Insight 021210 Lowres

Insight
Market Overview • Sector Focus • Company Profiles

2010
Published by Edison Investment Research

Edison Insight
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
December 2010 1
Edison Insight
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
3200 50
3000 40
28 00
30
2600
20
2400
2200 10
2000 0
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
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
2 2 December 2010
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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
2 December 2010 3
Edison Insight
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
10-year govt bond spreads over German bunds EUR/USD rate
10 1.55
Percentage points
1.50
8 1.45
6 1.40
1.35
4 1.30
2 1.25
1.20
0 1.15
Sep/10
Jan/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Aug/10
Nov/10
Oct/10
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Spain Portugal Ireland Greece
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.
4 2 December 2010
Edison Insight
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.
130
120
110
100
90
80
Dec/09
Aug/10
Sep/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Nov/09
Gold MSCI World

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
2 December 2010 5
Edison Insight
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)

Y TD La s t month La s t thre e La s t s ix La s t 12
months months 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)
U K re la tive to E urope
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
6 2 December 2010
Edison Insight
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
GDP es timates : for 2010 and 2011 Output gap as a % of GDP
US UK
UK
Japan OECD
EU
US
Germany
France France
Brazil
Rus s ia Germany
India
China Japan
0 2 4 6 8 10 12 0 2 4 6 8
2010 2011 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
2 December 2010 7
Edison Insight
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
8 2 December 2010
Edison Insight
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
Inflation Unemployment
4.0% 8 .5%
8 .0%
3.0%
7.5%
2.0% 7.0%
6.5%
1.0% 6.0%
5.5%
0.0% 5.0%
Jun/10
Feb/10
Apr/10
Dec/08
Aug/09
Dec/09
Aug/10
Oct/09
Oct/10
Jun/09
Feb/09
Apr/09
Jun/10
Feb/10
Apr/10
Dec/08
Aug/09
Dec/09
Aug/10
Oct/09
Jun/09
Feb/09
Apr/09
Value 12M rolling 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.
2 December 2010 9
Edison Insight
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 D e c - 10 R a tiona le D e c - 09
Bes 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.
10 2 December 2010
Edison Insight
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.
10
0
Dec/09
Aug/10
Sep/10
Nov/10
Dec/10
Jan/10
Oct/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Apr/10
Telecoms Basic materials Healthcare Utilities

Industrials Technology Oil & gas Consumer services
Consumer 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 e c tor We ight* P/E Y ie ld Y TD La s t La s t La s t s ix La s t 12
month thre e months 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%
Ave ra ge 100.0% 14.3 3 .0% 6 .2% ( 0.8 % ) 10.2% 12.8 % 10.7%
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
2 December 2010 11
Edison Insight
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

2011 P/E multiples (x) 2011dividend yields (%)
Technology Utilities
Industrials Telecom
Financials Healthcare
Consumer goods Consumer goods
FTSE All Share FTSE All Share
Consumer services Oil & gas
Healthcare Financials
Oil & gas Consumer services
Basic materials Industrials
Utilities Basic materials
Telecom Technology
0 5 10 15 20 25 0 2 4 6
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
12 2 December 2010
Edison Insight
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.
2 December 2010 13
Edison Insight
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.
14 2 December 2010
Edison Insight
Focus on:
Technology
Oil & gas
2 December 2010 15
Edison Insight
Sector focus: Technology

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
Analyst
model of SaaS businesses versus upfront licensing in software, it is possible these
Katherine Thompson
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 Sector P/E Key sector data

FY1 17.8x Number of constituents 102
3,500 900
800
FY2 13.1x Average market cap. £2.3m
3,000
2,500
700 No of profitable companies 89
600
2,000 500
1,500 400
1,000
300 Significant price changes one month Significant deall flow/catalysts
200
500 100
(%) Holiday season trading
0 0
Nasstar 54
Apr/10
Oct/10
Nov/09
Dec/09
Aug/10
Sep/10
Nov/10
Jan/10
Jun/10
Jul/10
May/10
Feb/10
Mar/10
Focus Solutions 34
FTSE ALL SHARE - PRICE INDEX Endace 33
FTSE ALL SHARE S/W &COMP SVS £ - PRICE INDEX
Belgravium Technologies 32
Scotty Group (24)
16 2 December 2010
Edison Insight
Sector focus: Oil & gas

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.
Analyst
Fast-forward 10 years and the industry is grappling with a different set of lessons from
Elaine Reynolds
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 Sector P/E Key sector data

FY1 19.1x Number of constituents 100
3,500 10,000 FY2 14.1x Average market cap. £2.9bn
9,000
3,000
8 ,000 No of profitable companies 75
2,500 7,000
2,000 6,000
5,000
1,500 4,000
Significant price changes one month Significant deal flow/catalysts
1,000 3,000
2,000
(%) Bentley well results for Xcite December
500
0
1,000
0
Haike Chemical GP 214 Commence drilling at Catcher December
Bahamas Ptl. Co. 137 discovery
Dec/09
Aug/10
Sep/10
Nov/10
Jan/10
Oct/10
Jun/10
Jul/10
Feb/10
May/10
Mar/10
Apr/10
Nov/09
Bowleven 92 Rachel well results for Desire December

FTSE ALL SHARE - PRICE INDEX FTSE ALL SHARE OIL &GAS £ - PRICE INDEX
Woburn Energy 83 Cairn completion of sale of December
Xcite Energy 71 Indian blocks to Vedanta
2 December 2010 17
Edison Insight
Forecast changes
The table below details stocks where we have changed our forecasts to 2 December.
Stock Year end Movement FY1 ch

hange in EPS FY22 change in EPS
From To From To
Ablynx Dec p N/A N/A (93.9) (94.9)

Alliance Pharma Jun nn 5.5 5.7 4.0 4.3
Antisoma Jun nn (4.7) (3.9) (4.7) (4.3)
Arian Silver Dec nn 0.0 0.3 1.7 2.9
Armour Group Aug pp 1.0 0.32 1.3 0.74
Aurizon Mines Sep pn 19.6 10.2 22.5 33.0
Avon Rubber Sep n 22.5 27.0 N/A N/A
Bezant Jun n (2.9) (1.8) N/A N/A
Byotrol Mar pp (0.8) (1.9) 0.4 0.0
Chemring Oct pp 251.7 245.8 304.2 308.0
Clearstream Technologies Group Jul pp 6.5 3.1 9.1 5.4
Daisy Group Mar pn 10.0 9.5 11.7 12.3
Eastern Platinum Dec p 1.0 0.6 N/A N/A
Entertainment One Mar pp 12.2 12.1 13.5 13.2
Fronteer Gold Dec pn (17.5) (41.8) (18.1) (17.5)
GMA Resources Dec nn (0.1) 0.0 0.6 0.9
Gold One Dec nn 0.6 0.7 5.8 6.1
Gold One Dec p N/A N/A 5.8 3.6
Goldplat Jun nn 1.94 2.35 4.83 5.92
Hogg Robinson Group Mar nn 6.2 6.72 6.7 7.15
Ithaca Energy Dec n 10.3 13.0 N/A N/A
K3 Business Technology Group Jun pn 22.4 23.2 23.9 26.1
KCOM Mar pp 7.5 5.5 8.2 6.2
Landkom Oct n N/A N/A (0.8) (0.7)
LSL Property Services Dec p N/A N/A 24.5 23.5
MDM Engineering Mar n N/A N/A 15.5 16.1
Medcom Tech Dec nn 21.0 27.0 27.8 32.1
MedicX Fund Sep p N/A N/A 3.5 3.1
Merrion Pharma Dec n (0.2) (0.1) N/A N/A
Monitise Jun pp (1.9) (2.1) (1.3) (1.4)
Nevsun Resources Dec nn (4.3) (3.9) 73.0 108.8
Petropavlovsk Dec p 162.2 55.7 N/A N/A
Psion Dec p 1.4 1.5 N/A N/A
QinetiQ Mar n 12.6 13.9 N/A N/A
Rolls-Royce Group Dec pp 39.6 38.4 44.4 43.7
Sosei Mar p (2184.0) (2266.8) N/A N/A
Supergen Dec nn 10.2 22.9 11.2 14.9
Trifast Mar nn 2.52 2.93 3.17 3.40
Umeco Mar nn 38.2 39.3 44.2 46.3
Volex Mar nn 17.9 18.3 21.9 22.4
WILEX Nov nn (177.1) (133.5) (155.8) (137.1)
18 2 December 2010
Edison Insight
Sector: Pharma & Healthcare 4SC (VSC)

Price: €3.17
Market cap: €122m INVESTMENT SUMMARY
Forecast net cash (€m) 16.9 4SC’s investment proposition will be driven by the outcomes of four clinical trials – two each
Forecast gearing ratio (%) N/A
Market AIM, FRA with vidofludimus and resminostat. The first of these, the ENTRANCE study of vidofludimus in
Share price graph (€) 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
Company description
2017-18. The major TNFĩ inhibitors already generate sales already in aggregate of c
4SC is a drug discovery/development
company with four compounds in $18bn across all indications (RA and other autoimmune diseases), with three products Enbrel
clinical trials. These include vidofludimus
for rheumatoid arthritis and inflammatory (etanercept, Pfizer/Amgen), Humira (adalimumab, Abbott) and Remicade (infliximab,
bowel disease and resminostat for liver J&J/Merck & Co) all achieving sales of over $5bn/year.
cancer and Hodgkin’s lymphoma.
Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (€m) (€m) (€m) (c) (x) (x)
% 1m 3m 12m 2008A 3.0 (10.8) (10.7) (45.87) N/A N/A
Actual 16.0 15.2 (2.0)
Relative* 12.0 (3.2) (19.6) 2009A 1.9 (15.0) (15.2) (51.17) N/A N/A
* % Relative to local index
2010E 1.0 (18.6) (18.9) (48.89) N/A N/A
Analyst
2011E 1.0 (22.0) (22.3) (58.01) N/A N/A
Robin Davison
Sector: General Retailers Abcam (ABC)

Price: 334.3p
Market cap: £603m INVESTMENT SUMMARY
Forecast net debt (£m) N/A Demand for Abcam's products will be driven by a combination of factors including the
Market AIM availability of grant funding in core market North America, under pressure as a result of
Share price graph (p) 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
Company description
Antibodies are an essential and fundamental tool of life sciences research. There are millions of
Abcam is focused on making, sourcing,
and selling antibodies online for such antibodies and the market is fragmented, providing Abcam enough growth potential.
research use. Its main operations are in
the UK, the US and Japan, with a global Abcam and Santa Cruz Biotechnology are market leaders, although Abcam is a smaller niche
customer base. supplier compared with wider peer group.
Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (£m) (£m) (£m) (p) (x) (x)
% 1m 3m 12m 2009A 56.8 17.7 17.0 36.9 9.1 8.0
Actual (0.3) 8.7 82.7
Relative* 0.4 17.6 65.1 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
Analyst
Robin Davison
2 December 2010 19
Edison Insight
Sector: Property Ablon Group (ABL)

Price: 60.5p
Forecast net debt (€m) 231.0 The interims provided a few signs that Ablon's CE European markets may be bottoming out.
Forecast gearing ratio (%) 113.0
Market AIM Asset values were steady during the first half: NAV/share €2.69 vs €2.68 six months earlier,
Share price graph (p) 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.
Company description
These were built to meet an identified need for modern commercial space, but local recession
Ablon Group is a leading developer and
investor in commercial and residential cut demand and increased competition for tenants, so key markets face oversupply. A
property in Central and Eastern Europe.
It holds a portfolio of 33 assets, 14 shortage of debt finance and lack of well-developed investment markets may delay recovery,
income producing investments and 19 but a diminishing development pipeline will help.
development projects.
% 1m 3m 12m 2008A 23.9 7.0 (17.1) (9.2) N/A 27.2
Actual (10.4) 15.2 (12.9)
Relative* (9.7) (14.2) (21.3) 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
Analyst
Roger Leboff
Sector: Pharma & Healthcare Ablynx (ABLX)

Price: €8.00
Forecast net cash (€m) 108.7 Ablynx has developed a broad pipeline of products using its Nanobody technology in several
Market Euronext Brussels disease areas. These novel therapeutic proteins have the specificity of monoclonal antibodies
Share price graph (€) 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
Company description
There is a strong demand for novel pharmaceutical products for either unmet medical needs or
Ablynx is a drug discovery company
with a proprietary technology platform. It to improve on current treatments. The characteristics of Ablynx's Nanobodies, together with
is developing a novel class of
therapeutic proteins called Nanobodies the initial results from clinical trials, mean they have considerable commercial potential across
to treat a range of indications. It has four many indications.
products in clinical development.
% 1m 3m 12m 2008A 16.8 (18.5) (15.0) (41.3) N/A N/A
Actual (3.0) 10.3 5.3
Relative* 1.2 (6.7) (1.0) 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
Analyst
2011E 32.0 (43.1) (41.4) (94.9) N/A N/A
Mick Cooper
20 2 December 2010
Edison Insight
Sector: Financials ACM Shipping Group (ACMG)

Price: 222.0p
Forecast net cash (£m) 5.4 The manner in which ACM has come through the global recession reflects highly on the
Market AIM business model and the teamwork ethic established by management. Investment in future
Share price graph (p) 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
Company description
underlying potential for shipping. The global recession has created volatility in freight rates, but
ACM is a shipbroker with a focus on the
global oil tanker market. It arranges spot rising oil consumption is stabilising wet freight rates. The larger shipbrokers are better
and time charters, and also handles
ship sale and purchase to an equipped to provide advice to customers which, combined with the cash-generative nature of
international customer base. 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
% 1m 3m 12m 2009A 30.1 8.9 8.7 36.7 6.0 4.3
Actual 3.3 23.3 7.8
Relative* 4.1 0.9 (2.6) 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
Analyst
2012E 35.0 8.3 8.0 29.8 7.4 5.4
Nigel Harrison
Sector: Technology Active Energy (AEG)

Price: 3.4p
Forecast net cash (£m) 0.5 Active Energy has disposed of its Gasignition and Derlite businesses, leaving the company
Market AIM focused on its 72.8%-owned voltage optimising unit, Active Energy Ltd. While the disposal
Share price graph (p) 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
Company description
demand. Current market penetration is estimated at c 0.5% in the UK, and overseas markets
Active Energy's origins are in supplying
various components to manufacturers are even more nascent. Competition is present, however, and Active Energy's success will
of gas appliances. The investment case
is now centred around a UK-based hinge on its ability to further establish itself as one of the UK's leading suppliers while finding
subsidiary that designs and sells power appropriate channels to exploit opportunities overseas.
optimising transformers under the brand
VoltageMaster. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 2.0 (0.3) (0.3) (1.03) N/A N/A
Actual (32.5) (41.3) (69.2)
Relative* (32.0) (72.1) (72.2) 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
Analyst
2011E 6.4 0.2 0.2 0.19 17.9 N/A
Dan Ridsdale
2 December 2010 21
Edison Insight
Sector: Pharma & Healthcare Addex Pharma (ADXN)

Price: CHF11.15
Market cap: CHF72m INVESTMENT SUMMARY
Forecast net cash (CHFm) 73.9 Addex will shortly start its Phase II study of the mGluR5 NAM, ADX48621 in Parkinson’s
Market Swiss Stock Exchange disease levodopa-induced dyskinesia (PD-LID). The company is also planning a small Phase II
Share price graph (CHF) 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,
Company description
compounds which offer significant potential advantages over classical agonist/antagonists.
Addex is engaged in the adaptation and
expansion of its allosteric modulator Novartis's decision to undertake pivotal/Phase III studies of its mGluR5 NAM, AFQ056, in
discovery platform for targets in central
nervous system (CNS), metabolic Fragile X and PD-LID further endorses the potential of the platform.
disorders and inflammation.

Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x)
% 1m 3m 12m 2008A 26.9 (21.5) (22.0) N/A N/A N/A
Actual 1.4 25.3 (71.1)
Relative* 1.3 1.0 (72.0) 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
Analyst
2011E 0.3 (38.4) (40.9) N/A N/A N/A
Robin Davison
Sector: Oil & Gas ADX Energy (ADX)

Price: A$0.10
Market cap: A$34m INVESTMENT SUMMARY
Forecast net cash (A$m) 0.8 In early November ADX Energy announced a resource upgrade at Dougga following the
Market ASX completion of 3D seismic processing. The announcement confirms the understanding of
Share price graph (A$) 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 $80/bbl range, the economics of a number of
Company description
exploration plays remain attractive. Along with strong farm-in partners and stable operating
ADX Energy (formerly AuDAX
Resources) is an oil and gas exploration regimes, ADX has every chance of success if it finds commercial quantities of hydrocarbons in
business listed in Australia with
exploration activities in Tunisia, offshore its prospects.
Italy, Romania and Australia. The group
also has mining interests which are in
the process of being demerged. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (A$m) (A$m) (A$m) (c) (x) (x)
% 1m 3m 12m 2009A 0.0 (2.7) (2.7) (1.4) N/A N/A
Actual (1.0) (34.0) 4.5
Relative* 0.5 (39.1) 5.3 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
Analyst
Ian McLelland
22 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Agennix (AGX)

Price: €3.66
Forecast net cash (€m) 50.5 Agennix is developing talactoferrin for two major indications, cancer and sepsis; the drug could
Market FRA generate peak sales of $2.5bn. There are two Phase III trials for the treatment of non-small cell
Share price graph (€) 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
Company description
small sales forces, but there is significant competition in oncology and sepsis is difficult to
Agennix is a drug development
company based in Germany and the treat. Talactoferrin has the potential to become a complementary treatment in oncology to the
US. Its lead product talactoferrin is
being developed for the treatment of current treatments without competing directly against other drugs, and to be widely used in
cancer and sepsis. the treatment of sepsis.
% 1m 3m 12m 2008A 12.4 (19.6) (18.8) (254.7) N/A N/A
Actual (1.9) (7.6) (1.3)
Relative* (5.2) (27.1) (19.1) 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
Analyst
2011E 0.0 (48.5) (48.9) (132.3) N/A N/A
Mick Cooper
Sector: Financials Ai Claims Solutions (ACS)

Price: 22.0p
Forecast net debt (£m) 24.3 Ai Claims provides accident management solutions, built around credit hire and credit repair,
Market AIM to 'non-fault' drivers and the insurance companies of 'at fault' drivers. Its product set and
Share price graph (p) 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
Company description
costs and restore their own profitability. Typically, the insurers have been slow to pay and have
Ai Claims Solutions provides credit hire
and credit repair as well as other challenged claims, starving the industry of cash. In this environment, Ai Claims' lower cost,
accident management solutions
nationally. It represents non-fault drivers more insurer-aligned offering is serving it well.
and insurers of at-fault drivers.

% 1m 3m 12m 2009A 55.7 3.2 2.0 2.4 9.2 N/A
Actual (6.4) (4.3) 44.3
Relative* (5.7) (7.1) 30.4 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
Analyst
2012E 144.5 6.7 4.3 5.1 4.3 2.8
Martyn King
2 December 2010 23
Edison Insight
Sector: Pharma & Healthcare Algeta (ALGETA)

Price: NOK124.00
Market cap: NOK4900m INVESTMENT SUMMARY
Forecast net cash (NOKm) 502.1 Algeta's investment case firmly centres on Alpharadin, its alpha-emitting drug for the treatment
Market OSE of bone metastases. The drug is partnered globally with BayerSchering, although Algeta
Share price graph (NOK) 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
Company description
Algeta is the world leader in the development of alpha-pharmaceuticals for cancer. Alpharadin
Algeta is a Norwegian listed biotech
company. 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.
Price performance (NOKm) (NOKm) (NOKm) (øre) (x) (x)
% 1m 3m 12m 2008A 0.1 (180.9) (170.8) (1034.7) N/A N/A
Actual 25.3 45.0 75.9
Relative* 26.6 31.0 57.7 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
Analyst
2011E 202.3 0.6 8.4 21.4 579.4 N/A
Robin Davison
Sector: Mining Alkane Resources (ALK)

Price: A$0.84
Forecast net cash (A$m) 10.8 Alkane is a diversified explorer with interests in REEs and gold. It recently recovered its first
Market ASX yttrium heavy rare earth product and a light rare earth sample from its DZP Pilot Plant. The
Share price graph (A$) 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.
Company description
INDUSTRY OUTLOOK
Alkane is a multi-commodity explorer,
with projects located in the central west Recent increases in the price of REEs point to potential annual revenues of between US$135m
region of New South Wales in Australia.
and US$196m (company announcement). We have used a long-term gold price of
US$1,177/oz for valuing the gold assets.
% 1m 3m 12m 2008A 2.4 (0.6) 0.1 0.04 2100.0 N/A
Actual (0.6) 87.8 103.6
Relative* 0.9 189.0 105.2 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
Analyst
2011E 0.2 (2.1) (6.8) (2.71) N/A N/A
Charles Gibson
24 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Allergy Therapeutics (AGY)

Price: 9.3p
Forecast net debt (£m) 10.0 Allergy Therapeutics’ investment case is geared to M&A and to German regulatory approval of
Market AIM Pollinex Quattro Grass, due in early 2011. It aims to be among the top three global players in
Share price graph (p) 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
Company description
allergy vaccine given as four shots over three weeks. This compares favourably with existing
Allergy Therapeutics is a
European-based speciality vaccines (typically requiring 16-50 injections under specialist supervision pre-hay fever season)
pharmaceutical company focused on
the treatment and prevention of allergy. and with comparable efficacy.

