to see continuing M&A activity.

Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 164.0 39.7 31.5 6.0 9.9 15.6

2010A 208.0 46.5 35.2 6.2 9.5 6.4

2011E 215.0 49.0 37.0 6.3 9.4 8.6

2012E 230.0 52.5 40.0 6.7 8.8 7.1

108 2 December 2010

Edison Insight

Sector: Technology

Price: 192.0pMarket cap: £52mForecast net cash (€m) 3.7Forecast gearing ratio (%) N/AMarket AIM


Company description

SQS is the largest independent providerof software testing and qualitymanagement services. The majority ofits revenues are derived fromconsultancy services to a client baseincluding a long list of blue-chipcustomers.

Price performance



SQS Software Quality Systems AG (SQS)

INVESTMENT SUMMARY

H110 results showed that SQS has returned to revenue growth, with demand strength in both

the traditional project-based business and managed testing services. Investment in headcount

and infrastructure to support future growth hampered margins, but the company expects FY10

earnings to be in line with expectations and FY11 to see revenue and margin growth. We have

revised up our revenue forecasts while our earnings forecasts remain substantially unchanged.

We estimate Managed Services will make up nearly 9% of FY10 revenues (vs 3% in FY09), as

SQS works towards its medium-term aim to grow this to 50% of the business.

INDUSTRY OUTLOOK

The fundamental driver behind the demand for independent software testing is the dismal

failure rate of IT projects. Market surveys suggest that around two-thirds of IT projects either

fail or fall behind time and budget, partly reflecting that around 90% of testing is carried out

in-house. As the global market leader in independent testing, SQS is well placed to benefit.


2008A 142.9 17.3 13.1 43.2 5.2 3.0

2009A 134.3 12.5 7.0 21.1 10.6 6.4

2010E 150.1 14.0 8.6 22.6 9.9 4.8

2011E 159.7 16.9 11.4 28.8 7.8 4.1

Sector: Technology



Company description

StatPro Group provides assetmanagement software and asset pricingto the global investment industry.

Price performance



StatPro Group (SOG)

INVESTMENT SUMMARY

In a short trading update in October, StatPro announced that Q3 trading was in line with

management’s expectations. This is despite challenging market conditions. The company also

says it has continued to sign up new clients to its StatPro Seven hosted platform. The group

remains on target for the full commercial launch of its new SaaS product, StatPro Revolution,

in January. With the shares trading on c 12x our FY11 forecasts, we believe the potential for

StatPro Revolution continues to be significantly underrated by the market.

INDUSTRY OUTLOOK

StatPro's products are targeted at the global wealth management industry. While this target

market has clearly suffered a fair amount of turmoil over the last two years, volatility and a

lower interest rate environment should help underpin retail demand for equities and bonds, and

therefore the longer-term industry growth profile. In addition, competitive, cost and regulatory

pressures all require asset managers to maintain and upgrade their reporting and risk

management systems.


2008A 27.9 6.8 4.7 7.0 16.7 7.8

2009A 31.6 8.6 6.9 9.0 13.0 6.9

2010E 33.0 8.7 7.0 8.8 13.3 5.7

2011E 34.7 9.5 8.0 9.9 11.8 6.0

1092 December 2010

Edison Insight




Company description

Stobart Group operates a multimodaltransport business, including EddieStobart (road haulage, 82%), StobartRail (14%), Stobart Ports (3%) andStobart Air (1%).

Price performance



Stobart Group (STOB)

INVESTMENT SUMMARY

Interims demonstrated Stobart’s ability to sustain growth through the recession despite

changes in customer behaviour and with challenging conditions in areas such as Network Rail.

Revenues were up 11% to £243.7m, underlying EAFFC up 26% to £17.0m, normalised PBT

up 24% to £15.4m and normalised EPS up 16% to 4.3p. However, with caution over

government spending, VAT increases and higher finance charges, we have eased back our FY

forecasts. Nevertheless, we believe that the strategic developments at London Southend

Airport and the recent Biomass expansion support continued long-term growth.

INDUSTRY OUTLOOK

With food, drink and other resistant sectors amounting to 85% of goods carried, Stobart is

pretty insensitive to the UK slowdown. With a greater focus on more environmental

transportation and the creation of a Biomass JV, we believe Stobart's multi-modal model is set

to become increasingly attractive, supported by asset developments.

Y/E Feb Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 431.8 40.9 23.1 7.7 18.6 14.0

2010A 447.7 38.3 28.6 8.6 16.7 14.2

2011E 516.0 52.4 32.9 9.3 15.4 13.2

2012E 558.0 59.2 39.2 10.8 13.3 7.4




Company description

SuperGen is a NASDAQ-listed biotechfirm focused on the development ofkinase, cell signalling and DNAmethyltransferase inhibitors for cancerindications.

Price performance



SuperGen (SUPG)

INVESTMENT SUMMARY

SuperGen has confirmed plans to initiate a Phase II study with its DNA repair

suppressor/multi-tyrosine kinase inhibitor, amuvatinib, in small cell lung cancer (SCLC). The

study will test the drug in the first-line setting with standard platinum-based doublet

chemotherapy and start to enrol patients later this year. Positive results should be a significant

value-creating event and provide the basis for a partnering deal. Following the perceived failure

of the Phase III study of Dacogen in elderly AML, marketing partners Eisai and J&J remain

committed to submitting registration applications based on secondary endpoint data.

INDUSTRY OUTLOOK

SuperGen is focused on the development of novel, usually first-in-class anticancers based on

kinase, cell signalling and DNA methyltransferase inhibitors. Such compounds are attractive as

licensing candidates to major pharmaceutical companies and can often be licensed at high

values at a relative early stage.


2008A 38.4 (1.0) (3.0) (5.1) N/A N/A

2009A 41.3 7.8 7.3 13.8 20.1 32.4

2010E 51.3 15.2 14.2 22.9 12.1 10.2

2011E 52.7 10.1 9.4 14.9 18.7 16.8

110 2 December 2010

Edison Insight




Company description

Symphony designs and globally marketsa special formulated additive that makespolythene and polypropyleneoxo-biodegradable. The company alsosells oxo-biodegradable finishedproduct, such as carrier bags.

Price performance

% 1m 3m 12mActual (8.5) (1.8) 14.9Relative* (7.8) 14.0 3.8* % Relative to local index

AnalystNeil Shah

Symphony Environmental Tech. (SYM)

INVESTMENT SUMMARY

Symphony shares fell 10% over the last month, after a strong run that saw shares up 35%

over the last six months. The company exhibited its d2w product at the K Show in Dusseldorf

in October, with 5,000 visitors getting samples and marketing material at the show.