% 1m 3m 12m 2009A 37.8 (3.5) (10.9) (13.7) N/A N/A
Actual (5.1) (11.9) (38.3)
Relative* (4.4) (13.7) (44.3) 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
Analyst
2012E 45.0 3.5 1.3 0.4 23.3 10.4
Lala Gregorek
Sector: Pharma & Healthcare Alliance Pharma (APH)

Price: 34.8p
Forecast net debt (£m) 25.3 Alliance's renegotiation of financing indicates that an acquisition is possible. The financing is
Market AIM around 5% lower rate of interest than previously and at present, the level of debt appears to be
Share price graph (p) 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
Company description
well-established, off-patent sales. Its products usually have few direct competitors and are low
Alliance Pharma is a speciality
pharmaceutical company that develops, priced to encourage high prescription take-up. The company achieves growth by a
markets and distributes pharmaceutical
products. combination of product in-licensing and organic sales.

% 1m 3m 12m 2008A 21.8 6.5 2.5 1.6 21.7 10.8
Actual (5.4) (8.0) 51.1
Relative* (4.7) (4.5) 36.5 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
Analyst
2011E 43.1 14.8 13.6 4.3 8.1 5.1
Robin Davison
2 December 2010 25
Edison Insight
Sector: Mining Allied Gold (AGLD)

Price: 33.8p
Forecast net debt (A$m) 38.2 Allied has finalised its decision to upgrade the Simberi oxide plant from its current 2.2Mtpa to
Market AIM, ASX, TSX 3.5Mtpa, lifting production from around 73koz to 100koz during 2011. A PFS on the sulphide
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
Allied Gold is a gold explorer-producer
with its main assets the Simberi Oxide On an EV per resource basis Allied Gold is trading at a value that equates to US$68/oz. This is
Gold mine in Papua New Guinea and
the Gold Ridge mine in the Solomon a 44% discount to the industry average for AIM-listed gold companies (US$121/oz).
Islands.
Y/E Jun Revenue EBITDA PBT EPS (fd) P/E P/CF

% 1m 3m 12m 2009A 77.5 18.7 (2.9) (0.3) N/A 10.5
Actual 18.4 64.6 55.2
Relative* 19.4 31.5 40.2 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
Analyst
Charles Gibson
Sector: Technology Allocate Software (ALL)

Price: 76.5p
Forecast net cash (£m) 5.4 The recent investor day demonstrated how powerful Allocate's solutions are for organisations
Market AIM with complex staffing needs but also how strategically important these solutions have become
Share price graph (p) 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
Company description
UK public sector spending concerns still cannot be ignored, but the CSR was about as
Allocate Software is the leading provider
of software applications designed for positive as it could be and projects that generate nearer-term financial savings should be more
workforce optimisation within global
organisations employing large, shielded from cuts. A growing proportion of international and SaaS revenues also adds
multi-skilled workforces. robustness to Allocate’s revenue profile.
Y/E May Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 15.8 2.7 2.6 5.4 14.2 18.9
Actual 3.0 5.5 31.9
Relative* 3.8 (1.0) 19.2 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
Analyst
Dan Ridsdale
26 2 December 2010
Edison Insight
Sector: Financials Alpha Strategic (APS)

Price: 64.5p
Forecast net cash (£m) 1.4 On 28 October Alpha amended a management agreement held by its 100% subsidiary ACME
Market AIM Advisors Limited, which will result in a minimum of $800k of revenues being paid to Alpha in
Share price graph (p) 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
Company description
+7.9% year to date at the end of October 2010.
Alpha Strategic plans to pool a portion
of the revenue streams from several
single strategy hedge funds.
Y/E Mar Revenue EBITDA PBT EPS P/E P/CF

% 1m 3m 12m 2009A 0.3 (0.2) (0.1) (4.9) N/A 71.0
Actual 0.0 (1.5) (30.3)
Relative* 0.8 (15.3) (37.0) 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
Analyst
2012E 1.0 0.1 0.1 2.3 28.0 151.4
Neil Shah
Sector: Mining Altona Energy (ANR)

Price: 11.3p
Forecast net cash (£m) 1.0 In early November, energy companies Solena and Rentech agreed to establish a commercial
Market AIM scale sustainable jet fuel facility in the UK using Rentech's Fischer-Tropsch synthetic fuel
Share price graph (p) 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
Company description
In addition to supplying local demand for fuel and power (including potentially BHP Billiton’s
Altona holds a 49% interest in three
exploration licences covering 2,500km nearby Olympic Dam project), the JV is also looking to export fuel and possibly coal to the
square in the north of the Permian
Arckaringa Basin, South Australia. Its Asian markets. The BFS commenced last month and is expected to take around two years.
immediate focus is completing a
bankable feasibility study for a coal to
liquids plus co-generation facility. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 0.0 (1.3) (1.3) (0.31) N/A N/A
Actual 9.8 36.4 116.3
Relative* 10.6 (13.3) 95.5 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
Analyst
2012E 0.0 (1.7) (1.7) (0.41) N/A N/A
Michael Starke
2 December 2010 27
Edison Insight
Sector: Mining Anglesey Mining (AYM)

Price: 45.3p
Forecast net cash (£m) 0.6 Anglesey has a 41% interest in Labrador Iron Mines Holdings, TSX LIM, which has resources
Market FULL of 150Mt of direct-shipping hematite iron ore. On 25 November Anglesey announced that the
Share price graph (p) 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
Company description
25% rise in earnings for Anglesey from 6.3p per share to 7.9p per share. A 10% fall would see
Anglesey has a 41% interest in
TSX-listed Labrador Iron Mines, which a drop of around 27%. Current comparable spot prices are strong at U$160/t (62% fines CFR
has resources of 150 Mt of
direct-shipping hematite iron ore. It is Chinese ports). With shipping rates at $40/t, this equates to around U$120/t FOB.
about to commence production. It also
owns 100% of the Parys Mountain
zinc-copper-lead deposit, Wales. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 0.0 (0.5) (0.8) (0.5) N/A N/A
Actual 54.7 90.5 196.7
Relative* 55.9 39.5 168.2 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
Analyst
2012E 0.0 (0.3) 4.4 2.9 15.6 26.2
Anthony Wagg
Sector: Pharma & Healthcare Animalcare Group (ANCR)

Price: 123.5p
Forecast net cash (£m) 2.0 Animalcare reported revenue growth of 12.9% to £19.9m for the year to June 2010, with EPS
Market AIM before exceptionals up 56% to 11.2p. The main growth driver was the companion animal
Share price graph (p) 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
Company description
The companion animal market in the UK grew by 8.2% in 2009, which highlights its resilience.
Animalcare markets and sells licensed
veterinary pharmaceuticals, animal The growth is being sustained by the public continuing to care deeply for their pets, and the
identification products and animal
welfare goods for the companion animal increasing numbers of new treatments and products.
market across the UK. Its products are
sold in Europe through distributors.
% 1m 3m 12m 2009A 17.6 2.6 2.0 6.5 19.0 7.5
Actual 0.8 24.8 23.5
Relative* 1.6 (5.6) 11.6 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
Analyst
2012E 13.5 3.9 3.8 13.9 8.9 6.8
Mick Cooper
28 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Antisoma (ASM)

Price: 6.0p
Forecast net cash (£m) 4.1 Antisoma faces the dilemma of when, and if, it should partner AS1413 in relation to read-out of
Market FULL the Phase III ACCEDE study. A pre-data deal in H111 would be worth less than one
Share price graph (p) 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
Company description
The investment case is heavily geared to success of the AS1413 Phase III ACCEDE study and
Antisoma is a UK biotech company
specialising in the development of drugs the partnering of this programme, which could bring in a substantial sum. Market research
for the treatment of cancer. It has a
broad R&D pipeline with a lead product indicates global AS1413 sales potential of $440-580m in secondary AML, or up to $670m
licensed to Novartis. It has ambitions to including de novo AML. Positive ASA404 news from Novartis would represent upside.
establish a US sales franchise in
oncology products. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 25.2 (22.6) (18.2) (2.5) N/A N/A
Actual 0.3 0.0 (80.5)
Relative* 1.1 7.7 (82.4) 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
Analyst
2012E 0.6 (28.3) (29.6) (4.3) N/A N/A
Lala Gregorek
Sector: Mining Aquarius Platinum (AQP)

Price: 329.1p
Forecast net cash (US$m) 152.1 Aquarius has now closed its Blue Ridge mine until mid-next year to implement a
Market FULL redevelopment plan. Including capitalised net operating costs (of R50m), remaining capex from
Share price graph (p) 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$20m)
of the new capex, its BEE partner (Imbani Platinum) may struggle. One option is for Aquarius to
provide additional funding and dilute the BEE partners. We expect Aquarius's valuation to
continue to improve on the back of the operational turnaround at Everest and Blue Ridge as
well as recent positive automotive sales data from the US.
INDUSTRY OUTLOOK
Company description
We remain cautiously optimistic about the current outlook following recent positive US
Aquarius is the world's fourth largest
PGM producer, with five mines in automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to
southern Africa: Kroondal (50%),
Marikana (50%), Blue Ridge (50%) mid-2011 as auto producers restock ahead of forecast increases in vehicle production in
Everest (100%) and Mimosa (50%) as 2012.
well as tailings retreatment operations
and exploration projects. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
Price performance (US$m) (US$m) (US$m) (c) (x) (x)
% 1m 3m 12m 2009A 298.9 (0.2) (34.7) (1.0) N/A 65.2
Actual (13.3) 24.4 (2.6)
Relative* (12.6) (20.1) (12.0) 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
Analyst
2012E 683.0 133.2 101.1 15.5 33.9 19.9
Michael Starke
2 December 2010 29
Edison Insight
Sector: Financials Arbuthnot Banking Group (ARBB)

Price: 391.0p
Forecast net cash (£m) N/A Arbuthnot Banking Group has diversified financial earnings, a risk-averse but innovative
Market AIM management, and a high dividend yield (6% on our 2010e) covered by earnings. It is strongly
Share price graph (p) 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
Company description
credit conditions appear to have stabilised. For those with good funding, it is an excellent time
Arbuthnot Banking Group is engaged in
retail, investment and private banking to lend. Market conditions for investment banking remained tough through the summer and
and other financial services.
into Q3, which will adversely affect the results. Private banking remains competitive with low
interest rates limiting the value of deposits.
% 1m 3m 12m 2008A 41.9 N/A (2.2) 3.5 111.7 N/A
Actual (1.6) (5.2) 2.9
Relative* (0.9) (12.8) (7.0) 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
Analyst
2011E 60.4 N/A 8.7 38.0 10.3 N/A
Mark Thomas
Sector: Pharma & Healthcare Arena Pharmaceuticals (ARNA)

Price: US$1.41
Market cap: US$171m INVESTMENT SUMMARY
Forecast net cash (US$m) 110.7 Arena’s investment case hinges on FDA approval of lorcaserin in obesity. The FDA issued a
Market NASDAQ Complete Response Letter, following the negative Ad-Com, outlining the deficiencies of the
Share price graph (US$) 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
Company description
Lorcaserin is one of three FDA-filed obesity drugs. In Phase III it showed the least impressive
Arena's lead project, lorcaserin
(partnered with Eisai), is pending FDA efficacy (placebo-adjusted weight loss of 3.6% vs 9.4% for Vivus’s Qnexa and 5.2% for
approval for the treatment of obesity. It
has a development pipeline of late Orexigen’s Contrave) but had the best cardiovascular and CNS safety profile. Qnexa also
preclinical and early clinical received a negative 10-6 AdCom vote in July and a Complete Response Letter.
programmes, including one partnered
with Ortho-McNeil-Janssen (J&J). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 9.8 (213.5) (226.8) (309.69) N/A N/A
Actual (10.2) (78.6) (61.3)
Relative* (10.5) (54.8) (63.8) 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
Analyst
2011E 7.0 (60.7) (74.4) (309.69) N/A N/A
Lala Gregorek
30 2 December 2010
Edison Insight
Sector: Mining Arian Silver (AGQ)

Price: 31.3p
Forecast net cash (US$m) 11.6 Arian has announced that it has commenced commercial production at its 100%-owned San
Market AIM José mine, Zacatecas, Mexico, with ore being stockpiled for delivery to the mill from around
Share price graph (p) 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
Company description share in current money terms.
Arian Silver, listed on AIM and TSX,
specialises in Mexican silver deposit INDUSTRY OUTLOOK
exploration and development. Its San
Jose mine is expected to enter Often know as 'poor man's gold', during bull markets silver nevertheless tends to outperform
production soon. Its other three projects its yellow companion.
are Calicanto and San Celso, located in
Zacatecas, and Tepal in Michoacan. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 0.0 (3.7) (3.7) (2.5) N/A N/A
Actual 60.3 184.1 861.5
Relative* 61.5 191.6 769.0 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
Analyst
2011E 16.2 7.8 7.9 2.9 17.2 18.1
Charles Gibson
Sector: Mining Ariana Resources (AAU)

Price: 4.1p
Forecast net cash (£m) 2.9 Ariana has recently announced that it has subscribed to 2.7m shares in Tigris Resources for a
Market AIM total consideration of C$115,000, giving Ariana 15% of the total shares issued in the company.
Share price graph (p) 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
Company description sectors. We currently value Ariana's assets at 5.57pps.
Ariana is a gold exploration company
focused on exploration and INDUSTRY OUTLOOK
development projects in the Republic of
Turkey. Our valuation uses a long-term gold price of US1,177/oz.

% 1m 3m 12m 2008A 0.0 (0.6) (0.6) (0.7) N/A N/A
Actual (5.7) 37.5 17.9
Relative* (5.0) 46.3 6.5 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
Analyst
2011E 0.0 (0.4) (2.3) (0.5) N/A N/A
Charles Gibson
2 December 2010 31
Edison Insight
Sector: Pharma & Healthcare Ark Therapeutics (AKT)

Price: 4.0p
Forecast net cash (£m) 7.5 Ark Therapeutics’ Q3 IMS provided additional detail on the progress and timelines for its
Market FULL strategic restructuring aims. Ark is seeking to bolster its cash position through cost
Share price graph (p) 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
Company description
human IgG1 antibody, MNRP1685A. Competitor therapies to EG011 for refractory angina are
Ark Therapeutics specialises in
developing products for treating mainly stem cell therapies, while EG016 is a novel approach in peripheral vascular disease.
vascular disease, cancer and wound
care. The company is a leader in the Large pharma interest in foetal growth restriction (EG013) is evidenced by Pfizer's Phase II/III
field of gene-based therapies, and has sildenafil trial.
in-house manufacturing capabilities.
% 1m 3m 12m 2008A 0.9 (18.0) N/A (6.9) N/A N/A
Actual (15.1) (19.1) (88.0)
Relative* (14.4) (56.2) (89.2) 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
Analyst
2011E 6.1 (8.2) N/A (4.4) N/A N/A
Robin Davison
Sector: Electrical Equipment Armour Group (AMR)

Price: 8.5p
Forecast net debt (£m) 6.0 Trading conditions remain challenging, as reinforced by last month's results announcement.
Market AIM The focus remains on product development and tight internal controls as key factors in driving
Share price graph (p) 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
Company description
spending review. However, experience shows that businesses which invest in innovation and
Armour Home designs and distributes a
comprehensive upmarket range of quality consistently outperform their peers. Estimates have been lowered across the sector,
home entertainment products, and
Armour Auto supplies in-car but we remain optimistic that Armour can deliver meaningful recovery over the medium term.
communications and entertainment
components and systems.
Y/E Aug Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 51.6 3.0 1.2 1.44 5.9 0.8
Actual (2.9) (27.7) (45.2)
Relative* (2.1) (43.1) (50.4) 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
Analyst
2012E 59.0 3.0 0.6 0.74 11.5 2.1
Nigel Harrison
32 2 December 2010
Edison Insight
Sector: Construction & Blding Mat. Ashley House (ASH)

Price: 30.0p
Forecast net cash (£m) 0.2 Completion of the acquisition of Strategic Property Solutions, originally announced in May, fits
Market AIM with a strategy to reduce dependence on NHS revenues. It adds delivery of community mental
Share price graph (p) 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
Company description
There is no shortage of demand for modern healthcare facilities, but clients have been more
Ashley House supplies project
management and consultancy services. reticent to commit to new projects until the government's NHS spending plans are clearer. In
These are primarily allied to the delivery
of new medical facilities for NHS-led that respect, more detail on budgets and responsibility for investment decisions awaits
primary care, the management of assets publication of the healthcare bill.
and clinical services.
Y/E Apr Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 23.8 5.5 5.5 10.0 3.0 N/A
Actual 0.0 (6.3) (63.6)
Relative* 0.8 (30.9) (67.1) 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
Analyst
Roger Leboff
Sector: Property Asian Growth Properties (AGP)

Price: 25.5p
Forecast net debt (HK$m) N/A H1 saw 15% y-o-y revenue growth to HK$306m, with stable gross rents from investment
Market AIM properties in Hong Kong and China. Occupancy remained high at the Dah Sing Financial
Share price graph (p) Centre in Hong Kong and AGP received a first contribution from the new Crowne Plaza Hong
Kong Causeway Bay hotel and sale of one of the remaining units at The Forest Hills
development. The valuation, at c 68% below NAV, is at odds with conservatively financed
growth plans, well balanced portfolio of investment and development assets in mature and
emerging markets and a measured and affordable approach to new development.
INDUSTRY OUTLOOK
AGP's developments aim to capitalise on the growing demand for residential property in
Company description
mainland China. The drivers for the group's schemes remain sound, despite recent moves by
Asian Growth Properties is an investor
and developer of commercial and the PRC government to discourage speculation in residential property and similarly motivated
residential property in Hong Kong and
mainland China, ie Chengdu, Nanjing moves in Hong Kong. Each project is phased and budgeted to achieve satisfactory returns at
and Guangzhou. prices supported by occupational demand.
Price performance (HK$m) (HK$m) (HK$m) (c) (x) (x)
% 1m 3m 12m 2008A 1508.0 303.0 247.0 0.0 N/A 3.0
Actual 0.0 0.0 13.3
Relative* 0.8 (17.8) 2.4 2009A 517.0 151.0 89.0 0.0 N/A 39.7
Analyst
Roger Leboff
2 December 2010 33
Edison Insight
Sector: Support Services Augean (AUG)

Price: 26.5p
Forecast net debt (£m) 5.0 The most significant short-term driver for Augean will be the outcome of the LLW appeal, the
Market AIM decision of which is expected in the new year. Meanwhile, we see 2010 as a year of
Share price graph (p) 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.
Company description
While new regulations since 2004 initially caused confusion, we believe that as the industry
Augean is a United Kingdom-based
waste and resource management understands what is required and enforcement improves, volumes will become increasingly
company. It provides a range of
services to the hazardous waste sector, predictable.
including hazardous landfill and
treatment services.
% 1m 3m 12m 2008A 40.1 10.4 4.0 7.1 3.7 1.5
Actual 1.9 (1.9) (30.3)
Relative* 2.7 (4.1) (37.0) 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
Analyst
2011E 32.9 5.6 1.0 1.0 26.5 4.6
Roger Johnston
Sector: Mining Aurizon Mines (ARZ)

Price: C$7.44
Market cap: C$1202m INVESTMENT SUMMARY
Forecast net cash (C$m) 145.2 Despite its first disappointing quarter in Q310, we have upgraded our forecasts for Aurizon for
Market TSX FY10 on account of the consistently high gold price and also the expiration of all of the
Share price graph (C$) 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
Company description
The current gold price of US$1,350/oz is consistent with the US's additional QE2 stimulus,
Aurizon is a Canadian gold company
with three major assets in Canada's while upward pressure on prices will continue to be exerted by geopolitical (eg Korea) and
Abitibi region. Its aims to become an
intermediate producer focused on economic (eg Ireland, Spain, Portugal) tensions.
favourable geological trends, close to
infrastructure, in politically stable,
pro-mining jurisdictions. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
Price performance (C$m) (C$m) (C$m) (c) (x) (x)
% 1m 3m 12m 2008A 144.5 59.3 21.1 9.8 75.9 15.4
Actual 11.0 13.9 42.3
Relative* 9.3 28.9 26.2 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
Analyst
2011E 234.9 134.5 92.6 33.0 22.5 9.2
Charles Gibson
34 2 December 2010
Edison Insight
Sector: Aerospace & Defence Avon Rubber (AVON)

Price: 200.0p
Forecast net debt (£m) 9.7 Results from Avon Rubber were ahead of expectations, with contributions from both Dairy and
Market FULL Protection & Defence (P&D). We feel that management has cast off the shadow of the ‘old
Share price graph (p) 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
Company description
base to target buyers including other security and safety agencies and international militaries.
Avon Rubber designs, develops and
manufactures products in the While the timing of such inroads is difficult to predict, the emerging portfolio effect should
respiratory protection, defence and
dairy sectors. Its major contract enable continued growth.
partners are defence and national
security and safety organisations.
Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 100.9 9.7 6.2 14.5 13.8 18.1
Actual 19.4 70.2 113.9
Relative* 20.3 62.7 93.3 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
Analyst
2012E 134.8 16.4 12.3 31.0 6.5 3.9
Roger Johnston
Sector: Aerospace & Defence Babcock (BAB)

Price: 527.5p
Forecast net debt (£m) 816.7 Babcock's interims highlighted the continued strong performance across the business with
Market FULL revenues up 31%, underlying operating profit up 38%, PBT up 27% and EPS up 24%. It is our
Share price graph (p) 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
Company description
focus on supporting operations. However, this provides opportunities for outsourcing and,
Babcock is a primarily UK-based
support service company with when combined with growth in international and recovery in non-defence markets, leaves
operations in Marine (34%),
Defence(18%), Support Services (33%) Babcock well placed to benefit in a cost down environment.
and International (15%).