INDUSTRY OUTLOOK

Symphony's main activity is in overseas markets, where environmental conditions and

legislation are creating positive momentum. Products made with Symphony's d2w

eco-compatible technology can be found in many large brands. The d2w droplet logo can also

be found on many magazine covers at UK newsagents. BASF recently moved out of the

oxo-degradable market, leaving further market share opportunities for Symphony.


2008A 5.4 (0.1) (0.4) 0.3 45.0 N/A

2009A 7.0 0.9 0.6 0.8 16.9 27.6

2010E 8.4 1.1 0.9 0.8 16.9 17.3



Price: DKK3.35Market cap: DKK444mForecast net cash (DKKm) 202.3Forecast gearing ratio (%) N/AMarket OMX

Share price graph (DKK)

Company description

TopoTarget is a Danish drugdevelopment and marketing companyfocused on the field of oncology. Its leadproduct is belinostat and it hasout-licensed its North American andIndia rights to Spectrum.

Price performance


AnalystMick Cooper

TopoTarget (TOPO)

INVESTMENT SUMMARY

TopoTarget's prospects are closely tied to those of its lead drug, belinostat. It is in a pivotal

Phase II trial for peripheral T-cell lymphoma (PTCL) and could be approved in 2012. The drug

is also being developed for cancer of unknown primary (CUP) and non-small cell lung cancer

(NSCLC). The North American and Indian rights have been out-licensed to Spectrum

Pharmaceuticals and belinostat could generate peak revenues of $1.2bn. At its Q310 results,

the company indicated that it was increasing its focus on belinostat and looking to out-license

its other products; it also maintained its financial guidance for FY10.

INDUSTRY OUTLOOK

TopoTarget's belinostat belongs to the class of drugs called histone deacetylase inhibitors

(HDACi), which have considerable potential as oncology products because of their epigenetic

effects. Two such drugs have been approved and nine others are in clinical development.

However, belinostat has a favourable safety profile and could be the first HDACi approved for

the treatment of solid tumours.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(DKKm) (DKKm) (DKKm) (DKK) (x) (x)

2008A 43.9 (192.9) (306.1) (4.68) N/A N/A

2009A 44.0 (106.8) (142.7) (1.41) N/A N/A

2010E 128.8 (15.5) (26.3) (0.20) N/A N/A

2011E 90.6 (42.2) (50.2) (0.36) N/A N/A

1112 December 2010

Edison Insight

Sector: Oil & Gas



Company description

Tower Resources plc is an AIM-listed,London-based, independent oil and gasexploration company with a regionalfocus on sub-Saharan Africa.

Price performance


AnalystPeter Dupont

Tower Resources (TRP)

INVESTMENT SUMMARY

Two key items of Tower newsflow are eagerly awaited. The first relates to securing a farm-in

partner for the Ugandan interests with a view to undertaking a 2-D seismic survey in early 2011

and drilling a new well by mid-year. The second potential event relates to the results of the 3-D

survey offshore Namibia. Processing is expected to be completed by early 2011, which could

pave the way for a well by early 2012. Early indications suggest the Namibian licence has three

giant structures with strong indications of hydrocarbons. Namibia has clear company-maker

potential for Tower.

INDUSTRY OUTLOOK

Rockhopper's Falklands discovery points to the prospectivity of source rocks laid down in the

south Atlantic. Arguably, there are positive implications, albeit tentative, for Tower offshore

Namibia. More drilling success in the Falklands could stimulate interest in offshore Namibia

plays. Significantly, the Brazilian junior HRT has recently raised $1.5bn partly to finance

exploration activity offshore Namibia.


2008A 0.0 (1.3) (1.2) (0.2) N/A N/A

2009A 0.0 (1.1) (1.0) (0.2) N/A N/A

2010E 0.0 (1.0) (1.1) (0.1) N/A N/A

2011E 0.0 (2.8) (2.8) (0.3) N/A N/A




Company description

Travelzest is an online travel groupoffering specialist travel programmes.

Price performance


AnalystRichard Finch

Travelzest (TVZ)

INVESTMENT SUMMARY

Travelzest looks to be managing its restructuring successfully in uncertain conditions and

without detriment to top-line growth. In the half to April, sales at its North American operations,

the driver of interim profit growth, were up 10%, with summer bookings at end-April 30%

ahead, albeit in both cases with a currency boost. UK tour operations were holding up well,

suggesting an improved full-year return. FY11 should see the full benefit of new marketing and

distribution strategies, which include a unified UK retail brand. We are reviewing our forecasts.

INDUSTRY OUTLOOK

While Thomas Cook and TUI Travel have blamed a marked slowdown in UK summer 2010

trading on airspace closures, tighter consumer spending, fine weather and the World Cup,

there is renewed concern that the massive capacity cuts of recent years may not deliver the

long-term market stability envisaged at the time of the industry mergers. In Canada, despite

consolidation, the charter market remains highly competitive, which benefits Travelzest's

agency business.

Y/E Oct Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2008A 44.3 5.4 3.9 6.3 2.8 N/A

2009A 41.5 5.8 4.1 5.8 3.0 11.0



112 2 December 2010

Edison Insight

Sector: Property

Price: S$1.57Market cap: S$377mForecast net debt (S$m) 575.0Forecast gearing ratio (%) 61.0Market Singapore Exchange

Share price graph (S$)

Company description

TCT's main objective is to maximisecapital growth from a portfolio ofproperties in China. The focus is onlarge scale development opportunities inthe commercial sector and on incomeproducing assets such as office,logistics and retail properties.

Price performance

% 1m 3m 12mActual 0.0 4.7 N/ARelative* 0.1 N/A N/A* % Relative to local index

AnalystRoger Leboff

Treasury China Trust (TCT)

INVESTMENT SUMMARY

Operational progress in Q3 included an increase in aggregate portfolio occupancy to 86.9%

(end Q2: 83.6%). Other news included refinance of the City Center debt facility on improved

terms and including development debt for CC3. It also reported 68% occupancy for its newly

refurbished retail podium at Central Plaza, with the property well on track for full occupation. In

November, TCT secured a new strategic partnership that will extend the portfolio into mainly

retail property in central and western China. A commitment to pay 2.5c quarterly dividends put

the units on a 6.4% prospective yield which, with the steep discount to NAV, adds weight to

the case that TCT is undervalued.

INDUSTRY OUTLOOK

The PRC government's determination to curb inflation pressure and property speculation

prompted its fifth increase in capital reserve requirements this year. This followed October's

0.25% increase in the benchmark interest rate. Much of this is aimed at residential property,

outside of TCT's business model.

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF(S$m) (S$m) (S$m) (c) (x) (x)

2008A 80.9 4.3 (49.4) (29.0) N/A N/A

2009A 77.8 13.3 (29.2) (13.4) N/A 6.4

2010E 77.2 21.0 (23.8) (10.9) N/A 4.4

2011E 85.0 26.8 (15.5) (7.7) N/A 11.9




Company description

Tribal provides consultancy, supportand delivery services focused onimproving the delivery of public services,primarily within the UK.

Price performance



Tribal Group (TRB)

INVESTMENT SUMMARY

Bid discussions have been terminated and we are now reinstating forecasts, albeit at

substantially lower levels. This reflects the materially reduced UK government advisory work

and continued delays and deferrals in UK health advisory business. The CEO, Peter Martin, is

leaving the group at the end of December and progress is being made identifying a successor.

Longer-term prospects benefit from HMG's intention to reduce public spending through

shared service provision. Debt is in line, with refinancing completed in H110. Overseas

revenues are building, with new contracts for student management systems in the UK and

New Zealand and for mobile learning in the US.

INDUSTRY OUTLOOK

Post the CSR, efficiency in service delivery and intelligent investment in technology remain key

priorities given curtailed budgets. Radical changes to the role of the state in the provision of

public services could present Tribal with myriad opportunities, such as working with GP

practices in their envisaged commissioning role.


2008A 234.0 24.1 18.6 14.7 2.4 1.2

2009A 193.7 18.0 13.8 10.7 3.3 1.5

2010E 178.0 10.6 6.0 4.6 7.7 N/A

2011E 170.1 13.5 9.0 6.8 5.2 2.9

1132 December 2010

Edison Insight

Sector: Engineering



Company description

Trifast is a leading global manufacturerand distributor of industrial fasteners.Principal operations are in Europe andSouth-East Asia, with a toehold in theUS.

Price performance



Trifast (TRI)

INVESTMENT SUMMARY

As emphasised by the recent interim statement, Trifast is well past the early phases of its

restructuring. The new management team, reinstalled 18 months ago, is now looking ahead

positively, despite the challenging trading climate. The business is moving ahead, employing

more effective internal controls and positioning itself to respond to any stimulus to the global

economy. The strong first-half performance has encouraged us again to lift our profit

estimates.

INDUSTRY OUTLOOK

The global industrial fasteners market is valued at more than £20bn. Successful manufacturers

and distributors have responded to the shift in manufacturing capacity to lower-cost regions by

developing their own local facilities or supply routes. They have also created effective logistical

services and shifted the emphasis towards more complex products to increase value added.

The global recession has caused pain across the sector, but provides consolidation

opportunities for stronger businesses.


2009A 104.9 4.5 2.5 1.15 44.3 7.3

2010A 85.9 2.1 0.9 0.68 75.0 11.1

2011E 104.0 5.2 3.4 2.93 17.4 26.8

2012E 108.0 5.9 4.0 3.40 15.0 9.6




Company description

Ultra Electronics is a global specialistaerospace & defence electronicscompany with operations across threedivisions: tactical & sonar systems (43%2009 sales); aircraft & vehicle systems(24%); and information & powersystems (33%).

Price performance



Ultra Electronics (ULE)

INVESTMENT SUMMARY

Ultra Electronics is a steady-growth business that has provided a 17% CAGR in total

shareholder return since flotation in 1996. This has been delivered through both organic and

acquisitive growth in niche areas of defence electronics across a range of customers. With no

programme >5% of revenues, Ultra is better placed than most, providing a highly visible and

predictable revenue stream. The recent pull back in the shares caused by sector read-across

provides an opportunity to consider the stock again.

INDUSTRY OUTLOOK

With end-markets across defence moving towards a greater demand for electronic equipment

and information management, Ultra is well positioned to benefit from the trend towards more

frequent upgrade cycles. In addition, we feel the key themes to come out of the UK's SDSR

play to Ultra's strengths surrounding Battlespace IT and security. We also feel that Ultra

benefits from its geographic strategy with 53% of sales to the US and only 6% direct to the UK

MoD.


2008A 515.3 84.1 72.2 80.1 20.4 11.8

2009A 651.0 105.1 89.5 96.4 17.0 9.2

2010E 713.6 114.3 98.8 103.3 15.9 10.6

2011E 765.0 125.7 112.2 116.3 14.1 9.4

114 2 December 2010

Edison Insight




Company description

Umeco is an international provider ofsupply chain services and advancedcomposite materials primarily toaerospace and defence (70%), windenergy (5%), motor sport (7%), marine(4%) and other industries (14%).

Price performance



Umeco (UMC)

INVESTMENT SUMMARY

Umeco's interims saw revenue increased by 9%, PBT by 12%, EPS up 18% and the dividend

raised by 4%. There was some margin pressure during the period due to higher raw material

costs in Process Materials and reduced aftermarket performance fees in supply chain,

although we anticipate that these will ease during H2. As a result of the strong recovery in

Composites, we have increased our FY11 and FY12 EPS forecasts by 3% and 5%

respectively. With the long-term outlook bolstered by a new RR North America contract, a

proposed Chinese wind market JV and reduced leverage, we feel Umeco is well placed to

benefit from a recovery in its end markets.

INDUSTRY OUTLOOK

60% of the business is in the higher visibility Supply Chain. While 2010 results were hit by

lower composite revenues, with delays in aerospace and automotive and wind energy markets

essentially grinding to a halt. The recent interims highlighted these markets have moved into a

strong recovery mode.


2009A 410.9 39.7 28.5 39.7 11.3 7.9

2010A 409.4 37.4 24.9 36.6 12.3 3.6

2011E 424.2 39.8 26.7 39.3 11.5 5.7

2012E 459.3 45.1 31.5 46.3 9.7 5.6




Company description

Vectura Group is a productdevelopment company focused on thedevelopment of a range of inhaledtherapies, principally for the treatment ofrespiratory diseases. Its goal is toimprove patients’ lives and generatevalue for its stakeholders.

Price performance



Vectura (VEC)

INVESTMENT SUMMARY

Vectura’s strategic focus is on developing respiratory medicine/inhalation technologies and

securing new partners for these assets. The investment case remains geared to the success of

later-stage inhaled therapies, principally the two branded drugs NVA237 and QVA149

(partnered with Novartis, launch expected in 2012 and 2013 respectively) and generic projects

VR315 and VR632, which are now one to three years from the market. However, as the recent

formulation licensing deal with GSK highlighted, there is also unrealised value in its IP and

technology platforms. Interims revealed increased revenues, a narrower net loss (including

exceptional restructuring costs) and an improved cash balance.

INDUSTRY OUTLOOK

Vectura offers exposure to potential generic ICS/LABA asthma combinations (despite US

regulatory complexity) and novel LAMA (NVA237) and LABA/LAMA combination (QVA149),

which could become the first such therapies to reach the blockbuster COPD market.