% 1m 3m 12m 2009A 1901.9 169.0 121.1 41.9 12.6 7.8
Actual (11.1) 5.5 (15.8)
Relative* (10.3) (15.7) (23.9) 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
Analyst
2012E 3502.0 402.1 295.8 63.3 8.3 7.7
Roger Johnston
2 December 2010 35
Edison Insight
Sector: Aerospace & Defence BAE Systems (BA.)

Price: 340.1p
Forecast net debt (£m) 98.0 BAE Systems' 9 November investor day highlighted the benefits of its international focus and
Market FULL home markets strategy. In addition, the balance across air, land and sea in both original
Share price graph (p) 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
Company description
the cancellation of Nimrod MRA4, retirement of the Harrier fleet and the decommissioning of
BAE Systems is a global defence
company with activities spanning HMS Ark Royal. However, this has been offset to a large extent by the positives of the
production and support across air, land,
sea and security markets. The group confirmation of the aircraft carrier build and the full complement of seven Astute submarines.
has operations in the UK, US, Kingdom
of Saudi Arabia, Sweden, Australia and
now India. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 18543.0 2096.0 1795.0 37.1 9.2 6.0
Actual (2.2) 13.3 3.8
Relative* (1.4) (4.4) (6.2) 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
Analyst
2011E 23119.0 2509.0 2179.0 45.4 7.5 5.9
Roger Johnston
Sector: Mining Baobab Resources (BAO)

Price: 11.8p
Forecast net cash (£m) 2.1 Baobab's focus is the Tete Fe-Vn-Ti project close to Cahora Bassa in Mozambique. The
Market AIM company’s currently declared JORC resource is 47.7Mt at 25.3% Fe, which we estimate
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
Baobab Resources is focused on
developing its Tete Baobab has an EV equivalent to c US$2/t JORC iron (cf an industry average of US$3.53/t).
iron-vanadium-titanium open-pit project
in central-western Mozambique. A Pro-rata the higher resource estimate implies a share price of c 65p (49p after dilution), rising
pre-feasibility study is expected in mid to over £1 at the industry average rating.
2011.
% 1m 3m 12m 2009A 0.3 (1.5) (1.6) (1.9) N/A N/A
Actual 6.8 34.3 84.3
Relative* 7.7 26.3 66.6 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
Analyst
Charles Gibson
36 2 December 2010
Edison Insight
Sector: Mining Bellzone Mining (BZM)

Price: 66.5p
Forecast net cash (US$m) 39.3 We anticipate that in early 2011 Bellzone could announce a total maiden oxide resource of up
Market AIM to 420Mt compared to company estimates of between 150Mt to 350Mt (and an estimated
Share price graph (p) 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
Company description
In recent days, benchmark prices of iron ore have hit six-month highs (of around US$170/t) on
BZM is focused on developing its Kalia
iron ore deposit in Guinea, West Africa. the back of healthy demand from Asian steel mills and lower iron ore exports from India.
Its estimates suggest Kalia hosts an
attributable iron ore resource of 10.0bt Meanwhile, the outlook for 2011 remains positive.
of magnetite and 2.55bt of oxide. It was
founded in November 2007 and listed
on AIM in April 2010. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 0.0 (14.5) (15.1) (3.6) N/A N/A
Actual (0.8) 22.0 N/A
Relative* 0.0 25.4 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
Analyst
2011E 0.0 (21.7) (24.5) (4.7) N/A N/A
Michael Starke
Sector: Mining Bezant Resources (BZT)

Price: 31.0p
Forecast net cash (£m) 1.3 Bezant Resources has released its annual report for the year to 30 June 2010. As of that date,
Market AIM the company had a net cash position of £1.9m. Looking ahead, the Mankayan scoping study
Share price graph (p) 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
Company description
Declining Chinese copper imports and lower global inventories of the metal highlight the
BZT has a 40% stake in the Mankayan
copper-gold project on the Philippine impact of higher prices on restocking. Nevertheless, we believe the longer-term fundamentals
island of Luzon and an option to acquire
the remaining 60% for ~US$40,000. In remain robust.
Tanzania, it has a 46% stake in a joint
venture with AngloGold Ashanti, and
other exploration tenements. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 0.0 (1.2) (1.1) (2.8) N/A N/A
Actual (13.3) 63.2 0.8
Relative* (12.6) (2.7) (8.9) 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
Analyst
2012E 0.0 (0.9) (0.9) (1.8) N/A N/A
Michael Starke
2 December 2010 37
Edison Insight
Sector: Pharma & Healthcare Biocompatibles (BII)

Price: 370.0p
Forecast net debt (£m) N/A An agreed Class 1 bid from BTG was announced on 19 November. This is structured as a
Market FULL scheme of arrangement for 1.6733 BTG shares per Biocompatibles share (41m fully diluted),
Share price graph (p) 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
Company description
compared to a theoretical bid price of 430p (based on the BTG share price prior to the
Biocompatibles is a leading medical
technology company in the field of bid).Edison is a connected party in the transaction.
drug-device combination products,
operating via two divisions: Oncology
Products, including Bead Products and
BrachySciences; and Licensing,
including CellMed and PC Licensing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 17.7 (2.1) (0.4) 0.9 411.1 N/A
Actual 22.3 39.6 56.5
Relative* 23.3 36.7 41.4 2009A 26.6 (3.2) (3.1) (4.7) N/A 1079.2
Analyst
John Savin
Sector: Engineering Biome Technologies (BIOM)

Price: 0.2p
Forecast net cash (£m) 3.0 A Q3 trading update highlighted ongoing business development. The updates on identified
Market AIM trials seem positive so far and we await news on further new major account wins. The
Share price graph (p) 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
Company description
by targeting niches where packaging is a small proportion of the overall cost of a product, and
Biome Technologies (previously
Stanelco) is focused on two areas: the consumer appeal of being eco-friendly adds enough differentiation. A range of third-party
bioplastics and radio frequency (RF).
The bioplastics division produces an estimates indicates CAGRs of 12% to 20% in the coming years for the industry.
organic-based resin (rather than oil
based) for use in the production of
plastics. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 14.8 (2.4) (2.5) (0.1) N/A N/A
Actual (23.1) 53.8 (42.9)
Relative* (22.5) (3.9) (48.4) 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
Analyst
2011E 16.2 (1.0) (1.5) 0.0 N/A N/A
Toby Thorrington
38 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Bionomics (BNO)

Price: A$0.32
Forecast net cash (A$m) 3.4 In the short term Bionomics’s investment case will be determined by the outcome of Start-up
Market ASX, NASDAQ Australia Ventures’ efforts to find a trade buyer for its 27.8% stake, which, if successful, would
Share price graph (A$) 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
Company description
attractive profile with a possible direct anti-tumour effect as a single agent. The anti-anxiety
Bionomics is an Australian biotech
company focused on developing small drug BNC210 could have a competitive advantage over existing anxiety treatments in terms of
molecule products for cancer, anxiety,
epilepsy and multiple sclerosis. Its lead speed of onset, the absence of sedative, memory or motor impairment and risk of habituation.
programmes are a VDA and an
anxiolytic compound.
% 1m 3m 12m 2009A 4.3 (5.6) (6.2) (2.5) N/A N/A
Actual 16.1 20.4 (12.2)
Relative* 17.8 (4.7) (11.5) 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
Analyst
2012E 3.8 (6.1) (6.7) (2.1) N/A N/A
Robin Davison
Sector: Pharma & Healthcare Biotie Therapies (BTH1V)

Price: €0.37
Forecast net debt (€m) 21.4 The results for the first of three Phase III studies of nalmefene for the treatment of alcoholism
Market OMX are due imminently and are central to the investment case. Positive results would trigger up to
Share price graph (€) €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
Company description
misusers in the major markets, of which only a very small proportion is currently treated with
Biotie Therapies is a Finnish biotech
company with a focus on clinical the available treatment options. The product could become a very significant advance in this
programmes in CNS and inflammatory
disease. Its lead project, nalmefene, for area.
the treatment of alcohol dependency, is
partnered with Lundbeck.
% 1m 3m 12m 2008A 5.1 (4.9) (5.6) (5.6) N/A N/A
Actual (2.6) (19.6) (27.4)
Relative* (0.8) (35.3) (38.8) 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
Analyst
2011E 1.4 (7.9) (8.8) (5.0) N/A N/A
Lala Gregorek
2 December 2010 39
Edison Insight
Sector: Mining Blackthorn Resources (BTR)

Price: A$0.67
Forecast net cash (A$m) 3.5 On 23 November 2010 Blackthorn Resources concluded an agreement with Glencore to form
Market ASX a JV for the Perkoa zinc project. As a result, construction and development has commenced
Share price graph (A$) 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.
Company description
INDUSTRY OUTLOOK
Blackthorn Resources is an Australian
exploration company with projects in The zinc price lost ground in November falling to US$2,093/t but the long-term price outlook
Burkina Faso, Zambia and South Africa.
By focusing on priority projects, the remains positive. After rising to almost US$9,000/t in mid-November, copper fell sharply and is
company aims to become a self-funding trading at US$8,254/t. Gold remains at record levels above US$1,300/oz.
exploration and mining company.
% 1m 3m 12m 2009A 0.0 (2.6) (0.1) (0.05) N/A N/A
Actual (19.3) 7.2 (5.6)
Relative* (18.1) (9.0) (4.9) 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
Analyst
2012E 0.0 (4.3) (10.3) (9.72) N/A N/A
Warren Johnstone
Sector: Financials Blue Star Capital (BLU)

Price: 2.4p
Forecast net cash (£m) 0.1 The October announcement that Zimiti has secured an ongoing contract with BP highlights the
Market AIM potential of Blue Star's homeland security-focused investment strategy. The contract is to
Share price graph (p) 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
Company description
are vital. With constantly developing technology and a growth profile that is expected to
Blue Star Capital invests primarily in
unquoted homeland security companies continue, this provides unique investment opportunities. This was highlighted within the UK's
with significant dual-use commercial
market opportunities. National Security Strategy and the SDSR with £650m of additional funding in the area.

% 1m 3m 12m 2008A 0.0 (2.0) (1.8) (1.5) N/A N/A
Actual (4.0) 0.0 (42.4)
Relative* (3.3) (29.8) (48.0) 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
Analyst
Roger Johnston
40 2 December 2010
Edison Insight
Sector: Technology Brady (BRY)

Price: 61.0p
Forecast net cash (£m) 6.9 Brady has announced the conditional acquisition of Viz Risk Management Services AS for
Market AIM £9.9m, which will boost the group's revenues by more than 50%. Further, it has raised £15m
Share price graph (p) (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
Company description
market – miners, fabricators, banks etc. Volatile commodity prices and potential general delays
Brady plc provides trading and risk
management software for global in clients’ decision making add some short-term uncertainty to the sales cycle. However, the
commodity markets. It has more than
20 years of expertise and more than target market is underinvested in IT and auditors, and regulators are seeking increased
500 users worldwide, including some of reporting and accountability across the industry.
the largest financial institutions and
mining corporations. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 6.2 0.9 1.1 3.1 19.7 7.1
Actual (5.8) (8.3) (12.2)
Relative* (5.0) (9.1) (20.7) 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
Analyst
2011E 18.7 3.6 3.2 4.7 13.0 8.9
Richard Jeans
Sector: Media & Entertainment BrainJuicer (BJU)

Price: 199.0p
Forecast net cash (£m) 2.2 BrainJuicer’s interim figures confirmed the growing US contribution, a greater proportion of
Market AIM revenues derived from the innovative ‘Juicy’ products, recovery in the UK and strong cash
Share price graph (p) 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
Company description
comparatives being poor. GfK and Synovate's Q3 revenues both made double-figure gains.
BrainJuicer carries out quantitative
online research using innovative, BrainJuicer continues to differentiate itself and to challenge traditional market research
bespoke software to produce insightful
market research for large, multinational approaches and methodologies, particularly with its tools designed to garner emotional as well
companies. as rational reactions.
Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2008A 9.3 1.4 1.4 7.4 26.9 22.0
Actual (5.0) 13.7 55.5
Relative* (4.3) 1.4 40.5 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
Analyst
2011E 20.0 2.5 2.3 12.5 15.9 9.7
Fiona Orford-Williams
2 December 2010 41
Edison Insight
Sector: Financials Brewin Dolphin (BRW)

Price: 139.5p
Forecast net cash (£m) N/A Brewin Dolphin (BD) offers geared equity-market exposure in high-growth wealth
Market FULL management. It has consistently grown FUM faster than benchmark indices and margins are
Share price graph (p) 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.
Company description
Equity markets remain volatile with sovereign risk concerns on top of stock-specific issues
Brewin Dolphin is one of the largest
independent private client investment such as BP. Investors may be more cautious on high-margin equity-related products as a
managers in the UK and manages
around £23bn. It provides a complete result, although it could also stimulate greater demand for advice.
service for private investors, charities
and pensions and has an investment
banking division. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 212.3 N/A 32.1 10.9 12.8 N/A
Actual 1.8 17.7 (12.5)
Relative* 2.6 (2.2) (21.0) 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
Analyst
Mark Thomas
Sector: Financials Brightside Group (BRT)

Price: 28.5p
Forecast net cash (£m) 14.6 Brightside reported interim 2010 results in September. Strong growth continues with a 24%
Market AIM increase in revenue and 33% increase in PBT. The purchase of eBike and eCar completed in
Share price graph (p) 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
Company description
fierce, although Brightside continues to expand market share, due to its widening product
Brightside Group’s principal activities
are insurance broking; the provision of range and competitive pricing. Rising premium rates translate directly into higher commission
premium finance and medical reports;
lead generation; and the provision of levels in cash terms.
debt management solutions.

% 1m 3m 12m 2008A 33.2 7.7 7.5 2.0 14.3 10.9
Actual 1.8 1.8 (8.1)
Relative* 2.6 (9.8) (16.9) 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
Analyst
2011E 74.2 18.4 17.7 3.0 9.5 6.3
Martyn King
42 2 December 2010
Edison Insight
Sector: Basic Industries British Polythene Industries (BPI)

Price: 249.0p
Forecast net debt (£m) 48.7 The November IMS showed that business conditions have yet to improve materially for BPI.
Market FULL However, management continues to exercise tight operational control supplemented by
Share price graph (p) 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
Company description
seen in some resin grades in the early part of H2, with small increases more recently.
BPI is the largest manufacturer of
polythene film products in Europe. It is
also Europe's largest recycler of waste
polythene film.

% 1m 3m 12m 2008A 480.7 27.2 8.4 22.1 11.3 2.3
Actual 2.5 9.7 (7.5)
Relative* 3.3 0.3 (16.4) 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
Analyst
2011E 470.2 34.2 16.5 44.6 5.6 2.0
Toby Thorrington
Sector: Pharma & Healthcare BTG (BGC)

Price: 219.9p
Forecast net debt (£m) N/A BTG has made an offer for Biocompatibles, which has been recommended. If consummated,
Market FULL the acquisition will create a UK-based speciality pharmaceutical company with a marketing
Share price graph (p) 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
Company description
(Genzyme), abiraterone (J&J), CytoFab (AstraZeneca), otelixizumab (Tolerx/GlaxoSmithKline)
BTG is a UK company specialising in
developing and commercialising and ONYX-0801 (Onyx Pharmaceuticals).
pharmaceutical products, particularly in
the areas of neuroscience and
oncology.

% 1m 3m 12m 2009A 84.8 8.7 5.1 1.8 122.2 N/A
Actual (8.8) 5.8 34.1
Relative* (8.1) 13.4 21.2 2010A 98.5 15.3 20.1 8.7 25.3 73.1
Analyst
Robin Davison
2 December 2010 43
Edison Insight
Sector: Media & Entertainment Burst Media (BRST)

Price: 5.3p
Forecast net cash (US$m) 1.1 Burst continues to put clear water between itself and commodity ad networks, under pressure
Market AIM from rapidly-developing Demand-Side Platforms (DSPs). September's interim statement
Share price graph (p) 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
Company description
maximise revenues while ensuring they display no inappropriate content. DSPs and real-time
Burst is a global provider of media,
technology and professional services to bidding have emerged to provide a less ‘clunky’ mechanism for placing inventory, leaving less
online advertisers, publishers and ad
networks. unsold and driving up publishers' revenues. Good technology and exclusive relationships are
the 'must haves' for ad networks, otherwise threatened by the market changes.
% 1m 3m 12m 2008A 27.3 0.1 (0.2) (0.3) N/A N/A
Actual 0.0 (2.3) (40.0)
Relative* 0.8 (35.8) (45.8) 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
Analyst
2011E 44.6 0.6 0.1 0.1 84.7 N/A
Sector: Basic Industries Byotrol (BYOT)

Price: 14.0p
Forecast net cash (£m) 2.1 Byotrol is ready for take-off. The recent interim results showed relatively modest underlying
Market AIM revenue growth, but the more coordinated response to the series of successful trials in the
Share price graph (p) 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
Company description
solutions (sometimes solving one problem to create another), a product that can damage the
Byotrol has developed and patented
specialist technology for the safe reproductive capacity of various types of bacteria offers considerable attractions to the user.
eradication of harmful microbes. These
include a variety of bacteria, algae, fungi The main challenge for such innovators is to convince major industry players of the efficacy of
and virulent diseases such as MRSA their technology.
and C-difficile.
% 1m 3m 12m 2009A 0.9 (2.7) (2.7) (4.4) N/A N/A
Actual (18.8) (12.5) (55.6)
Relative* (18.2) (4.5) (59.8) 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
Analyst
2012E 5.0 0.1 (0.1) 0.0 N/A N/A
Nigel Harrison
44 2 December 2010
Edison Insight
Sector: Aerospace & Defence Chemring Group (CHG)

Price: 2939.0p
Forecast net debt (£m) 310.2 Despite the difficult defence contracting environment, Chemring's pre-close statement
Market FULL highlighted that it generated 18% top line growth. It is a testament to management that this is
Share price graph (p) 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
Company description
an argument: timescales of withdrawal are difficult to predict; the group’s balance between
Chemring Group is a global leader in
aircraft and naval countermeasures and front-line and training; and acquisitions provide new opportunities (Mecar – non NATO and
other energetic materials for military use
in training, peacekeeping and conflict. It Roke – counter-terrorism and electronics, which completed on 30 September).
has activities in the US, UK, Italy and
Australia, primarily supplying home
governments and NATO forces. Y/E Oct Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 354.2 94.6 74.2 160.1 18.4 11.9
Actual (5.2) 11.9 9.0
Relative* (4.5) (16.6) (1.5) 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
Analyst
2011E 804.0 190.9 151.4 308.0 9.5 6.4
Roger Johnston
Sector: Pharma & Healthcare ClearStream Technologies Group (CTN)

Price: 27.0p
Forecast net debt (€m) 0.5 ClearStream has changed significantly as its underlying business mix is now dominated by
Market AIM higher-margin, more innovative peripheral catheters, generating overall 18% volume growth. In
Share price graph (p) 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
Company description
Co-labelled peripheral products are sold by Cordis (SLEEK and Savvy range and Bard
ClearStream Technologies is a
developer, manufacturer and supplier of (UltraVerse range, launched March 2010). Co-labelling growth in H2 was 65% and this is
medical devices.
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
% 1m 3m 12m 2009A 13.9 2.6 1.9 6.5 4.8 8.2
Actual (3.6) 8.0 5.9
Relative* (2.8) (20.2) (4.3) 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
Analyst
2012E 24.3 3.1 2.5 5.4 5.8 5.0
John Savin
2 December 2010 45
Edison Insight
Sector: Mining Coal of Africa (CZA)

Price: 73.8p
Forecast net cash (A$m) 46.9 Earlier this week, CoAL announced plans to acquire Chapudi and a number of other thermal
Market AIM, ASX, JSE and coking coal projects for US$75m from the Rio Tinto/Kwezi joint venture. Chapudi has a
Share price graph (p) 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
Company description
The steel and power generation industries are driving M&A in the sector as both look to secure
CZA's Mooiplaats Mine began
production in 2008. Earlier in 2010, CZA supply of key raw materials. Thanks to robust demand from Asia's steel mills, coking coal
acquired NuCoal’s producing mines for
ZAR650m. It is also developing its Vele prices are expected to increase c 10% in Q111 from current levels of around US$210/t.
and Makhado coking coal projects, Meanwhile, thermal coal leaving Richard Bay is currently priced at c US$100/t.
which should start production in H111
and H113, respectively. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 23.1 (20.5) (12.0) (3.0) N/A N/A
Actual (15.9) (1.7) (22.4)
Relative* (15.3) (38.3) (29.8) 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
Analyst
2012E 417.2 151.5 118.0 15.3 7.8 4.6
Michael Starke
Sector: Aerospace & Defence Cobham (COB)

Price: 198.7p
Forecast net debt (£m) 248.0 The 30 November investor seminar provided greater clarity over the structure, phasing and
Market FULL financial impact of the Excellence In Delivery (EID) programme. £65m of annual benefits will be
Share price graph (p) 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
Company description
feel the business will remain resilient to slowing defence spend, although the timing of orders
Cobham is an international aerospace &
defence equipment supplier with has been slower than anticipated. In other areas underlying growth is expected to be slower.
businesses across avionics &
surveillance, defence systems, mission Where this is the case, management has indicated active portfolio management relating to c
systems and aviation services. 10-15% of the technology division's revenues.
% 1m 3m 12m 2008A 1467.0 283.0 244.0 15.4 12.9 7.2
Actual (17.0) (4.5) (11.8)
Relative* (16.4) (22.0) (20.3) 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
Analyst
2011E 2108.0 453.0 338.0 21.6 9.2 5.4
Roger Johnston
46 2 December 2010
Edison Insight
Sector: Aerospace & Defence Cohort (CHRT)

Price: 84.0p
Forecast net cash (£m) 5.2 We feel that Cohort is in a difficult position with the business founded on a buy-and-build
Market AIM strategy that, through a lack of financial control, now finds it difficult to follow that strategy and
Share price graph (p) 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
Company description
cuts. While management has indicated 40% of its MoD revenue is not subject to spending
Cohort is a UK-based provider of
services and products into the defence constraints, that still leaves 60% under pressure. With a growing focus on export and
industry. The business operates through
three divisions: SCS (34% of FY10 non-defence opportunities across space and transportation, there are signs of hope.
sales); Mass (27%); and SEA (39%).

% 1m 3m 12m 2009A 76.7 6.6 5.8 12.3 6.8 4.3
Actual 19.1 13.5 (47.5)
Relative* 20.1 (28.4) (52.6) 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
Analyst
2012E 79.8 7.5 6.1 11.6 7.2 5.2
Roger Johnston
Sector: Pharma & Healthcare Consort Medical (CSRT)

Price: 472.5p
Forecast net debt (£m) 37.0 King Systems unveiled the King Vision video laryngoscope at the American Society of
Market FULL Anesthesiologists’ annual meeting. This is Consort Medical’s most recent product launch,
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
Consort Medical is an international
medical devices company. It operates Consort designs, develops and manufactures high-margin disposable medical devices through
through two divisions: Bespak
(inhalation and injection technologies) its Bespak (inhalation/injection technologies) and King Systems (airway management) divisions.
and King Systems (airway management These have leading positions in strong defensive, but relatively fragmented, markets.
products).
% 1m 3m 12m 2009A 120.3 25.4 17.9 45.1 10.5 5.9
Actual (1.6) 15.2 30.3
Relative* (0.8) 21.3 17.7 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
Analyst
2012E 127.1 28.3 19.6 48.6 9.7 5.8
Lala Gregorek
2 December 2010 47
Edison Insight
Sector: Technology Cyan Holdings (CYAN)

Price: 0.9p
Forecast net cash (£m) 1.5 H1 results showed margin improvement and tight cost control - future revenue growth
Market AIM depends on Cyan winning significant volume orders in the AMR and lighting control markets.
Share price graph (p) 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
Company description
R&D investment in the industry is relatively low. Cyan's solutions offer very high performance.
Cyan is a fabless semiconductor
company delivering flexible wireless Importantly, they also offer a configuration and software tool set and a module strategy that
solutions for lighting control, utility
metering and industrial telemetry. enables the rapid development of customer applications.

% 1m 3m 12m 2008A 0.1 (4.2) (4.2) (1.6) N/A N/A
Actual (8.1) 3.0 (58.5)
Relative* (7.4) (5.8) (62.5) 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
Analyst
Katherine Thompson
Sector: Technology Daisy Group (DAY)

Price: 94.0p
Forecast net debt (£m) 20.6 Daisy is proving itself adept as a consolidator in the SME telecoms space, and a successful
Market AIM integration of the just-announced £33m SpiriTel deal (its second-largest ever) would go some
Share price graph (p) 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
Company description
the SME space, there are over 600 voice product resellers and over 1,800 data resellers - a
Daisy provides unified communications
to the SME and mid-market sectors and key opportunity for Daisy as consolidator. Furthermore, Daisy itself sees an incremental £500m
offers a full suite of network services,
mobile, systems services and data opportunity to cross-sell additional services to its existing base. Opportunities abound.
solutions. It does not own any network
infrastructure and resells services over
other operators’ networks. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A N/A N/A N/A N/A N/A N/A
Actual (6.7) (8.5) (4.6)
Relative* (6.0) (6.1) (13.8) 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
Analyst
2012E 313.7 49.1 44.6 12.3 7.6 N/A
Neil K Shah
48 2 December 2010
Edison Insight
Sector: Technology DDD (DDD)

Price: 18.8p
Forecast net cash (£m) 2.5 DDD’s FY10 interims were as expected. However, an availability delay of third-party graphics
Market AIM hardware in its PC segment is likely to result in licensed product missing important PC launch
Share price graph (p) 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
Company description
IMS Research estimates that over 218m 3D TVs will ship by 2015. In October Toshiba
DDD develops and sells software and
services for the generation of unveiled a range of glasses-free 3D TV models at CEATEC 2010, scheduled for launch by
three-dimensional (3D) pictures and
video for PC, TV and mobile handset year-end, while Movidius launched a video processing chip in its Myriad 3D range, which has
screens. real time 2D to 3D capability.
% 1m 3m 12m 2008A 0.6 (1.4) (1.4) (1.9) N/A N/A
Actual (3.9) (1.3) 25.0
Relative* (3.1) (41.2) 13.0 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
Analyst
2011E 3.5 0.0 0.0 0.0 N/A 71.8
Martin Lister
Sector: Pharma & Healthcare Deltex Medical Group (DEMG)

Price: 16.0p
Forecast net debt (£m) 0.8 Deltex’s interim results show steady growth at 13%, with operating losses cut by 46% to
Market AIM £0.6m. Cash outflow was £0.6m before a deliberate building up of probe stocks by £0.3m to
Share price graph (p) £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
Company description
sub-optimal intra-operative fluid management. Evidence is emerging that competing arterial
Deltex Medical manufactures and sells
medical monitors that are used by pulse pressure monitors may not reliably track the haemodynamic status of patients in surgery.
doctors and nurses to help patients
recover more fully and more quickly The 3 November R&D day showed impressive results from the combined arterial pressure and
from the effects of major surgery. doppler monitor in initial Beta testing.
% 1m 3m 12m 2008A 5.2 (1.5) (1.5) (1.6) N/A N/A
Actual (4.5) 56.1 48.8
Relative* (3.7) 26.1 34.5 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
Analyst
2011E 7.0 0.5 0.4 0.3 53.3 494.9
John Savin
2 December 2010 49
Edison Insight
Sector: Technology Dillistone Group (DSG)

Price: 175.0p
Forecast net cash (£m) 1.6 Dillistone's H110 interims were reassuring and provide evidence that momentum in the
Market AIM business is continuing. Selling into the global recruitment market, the business is clearly
Share price graph (p) 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
Company description
strong following among the largest executive recruitment firms across the globe. We note that
Dillistone’s core product is
‘FILEFINDER’, an integrated client Bond International's recent acquisition of VCG is likely to mark a trend of further consolidation
management tool that delivers major
productivity gains. It is used by 12 of the in the space.
world’s 20 largest executive search
practices.
% 1m 3m 12m 2008A 4.6 1.5 1.4 17.5 10.0 4.9
Actual 12.9 20.7 48.9
Relative* 13.8 3.4 34.6 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
Analyst
2011E 4.1 1.5 1.2 16.4 10.7 6.8
Neil K Shah
Sector: Basic Industries DouglasBay Capital (DBAY)

Price: 8.0p
Forecast net debt (£m) 3.4 The group has announced the disposal of its largest investment, logistics business TDG, to
Market AIM France’s Norbert Dentressangle. DBAY should receive £205m on completion of the sale in
Share price graph (p) 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
Company description
We have removed forecasts after the current year. The bulk of DBAY assets will shortly be
DouglasBay Capital (formerly LIT) is a
holding company for investments in turned into cash and there is no visibility regarding contribution from new operating
quoted and unquoted small to
medium-sized businesses. companies. TDG has demonstrated management’s skills and provided a platform for future
fundraisings and gradual dilution of Laxey’s dominant shareholding.
% 1m 3m 12m 2008A 176.1 10.2 6.7 0.3 26.7 8.1
Actual (5.9) (15.8) 28.0
Relative* (5.1) (23.3) 15.7 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
Analyst
Roger Leboff
50 2 December 2010
Edison Insight
Sector: Mining Eastern Platinum (ELR)

Price: 99.3p
Forecast net cash (US$m) 25.0 Eastern Platinum plans to raise c C$300m to fund the first phase of the company’s Eastern
Market AIM, JSE, TSX Limb development plan and provide general working capital. The placement, the company’s
Share price graph (p) 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
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
Company description
2012.
Eastplats is a mid-tier producer of
platinum group metals. It has an 87.5%
interest in the Crocodile River Mine in
South Africa. It also has four
development projects, Mareesburg
(75.5%), Spitzkop (93.4%), DGV
(87.5%) and Kennedy’s Vale (87.5%). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 114.7 (286.6) (298.2) (30.9) N/A N/A
Actual (3.2) 55.1 87.3
Relative* (2.4) 23.1 69.2 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
Analyst
2011E 232.9 72.3 53.0 3.5 45.3 15.6
Michael Starke
Sector: Media & Entertainment Ebiquity (EBQ)

Price: 85.0p
Forecast net debt (£m) 3.1 Ebiquity announced its FY10 prelims in July. Underlying diluted EPS at 5.6p came in ahead of
Market AIM our 4.8p estimate, primarily due to better than-expected operating profitability. The critical
Share price graph (p) 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
Company description
investment. Warc has recently increased its international adspend forecast for the 12 major
Ebiquity is the leading provider of a
range of business-critical data, analysis markets to 4.8% in 2010 and 4.5% in 2011. IDC estimates that business analytics could see
and consulting services to advertisers,
media owners and PR professionals in compound annual growth of 7% between 2009 and 2014.
the UK and is growing these services in
both Europe and the US.
Y/E Apr Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 18.4 2.3 2.1 5.3 16.0 N/A
Actual 18.9 33.9 47.8
Relative* 19.8 16.8 33.6 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
Analyst
Martin Lister
2 December 2010 51
Edison Insight
Sector: General Retailers Eco City Vehicles (ECV)

Price: 5.9p
Forecast net debt (£m) 2.1 The autumn interim results announcement confirmed progress in the face of a challenging
Market AIM trading climate, with sales of the Mercedes Benz Vito taxi continuing to increase. This growth
Share price graph (p) 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
Company description
pent-up medium-term demand related to environmental/political pressures and preparation for
Eco City Vehicles has exclusive
distribution rights to the Mercedes Vito the 2012 Olympics. Plans for strategic group moves into adjacent markets will involve a
in the London market. The group
provides a one-stop new car, used car combination of accurately assessing market needs and sustaining relationships with OEM
and after sales service through its partners.
subsidiary KPM Taxis in the London
market. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 19.0 (0.4) (0.7) (0.23) N/A N/A
Actual (13.0) 14.6 (14.6)
Relative* (12.3) 6.8 (22.8) 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
Analyst
2011E 30.0 1.1 0.8 0.26 22.7 20.2
Nigel Harrison
Sector: Mining Electrum Resources (ECR)

Price: 1.6p
Forecast net debt (£m) 1.6 Electrum's principal asset is an interest in TSX-V listed THEMAC Resources, the operator of
Market AIM the Copper Flat project in southern USA. It also has a majority shareholding in Thai
Share price graph (p) 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
Company description further equity dilution).
Electrum Resources is a mineral
development company with a INDUSTRY OUTLOOK
substantial interest in THEMAC
Resources Group, which is developing Our discounted dividend valuation assumes a long-term copper price of US$6,151/t
the Copper Flat copper project in New (US$2.79/lb) compared to a current price of US$8,289/t (US$3.76/lb).
Mexico, and holdings in Silver Swan
Group, ACS Asia and Paniai Gold. Y/E Jun / Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 0.0 (1.7) (1.9) (3.3) N/A N/A
Actual 34.8 129.6 (41.0)
Relative* 35.8 30.9 (46.6) 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
Analyst
2011E 4.3 (3.4) (3.6) (0.8) N/A N/A
Charles Gibson
52 2 December 2010
Edison Insight
Sector: Mining EMED Mining (EMED)

Price: 8.9p
Forecast net debt (€m) 8.8 At an EGM held on 22 November, EMED obtained shareholder approval to go ahead with a
Market AIM second listing on the TSX and to issue shares at a price of not less than 8p per share to raise
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
EMED Mining aims to restart copper
production at its 100% owned Rio Tinto After rising to almost US$9,000/t in mid-November, the copper price fell sharply to
Mine (PRT) in Spain. In Slovakia, the
company has discovered a 1.1Moz US$8,254/t. The current spot prices far exceed the life-of-mine price of US$6,063/t
(JORC) gold deposit. The company also (US$2.75/lb) used in our valuation. Gold is trading at record levels of over US$1,300/oz.
has a 20% stake in Kefi Minerals plc.
% 1m 3m 12m 2008A 0.0 (4.9) (5.2) (3.7) N/A N/A
Actual (2.7) (10.1) (27.6)
Relative* (2.0) (3.2) (34.5) 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
Analyst
Warren Johnstone
Sector: Support Services Empresaria (EMR)

Price: 57.0p
Forecast net debt (£m) 6.0 Empresaria's September interims showed strong performances in each of its geographic
Market AIM regions (UK, Europe, ROW). The momentum continued into Q310 and we raised our
Share price graph (p) 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
Company description
across its operations: UK, with a pick-up in permanent recruitment, driven by some pockets of
Empresaria is a multi-disciplined
international specialist staffing group, real recovery in the economy; Germany, with a strong rebound on top of continuing structural
operating in 16 countries.
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.
% 1m 3m 12m 2008A 207.7 8.3 6.4 8.6 6.6 3.4
Actual (2.6) 23.9 35.7
Relative* (1.8) 31.3 22.6 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
Analyst
2011E 234.8 8.7 7.3 7.2 7.9 3.9
2 December 2010 53
Edison Insight
Sector: Technology Endace (EDA)

Price: 345.0p
Forecast net cash (US$m) 2.0 Endace is a leader in the market for network traffic capture equipment with a core competency
Market AIM in capturing 100% of packets flowing over high-speed networks. Our research indicates that
Share price graph (p) 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
Company description
architectures start to fall down. This is bringing Endace to the fore and our research suggests
Endace supplies high-end network
traffic monitoring and analysis that major customers are deploying Endace’s technology on a much broader basis. The
technology, with a fundamental
competence and ability to capture all of broader network security market is also one of the most corporately active globally.
the packets flowing through high-speed
data networks.
% 1m 3m 12m 2009A 30.4 7.5 5.4 20.0 27.6 21.7
Actual 35.3 119.0 39.4
Relative* 36.4 65.3 26.0 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
Analyst
2012E 41.8 7.1 3.0 15.6 35.3 15.0
Dan Ridsdale
Sector: Media & Entertainment Entertainment One (ETO)

Price: 113.3p
Forecast net debt (£m) 77.0 eOne released an excellent set of interims on 17 November, with EBITDA up 34% to £12.5m.
Market FULL The strong slate of film and TV titles bodes well for future growth and our estimates are
Share price graph (p) 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
Company description
issues can be overcome, the availability of reasonably priced on-demand entertainment
eOne is a leading international
entertainment company specialising in through a variety of new channels should continue to drive market growth and library values.
the acquisition, production and
distribution of film and television content Meanwhile, the box office has remained strong in 2010, helped by the popularity of new 3D
across all media. It is incorporated in films.
Canada and moved from AIM to the
Main Market on 15 July 2010. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 342.6 25.3 16.4 8.6 13.2 4.1
Actual 19.2 53.0 113.7
Relative* 20.1 60.6 93.1 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
Analyst
2012E 490.0 42.0 34.1 13.2 8.6 1.7
Jane Anscombe
54 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Epistem Holdings (EHP)

Price: 395.0p
Forecast net cash (£m) 4.2 The final results showed contract revenues up 10% to £5.2m but with higher margins, due to a
Market AIM better product mix. The Novartis deal will proceed as planned until February 2011. However,
Share price graph (p) 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
Company description
prototype GeneDrive testing instrument may create new growth expectations but the initial
Founded in 2000, Epistem has a
contracts services operation, an markets, particularly sexually transmitted disease testing, are competitive with Roche. The
emerging clinical biomarker technology
and a therapeutics discovery unit. company is seeking an acquisition to help GeneDrive commercialisation.