2009A 31.2 (7.2) (7.5) (1.4) N/A N/A

2010A 50.1 8.3 8.2 3.7 18.5 N/A

2011E 30.6 (10.3) (10.9) (1.4) N/A N/A

2012E 23.4 (18.8) (19.6) (5.0) N/A N/A

1152 December 2010

Edison Insight




Company description

Vernalis is a UK company with an earlyto mid-stage development pipeline ofprojects targeting indications in the CNSarea and cancer.

Price performance



Vernalis (VER)

INVESTMENT SUMMARY

With £33.6m in cash at end-October, Vernalis remains well positioned to progress and expand

its R&D pipeline through licensing and acquisition. However, the announcement that

development of V3381 has been discontinued (following a review of interim data from a small

study in chronic cough) represents additional clinical disappointment for 2010. The strategic

focus is now firmly on M&A and securing new research collaborations (or additional milestones

to add to the €750k received from Servier in October) over the next 12-18 months. Such

newsflow should represent the next significant catalyst, but the timing is difficult to predict.

INDUSTRY OUTLOOK

The next 12 months should see Phase II start for V85546 (possibly with a partner), and clinical

entry of in-house programmes, V158866 and V158411 plus Biogen’s A2A antagonist back-up.

AUY922 proof of concept and full recruitment of the V3381CC chronic cough Phase II is

expected by end-2010. Additional projects could be generated from the Cambridge research

facility.


2008A 54.8 (9.3) (19.5) (128.0) N/A 1.0

2009A 13.0 (6.5) (10.9) (19.2) N/A N/A

2010E 13.4 (4.4) (12.4) (10.7) N/A N/A

2011E 8.9 (6.5) (6.6) (4.9) N/A N/A




Company description

Vertu was established to build a majormotor vehicle distribution group. This isbeing achieved through the completionand subsequent improved performanceof a series of acquisitions.

Price performance



Vertu Motors (VTU)

INVESTMENT SUMMARY

The Vertu strategy is to develop regional clusters of franchises with chosen OEM partners in

the volume sector of the motor distribution market. The franchises are led by motivated teams,

supported by fundamental controls from the centre. The group remains acquisitive, having

added 16 dealerships this year. Recent share price movements reflect City caution about

consumer spending, rather than achievements; the rating recognises neither the earnings

potential of recently completed deals nor the capacity for further acquisitions.

INDUSTRY OUTLOOK






and 2011.

Y/E Feb Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 760.8 7.9 3.5 3.3 8.6 1.4

2010A 818.9 10.5 6.9 3.2 8.9 3.0

2011E 930.0 11.1 7.2 2.6 11.0 7.6

2012E 1000.0 12.0 8.1 3.0 9.5 4.2

116 2 December 2010

Edison Insight




Company description

Vivus, Inc is a pharmaceutical companydedicated to the development andcommercialisation of next-generationtherapeutic products addressingobesity, diabetes and sexual health.

Price performance



Vivus (VVUS)

INVESTMENT SUMMARY

Vivus remains focused on its response to the FDA for Qnexa following concerns raised relating

to teratogenicity (both a risk assessment and a mitigation strategy) and cardiovascular issues

(demonstrating that elevated heart rate does not increase the risk of adverse events). It also

requested formal submission of the two-year data from the OB-305 (SEQUEL) study. The

response is expected to be made during December. Q3 net loss widened from $41m to

$59.6m due to higher G&A expenses and absence of recurring revenue from Evamist. Vivus

held $158.2m in cash & equivalents at the end of the period.

INDUSTRY OUTLOOK

Qnexa is one of three FDA-filed obesity drugs, but unlike Arena's lorcaserin and Orexigen's

Contrave, it is currently unpartnered. In Phase III it showed the most impressive efficacy

(placebo-adjusted weight loss of 9.4% vs 5.2% for Contrave and 3.6% for lorcaserin).

Lorcaserin also received a CRL, while Contrave will face the FDA AdCom on 7 December.


2008A 102.2 0.2 (5.2) (8.19) N/A N/A

2009A 50.0 (48.0) (51.9) (66.01) N/A N/A

2010E 17.7 (67.7) (72.4) (90.15) N/A N/A





Company description

Volex Group is a leading global providerof power products and interconnectcable assemblies. It supplies data andtelecom equipment and healthcare andindustrial products to large OEMs ofconsumer electrical and electronicdevices.

Price performance



Volex Group (VLX)

INVESTMENT SUMMARY

Initial recovery phase benefits were clearly visible in strong H1 results, which triggered another

round of upgrades primarily driven by higher revenues. The trading environment is considered

to be stable and we now expect greater emphasis on delivering a sustained improvement in

margins and profitability from a deepening of the organisational improvement programme.

INDUSTRY OUTLOOK

A sharp downturn in consumer demand subsequently yielded some healthy year-on-year

percentage increases for electronics companies in the early stages of recovery. These rates

are flattening out and the rate of progress is also less uniform going into Q4. Consequently,

investors may need to be more selective on stocks and sub-sectors going forward. Asia

remains the most active region.


2009A 265.1 14.0 8.3 10.9 28.7 10.3

2010A 229.0 15.6 10.3 14.5 21.6 11.2

2011E 302.0 18.7 14.1 18.3 17.1 24.5

2012E 322.0 21.3 17.5 22.4 14.0 10.0

1172 December 2010

Edison Insight


Price: US$1.41Market cap: US$58mForecast net cash (US$m) 1.8Forecast gearing ratio (%) N/AMarket OTC


Company description

WaferGen Biosystems Inc. is a leader inthe development, manufacture and saleof state-of-the-art systems for geneexpression, genotyping, cell biology andstem cell research for the life scienceand pharmaceutical industries.

Price performance


AnalystJohn Savin

WaferGen (WGBS)

INVESTMENT SUMMARY

WaferGen has launched its SmartChip system with 11 early-access customers, including

prestigious universities such as Pittsburgh Medical Centre, Kyoto and Ghent and a distribution

deal with Takeda Rika Kogyo in Japan. The focus is now on working with these lead

customers to develop strong applications that use SmartChips as these will drive sales and

volumes in subsequent years. H1 results showed revenues of $822k, cash of $1.5m and

operating loss of $5.4m. A $7.2m equity issue was made in July to build working capital. Q3

results were in line with forecasts.

INDUSTRY OUTLOOK

The $150k SmartCycler RT-PCR system and SmartChip tests for 5,184 genes in one sample

enabling high-throughput quantitative analysis. Multi-sample 384-well capabilities are now

available (at an extra $75k). Two gene expression profiling SmartChips were launched on 10

June: a cancer pathway chip and a miRNA chip (miRNA are gene regulatory molecules). Each

chip tests 1,000 genes using sensitive quantitative PCR.


2008A 0.6 (7.7) (8.0) (33.0) N/A N/A

2009A 0.4 (9.5) (10.0) (37.2) N/A N/A

2010E 1.9 (10.5) (11.0) (33.1) N/A N/A

2011E 5.4 (9.8) (10.4) (31.2) N/A N/A

Sector: Pcare and household prd



Company description

Walker Greenbank is a verticallyintegrated producer and distributor ofhigh-quality wallcoverings and furnishingfabrics. Leading brands include Zoffany,Harlequin, Morris and Sanderson.