% 1m 3m 12m 2009A 4.0 (0.6) (0.7) 1.2 329.2 16.6
Actual 4.0 17.9 (4.8)
Relative* 4.8 (13.5) (14.0) 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
Analyst
John Savin
Sector: Pharma & Healthcare Evolva (EVE)

Price: CHF2.02
Market cap: CHF282m INVESTMENT SUMMARY
Forecast net cash (CHFm) 30.1 Evolva has developed an innovative platfrom using synthetic biology to make novel drugs and
Market Swiss Stock Exchange new production methods for nutritional and consumer health products. The platform's
Share price graph (CHF) 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
Company description
of nutritional products for cheaper production methods. Evolva's platform has already created
Evolva is a Swiss synthetic biology
company. It has developed a several first-in-class drug candidates. The recent expansion of the collaboration with Abunda
technology platform, which it uses to
develop novel drugs and new methods Nutrition suggests that Evolva will be able to reduce manufacturing costs for its partners in
of making nutritional and consumer health and nutrition.
health products.
Price performance (CHFm) (CHFm) (CHFm) (CHFc) (x) (x)
% 1m 3m 12m 2008A 11.9 (6.8) (8.4) (38.4) N/A N/A
Actual (14.0) (7.3) 47.5
Relative* (14.1) (19.9) 42.9 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
Analyst
2011E 19.8 (29.0) (31.2) (22.3) N/A N/A
Mick Cooper
2 December 2010 55
Edison Insight
Sector: Pharma & Healthcare Evotec (EVT)

Price: €2.70
Forecast net cash (€m) 53.8 Evotec continues to make significant progress to becoming a sustainably profitable business
Market FRA by 2012. Revenues increased 33% during the first nine months of 2010 and Evotec has been
Share price graph (€) 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
Company description
improve their productivity and decrease the fixed costs associated with them, which is driving
Evotec is a drug discovery business that
provides outsourcing solutions to the the growth of companies that can provide these services. However, Evotec's growth depends
pharmaceutical industry and develops
its own proprietary drugs. on it being able to provide a high quality integrated service that cheaper service providers are
unable to deliver.
% 1m 3m 12m 2008A 39.6 (40.7) (47.7) (52.1) N/A N/A
Actual 20.3 12.5 34.3
Relative* 16.2 13.5 10.1 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
Analyst
2011E 59.2 2.6 (0.5) (0.9) N/A 44.2
Mick Cooper
Sector: Mining Ferrexpo (FXPO)

Price: 369.1p
Forecast net debt (US$m) 154.0 In its interim management statement, Ferrexpo mapped out a route for increasing output to
Market FULL 12Mtpa of 65% Fe pellets from 38Mtpa of iron ore by 2013 and then 20Mtpa of pellets from
Share price graph (p) 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
Company description of c 644pps.
Ferrexpo is involved in producing and
exporting iron ore pellets to the global INDUSTRY OUTLOOK
steel industry. Backed by one of the
largest iron ore resources in the world, it Ferrexpo achieved a price of US$131/t for its pellets in Q210. Prices rose 5% in Q3 and look
aims to realise the potential of its unique likely to fall c 10% in Q4 for an average for the year of c US$118/t.
resource and to be a globally
recognised iron ore pellet supplier. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 1116.9 494.7 442.2 47.6 12.4 7.8
Actual 8.3 32.8 89.3
Relative* 9.2 38.4 71.1 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
Analyst
2011E 970.9 482.0 436.0 61.5 9.6 6.8
Charles Gibson
56 2 December 2010
Edison Insight
Sector: Technology FFastFill (FFA)

Price: 8.6p
Forecast net cash (£m) 2.4 FFastFill reported a 4% increase in H1 revenues to £7.3m, with SaaS revenue growing 8% to
Market AIM £5.5m. Operating profit (prior to a small asset sale and share-based payments) rose 13% to
Share price graph (p) £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.
Company description
The SaaS offering and the straight-through processing capability enable customers to achieve
FFastFill provides SaaS solutions for
trading and risk management on significant cost savings. In addition, industry trends towards electronic trading, higher volumes
electronic markets. These services
provide full application functionality, and a growing number of exchanges all contribute to a resilient outlook for the group against a
saving institutions the cost of investing tough economic backdrop.
in and maintaining their own technology
infrastructure and staff department. Y/E Mar Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 14.4 0.9 0.2 0.1 86.0 35.4
Actual 7.8 15.0 11.3
Relative* 8.7 3.7 0.6 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
Analyst
2012E 16.8 3.5 2.9 0.7 12.3 7.0
Richard Jeans
Sector: Basic Industries Fiberweb (FWEB)

Price: 78.0p
Forecast net debt (£m) 156.9 Building on progress made in the first half, Fiberweb’s trading update for 1 July to 25 October
Market FULL 2010 points to continued improvement in underlying profit margins driven by ongoing growth
Share price graph (p) 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
Company description
improving global industrial activity. Hygiene business will benefit from a solid performance in
Fiberweb is engaged in the
development, manufacturing and supply the consumer markets. P&G, Fiberweb's principal customer, continues to see good volume
of nonwoven fabrics. Nonwovens are
used in a range of products, such as growth in its end markets. Margins have been affected by higher raw material (polypropylene)
baby nappies, fabric softeners, filters, costs, although this has relented more recently.
construction products and protective
clothing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 512.8 48.6 10.5 8.6 9.1 1.6
Actual (3.7) 33.3 35.6
Relative* (3.0) 28.1 22.6 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
Analyst
2011E 506.0 56.5 16.0 12.1 6.4 1.7
Toby Thorrington
2 December 2010 57
Edison Insight
Sector: Oil & Gas Forum Energy (FEP)

Price: 68.5p
Forecast net cash (US$m) 5.8 Forum's main play is the development of the potentially world-class Sampaguita gas field in
Market AIM the South China Sea. With mean GIP of 3.4tcf and 20tcf upside, assuming a normal 60%
Share price graph (p) 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
Company description
of the North Sea, a 3tcf find would be one of the largest in the last 25 years. Similar to Shell's
Forum Energy, focused exclusively on
the Philippines, is an AIM-quoted adjacent Malampaya field, such a find would be the foundations of an LNG project.
company developing oil and gas assets.

% 1m 3m 12m 2008A 0.7 (4.7) (4.8) (16.1) N/A N/A
Actual 24.6 (8.1) 71.3
Relative* 25.5 (25.5) 54.8 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
Analyst
2011E 2.3 (2.4) (3.2) (8.6) N/A 7991.8
Ian McLelland
Sector: Mining Fronteer Gold (FRG)

Price: C$9.50
Forecast net cash (C$m) 104.1 Fronteer recently released its highest-ever drill result at its Long Canyon project, registering
Market TSX 12.3g/t Au over 50.4m with indications that the deposit is starting to thicken to the north,
Share price graph (C$) 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
Company description see a positive re-rating once a revised economic assessment on Long Canyon is published in
Fronteer Gold is a multi project gold and 2011.
uranium developer with a core of
near-term producing assets in Nevada,
INDUSTRY OUTLOOK
US, with gold-copper projects in Turkey
and a uranium project in Canada. Our valuation uses a long-term gold price of US$1,177/oz.
% 1m 3m 12m 2008A 0.0 (26.2) (23.6) (23.8) N/A N/A
Actual 17.7 18.0 108.8
Relative* 15.8 47.7 85.2 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
Analyst
2011E 0.0 (23.6) (26.3) (17.5) N/A N/A
Charles Gibson
58 2 December 2010
Edison Insight
Sector: Mining Frontier Mining (FML)

Price: 6.1p
Forecast net debt (US$m) 28.4 While awaiting certain permits and waivers to be signed by the Kazakh government in relation
Market AIM to its merger and re-domicile to the Cayman Islands (announced October), FML has signed a
Share price graph (p) 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
Company description revised 6koz of gold produced, and at least 10koz on the leach pads by end 2010. We value
Frontier Mining, incorporated in FML on an EV/resource multiple at 12pps.
Delaware, is a development stage
mining concern with two licences in
INDUSTRY OUTLOOK
Kazakhstan.
Copper currently trades at an LME spot price of around US$8,300/t.
% 1m 3m 12m 2008A 0.0 (4.4) (4.8) (2.3) N/A N/A
Actual 4.3 16.7 (7.5)
Relative* 5.1 3.4 (16.4) 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
Analyst
2011E 48.8 29.0 22.2 1.6 6.1 5.2
Charles Gibson
Sector: Pharma & Healthcare Futura Medical (FUM)

Price: 66.3p
Forecast net cash (£m) 0.9 Futura's investment case centres on the EU launch of its CSD500 Durex-branded condom by
Market AIM partner SSL International (recently acquired by Reckitt Benckiser). Given positive EU regulatory
Share price graph (p) 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
Company description
addresses potentially large but underdeveloped OTC markets (eg, erectile dysfunction and
Futura Medical is engaged in
researching and developing topical pain relief). Further development has been constrained by its cash position, but with a
pharmaceutical products and medical
devices, and their commercial commercial deal on TPR100 (GSK) and potentially PET500 in H210, Futura should unlock
exploitation through out-licensing. value through accelerating their development and launch.
% 1m 3m 12m 2008A 0.2 (2.2) (2.1) (3.4) N/A N/A
Actual 17.8 59.6 105.4
Relative* 18.7 65.4 85.6 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
Analyst
2011E 0.5 (0.9) (1.0) (1.2) N/A N/A
Lala Gregorek
2 December 2010 59
Edison Insight
Sector: Oil & Gas Gasol (GAS)

Price: 0.9p
Forecast net debt (£m) 5.9 Gasol's strategy is to continue pursuing liquefaction projects for stranded gas in West Africa
Market AIM and to investigate gas-to-power opportunities regionally. The rationale for the latter reflects the
Share price graph (p) 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
Company description
markets. Weakness reflects a combination of soft economic activity, the coming on-stream of
Gasol is an African-focused gas
independent. The company’s prime major LNG projects and the surge in shale gas availability in the US.
focus is on the monetisation of gas
reserves in Sub-Sahara Africa by its
aggregation, liquefaction and shipment
to high-value markets worldwide.
Y/E Feb / Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 0.0 (6.4) (6.4) (1.0) N/A N/A
Actual (7.5) (15.9) (63.0)
Relative* (6.8) (50.3) (66.6) 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
Analyst
Ian McLelland
Sector: Technology GB Group (GBG)

Price: 33.5p
Forecast net cash (£m) 5.9 Last month, GB announced its FY11 interim results were in line with our increased estimate on
Market AIM the back of the October trading update. DataSolutions is seeing good repeat revenues and
Share price graph (p) 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
Company description
checks and anti-fraud checks are behind growing interest in increasingly complex and
GB Group has complementary identity
management offerings of verification, comprehensive verification of personal data. The encouragement of the FSA and the cost and
capture, maintenance and analysis
enabling companies to identify and payback attractions mean the shift to making these checks electronically is accelerating.
understand their customers.

% 1m 3m 12m 2009A 23.8 2.0 1.8 2.2 15.2 27.1
Actual (4.3) 30.1 76.3
Relative* (3.5) 14.2 59.3 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
Analyst
2012E 26.8 2.9 2.4 2.8 12.0 10.0
Martin Lister
60 2 December 2010
Edison Insight
Sector: Mining GMA Resources (GMA)

Price: 4.1p
Forecast net debt (£m) 12.5 Output of 7,259oz Au in Q310 represented a strong turnaround at GMA, after the successful
Market AIM re-commissioning of the Tirek CIL plant at Amesmessa. Production of 1,933oz from the CIL
Share price graph (p) 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
Company description
pursued with a drilling campaign, while results from GMA's 162 hole RC drilling campaign are
GMA Resources is involved in gold
mining, exploration and mine expected in December. Given the density, grade and continuity of its veins, it is conceivable
development in Algeria.
that GMA’s land position represents a new world-class gold camp akin to Kirkland Lake or
Ashanti, with which it shares many characteristics.
% 1m 3m 12m 2008A 7.8 (0.9) (6.5) (1.8) N/A N/A
Actual 47.3 217.3 0.0
Relative* 48.5 192.5 (9.6) 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
Analyst
2011E 30.4 19.1 11.7 0.9 4.6 1.2
Charles Gibson
Sector: Mining Gold One (GDO)

Price: A$0.34
Forecast net debt (A$m) 94.1 After processing 86kt at Modder East (ME) in Q310, GDO is ramping up production at a rate of
Market ASX c +20kt per quarter to reach 150koz pa in FY12. GDO is spinning off its Megamine asset into
Share price graph (A$) 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$1,177/oz and
Company description
ZAR7.3114/US$ a sum of the parts analysis values GDO at 63.99pps (inc Ventersburg) to
Formed from the takeover of Aflease by
BMA Gold in 2009, Gold One is an which an immediate 3.82Acps needs to be added for GDO's interest in Goliath Gold
emerging mid-tier gold producer with
significant assets in the Witwatersrand (potentially rising 11-fold).
basin and growing ones outside.

% 1m 3m 12m 2008A 9.3 1.8 (6.0) (1.2) N/A N/A
Actual 3.1 17.5 6.3
Relative* 4.6 12.5 7.2 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
Analyst
2011E 168.0 86.7 59.9 3.6 9.4 3.4
Charles Gibson
2 December 2010 61
Edison Insight
Sector: Mining Goldplat (GDP)

Price: 12.8p
Forecast net cash (£m) 1.9 Having built a profitable base recovering 21koz Au pa at less than US$800/oz from other
Market AIM companies' residual mining materials, Goldplat is now in the process of acquiring conventional,
Share price graph (p) 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
Company description
extension of the quartz payshoots in accordance with the company's geological model.
Goldplat is a gold producer focused on
Africa with three primary assets: Nyieme will now be the subject of an extensive exploration programme. NB, our forecasts are
Goldplat Recovery (Pty) - South African
gold recovery plant; Gold Recovery conducted at a long-term gold price of US$1,350/oz and a cable rate of US$1.65/£.
Ghana – Ghanaian gold recovery plant;
and Kilimapesa Gold - mining project in
Kenya. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 11.1 2.0 2.0 1.32 9.7 9.2
Actual (7.3) 34.2 4.1
Relative* (6.5) 13.0 (5.9) 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
Analyst
2012E 23.9 8.3 7.9 5.92 2.2 2.4
Charles Gibson
Sector: Oil & Gas Gulfsands Petroleum (GPX)

Price: 367.0p
Forecast net cash (US$m) 72.5 Gulfsands continues to offer the investor upside through its extensive drilling programme in
Market AIM Syria. October brought news of the KHE-18 delineation well, indicating its large Khurbet East
Share price graph (p) 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
Company description
Syrian operations. Low-cost production continues to provide strong cash flow and, with
Gulfsands Petroleum is involved in the
production, exploration and management confirming better well performance than expected, a reserves review in early
development of oil and gas reserves in
the US, Syria and Iraq. It recently 2011 points to a potential reserves upgrade.
agreed to acquire working interest
positions in two exploration permits in
Tunisia and Southern Italy. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 53.6 7.9 (0.9) 0.9 651.7 40.1
Actual 12.5 26.1 58.2
Relative* 13.4 26.6 43.0 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
Analyst
2011E 138.4 94.7 73.1 60.0 9.8 7.6
Ian McLelland
62 2 December 2010
Edison Insight
Sector: Pharma & Healthcare GW Pharmaceuticals (GWP)

Price: 105.0p
Forecast net cash (£m) 5.8 GW Pharmaceuticals' FY10 results marked an important transition with the investment case
Market AIM now centred on: 1) the roll out of Sativex in Europe; 2) the execution of Phase III studies in
Share price graph (p) 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
Company description
have the potential to treat a broad range of indications and to become novel pharmaceutical
GWP is a UK pharmaceutical company
focused on development of products. We estimate that Sativex will achieve 5-10% in the indications that it has been
cannabinoids. Its lead product, Sativex,
has been approved in some countries approved (spasticity in MS [UK, Spain, Canada, New Zealand] and neuropathic pain in MS
for the treatment of neuropathic pain [Canada only]).
and spasticity associated with MS, and
is in development for cancer pain. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 24.1 2.1 1.8 125.0 0.8 N/A
Actual 8.3 1.5 15.4
Relative* 9.1 (19.8) 4.3 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
Analyst
2012E 26.7 (3.7) (4.4) 129.6 0.8 N/A
Lala Gregorek
Sector: General Retailers HR Owen (HRO)

Price: 92.0p
Forecast net cash (£m) 1.0 October's cautiously optimistic IMS reinforced the growing optimism about profits recovery.
Market FULL More significantly, the appointment of a new high-profile CEO from outside the industry
Share price graph (p) 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
Company description
build their downstream activities. SMMT forecasts on new vehicle registrations are still looking
Following major restructuring, HR Owen
principally comprises its luxury cars optimistic, but used car values have recently started to drift downwards. Nevertheless,
business involving franchises for
Bentley, Rolls-Royce, Ferrari, Maserati, indications from most leading groups suggest they will deliver profits progress in both 2010
Lamborghini, Bugatti and Alfa Romeo. It and 2011.
also operates aftersales franchises for
Audi, BMW/Mini and Lotus. Y/E Dec Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2008A 144.5 2.3 0.6 2.5 36.8 N/A
Actual 1.7 10.2 68.8
Relative* 2.5 3.2 52.5 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
Analyst
2011E 155.0 3.4 1.8 5.3 17.4 6.9
Nigel Harrison
2 December 2010 63
Edison Insight
Sector: Aerospace & Defence Hampson Industries (HAMP)

Price: 28.5p
Forecast net debt (£m) 85.6 Hampson's interims were affected by the later than-anticipated recovery in demand for
Market FULL composites tooling at its largest tooling facility, Odyssey. While revenues increased by 4%,
Share price graph (p) 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
Company description
B787 and A350 truly start and we believe that Hampson was unlucky with timing rather than
Hampson is the largest manufacturer of
composite tooling and assembly strategic direction. The acquisitions, however, left the group over-exposed to the high debt
systems for global aerospace. It
manufactures highly engineered levels and delays in this high value capital spend once the financial crisis hit and programmes
components and assemblies for moved to the right.
airframe and engine applications using
advanced lightweight materials. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 256.6 53.5 37.6 18.5 1.5 1.8
Actual (4.2) 39.0 (57.5)
Relative* (3.5) (52.1) (61.6) 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
Analyst
2012E 189.5 36.5 20.5 5.4 5.3 2.6
Roger Johnston
Sector: Alternative Energy Helius Energy (HEGY)

Price: 23.8p
Forecast net cash (£m) 10.4 We expect Helius to be able to capitalise on the significant growth in the market for biomass
Market AIM generation. The experienced management team has shown that it can create value for
Share price graph (p) 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
Company description
The UK has a significant requirement for renewable energy to meet the twin challenges of
Helius Energy identifies, develops, owns
and builds biomass generation projects reducing greenhouse gas emissions and ensuring security of energy supply. As a proven
in the UK.
technology, we expect biomass generation to play a significant role in helping the UK meet
these challenges.
% 1m 3m 12m 2008A 0.0 31.4 30.7 42.6 0.6 0.5
Actual (8.7) (5.9) (10.4)
Relative* (7.9) (18.2) (19.0) 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
Analyst
2011E 0.0 (2.5) (3.1) (3.7) N/A N/A
Graeme Moyse
64 2 December 2010
Edison Insight
Sector: Construction & Blding Mat. Hightex (HTIG)

Price: 7.4p
Forecast net cash (€m) 6.2 Group revenue and operating profit both increased materially in H1 as Hightex moved forward
Market AIM on its three high-profile sport stadium projects. This increased level of activity was achieved
Share price graph (p) 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
Company description
stadia/arenas; transportation; retail; commercial; governmental; entertainment and leisure. We
Hightex, operating worldwide, designs
and installs large area architectural estimate that the stadia/arenas segment is the largest, with a market share of around 30%.
tensile polymer membrane structures for
roofs and facades.

% 1m 3m 12m 2008A 16.2 (2.3) (2.5) (2.46) N/A N/A
Actual (4.8) 1.7 (7.8)
Relative* (4.1) (12.8) (16.7) 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
Analyst
2011E 40.3 4.5 4.0 1.48 5.8 9.1
Toby Thorrington
Sector: Support Services Hogg Robinson Group (HRG)

Price: 34.3p
Forecast net debt (£m) 66.0 Bumper interim results confirmed HRG’s ability to leverage off its much-reduced cost base as
Market FULL activity recovered. While investment in growth is set to curb H2 profit, increasingly favourable
Share price graph (p) 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
Company description
encouraging. According to IATA, a 10% year-on-year rise in international traffic in October
Hogg Robinson is a major global player
in corporate travel services. 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.
% 1m 3m 12m 2009A 351.3 42.3 24.7 4.67 7.3 1.6
Actual 14.2 15.1 (11.0)
Relative* 15.1 5.6 (19.6) 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
Analyst
2012E 370.0 55.8 33.0 7.15 4.8 2.2
Richard Finch
2 December 2010 65
Edison Insight
Sector: Media & Entertainment i-design (IDG)

Price: 33.0p
Forecast net cash (£m) 0.7 i-design's FY10 year-end trading update was positive - revenues in H2 were significantly
Market AIM higher than H1 and the loss for the year was better than our estimates. We are encouraged by
Share price graph (p) 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
Company description
Although the banking sector remains under the spotlight both politically and economically,
i-design is a specialist provider of self
service devices, primarily ATM, software network owners are increasingly looking for alternative ways to generate revenues from their
and services.
ATMs and advertisers are always searching for new avenues to reach customers for the most
effective impact.
% 1m 3m 12m 2008A 2.1 (0.6) (0.5) (3.8) N/A N/A
Actual 43.5 144.4 37.5
Relative* 44.6 109.0 24.3 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
Analyst
Martin Lister
Sector: Electrical Equipment IdaTech (IDA)

Price: 60.0p
Forecast net debt (US$m) 54.0 IdaTech's recent acquisition of the GenSys LPG fuel cell system, from Plug Power, extends
Market AIM the company's capabilities into the prime power market. However, the key to validating
Share price graph (p) 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
Company description
IdaTech has patented fuel reforming and processing technology that is market leading. It has
IdaTech develops fuel cells technologies
and related applications. Through its integrated this capability with fuel cell stacks to make a working system for use in stationary
technology, IdaTech seeks to address
the growing demand for clean, and portable electric power generation.
convenient, dependable and scalable
sources of power.
% 1m 3m 12m 2008A 5.9 (19.3) (19.6) (38.0) N/A N/A
Actual 0.0 0.0 (24.1)
Relative* 0.8 (11.3) (31.4) 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
Analyst
Graeme Moyse
66 2 December 2010
Edison Insight
Sector: Financials IFG Group (IFG)

Price: €1.32
Forecast net debt (€m) 22.4 IFG has re-focused a disparate group of financial services companies into a business centred
Market FULL, Irish Stock Exchange in double-digit growth markets. It is the largest provider of UK bespoke SIPPs and has a
Share price graph (€) 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
Company description
self-provision, and higher tax rates encouraging tax-efficient saving. There is a possible drag
IFG provides financial services
comprising a pension administration on growth of tax restraint on the highest earners affecting bespoke SIPPs. The trustee and
and personal advisory business
operating in Ireland and the UK, and savings is driven by regulatory and tax management opportunities and some competition is
international corporate and trustee reducing as they face conflicts of interest.
administration services.
% 1m 3m 12m 2008A 105.1 20.6 13.2 24.29 5.4 7.6
Actual 1.5 14.8 10.8
Relative* 2.6 42.5 16.0 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
Analyst
2011E 141.3 29.5 21.1 21.28 6.2 5.6
Mark Thomas
Sector: Pharma & Healthcare ImmuPharma (IMM)

Price: 86.5p
Forecast net cash (£m) 14.0 H1 results showed minimal revenues with expenses of £2.5m and cash of £20m, largely held
Market AIM as US dollars. Cash outflow was £2.5m. An update on the cancer product IPP-204106 (N6L)
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
ImmuPharma is a UK drug development
company, with a pipeline of products Lupuzor addresses a market that could be worth over $1bn. The 9 December Benlysta
targeting immune system disorders,
cancer and pain. Its lead product, PDUFA date could allow sales from early 2011; the advisory meeting is 16 November. A Lilly
Lupuzor, is licensed to Cephalon and is drug, LY2127399 is about to start a 1,140 patient Phase II study.
in Phase IIb development for treating
systemic lupus erythematosus. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 0.1 (4.4) 5.0 6.4 13.5 11.2
Actual (7.0) 21.0 (11.3)
Relative* (6.3) (1.7) (19.8) 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
Analyst
2011E 0.0 (5.5) (5.4) (6.7) N/A N/A
John Savin
2 December 2010 67
Edison Insight
Sector: Technology Innovation Group (TIG)

Price: 13.5p
Forecast net cash (£m) 26.0 The major outsourcing deal with Enterprise Rent-A-Car is expected to generate £25m over five
Market FULL years and adds a good level of underpinning to our 2012 estimates. Further conversion of
Share price graph (p) 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
Company description
flexibility and efficiency. Innovation's revenue model is predominantly tied to claims volumes so
Innovation Group is one of the leading
solution providers to the global financial performance is influenced by economic activity levels.
insurance industry through the
development of a flexible combination of
business process outsourcing, supply
chain management and technology
solutions. Y/E Sep Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2008A 139.9 12.8 10.1 0.5 27.0 5.3
Actual (1.8) 28.6 19.3
Relative* (1.0) 6.4 7.8 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
Analyst
2011E 173.2 24.4 15.9 0.9 15.0 5.2
Dan Ridsdale
Sector: Technology IQE (IQE)

Price: 46.5p
Forecast net cash (£m) 4.7 The acquisition of Galaxy should open up new opportunities in defence while further cementing
Market AIM IQE's position as the leading and most diverse supplier of compound semiconductor wafers
Share price graph (p) 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
Company description
phone and tablet adoption cycles are undeniable. The opportunity in optical networking (eg
IQE has established itself as a one-stop
shop for the compound semiconductor Lightpeak) looks significant and is drawing closer. Developments in CPV solar cells and solid
wafer needs of the world’s leading
semiconductor device manufacturers. state lighting are earlier stage but could also yield significant incremental revenue streams.

% 1m 3m 12m 2008A 60.5 8.9 3.4 0.8 58.1 26.9
Actual 21.6 87.9 173.5
Relative* 22.5 139.0 147.2 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
Analyst
2011E 73.3 13.6 8.5 1.5 31.0 20.7
Dan Ridsdale
68 2 December 2010
Edison Insight
Sector: Mining Ironwood Gold (IROG)

Price: US$0.07
Forecast net debt (US$m) 3.1 Ironwood Gold has entered into a Letter of Intent to acquire 100% of 20 unpatented lode
Market OTC claims that make up the 36-mile square Cherry Creek property, located ~90 miles south of
Share price graph (US$) 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
Company description
Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier
Ironwood Gold is a US-listed gold
exploration company with three projects this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by
in Nevada, US. Together the projects
have the potential to host between demand-side concerns.
2.3Moz and 10.7Moz of gold.
Y/E Aug Revenue EBITDA PBT EPS P/E P/CF

% 1m 3m 12m 2008A 0.0 (0.1) (0.1) (0.1) N/A N/A
Actual (9.9) (38.1) (91.0)
Relative* (10.1) (83.6) (91.6) 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
Analyst
2011E 0.0 (3.6) (3.6) (4.4) N/A N/A
Michael Starke
Sector: Pharma & Healthcare IS Pharma (ISPH)

Price: 83.5p
Forecast net debt (£m) 6.0 Two successive capital raisings totalling £16m give IS Pharma a strengthened and simplified
Market AIM balance sheet, with the capacity and intention to make focused acquisitions. The portfolio
Share price graph (p) 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
Company description
The cash pile, estimated at c £15m, is available for growth-enhancing acquisitions as indicated
IS Pharma is a speciality pharmaceutical
and medical devices firm focused on the by management. The bank loan is £4.5m and could be extended by £2.5m if an acquisition
specialist hospital sector. It aims to
grow organically and through product needed additional cash.
and company acquisitions.

% 1m 3m 12m 2009A 12.2 3.8 3.2 13.3 6.3 7.9
Actual 1.8 32.5 (7.7)
Relative* 2.6 9.7 (16.6) 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
Analyst
2012E 17.1 4.8 4.1 9.3 9.0 5.3
John Savin
2 December 2010 69
Edison Insight
Sector: Investment Companies Is Yatirim (ISMEN)

Price: TRY2.40
Market cap: TRY480m INVESTMENT SUMMARY
Forecast net debt (TRYm) 0 ISY has reported Q3 results, with net profit of TRY46.2m YTD and shareholders' equity up
Market IS 12% y-o-y. Interest and trading income improved from the weak Q2 levels and brokerage and
Share price graph (TRY) 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
Company description
public finances and increasing confidence that a lasting transformation in the country's
Is Yatirim Menkul Degerler offers
brokerage, corporate finance, economic prospects". However, it noted the key issue was whether Turkey could grow without
investment advisory services and
portfolio management services. The excessive deficits. Fitch forecast a current account deficit of $44bn (5.9% of GDP) by year end.
company also advises on IPOs.

Price performance (TRYm) (TRYm) (TRYm) (Kr) (x) (x)
% 1m 3m 12m 2008A N/A N/A 52.9 37.4 6.4 N/A
Actual 6.7 17.1 43.6
Relative* 14.1 4.1 (1.6) 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
Analyst
2011E N/A N/A 116.4 40.6 5.9 N/A
Maana Ruia
Sector: Oil & Gas Ithaca Energy (IAE)

Price: 143.0p
Forecast net cash (US$m) 213.9 Ithaca announced its Q310 financial results in November. Operational and financial
Market AIM performance remains firmly on track with no surprises from previous announcements. The
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
Ithaca Energy is a Canadian
independent oil and gas company with IAE is building a reputation in the North Sea as a cost-efficient marginal field E&P operator.
exploration, development and
production assets in the UK North Sea. Shrewd acquisitions coupled with an exciting portfolio under development point to a positive
outlook.
% 1m 3m 12m 2008A 2.5 (6.9) (12.7) (20.3) N/A N/A
Actual 10.8 28.3 184.6
Relative* 11.7 (12.3) 157.2 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
Analyst
2011E 164.3 98.2 42.2 11.6 19.7 5.5
Ian McLelland
70 2 December 2010
Edison Insight
Sector: Technology K3 Business Technology Group (KBT)

Price: 148.0p
Forecast net debt (£m) 11.5 K3 has acquired Panacea, a UK managed services and IT solutions provider (revenues split
Market AIM roughly 50/50 between the two businesses). The deal effectively doubles the size of K3’s
Share price graph (p) 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
Company description
The enterprise resource planning market for SMEs is consolidating, and evidence suggests MS
K3 provides Microsoft-based supply
chain management solutions to SMEs in Dynamics is growing market share during the current downturn. K3 has become MS's biggest
the retail and manufacturing sectors.
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
% 1m 3m 12m 2009A 39.5 7.8 6.0 18.2 8.1 4.0
Actual 3.5 26.0 72.6
Relative* 4.3 14.1 56.0 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
Analyst
2012E 58.9 10.4 9.0 26.1 5.7 4.3
Katherine Thompson
Sector: Technology KBC Advanced Technologies (KBC)

Price: 56.8p
Forecast net cash (£m) 3.4 Overall trading conditions appear to have improved since H1, although the FY10 result will
Market AIM hinge upon the timing of new business coming in, particularly licensing deals for Petro-SIM V4.
Share price graph (p) 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
Company description
focus as clients seek improvements in flat or negative refining margins.
KBC is a leading independent
consulting and technology group
delivering competitive advantage to
owners and operators in the oil refining,
petrochemical, and other processing
industries worldwide.
Y/E Dec / Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 52.8 6.6 5.9 7.0 8.1 4.7
Actual 1.3 34.3 40.1
Relative* 2.1 24.2 26.6 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
Analyst
2011E 56.7 7.8 6.3 6.9 8.2 5.2
Dan Ridsdale
2 December 2010 71
Edison Insight
Sector: Technology KCOM Group (KCOM)

Price: 51.0p
Forecast net debt (£m) 98.0 With KCOM’s two-year transformation plan complete, pension issues clarified and debt
Market FULL refinanced, management can now focus its attention increasingly on delivering organic growth
Share price graph (p) 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
Company description
services market continues to expand. Growth is being driven by corporate cost-savings plans
KCOM Group provides a range of
integrated IT and communications and an increasing appetite for simple and flexible solutions.
services to businesses, and internet and
telecommunications services to
selected consumer markets, within the
UK.
% 1m 3m 12m 2009A 472.3 65.1 32.7 7.3 7.0 4.2
Actual 3.0 12.7 24.4
Relative* 3.8 (5.3) 12.4 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
Analyst
2012E 405.2 75.8 44.8 6.2 8.2 3.3
Alex Gunz
Sector: Construction & Blding Mat. Kedco (KED)

Price: €0.06
Forecast net debt (€m) N/A On 3 November 2010 Kedco announced it had secured £9.9m of project finance facilities from
Market AIM Ulster Bank for the Newry project; this is the first of many such announcements we expect to
Share price graph (€) 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
Company description
disposal. The October 2010 approval of the Renewable Heat Incentive (similar to a feed-in
Kedco is a leading bioscience energy
company taking a professional tariff) is a further sign of commitment to the sector.
approach to green energy production. It
helps companies throughout the UK
and Ireland to convert waste into clean
energy.
% 1m 3m 12m 2009A 5.9 (4.1) (5.3) N/A N/A N/A
Actual 41.2 0.0 (66.7)
Relative* 42.3 (29.1) (69.9) 2010A 9.0 (1.6) (3.2) N/A N/A N/A
Analyst
Neil Shah
72 2 December 2010
Edison Insight
Sector: Mining Kopylovskoye (KOPY)

Price: 23.3p
Forecast net cash (SEKm) 12.2 In mid-November, Kopylovskoye announced plans to raise up to SEK64.8m (c US$9.3m), by
Market NASDAQ OMX First North way of a rights issue comprising four new shares at SEK22 for every five shares held.
Share price graph (p) 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
Company description
Gold has retraced 3% since its record-high nominal price of over US$1,421/oz achieved earlier
Kopylovskoye is a gold exploration
company focused on the development this month. Nevertheless, we expect it to outperform industrial metals as the latter are beset by
of its six licences in Russia. Together
these cover 225km2 and have C1, C2 demand-side concerns.
and P1 reserves/resources of 2.0Moz.
Currently listed in Stockholm, it is also
considering a secondary listing. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (SEKm) (SEKm) (SEKm) (öre) (x) (x)
% 1m 3m 12m 2008A 0.4 (11.8) (13.6) (2.2) N/A 1633.7
Actual (17.6) N/A N/A
Relative* (17.8) N/A N/A 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
Analyst
2011E 0.4 (9.5) (10.4) (281.9) N/A N/A
Michael Starke
Sector: Food & Drink Landkom (LKI)

Price: 7.1p
Forecast net cash (US$m) 6.8 The first interim results announcement under the new management team confirms that its
Market AIM changes are beginning to have an effect – costs are being contained and solid prices have
Share price graph (p) 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
Company description
The rich arable land in Ukraine combined with low local costs offer the opportunity to produce
Landkom International is involved in
arable farming in Ukraine. 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

% 1m 3m 12m 2008A 10.6 (56.1) (57.4) (29.1) N/A N/A
Actual (1.7) (21.9) 7.5
Relative* (1.0) (14.4) (2.8) 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
Analyst
2011E 35.0 3.9 (3.1) (0.7) N/A 18.2
Guy Bell
2 December 2010 73
Edison Insight
Sector: Oil & Gas Leni Gas & Oil (LGO)

Price: 3.1p
Forecast net cash (£m) 0.1 LGO has a very active field development and rehabilitation programme. We believe this is very
Market AIM much on track and that production is gathering momentum in the closing months of 2010. The
Share price graph (p) 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
Company description
rather than frontier exploration. The strategy applied by Leni can perhaps be best described as
Leni Gas & Oil is an E&P junior focused
on development opportunities in low a 'vulture' approach and is broadly analogous to that applied by a number of E&P concerns
political risk countries. There are
producing assets in Spain, Trinidad and such as Apache in the North Sea.
the US GoM and an exploration project
offshore Malta.
% 1m 3m 12m 2008A 2.1 0.2 0.1 0.0 N/A N/A
Actual (15.0) 48.8 (16.7)
Relative* (14.3) 35.1 (24.7) 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
Analyst
2011E 43.9 30.9 24.1 3.2 1.0 0.9
Peter Dupont
Sector: Pharma & Healthcare Lifeline Scientific (LSI)

Price: 227.5p
Forecast net debt (US$m) N/A Lifeline’s interim results showed H1 revenue at $11.1m, with $10.4m in product sales. This is
Market AIM up 44% on the comparable period. Lifeline experienced a major market shift in 2009 as it
Share price graph (p) 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
Company description
should steadily boost growth; there may be up to $25m of additional US potential. EU
Lifeline is a Chicago-based global
medical technology company. It has reimbursement is set at national levels and should generate higher sales levels from 2012.
developed innovative proprietary
technologies to improve the quality, and Lifeline has a high share of the organ static preservation market with its SPS-1 solution.
increase the availability, of vital organs,
tissues and cells for transplantation and
medical research. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 8.3 (4.2) (4.6) (29.3) N/A N/A
Actual 13.8 35.8 213.8
Relative* 14.7 10.5 183.6 2009A 18.3 3.3 3.0 18.2 20.0 38.6
Analyst
John Savin
74 2 December 2010
Edison Insight
Sector: Engineering Lincat (LCT)

Price: 650.0p
Forecast net cash (£m) 7.5 A good set of interim results compared to a depressed period shows the positive management
Market AIM action that boosted the second half of 2009 has continued to bear fruit. The core business,
Share price graph (p) 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
Company description
Despite official figures that the UK is now out of the recession, the underlying reality is still
Lincat manufactures and supplies
commercial catering equipment for unclear. The scale of cuts by the new government is now in the open. However, the impact on
professional kitchens.
suppliers like Lincat is unclear and instability in the eurozone sustains uncertainty.

% 1m 3m 12m 2008A 32.9 6.8 5.5 73.4 8.9 4.1
Actual 2.8 10.6 52.9
Relative* 3.6 (1.9) 38.2 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
Analyst
2011E 33.5 6.4 5.7 75.4 8.6 5.5
Guy Bell
Sector: Pharma & Healthcare Lombard Medical Technologies (LMT)

Price: 1.0p
Forecast net debt (£m) N/A Near-term value at Lombard focuses on timely completion of the Aorfix PMA submission.
Market AIM Module four was recently submitted according to schedule and the sixth and final module,
Share price graph (p) 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
Company description
While Cook is the global market share leader, Medtronic is thought to control around 50% of
Lombard Medical Technologies is
developing a range of cardiovascular the US market and has been eroding Gore’s dominance there. Lombard will compete to
devices, principally the Aorfix stent graft
system for the treatment of abdominal achieve further penetration in $1bn global AAA market on the basis of its high angle approval
aortic aneurysm (AAA). for Aorfix.
% 1m 3m 12m 2008A 2.0 (10.8) (11.0) (6.8) N/A N/A
Actual (0.5) 9.1 (15.1)
Relative* 0.3 (17.4) (23.3) 2009A 2.4 (7.3) (7.6) (0.8) N/A N/A
Analyst
Robin Davison
2 December 2010 75
Edison Insight
Sector: Financials Lonrho (LONR)

Price: 16.3p
Forecast net debt (£m) N/A Lonrho announced its Q4 update on 2 November and provided a number of highlights that
Market AIM show the progress the business has made. With FY revenues up 20% to £107.7m, EBITDA of
Share price graph (p) £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
Company description
five divisions that spread both operational and geopolitical risk. With impressive recent revenue
Lonrho is a pan-African company with a
diverse portfolio of investments. It growth, the group is moving towards profitability. Short-term growth drivers involve expansion
focuses on servicing Western
investment and African business by plans focusing on developing tried and proven businesses across the continent, although
investing in emerging sectors across capital will be required to meet these objectives.
Africa, creating hubs of business
through key investments. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 43.1 (36.6) (36.9) (8.5) N/A N/A
Actual 3.2 47.7 58.5
Relative* 4.0 31.0 43.3 2009A 90.9 (6.6) (7.1) (1.3) N/A N/A
Analyst
Roger Johnston
Sector: General Retailers Lookers (LOOK)

Price: 59.3p
Forecast net debt (£m) 63.0 At a recent investor day, management reinforced the progress being achieved in the current
Market FULL year. The Motor division continues to build after the setback in 2008, with investment in
Share price graph (p) 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
Company description
Lookers is one of the leading UK motor
vehicle distributors operating 111 optimistic, but used car values have recently started to drift downwards. Nevertheless,
outlets covering 28 marques.
Management is ambitious and the indications from most leading groups suggest they will deliver profits progress in both 2010
group is set to grow strongly over the and 2011.
medium term.
% 1m 3m 12m 2008A 1776.0 42.9 14.0 4.7 12.6 5.2
Actual (1.7) 8.7 2.6
Relative* (0.9) (2.3) (7.3) 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
Analyst
2011E 1800.0 51.5 33.5 6.4 9.3 5.0
Nigel Harrison
76 2 December 2010
Edison Insight
Sector: Construction & Blding Mat. Low & Bonar (LWB)

Price: 43.0p
Forecast net debt (£m) 90.4 As the October IMS demonstrated, Low & Bonar has delivered a healthy recovery in revenue in
Market AIM the year to date, with an improvement in operating margin expected to come through in due
Share price graph (p) 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
Company description
with new products and markets are also expected to be key drivers.
Low & Bonar produces yarns and
fabrics for a variety of end markets of
end markets by combining polymers
with specialty additives and pigments. It
operates as two divisions: Performance
Technical Textiles (70% FY09 revenues)
and Technical Coated Fabrics (30%). Y/E Nov Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 335.2 41.7 16.4 7.7 5.6 1.7
Actual (7.0) 10.3 29.3
Relative* (6.3) 27.1 16.9 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
Analyst
2011E 345.0 42.8 23.0 5.8 7.4 3.8
Toby Thorrington
Sector: Property LSL Property Services (LSL)