Price performance



Walker Greenbank (WGB)

INVESTMENT SUMMARY

Trading conditions remain challenging, especially in the US and continental Europe, but the

Walker Greenbank brands continue to progress as a result of consistent investment in design

and colour. Meanwhile, the group's manufacturing operations have responded to restructuring

and are benefiting from the operational gearing impact on improved demand. The balance

sheet is strong and overheads have been reduced. We have raised our estimates again

following a positive trading statement earlier this week.

INDUSTRY OUTLOOK

The UK interior furnishing industry has experienced uncertain times for many years under the

influence of fashion changes. Many brands have failed to grow, while several specialist

manufacturing facilities have closed down. Manufacture for the volume segment of the market

has largely moved overseas. However, success is being delivered delivered by operators able

to differentiate themselves from competition by consistently offering innovative and high-quality

design and products.

Y/E Jan Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 63.7 5.8 3.2 4.29 9.4 6.2

2010A 60.4 4.4 2.4 3.07 13.1 4.9

2011E 68.0 6.5 4.5 5.79 7.0 6.4

2012E 71.5 7.0 5.0 6.43 6.3 5.8

118 2 December 2010118 2 December 2010

Edison Insight




Company description

Westminster is predominantly anestablished niche player in the provisionof advanced technical security solutions,along with close protection services andtraining.

Price performance



Westminster Group (WSG)

INVESTMENT SUMMARY

In October, Westminster announced it had raised £1m from a new strategic investor through

the issue of 400,000 shares at 25p/share, representing 16.49% of the enlarged share capital.

This will be used to deliver further growth, while providing flexibility to pay-down debt if

necessary. We feel the combination of Westminster's focus on security, increasing level of

enquiries and international focus provides substantial growth opportunities. While there is

near-term forecast risk due to the lumpy nature of contracts, we feel that if the group converts

a small proportion of enquiries it could well outperform over the coming years.

INDUSTRY OUTLOOK

Westminster is an established niche player providing advanced technical security solutions to

UK and overseas customers, a core activity that represents two-thirds of turnover, which we

believe will remain robust. The balance comprises the provision of close protection services

and training, as well as a 24/7 alarm receiving centre and control room.


2008A 5.5 0.2 0.2 1.5 13.9 N/A

2009A 7.9 0.2 0.1 0.8 26.0 N/A

2010E 10.1 1.1 0.9 3.5 5.9 5.6

2011E 11.0 1.3 1.2 3.6 5.8 4.3




Company description

WILEX is a biopharmaceutical companylisted on the Frankfurt Stock Exchange.Its aim is to develop drugs anddiagnostic agents with a low side effectprofile and targeted treatment ofdifferent types of cancer as well as forearly detection of tumours.

Price performance

% 1m 3m 12mActual 2.9 16.7 14.1Relative* (0.6) 1.2 (6.4)* % Relative to local index


WILEX (WL6)

INVESTMENT SUMMARY

WILEX’s recent acquisitions of Heidelberg Pharma and Oncogene Science have created a

larger entity and should pave the way for a fundraising, which should put it in a strong position

to license Mesupron. This, in turn, would enable WILEX to capture the value uplift associated

with a positive result in the ARISER study, the interim analysis of which is now in prospect for

mid-2011. WILEX's cash remains lean, hence the need for a fundraising, but a €20m equity

line and the cornerstone shareholding of Dievini Hopp (35.7%) ensure its financial position. The

financial model has not yet been updated to reflect the acquisitions.

INDUSTRY OUTLOOK

Mesupron is an orally-available anti-metastatic drug, with development potential in most solid

tumours. Rencarex is targeted at adjuvant treatment of non-metastatic kidney cancer,

following surgical removal of the kidney. Rencarex is the leading product in development for

this specific indication, for which no product is currently approved.

Y/E Nov Revenue EBITDA PBT EPS P/E P/CF(€m) (€m) (€m) (c) (x) (x)

2008A 3.2 (20.9) (20.0) (167.4) N/A N/A

2009A 13.0 (12.5) (12.5) (93.4) N/A N/A

2010E 1.5 (24.5) (24.6) (133.5) N/A N/A

2011E 1.5 (25.0) (25.2) (137.1) N/A N/A

1192 December 2010

Edison Insight

Sector: Technology



Company description

Xaar designs and manufactures inkjetprintheads. Its Platform 1 products areused primarily for outdoor advertising.Platform 3 widens the addressablemarket to include industrial, labellingand other applications.

Price performance


AnalystDan Ridsdale

Xaar (XAR)

INVESTMENT SUMMARY

As a pivotal figure in the global transition to digital printing, Xaar’s growth story should have a

long way to run. The ceramics market is embracing the technology most aggressively at

present but the range of potential applications is broad. The 2011 rating is a premium, but

virtually all capacity for this year has already been allocated, and its is not until 2013 that we

will see a full year's financial benefit from the £22m investment in capacity expansion. We

believe our 19p EPS estimate for 2013 is conservative.

INDUSTRY OUTLOOK

The market for Xaar's P1 printheads (used in outdoor advertising and case coding) looks

relatively stable. The opportunity for the P3 products looks significant. Demand from the

ceramics market is the primary driver, where manufacturers are looking to make significant

investments in expanding their digital production capacity. This opens up significant

incremental revenue streams for Xaar.


2008A 42.0 6.8 2.8 3.0 75.3 26.7

2009A 42.1 7.2 2.5 5.0 45.2 18.9

2010E 52.0 10.2 5.1 5.8 39.0 24.5

2011E 57.5 14.6 8.2 8.6 26.3 12.9

Sector: Oil & Gas



Company description

Xcite Energy is an oil exploration anddevelopment company, which isfocused on the exploration anddevelopment of heavy oil resources inthe North Sea on the United KingdomContinental Shelf.

Price performance



Xcite Energy (XEL)

INVESTMENT SUMMARY

Xcite's strategic aim is to become a significant heavy oil producer in the North Sea by 2014,

through developing its Bentley field. All eyes are currently on the 9/3b-6 well flow test with

results due in the first week of December. If successful, XEL expects to move to first-stage

production by end-2011, with full field development to follow by 2014. Management is

understandably careful regarding newsflow but has indicated the potential for resources to be

higher than the current view of 160mmboe. Our current valuation of 235p is based on a

conservative 50% chance of success; we would expect this to increase significantly in the

event of a successful flow test and an indication of increased reserves.

INDUSTRY OUTLOOK

Xcite plans a unique alliance financing structure to both incentivise partners while retaining a

100% WI. Success with Bentley could make it one of the North Sea’s largest independent

players.