Price: 214.5p
Forecast net debt (£m) 0.0 A recent IMS, covering the four months to end October, confirmed that the group is on track
Market FULL to meet full-year forecasts despite market weakness. Turnover was up 33% in the first 10
Share price graph (p) 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
Company description
The outlook for the UK housing market remains weak, with broad expectations of slippage in
LSL Property Services is one of the
UK’s leading residential property house prices during 2011. The level of mortgage approvals hit a 19-month low in October,
services companies and second biggest
estate agency chain. It provides a broad reflecting tougher requirements for first-time buyers' deposits. Remortgages were however,
range of services to corporate above their six-month average.
(mortgage lenders) and retail clients.
% 1m 3m 12m 2008A 162.5 20.5 14.3 14.2 15.1 17.9
Actual (2.5) (14.3) (21.6)
Relative* (1.7) (31.0) (29.2) 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
Analyst
2011E 225.0 36.5 34.6 23.5 9.1 5.6
Roger Leboff
2 December 2010 77
Edison Insight
Sector: Support Services Matchtech Group (MTEC)

Price: 221.0p
Forecast net debt (£m) 5.0 Matchtech’s AGM statement indicated no change to full-year numbers, but reiterated that the
Market AIM additional investment in headcount will lead to a greater H2 weighting to profits, with the full
Share price graph (p) 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
Company description
permanent staff appointments and temporary/contract staff billings. Vacancies are also on a
Matchtech Group has grown into one of
the UK's leading technical, professional downward trend of weakening growth. Public sector redundancies are starting to step up and
and outsourcing recruitment groups.
Split into four business units, each a confidence is fragile, but qualified candidates with scarcer skill sets, such as many of those
solutions specialist in its area of supplied by Matchtech, remain in good demand.
recruitment in providing contract,
temporary and permanent staff. Y/E Jul Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 269.6 12.3 11.3 34.6 6.4 5.2
Actual 0.0 15.4 (14.0)
Relative* 0.8 (16.3) (22.3) 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
Analyst
2012E 311.1 11.1 10.3 31.4 7.0 6.1
Sector: Technology Maxima Holdings (MXM)

Price: 87.5p
Forecast net debt (£m) 9.9 Maxima has undergone substantial change over the last 18 months with the new management
Market AIM team significantly refocusing the group, positioning for cloud computing, expanding its facilities
Share price graph (p) 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
Company description
relationship to GDP, political uncertainties and the likely ongoing deferral of investment
Maxima is an IT business systems and
managed services company. 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
% 1m 3m 12m 2009A 56.6 8.6 6.9 20.3 4.3 3.0
Actual 4.2 15.1 1.2
Relative* 5.0 (24.3) (8.6) 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
Analyst
2012E 53.8 6.6 5.3 15.0 5.8 3.6
Richard Jeans
78 2 December 2010
Edison Insight
Sector: Mining MDM Engineering (MDM)

Price: 127.0p
Forecast net cash (US$m) 11.2 Industry-wide project delays and deferments have resulted in an intensely competitive
Market AIM environment among contractors. In addition, MDM has been hit by a strong rand. The
Share price graph (p) 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
Company description
Our forecasts assume the award of the Goldfields project from August 2011, on which basis
MDM Engineering is a metallurgical
engineering company established in MDM's Y2 EV/EBITDA ratio of 7.6x is at a discount to the average of its three principal
February 2006. It undertakes mineral
resources projects of varying size and international peers (Lycopodium, Ausenco and Outotec) of 7.8x.
concentrates on the gold, base metals,
industrial metals and diamond sectors.
Y/E Dec / Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 35.9 10.6 11.6 21.1 9.6 7.4
Actual (0.8) 22.1 (25.3)
Relative* 0.0 (36.2) (32.5) 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
Analyst
2012E 35.3 8.4 8.8 16.1 12.6 11.0
Charles Gibson
Sector: Pharma & Healthcare Medcom Tech (MED)

Price: €3.20
Forecast net cash (€m) 1.0 Medcom Tech is a rapidly growing orthopaedic device distributor based in Iberia. Its portfolio
Market MAB includes knee and hip implants, plates and screws to repair bone and spine fractures.
Share price graph (€) 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
Company description
The Spanish orthopaedic market was estimated to be worth €350m in 2008. We had been
Medcom Tech distributes a wide range
of innovative orthopaedic products expecting it to grow at c 5% pa, but it will now probably decline slightly because of austerity
across Spain and Portugal. Its portfolio
includes knee and hip implants, plates measures. The growth drivers offsetting budget constraints are the ageing population, political
and screws to repair bone and spine pressure and technical innovations.
fractures, and advanced types of bone
cement. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 6.8 1.1 0.7 7.0 45.7 N/A
Actual N/A N/A N/A
Relative* N/A N/A 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
Analyst
2011E 20.5 4.7 4.0 32.1 10.0 15.6
Mick Cooper
2 December 2010 79
Edison Insight
Sector: Property MedicX Fund Limited (MXF)

Price: 72.3p
Forecast net debt (£m) 85.5 MedicX reported a £211m end Q4 portfolio valuation which, at a net initial yield of 5.88%, was
Market FULL virtually unchanged over the quarter. All-in NAV per share at 71.4p reflected a fall in the
Share price graph (p) 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
Company description
GPs should be clarified when the healthcare bill is published, but the outlook remains positive
The MedicX Fund is a specialist investor
in primary healthcare property in the for investment in primary care facilities, with a new focus on greater efficiency within the NHS.
United Kingdom.
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
% 1m 3m 12m 2008A 8.2 4.3 1.1 1.4 51.6 24.0
Actual (3.0) 1.1 (9.1)
Relative* (2.3) (12.9) (17.9) 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
Analyst
2011E 13.3 10.0 4.4 3.1 23.3 10.6
Roger Leboff
Sector: Aerospace & Defence Meggitt (MGGT)

Price: 337.3p
Forecast net debt (£m) 813.0 Meggitt's 19 November investor day highlighted the resilience of the business based on a
Market FULL strategy to target markets in extreme environments, with high barriers to entry and high
Share price graph (p) 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
Company description
business, which accounts for 30% of revenues. With Meggitt’s internal assumptions based on
Meggitt is a global manufacturer of
aerospace equipment, sensing and 1% air traffic growth, we feel there is room for upgrades with current traffic growth up 3.6%
defence systems. Its end markets are
civil aerospace (43%), military (43%) and year-to-date. H2 should also see improved military revenues with orders now released in the
energy & other (14%). US.
% 1m 3m 12m 2008A 1163.0 341.0 243.0 26.5 12.7 8.0
Actual 3.6 26.1 42.1
Relative* 4.4 5.2 28.4 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
Analyst
2011E 1213.0 352.0 265.0 28.3 11.9 7.2
Roger Johnston
80 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Merrion Pharma (3MP)

Price: €3.27
Forecast net cash (€m) 0.6 An FDA review has switched Orazol’s development plan in the US from bone metastases, the
Market Irish Stock Exchange indication agreed with the CHMP, to adjuvant early-stage breast cancer therapy. This opens
Share price graph (€) 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
Company description
patients. Markers (VEGF) show that low-dose weekly ZA impacts tumour growth. In 2009,
Merrion is an Irish company that uses
technology acquired from Elan to 254,650 US women were diagnosed with breast cancer; some 40,170 women died. If
reformulate injectable drugs into oral
formulations. Its lead projects are approved, many patients could use Orazol for five years; survival is over 98% with localised
Orazol, insulin and GLP-1 (in disease which is c 60% of cases. Another adjuvant indication could be prostate cancer.
collaboration with Novo Nordisk).
% 1m 3m 12m 2008A 1.3 (5.1) (5.1) (0.3) N/A N/A
Actual (6.6) (18.3) (4.4)
Relative* (5.6) (9.0) 0.1 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
Analyst
2011E 2.5 (3.1) (3.7) (0.2) N/A N/A
John Savin
Sector: Engineering Molins (MLIN)

Price: 58.5p
Forecast net cash (£m) 3.5 Molins has raised the quality of its earnings by switching its business emphasis towards solving
Market FULL customers' engineering problems and supplying spare parts and specialist services.
Share price graph (p) 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
Company description
businesses anticipating and responding to specific customer problems. Many companies,
Molins is a specialist engineering group
supplying processing and packaging including Molins, have transferred their manufacturing operations to lower-cost countries in an
machinery, and scientific services to the
global tobacco, pharmaceutical and attempt to maintain competitiveness. The tobacco products industry is under political pressure
FMCG industries. in many developed markets, but worldwide consumption continues to rise.
% 1m 3m 12m 2008A 91.5 6.2 2.3 10.3 5.7 N/A
Actual 6.4 5.4 10.4
Relative* 7.2 (22.6) (0.3) 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
Analyst
2011E 88.0 6.5 3.0 9.9 5.9 1.5
Nigel Harrison
2 December 2010 81
Edison Insight
Sector: Media & Entertainment Mondo TV (MTVI)

Price: €5.10
Forecast net debt (€m) 9.0 Mondo TV is making good operational progress, including a recent multi-territory broadcast
Market Milan Stock Exchange deal with Turner for 'Puppy in My Pocket'. However, new properties take time to build while
Share price graph (€) 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
Company description
The broadcast market remains very difficult, with programme budgets under considerable
Mondo TV is a leading Italian producer
and distributor of animated TV series pressure. However, successful animations and children's characters have long-lasting global
and feature-length cartoons. It also
licenses and merchandises its rights appeal and Mondo TV is now trying to grow its licensing and merchandising revenue streams,
through home video, music, multimedia working with established toy manufacturers as well as broadcasters.
productions and publishing.
% 1m 3m 12m 2008A 38.0 0.8 (18.0) (265.1) N/A N/A
Actual (20.3) (28.9) (36.3)
Relative* (14.7) (24.6) (30.5) 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
Analyst
2011E 24.0 10.5 3.9 88.6 5.8 2.2
Jane Anscombe
Sector: Technology Monitise (MONI)

Price: 21.0p
Forecast net cash (£m) 30.1 Monitise announced the formation of the Mobile Money Network joint venture, in which it holds
Market AIM a 40% stake, while Best Buy Europe and Charles Dunstone hold the remaining 60%. The
Share price graph (p) 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
Company description
With the number of mobile phone connections topping five billion globally, handset-based
Monitise provides a mass market
technology platform that enables banks, services such as mobile banking continue to show strong growth. For example, mobile
card schemes and other financial
providers to offer mobile banking and banking in the UK is showing fast adoption, with over three million users. Further growth is
payment services. likely from the use of mobile phones for retail payments.
% 1m 3m 12m 2009A 2.7 (11.8) (11.4) (3.5) N/A N/A
Actual (8.7) (3.5) 64.7
Relative* (8.0) (23.2) 48.9 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
Analyst
2012E 21.7 (9.4) (9.8) (1.4) N/A N/A
Katherine Thompson
82 2 December 2010
Edison Insight
Sector: Oil & Gas Nautical Petroleum (NPE)

Price: 347.8p
Forecast net cash (£m) 100.1 NPE announced that Celtic Oil Limited who did not participate in the Kraken exploration side
Market AIM track have opted to buy back into the Kraken side track by paying their share of their costs.
Share price graph (p) 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.
Company description
Nautical Petroleum was established in
2005 to secure, develop and add value
to heavy oil discoveries, initially on the
UKCS and continental Europe.

% 1m 3m 12m 2009A 0.0 (1.1) (0.1) 1.0 347.8 N/A
Actual 1.4 128.0 479.6
Relative* 2.2 516.5 423.8 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
Analyst
2012E 0.1 (5.0) (5.0) (5.4) N/A N/A
Ian McLelland
Sector: Pharma & Healthcare NeuroSearch (NEUR)

Price: DKK88.00
Market cap: DKK2161m INVESTMENT SUMMARY
Forecast net cash (DKKm) 288.0 The Phase II HART study of Huntexil in Huntington’s disease showed some good evidence of
Market OMX efficacy but only a trend, rather than statistical significance, on its primary endpoint. Since the
Share price graph (DKK) 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,
Company description
indicated for treatment of chorea (involuntary movement). Tesofensine licensing is interlinked
NeuroSearch is a Scandinavian
biopharmaceutical company. Its core with the fate of three competing anti-obesity drugs, Vivus's Qnexa, Orexigen's Contrave and
business covers the development of
novel drugs, based on a broad and Arena's lorcaserin, which are filed with the FDA.
well-established drug discovery platform
focusing on ion channels and CNS
disorders. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (DKKm) (DKKm) (DKKm) (DKK) (x) (x)
% 1m 3m 12m 2008A 66.8 (324.7) (390.8) (22.86) N/A N/A
Actual (9.3) (0.6) 23.9
Relative* (11.1) (8.9) (5.6) 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
Analyst
2011E 49.2 (269.0) (294.5) (9.71) N/A N/A
Lala Gregorek
2 December 2010 83
Edison Insight
Sector: Mining Nevsun Resources (NSU)

Price: C$5.75
Forecast net cash (US$m) 4.3 Nevsun's shares have risen from their C$3.75 price in July as the company has consistently
Market TSX met milestone targets. It has now commenced commissioning (both within time and within
Share price graph (C$) 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).
Company description
INDUSTRY OUTLOOK
Nevsun Resources is developing the
Bisha Au-Ag-Cu-Zn volcanic massive Nevsun has commenced an 8,000m drill programme to increase resources. Over the life of
sulphide deposit in western Eritrea. The
company expects production from the Bisha's operations, the breakdown of Nevsun's revenue by metal is: gold (6%), silver (7%),
project in 2011. Nevsun is debt free. copper (27%) and zinc (60%).
% 1m 3m 12m 2008A 0.0 (8.1) (7.2) (5.6) N/A N/A
Actual 9.1 23.4 86.7
Relative* 7.3 67.2 65.6 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
Analyst
2011E 559.6 389.1 375.4 108.8 5.2 3.2
Charles Gibson
Sector: Support Services Newmark Security (NWT)

Price: 1.7p
Forecast net debt (£m) N/A Newmark reported in line FY10 results: Asset Protection had a strong year, while the Electronic
Market AIM division was affected by the current economic climate. Fortunes are likely to reverse in FY11;
Share price graph (p) 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
Company description
FY11. Grosvenor benefits from the need for businesses and public sector organisations to
Newmark Security is a leading provider
of electronic and physical security track assets and monitor employee time and attendance.
systems that focus on personal security
and the safety of assets.

% 1m 3m 12m 2009A 13.0 2.0 1.4 0.27 6.3 2.9
Actual 3.0 1.5 15.3
Relative* 3.8 (15.1) 4.2 2010A 13.8 2.3 1.7 0.32 5.3 4.2
Analyst
Katherine Thompson
84 2 December 2010
Edison Insight
Sector: Media & Entertainment Next Fifteen Communications (NFC)

Price: 74.0p
Forecast net debt (£m) 0.6 Next Fifteen released its FY10 prelims in mid-October. Revenues came in higher than our
Market AIM estimate and pre-tax profit was in line. Adjusted diluted EPS of 7.5p was 0.3p less than our
Share price graph (p) 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
Company description
The PR industry is ideally placed to protect and enhance clients’ products and businesses and
Next Fifteen Communications is an
international PR consultancy group with is benefiting from changing client demands, particularly in respect of social media. Chime
world-leading and autonomous PR and
marketing subsidiaries predominately reported in November that its PR division is expected to show its strongest divisional organic
addressing the high-tech industry. growth in H210.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 65.4 7.3 5.2 6.5 11.4 6.2
Actual (3.3) 15.6 14.3
Relative* (2.5) (1.4) 3.3 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
Analyst
Martin Lister
Sector: Pharma & Healthcare NextGen Sciences (NGG)

Price: 0.1p
Forecast net debt (US$m) 1.9 NextGen reported group interim revenue of $708,831 compared to $807,769 in 2009. The
Market AIM core business remains its CRO offering of biomarker discovery, assay development and
Share price graph (p) 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
Company description
facilitation of a more cost-effective drug discovery process. Growth of the business is dictated
NextGen Group provides biomarker
services to the pharma industry. It is by pharmaceutical and biotech R&D budgets, likely to experience sustained near-term
using advanced analysis techniques to
develop a portfolio of robust assays for pressure. The biomarker market's estimated value is $21bn by 2013.
biomarkers to be used in testing clinical
samples for drug development and
diagnostics. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 1.2 (2.2) (2.8) (0.16) N/A N/A
Actual (7.7) (7.7) (45.5)
Relative* (7.0) (49.3) (50.7) 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
Analyst
Robin Davison
2 December 2010 85
Edison Insight
Sector: Oil & Gas Nighthawk Energy (HAWK)

Price: 13.3p
Forecast net debt (US$m) N/A Nighthawk has recently announced a £3.3m draw down from its £25m Equity Financing
Market AIM Facility with Darwin Strategic. The funds will be focused on the Jolly Ranch shale oil project
Share price graph (p) 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
Company description
Nighthawk has referred to growing interest by oil companies in leasing land in the vicinity of the
Nighthawk Energy is involved in the
development, appraisal and production Jolly Ranch property. Key companies recently moving into the area include Unit Corporation,
of hydrocarbons, with the area of focus
being onshore US. EOG Resources, Sundance Energy and McElvain Oil&Gas. Additionally, Newfield has
commenced drilling of late.
% 1m 3m 12m 2009A 0.5 (2.5) (2.1) (0.7) N/A N/A
Actual 1.9 (42.4) (62.4)
Relative* 2.7 (42.7) (66.0) 2010A 2.1 (1.6) (1.4) (0.4) N/A N/A
Analyst
Peter Dupont
Sector: Mining Nkwe Platinum (NKP)

Price: A$0.50
Forecast net debt (A$m) 38.6 Nkwe had cash of A$4.9m as of 30 September 2010 excluding US$5m in receivables and
Market ASX Xstrata's US$10m option fee due before the end of the year. Before then, Xstrata's platinum
Share price graph (A$) 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
Company description
automotive sales. Furthermore, we believe platinum prices will continue to recovery in early to
Nkwe Platinum is a platinum group
metals (PGM) development company mid-2011 as auto producers restock ahead of forecast increases in vehicle production in
with two main projects; Garatau (74%)
and Tubatse (optioned stake of 74%) 2012.
which have total resources of 68.9Moz
(3PGM+Au). Xstrata has an option to
acquire 50% of both projects. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 1.7 (12.9) (12.9) (4.6) N/A N/A
Actual (18.5) 6.3 36.5
Relative* (17.3) (23.6) 37.6 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
Analyst
2012E 0.0 (4.3) (69.8) (10.3) N/A N/A
Michael Starke
86 2 December 2010
Edison Insight
Sector: Oil & Gas Northern Petroleum (NOP)

Price: 105.0p
Forecast net debt (€m) N/A Northern continues to develop its core Netherlands and Italian portfolio of exploration,
Market AIM development and production assets. In Italy, interpretation of West of Sicily seismic is ongoing,
Share price graph (p) 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
Company description
NOP operates in stable Western European countries where there is very low political risk. The
Northern Petroleum is an oil and gas
production, development, exploration company is well funded with zero debt. Our forecasts are currently under review but with P2
and asset trading company with a
political exposure limited to countries in reserves in excess of 100mmboe, the stock appears good value with an EV/2P of less than
the European Union. $1/boe compared with European peers in the $10/boe range.
% 1m 3m 12m 2008A 7.0 2.8 2.7 1.5 81.6 1150.6
Actual 16.7 18.0 (29.1)
Relative* 17.6 (19.8) (35.9) 2009A 5.1 (2.3) (3.0) (2.6) N/A 8.8
Analyst
Ian McLelland
Sector: Pharma & Healthcare Omega Diagnostics (ODX)

Price: 17.0p
Forecast net cash (£m) 0.9 Omega is undertaking a transforming acquisition of the IVD testing business of German allergy
Market AIM specialist AllergoPharma for €6m (c £5m) (inc property); we will update our forecasts once it is
Share price graph (p) 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
Company description
benefit is its valuable, and tedious to replicate, 600 allergen range. Allergy will be based on
Omega is a UK-based company
focused on developing and marketing three products: an existing general IgE test, a new Genarryt allergy screen and detailed new
in-vitro diagnostic products in infectious
and autoimmune diseases and for food automated tests based on the Immunodiagnostic Systems iSys platform to find the exact
intolerance. Intolerance tests account allergy.
for over 40% of revenues.
% 1m 3m 12m 2009A 5.4 0.9 0.5 3.2 5.3 3.9
Actual (6.8) 3.0 (53.4)
Relative* (6.1) (42.0) (57.9) 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
Analyst
2012E 12.5 2.2 1.8 1.6 10.6 73.5
John Savin
2 December 2010 87
Edison Insight
Sector: Pharma & Healthcare Oncolytics Biotech (ONC)