2008A 0.0 (0.9) (0.5) (0.9) N/A N/A

2009A 0.0 (0.8) (0.8) (1.4) N/A N/A

2010E 0.0 (0.9) (0.9) (0.6) N/A N/A

2011E 66.4 30.6 30.8 20.8 13.2 17.5

120 2 December 2010

Edison Insight




Company description

XP Power is a developer and designerand manufacturer of power controlsolutions with a production facility inChina and design, service and salesteams across the US, Europe and Asia.

Price performance



XP Power (XPP)

INVESTMENT SUMMARY

XP's 4 October IMS confirmed that the company continued to see robust trading through Q3

with business strong across the board. XP continues to gain market share as customer

programmes based on recently launched products ramp into production. Consequently, the

company guided to higher revenue growth for FY10 (at least 30% y-o-y) and raised the Q3

dividend. XP received planning permission for the Vietnam facility last month, which should

enable construction to begin by year-end as planned. We upgraded our revenue, earnings and

dividend forecasts to reflect the strong order backlog: EPS was boosted by 7.3% in FY10 and

7.2% in FY11.

INDUSTRY OUTLOOK

The three end-markets supplied by XP are showing differing rates of recovery. Healthcare

equipment manufacturers are reporting bookings growth and improving book-to-bill ratios after

many quarters of weak bookings. Technology customers have rebounded strongly after a

dismal 2009, while the industrial sector is starting to show signs of improved activity.


2008A 69.3 10.9 8.0 34.8 28.8 20.0

2009A 67.3 11.2 8.7 40.8 24.6 11.2

2010E 87.6 18.6 15.6 66.5 15.1 14.6

2011E 95.0 20.8 17.5 74.6 13.4 9.8




Company description

YM BioSciences is an oncology-focusedbusiness developing compoundslicensed from academia and acquiredthrough company takeovers. Its stock islisted on Amex and the Toronto stockexchange.

Price performance



YM BioSciences (YM)

INVESTMENT SUMMARY

CYT387 is the most advanced unpartnered JAK1/2 inhibitor in development. Initial data from

the Phase I/II MPN study has been positive, with more detailed results to be presented at ASH

on 6 December; this and the recent ESH poster on CYT387's comparative profile may

stimulate partnering interest. Clinical data for potential best-in-class EGFr inhibitor

nimotuzumab is also expected this year and may trigger deal activity/further development.

Cash of C$45.6m provides a runway into 2012; although business development may bring in

further funds.

INDUSTRY OUTLOOK

Anti-EGFR MAb Vectibix failed in first-line head and neck cancer, an indication dominated by

Erbitux. Nimotuzumab has shown a reduced incidence of side effects common to Erbitux and

Vectibix: a potential competitive advantage. Phase I/II data from Incyte/Novartis’s twice-daily

JAK1/2 inhibitor INCB18424 is promising; although preclinical data review suggests CYT387

has comparative potency but with potentially an improved therapeutic window and dosing.

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF(C$m) (C$m) (C$m) (c) (x) (x)

2009A 4.5 (12.6) (11.6) (20.1) N/A N/A

2010A 2.6 (17.3) (17.3) (26.8) N/A N/A

2011E 3.5 (20.2) (20.0) (24.9) N/A N/A

2012E 0.4 (23.9) (23.7) (28.1) N/A N/A

1212 December 2010

Edison Insight




Company description

YouGov is a professional research andconsulting organisation, pioneering theuse of the internet and informationtechnology to collect high quality,in-depth data for market research andstakeholder consultation.

Price performance



YouGov (YOU)

INVESTMENT SUMMARY

YouGov is now back on a growth trend after a difficult couple of years, with the new CEO

focusing on building on the group’s core strengths. Investment in a technology platform and

new products is providing a credible portfolio of real value to the corporate market, which can

be rolled out across territories, providing greater consistency. The Harrison acquisition has

given a step up to building the scale needed to tackle the key US market. The rating is at the

bottom of the range of peers, reflecting past disappointments.

INDUSTRY OUTLOOK

After discovering that it was not, in fact, immune from economic factors, the industry is

showing gentle recovery, with both GfK and Synovate reporting revenues over 10% ahead.

Buyers’ and providers’ confidence, though improving, is still brittle. There has been a little

M&A, mostly earlier in the year (Ipsos/OTX, IMS) and much noise around the development of

opportunities in social networking. WPP's Q3 statement also talks of the need to focus on "the

application of technology and analysis of data, to the benefit of our clients and people".

Y/E Jul Revenue EBITDA PBT EPS P/E P/CF(£m) (£m) (£m) (p) (x) (x)

2009A 44.3 3.5 3.5 2.3 19.9 8.3

2010A 44.2 4.4 3.8 2.3 19.9 9.1

2011E 52.5 6.0 5.4 3.8 12.1 8.1

2012E 57.1 6.7 6.1 3.9 11.7 6.6

122 2 December 2010

Edison Insight

2 December 2010 123

Events diary

Listed below are the expected dates of forthcoming events commencing Monday 6 December 2010.

If you would like to attend an Edison investor event, please contact Celine Saikali on 020 3077 5702.

Date Company Event

Monday 6 December Alternative Networks Treatt

Plastics Capital Sirius Real Estate Tricorn Group

HarbourVest Partners

Finals

Interims

Edison event, London

Tuesday 7 December Andor Technology Innovation Group Pressure Technologies Southern Cross Healthcare Group Victrex

Bglobal Brulines Group Daisy Group Focus Solutions Group NewRiver Retail Ltd (Reg S)

Cloud computing roundtable HarbourVest Partners

Finals

Interims

Edison breakfast, London Edison event, Edinburgh

Wednesday 8 December ATH Resources MedicX Fund

International Greetings Kesa Electricals Micro Focus International Stagecoach Group

HarbourVest Partners SQS Software Quality Systems Matchtech

Finals

Interims

Edison event, Glasgow/Manchester Edison event, Leeds/Manchester/Liverpool Edison breakfast, London

Thursday 9 December Caretech Holding Titon Holdings

Ashtead Group DS Smith HMV Group Park Group Photo-Me International

HarbourVest Partners Management Consulting Group

Finals

Interims

Edison event, London Edison event, South West

Friday 10 December Ocean Power Technologies Polar Capital Holdings

Interims

Monday 13 December AssetCo Spice

Interims

Edison Insight

124 2 December 2010

Date Company Event

Tuesday 14 December 2 ergo Group Domino Printing Sciences Infrastrata Renovo Group RWS Holdings

Carpetright European Nickel Imagination Technologies Group Private and Commercial Finance Group Scott Wilson

Finals

Interims

Wednesday 15 December eXpansys Supergroup

Interims

Thursday 16 December Sports Direct International Interims

Friday 17 December Jersey Electricity A Shares

Alpha Strategic

Finals

Interims

Edison Insight

2 December 2010 125

Company Sector Most recent note Date published

4SC Pharmaceuticals & Biotech Outlook 18/11/10

Aberdeen New Thai Investment Trust Investment Companies Investment Trust Review 07/05/10

Ablon Group Property Update 21/09/10

Ablynx Pharmaceuticals & Biotech Update 22/11/10

Acencia Debt Strategies Investment Trusts Outlook 22/11/10

ACM Shipping Group Transport Review 01/12/10

Active Energy Group Electronics & Electrical Equipment Update 02/11/10

Addex Pharmaceuticals Pharmaceuticals & Biotech Update 16/09/10

ADX Energy Oil & Gas Flash 05/11/10

Agennix AG Pharmaceuticals & Biotech Update 22/10/10

Ai Claims Solutions Financials Update 29/09/10

Algeta Pharmaceuticals & Biotech Review 17/08/10

Alkane Resources Mining Outlook 23/07/10

Allergy Therapeutics Pharmaceuticals & Biotech Outlook 15/11/10

Allied Gold Mining Update 07/09/10

Allocate Software Technology Update 10/08/10

All Star Minerals Mining Outlook 11/11/09

Alpha Strategic General Financial N/A N/A

Altona Energy Mining Outlook 04/10/10

Anglesey Mining Mining Update 04/11/10

Animalcare Support Services Review 25/10/10

Arbuthnot Banking Group Financials Update 04/11/10

Ariana Resources Mining Outlook 03/08/10

Ark Therapeutics Pharmaceuticals & Biotech Update 01/12/10

Arian Silver Mining Update 12/11/10

Armour Group Electronics & Electrical Equipment Update 01/12/10

Ashley House Property Update 05/10/10

Asian Growth Properties Property Update 31/03/10

Augean Support Services Flash Note 29/09/10

Aurizon Mines Mining Update 11/11/10

Avon Rubber Aerospace & Defence Update 24/11/10

Baobab Resources Mining Update 12/11/10

Bellzone Mining Mining Update 23/11/10

Bezant Resources Mining Update 27/09/10

Biocompatibles Pharmaceuticals & Biotech Review 09/09/10

Biome Technologies Engineering Flash note 05/11/10

Bionomics Pharmaceuticals & Biotech Review 17/11/10

Biotie Therapies Corp Pharmaceuticals & Biotech Review 03/11/10

Blackthorn Resources Mining Update 25/10/10

Blue Star Capital Financials Update 30/06/10

BrainJuicer Media Review 05/10/10

Brewin Dolphin Asset Management Update 04/10/10

Brady Technology Update 29/11/10

Brightside Group Financials Outlook 12/05/10

British Polythene Industries General Industrial Flash note 16/11/10

BTG Pharmaceuticals & Biotech Review 26/11/10

Burst Media Media & Entertainment Review 01/11/10

Byotrol Basic Industries Outlook 23/11/10

City Natural Resources Investment Companies Investment Trust Review 29/09/10

ClearStream Technologies Group Pharmaceuticals & Biotech Outlook 24/11/10

Coal of Africa Mining Update 13/09/10

Consort Medical Pharmaceuticals & Biotech Update 20/10/10

Cyan Holdings Technology Flash 11/11/10

Daisy Group Technology Update 01/12/10

DDD Group Technology Update 28/09/10

Deltex Medical Pharmaceuticals & Biotech Update 22/09/10

Dexion Commodities Investment Companies Investment Trust Review 09/06/10

Edison Insight

126 2 December 2010


Dillistone Group Technology Review 24/09/10 DouglasBay Capital Investment Companies Update 30/11/10

Eastern Platinum Mining Update 16/11/10

Ebiquity Media Update 23/07/10 Eco City Vehicles General Retailers Flash 17/11/10

Electrum Resources Natural Resources Update 01/12/10

EMED Mining Mining Update 26/05/10

Empresaria Group Support Services Update 05/10/10

Entertainment One Travel & Leisure Update 17/11/10

Epistem Holdings Pharmaceuticals & Biotech Update 16/03/10

Evolva Pharmaceuticals & Biotech Outlook 22/11/10

Evotec Pharmaceuticals & Biotech Update 16/08/10

Ferrexpo Mining Update 10/08/10

Fiberweb Basic Industries Update 25/10/10

Forum Energy Oil & Gas Flash 25/11/10

Fronteer Gold Mining Update 17/11/10

Frontier Mining Mining Update 29/10/10

Gartmore Fledgling Trust Investment Companies Investment Trust Review 05/11/10

Gartmore Global Trust Investment Companies Investment Trust Review 30/09/10

Gartmore Growth Opportunities Investment Companies Investment Trust Review 21/04/10

Gartmore Irish Growth Fund Investment Companies Investment Trust Review 17/08/10

Gasol Oil & Gas N/A N/A

GB Group Technology Update 30/11/10

GMA Resources Mining N/A N/A

Gold One Mining Update 27/10/10

Goldplat Mining Update 23/09/10

Gulfsands Petroleum Oil & Gas Update 04/11/10

GW Pharmaceuticals Pharmaceuticals & Biotech Review 30/11/10

Helius Energy Electricity Outlook 16/09/10

Hightex Construction & Building Materials Update 20/09/10

Hogg Robinson Group Support Services Flash Note 30/11/10

H R Owen General Retailers Flash Note 08/09/10

Hybrigenics Pharmaceuticals & Biotech Outlook 19/10/10

i-design Media Update 18/10/10

Idatech Alternative Energy Update 06/10/10

IFG Group Financials Outlook 22/09/10

ImmuPharma Pharmaceuticals & Biotech Update 25/10/10

Innovation Group Technology Flash Note 09/09/10

IQE Technology Update 05/10/10

Ironwood Gold Mining Outlook 10/06/10

IS Pharma Pharmaceuticals & Biotech Update 12/10/10

Is Private Equity Investment Companies Update 12/10/10

Is Yatirim Menkul Degerler General Financial Update 23/11/10

Ithaca Energy Oil & Gas Update 22/11/10

K3 Business Technology Group Technology Update 18/11/10

KBC Advanced Technologies Technology Update 07/10/10

KCOM Group Electronics & Electrical Equipment Update 25/11/10

Kopylovskoye Mining Outlook 21/10/10

Landkom International Food Producers Update 25/11/10

Leni Gas & Oil Oil & Gas Flash note 01/10/10

Lifeline Scientific Pharmaceuticals & Biotech Outlook 11/05/10

Lincat Engineering Update 12/08/10

Lombard Medical Technologies Pharmaceuticals & Biotech N/A N/A

Lonrho Investment Companies Update 11/12/09

Lookers General Retailers Outlook 09/11/10

Low & Bonar Construction & Building Materials Outlook 28/10/10

LSL Property Services Property Update 05/11/10

Edison Insight

2 December 2010 127


Matchtech Group Support Services Outlook 13/10/10

Maxima Holdings Technology Update 12/08/10

MDM Engineering Group Mining Update 13/10/10

Medcom Tech Pharmaceuticals & Biotech Review 22/11/10

MedicX Fund Limited Property Update 15/11/10

Merchants Trust (The) Investment Trust Investment Trust Review 24/09/10

Merrion Pharmaceuticals Pharmaceuticals & Biotech Update 19/11/10

Mondo TV Media Update 17/11/10

Molins Engineering Update 26/10/10

Monitise Technology Outlook 16/02/10

Nautical Petroleum Oil & Gas Update 29/10/10

Nevsun Resources Mining Update 15/07/10

Newmark Security Support Services Outlook 26/07/10

NeuroSearch Pharmaceuticals & Biotech Review 19/10/10

Next Fifteen Communications Media Outlook 19/10/10

NextGen Sciences Pharmaceuticals & Biotech N/A N/A

Nexus Management Technology Update 06/10/10

Nighthawk Energy Oil & Gas Flash Note 21/10/10

Nkwe Platinum Mining Update 15/10/10

Northern Petroleum Oil & Gas Flash note 12/11/10

Omega Diagnostics Group

Pharmaceuticals & Biotech Flash note 17/11/10

Oncolytics Biotech Inc Pharmaceuticals & Biotech Update 23/06/10

Oracle Coalfields Mining Update 27/09/10

Oxford BioMedica Pharmaceuticals & Biotech Outlook 26/08/10

Paion Pharmaceuticals & Biotech Update 25/11/10

Panmure Gordon Financials Outlook 30/11/10

Patsystems Technology Review 27/07/10

Pharming Group Pharmaceuticals & Biotech Update 01/12/10

Phytopharm Pharmaceuticals & Biotech Update 25/06/10

Praesepe Travel & Leisure Update 15/07/10

Primary Health Properties Property Update 10/11/10

ProMetic Life Sciences Pharmaceuticals & Biotech Update 20/10/10

Proximagen Neuroscience Pharmaceuticals & Biotech Update 06/08/10

Psion Technology Outlook 22/11/10

Public Service Properties Investments Property Update 22/09/10

QinetiQ Aerospace & Defence Update 24/11/10

Randall & Quilter Financials Update 14/10/10

Range Resources Oil & Gas Outlook 15/06/10

Redhall Group Engineering Review 15/06/10

Red Rock Resources Mining Update 22/09/10

ReGen Therapeutics Pharmaceuticals & Biotech N/A N/A

Renewable Energy Generation Electricity Outlook 26/10/10

Rockhopper Exploration Oil & Gas Update 10/06/10

RPC Group Basic Industries Flash Note 01/10/10

Sarantel Group IT Hardware Update 13/10/10

Sceptre Leisure Travel & Leisure Outlook 28/10/10

SciSys Technology Review 05/10/10

SeaEnergy Alternative Energy Update 20/05/10

Securities Trust of Scotland Investment Companies Investment Trust Review 22/11/10

Seeing Machines Technology Review 21/10/10

Share plc General Financial Update 01/11/10

Sigma Capital Group General Financial Update 30/09/10

Sirius Exploration Mining Update 20/08/10

Sirius Real Estate Property Update 26/10/10

SkyePharma Pharmaceuticals & Biotech Outlook 09/04/10

Sosei Group Corporation Pharmaceuticals & Biotech Update 26/05/10

Sportingbet Travel & Leisure Update 24/11/10

SQS Software Quality Systems AG Technology Review 09/09/10

Edison Insight

128 2 December 2010


StatPro Technology Flash Note 19/10/10

Stobart Group Support Services Update 22/10/10

Sumatra Copper & Gold Metals & Mining QuickView 30/11/10

SuperGen Pharmaceuticals & Biotech Review 23/08/10

Symphony Environmental Technologies Basic Industries N/A N/A

The Biotech Growth Trust Investment Companies Investment Trust Review 21/07/10

The Merchants Trust Investment Companies Investment Trust Review 08/04/10 The Quarto Group, Inc. Media Update 02/11/10

TopoTarget Pharmaceuticals & Biotech Outlook 10/09/10

Tower Resources Oil & Gas Update 04/08/10

Travelzest Travel & Leisure N/A N/A

Treasury China Trust Property Update 01/11/10

Tribal Group Support Services Update 01/02/10

Trifast Engineering Review 22/11/10

Vectura Pharmaceuticals & Biotech Update 14/06/10

Vernalis Pharmaceuticals & Biotech Update 22/11/10

Vertu Motors General Retailers Update 14/05/10

Volex Group Electronic & Electrical Equipment Update 04/11/10

WaferGen Biosystems Pharmaceuticals & Biotech Review 25/10/10

Walker Greenbank Household Goods Flash 29/11/10

Westminster Group Support Services Flash note 09/03/10

Wilex Pharmaceuticals & Biotech Review 19/07/10

Worldwide Healthcare Trust Investment Companies Investment Trust Review 22/11/10

Xaar Technology Update 21/10/10

Xcite Energy Oil & Gas Outlook 21/10/10

XP Power Electronic & Electrical Equipment Update 04/10/10

YM BioSciences Pharmaceuticals & Biotech Review 04/10/10

YouGov Media Outlook 20/10/10

Edison Insight

2 December 2010 129

EDISON INVESTMENT RESEARCH LIMITED Edison is Europe’s leading investment research company. It has won industry recognition, with awards in both the UK and internationally. The team of more than 50 includes over 30 analysts supported by a department of supervisory analysts, editors and assistants. Edison writes on more than 250 companies across every sector and works directly with corporates, investment banks, brokers and fund managers. Edison’s research is read by major institutional investors in the UK and abroad, as well as by the private client broker and international investor communities. Edison was founded in 2003 and is authorised and regulated by the Financial Services Authority (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). DISCLAIMER Copyright 2010 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison Investment Research Limited for publication in the United Kingdom. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison Investment Research Limited at the time of publication. The research in this document is intended for professional advisers in the United Kingdom for use in their roles as advisers. It is not intended for retail investors. This is not a solicitation or inducement to buy, sell, subscribe, or underwrite securities or units. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment. A marketing communication under FSA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison Investment Research Limited has a restrictive policy relating to personal dealing. Edison Investment Research Limited is authorised and regulated by the Financial Services Authority for the conduct of investment business. The company does not hold any positions in the securities mentioned in this report. However, its directors, officers, employees and contractors may have a position in any or related securities mentioned in this report. Edison Investment Research Limited or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. This communication is intended for professional clients as defined in the FSA’s Conduct of Business rules (COBs 3.5).

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