Price: C$4.67
Forecast net cash (C$m) 34.1 Oncolytics has recently raised C$28.8m to maintain its clinical programme with its lead
Market NASDAQ, TSX product, Reolysin. The drug is in a pivotal FDA and MHRA Phase III head and neck cancer trial
Share price graph (C$) 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
Company description
Oncolytics’ current rivals are the companies developing oncology products in the same
Oncolytics Biotech is a Canadian
biotechnology company focused on therapeutic areas, but there are some interesting viral oncolytic companies, including BioVex,
developing Reolysin, a pharmaceutical
formulation of oncolytic reovirus, for the Jennerex, Genelux and Viralytics, suggesting a new era in cancer treatment.
treatment of a wide variety of human
cancers.
% 1m 3m 12m 2008A 0.0 (17.7) (18.2) (41.6) N/A N/A
Actual (5.1) 50.6 53.6
Relative* (6.6) 49.9 36.3 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
Analyst
2011E 0.0 (22.0) (22.1) (33.6) N/A N/A
Wang Chong
Sector: Pharma & Healthcare Optos (OPTS)

Price: 131.0p
Forecast net debt (US$m) N/A Prelim 2010 results showed revenues rose to $106m from $97m, aided by a cosmetic $8.1m
Market FULL accounting change in that c 130 systems are now treated as finance leases bringing forward
Share price graph (p) 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
Company description
abnormalities are either benign or very rare. OptoMap had a 30% greater capability for
Optos uses a leasing model to place its
wide-field laser retinal imaging systems detecting retinal lesions than traditional exams in patients under 65. An Icelandic study on 573
with optometrists. Instruments are
leased at $24k per year and may patients aged 72 or older found 56% with AMD-related peripheral changes using OptoMap.
generate additional per-use revenues Optos is moving the right direction but accounting complexity remains.
over a typical 36-month contract.
Vendor finance provides capital. Y/E Sep Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 97.2 43.9 2.5 0.6 348.9 3.9
Actual 23.6 56.0 47.2
Relative* 24.6 (4.4) 33.0 2010A 106.3 50.3 13.3 21.7 9.6 3.2
Analyst
John Savin
88 2 December 2010
Edison Insight
Sector: Mining Oracle Coalfields (ORCP)

Price: 6.9p
Forecast net cash (£m) 1.2 Oracle Coalfields has entered into deals with the Karachi Electric Supply Company (KESC) and
Market PLUS Lucky Cement, which have the potential to unlock the value of its coal assets in Pakistan. The
Share price graph (p) 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
Company description quantified.
Oracle Coalfields plc is a coal
exploration and development company. INDUSTRY OUTLOOK
Block VI, its main project, has total
measured resources (JORC) of 1.4bn The Pakistan government continues to support the development of the Thar coalfield as part of
tonnes of lignite coal and is located in its strategy to meet growing domestic demand for low-cost energy.
southern Pakistan’s Thar coalfield.
% 1m 3m 12m 2008A 0.0 (0.2) (0.2) (0.2) N/A N/A
Actual 27.9 103.7 120.0
Relative* 28.9 80.6 98.8 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
Analyst
Warren Johnstone
Sector: Pharma & Healthcare Orexigen Therapeutics (OREX)

Price: US$5.80
Forecast net cash (US$m) 32.2 Orexigen essentially offers a pure-play investment geared to the success of Contrave
Market NASDAQ (naltrexone + bupropion), one of three late-stage obesity projects currently under regulatory
Share price graph (US$) 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
Company description
Obesity drugs have attracted increased scrutiny from regulators, particularly in view of the high
Orexigen Therapeutics is a
biopharmaceutical company focused on risk profile of the class. Side effects include high rate of birth defects, higher risk of kidney
developing pharmaceutical product
candidates for treating obesity. stones and suicide.

% 1m 3m 12m 2008A 0.1 (88.6) (87.5) (259.03) N/A N/A
Actual 0.2 27.5 (17.7)
Relative* (0.1) (1.7) (23.2) 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
Analyst
2011E 0.1 (53.8) (54.0) (117.62) N/A N/A
Robin Davison
2 December 2010 89
Edison Insight
Sector: Pharma & Healthcare Oxford BioMedica (OXB)

Price: 9.5p
Forecast net cash (£m) 14.5 Oxford BioMedica has started its Phase II TroVax prostate cancer trial; TroVax mesothelioma
Market FULL and ovarian cancer trials, and first-in-man studies for two ocular programmes are due to start
Share price graph (p) 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
Company description
Gene therapy can correct dysfunctional cells and/or create endogenous therapeutic protein
Oxford BioMedica is a UK company
with a leading position in cancer factories. Neurologix's Phase II PD therapy NLX-101 uses a similar approach, but ocular
immunotherapy and gene-based
products. It is focusing its efforts on two disease is an area of unmet need. US approval of Dendreon's prostate cancer vaccine
clinical programmes: ProSavin and Provenge bodes well for cancer vaccines.
TroVax.
% 1m 3m 12m 2008A 18.4 (7.6) (6.3) (0.8) N/A N/A
Actual (7.3) (0.4) (22.4)
Relative* (6.6) (15.8) (29.9) 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
Analyst
2011E 10.1 (6.5) (6.4) (0.9) N/A N/A
Lala Gregorek
Sector: Pharma & Healthcare Paion (PA8)

Price: €2.60
Forecast net cash (€m) 6.6 Paion reported a positive outcome to its Phase IIb trial of ultra short-acting IV
Market FRA anaesthetic/sedative remimazolam, putting it in an excellent position to secure an ex-Japan
Share price graph (€) 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
Company description
has the potential to widen the treatment window to up to nine hours (the current treatment
Paion is a biopharmaceutical company
based in Germany, with a presence in alteplase is only indicated for use up to three hours from symptom onset). Only 5% of patients
the UK. It develops drugs for diseases
or interventions for which there is who experience a stroke are eligible for therapy by the time they reach hospital.
substantial unmet medical need.

% 1m 3m 12m 2008A 3.2 (12.7) (12.8) (59.3) N/A N/A
Actual (2.2) 34.1 23.9
Relative* (5.6) 17.0 1.5 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
Analyst
2011E 1.5 (9.3) (9.8) (38.1) N/A N/A
Lala Gregorek
90 2 December 2010
Edison Insight
Sector: Technology Patsystems (PTS)

Price: 25.8p
Forecast net cash (£m) 12.5 In a trading update, Patsytems said several Risk Solutions deals have been deferred to FY11
Market AIM or cancelled. Hence, adjusted FY10 profits would be in line with FY09. We note Risk Solutions
Share price graph (p) 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.
Company description
The outlook benefits from the expected launch of more exchanges and trading platforms, and
Patsystems delivers tailored solutions,
built from modular components, to pressures to shift OTC derivatives to regulated exchanges may also boost the industry. The
enhance derivatives trading
performance and trade processing. ability to offer a one-stop solution for exchanges helped Patsystems win its latest two
Solutions range from plug-and-play exchange deals. Its risk solutions also benefit from strong drivers.
modules to complete high-performance
trading systems. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 19.6 3.7 3.5 1.8 14.3 N/A
Actual (8.0) 6.2 10.8
Relative* (7.3) (8.7) 0.1 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
Analyst
2011E 26.6 6.9 6.3 3.1 8.3 N/A
Richard Jeans
Sector: Mining Petropavlovsk (POG)

Price: 1058.0p
Forecast net debt (US$m) 207.6 After nine months of travails, POG's production guidance for the full year is now
Market FULL 510-530,000oz (vs 306,600oz at the nine-month stage). This is achievable as long as its
Share price graph (p) 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)
Company description is worth c $2.11 (or £1.32 per POG share).
Petropavlovsk's principal assets are in
the Amur region of Russia, comprising INDUSTRY OUTLOOK
the Pokrovskiy mine and associated
operations, Pioneer and Malomir. The Performance in H2 should be ameliorated by higher grades and lower unit costs. Our FY10
company was founded in 1994 and numbers currently assume a gold price of US$1,222/oz.
listed on AIM in 2002.
% 1m 3m 12m 2008A 381.7 108.1 58.7 49.7 34.0 22.8
Actual 7.0 3.8 (12.1)
Relative* 7.9 (20.2) (20.6) 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
Analyst
Charles Gibson
2 December 2010 91
Edison Insight
Sector: Pharma & Healthcare Pharming Group (PHARM)

Price: €0.21
Forecast net cash (€m) 8.5 Formal EU marketing authorisation for Ruconest finally arrived on 28 October. This makes
Market AMS Pharming the first company with a commercially viable transgenic product to reach the market.
Share price graph (€) 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
Company description
Cinryze could be EU marketed from May 2011; there now seem to be c 550 US patients each
Pharming has focused on
Ruconest/Rhucin for angioedema, a taking 1.7 doses per week, a £150m market. Kalbitor US sales in Q3 fell to $2.6m, indicating
rare hereditary disease. Ruconest is
now EU approved and will be marketed stocking orders in Q2 but also showing low patient use: 246 patients have Kalbitor available.
by sobi and Esteve. Kidney transplant Dyax filed an EU MAA for Kalbitor in July so could be EU marketed from H211.
trials could start soon. The DNage 51%
owned subsidiary is being divested. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 0.7 (27.5) (25.6) (28.0) N/A N/A
Actual (15.3) 31.3 (58.2)
Relative* (14.2) (51.4) (61.8) 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
Analyst
2011E 10.7 (17.8) (20.2) (5.4) N/A N/A
John Savin
Sector: Pharma & Healthcare Phytopharm (PYM)

Price: 7.7p
Forecast net cash (£m) 21.3 Phytopharm’s investment case critically depends on the success and timely execution of its
Market FULL Parkinson's disease Phase II proof-of-concept study of Cogane. This study in c 400 patients
Share price graph (p) 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
Company description
expression of neurotrophic factors (ie GNDF and BNDF, respectively glial- and brain-derived
Phytopharm is a UK pharmaceutical firm
focused on the development of neurotrophic factors). GDNF is known to promote neurite out-growth but it has not been
pharmaceuticals and functional foods,
identified as a result of research into successfully delivered to the brain to date (as a protein it cannot be given orally and also does
medicinal plants. not readily cross the BBB).
% 1m 3m 12m 2008A 2.6 (3.4) (3.2) (4.0) N/A N/A
Actual 4.5 (15.9) (41.4)
Relative* 5.3 (25.4) (47.1) 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
Analyst
2011E 0.0 (9.5) (9.3) (2.5) N/A N/A
Robin Davison
92 2 December 2010
Edison Insight
Sector: Travel & Leisure Praesepe (PRA)

Price: 8.4p
Forecast net debt (£m) 43.0 Praesepe is acquiring 14 more gaming centres from Nobles for £2.3m (28.5m new shares
Market AIM issued to the vendors at 8.06p) subject to shareholder approval. The sites should deliver
Share price graph (p) 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
Company description
(from £1 to £2, which will improve game play and provide greater differentiation from 'C'
Praesepe's strategy is to build a
diversified gaming group in the UK and machines) and to increase the number permitted (hopefully to 20% of the total, with various
Europe. It currently operates 84 adult
gaming centres (AGCs) including the possible alternatives). The consultation will run to 25 January and there may also be an EU
Crystal Rooms in London, six bingo review period. Meanwhile, high street trading remains very tough.
clubs and four family entertainment
centres (seaside arcades). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 4.5 (1.1) (1.6) (1.34) N/A N/A
Actual 13.6 59.5 1.5
Relative* 14.4 2.4 (8.3) 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
Analyst
Jane Anscombe
Sector: Property Primary Health Properties (PHP)

Price: 319.0p
Forecast net debt (£m) 266.3 There were no additions to the portfolio in Q3, but stable investment yields and rental growth
Market FULL averaging 3.23% pa during the period, slightly ahead of the interims in August, will have
Share price graph (p) 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
Company description
healthcare spending. July's White Paper 'Equity and Excellence: Liberating the NHS' proposed
PHP invests in primary healthcare
property, let to GPs, PCTs and other that GPs take an enhanced role in providing NHS services, which should underpin demand for
NHS entities backed by the UK
government. This tenant profile provides purpose-built premises. More detail should be available with publication of the healthcare bill.
an exceptionally secure revenue
outlook.
Y/E Jun / Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 19.7 15.1 4.6 13.3 24.0 6.8
Actual (3.2) 6.3 13.1
Relative* (2.4) (3.4) 2.2 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
Analyst
2011E 29.5 25.2 12.0 19.2 16.6 7.7
Roger Leboff
2 December 2010 93
Edison Insight
Sector: Pharma & Healthcare ProMetic Life Sciences (PLI)

Price: C$0.10
Forecast net debt (C$m) 9.7 ProMetic revised its 2010 financial guidance at its Q3 results, revealing that revenues would be
Market TSX affected by a delay to an order for prion reduction resin by partner Octapharma into 2011. The
Share price graph (C$) 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.
Company description
INDUSTRY OUTLOOK
ProMetic Life Sciences is a
biopharmaceutical business, comprised Competitive developments include suspension of commercialisation plans for Amorfix's vCJD
of a group of companies focused on
developing technologies, which bring blood test, the Grifols acquisition of Talecris, and safety concerns with Affymax/Takeda's
pharmaceutical products to market. Hematide.
% 1m 3m 12m 2008A 10.2 (13.5) (16.9) (5.6) N/A N/A
Actual (22.2) 23.5 (47.5)
Relative* (23.5) (1.0) (53.4) 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
Analyst
2011E 24.1 (1.0) (2.1) (0.6) N/A N/A
Lala Gregorek
Sector: Pharma & Healthcare ProStrakan (PSK)

Price: 86.5p
Forecast net debt (£m) 19.8 ProStrakan shares started recovering after September's announcement of a further delay to
Market FULL US Abstral approval, confirmation of a three-month Sancuso stock shortage and the CEO's
Share price graph (p) 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
Company description
The FDA is taking a cautious view on abuse/misuse potential and off-label use of rapid-acting
ProStrakan Group plc is a European
specialty pharmaceutical company, with fentanyl drugs. Marketed drugs Actiq and Fentora do not have a risk mitigation and evaluation
a developing US franchise. It is engaged
in the development and strategy (REMS) yet, but Onsolis was approved in 2009 on this basis.
commercialisation of prescription
medicines for the treatment of unmet
therapeutic needs in major markets. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 56.1 (15.4) (19.8) (7.9) N/A N/A
Actual 17.7 13.1 (10.6)
Relative* 18.6 1.2 (19.2) 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
Analyst
2011E 112.6 (3.9) (7.0) (3.5) N/A N/A
Lala Gregorek
94 2 December 2010
Edison Insight
Sector: Pharma & Healthcare Proximagen Group (PRX)

Price: 151.5p
Forecast net cash (£m) 44.9 Proximagen has partnered both clinical assets obtained via the February acquisition of Minster
Market AIM Pharmaceuticals. These deals and the research agreement (CRADA) for naluzotan provide
Share price graph (p) 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
Company description
programmes across CNS, with the most advanced in Phase II. It seeks to create value through
Proximagen is a UK biotech company
specialising in the development of consolidation and has a medium-term objective of becoming self funding, with a longer-term
treatments for central nervous system
disorders. goal of becoming a fully integrated company.
Y/E Nov Revenue EBITDA PBT EPS P/E P/CF

% 1m 3m 12m 2008A 0.3 (3.3) (2.9) (11.1) N/A N/A
Actual 31.7 42.3 37.7
Relative* 32.8 51.8 24.5 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
Analyst
2011E 0.2 (12.7) (12.6) (19.3) N/A N/A
Lala Gregorek
Sector: Electrical Equipment Psion (PON)

Price: 98.0p
Forecast net cash (£m) 40.0 The reconstruction of Psion now looks to have reached a stage whereby the company is well
Market FULL placed to move forward. The first modular products are being brought to market, the channel
Share price graph (p) 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
Company description
VDC to be growing at 8-10% per year. Psion holds c 7% market share, but plans to expand
Psion designs and sells ruggedized
mobile computers, which are used by this substantially. These plans revolve around the move towards a modular product
field workers and in supply chain and
logistics functions. architecture and leveraging a network of partners to drive product innovation.

% 1m 3m 12m 2008A 199.4 11.1 7.2 3.6 27.2 124.5
Actual 2.1 4.8 14.6
Relative* 2.9 12.1 3.6 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
Analyst
2011E 185.2 20.7 8.4 4.1 23.9 9.4
Dan Ridsdale
2 December 2010 95
Edison Insight
Sector: Property Public Service Properties Invest. (PSPI)

Price: 72.0p
Forecast net debt (£m) 135.0 The interims were typically steady. Cash rents increased by 4% to £8.7m, annual rent reviews
Market AIM in the UK produced 3.8% average growth up to the end of June, with 4% in prospect for
Share price graph (p) 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
Company description
confirmed the government's commitment to healthcare spending. PSPI has planned and fully
Public Service Properties Investments
Limited is a specialist real estate funded investment to enhance the quality and defensive positioning of the portfolio, also
investment and financing company. Its
main focus until recently has been on increasing its weighting in areas such as dementia care and mental illness. The UK portfolio is
the expansion of its UK portfolio of care let entirely to European Care, one of the industry's leading operators.
homes, which make up the majority of
the value of its portfolio. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 19.3 15.3 5.2 7.1 10.1 4.6
Actual (2.4) 1.4 5.7
Relative* (1.6) (4.0) (4.5) 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
Analyst
2011E 22.5 16.6 11.9 8.8 8.2 4.6
Roger Leboff
Sector: Aerospace & Defence QinetiQ Group (QQ.)

Price: 116.1p
Forecast net debt (£m) 309.9 QinetiQ’s interim results lived up to the UK government’s assertion that we live in an "age of
Market FULL uncertainty". Revenues were ahead of our expectations, predominantly due to the rapid
Share price graph (p) 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
Company description
good long-term contracts such as the LTPA. However, with MoD R&D in decline and now fully
QinetiQ Group provides technical
advice, services and solutions to competitive, QinetiQ has seen a rapid fall in profitability and order delays have plagued the
customers in the aerospace, defence
and security markets, primarily in the UK wider business. The US appears to have stabilised from last year's delays, although we
and US. anticipate margins to remain subdued.
% 1m 3m 12m 2009A 1617.3 185.1 130.2 15.9 7.3 4.3
Actual 8.6 8.6 (27.5)
Relative* 9.5 (11.5) (34.5) 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
Analyst
2012E 1710.6 174.3 115.7 14.5 8.0 4.9
Roger Johnston
96 2 December 2010
Edison Insight
Sector: Media & Entertainment Quarto (QRT)

Price: 137.0p
Forecast net debt (£m) 47.3 Quarto’s Q3 update described a good performance, despite mixed trading conditions in its key
Market FULL US and UK markets. Reports from the Frankfurt Book Fair, though, indicated it being one of
Share price graph (p) 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
Company description
experience and Amazon’s Q3 statement described print and digital sales both being ahead.
Quarto is an international book publisher
specialising in illustrated non-fiction eBooks continue to gain share as penetration of reading devices builds. Barnes & Noble's
books. It publishes under imprints
owned by the group in the US, UK and forecast is for consumer book sales to grow from $23bn in 2010 to $27bn in 2013. However,
Australia, and creates books that are this anticipates print sales falling by $2bn over the period and digital/e-books growing by $6bn.
licensed to other publishers worldwide.
% 1m 3m 12m 2008A 112.7 22.0 7.7 26.5 5.2 1.2
Actual 5.4 9.6 22.9
Relative* 6.2 32.0 11.0 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
Analyst
2011E 110.4 23.0 7.3 27.2 5.0 1.2
Sector: Financials Randall & Quilter Investment Hld (RQIH)

Price: 91.0p
Forecast net debt (£m) N/A Randall & Quilter Investment Holdings (R&Q) provides professional services to the insurance
Market AIM market. Its proven success relies on its staff's skills in managing claims and re-insurance, not
Share price graph (p) 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
Company description
Run-off portfolio prices remain high, but there are some opportunities in niche markets and in
RQIH is a holding and investment
company. It conducts business in the run-off debt. R&Q has developed a range of new income streams with opportunities for both
UK, Europe, US and Bermuda as
owners and managers of insurance organic and acquisitive growth. Given its modest scale, these are available across market
companies in run-off, as purchasers of conditions.
reinsurance receivables and as
consultants for the insurance market. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 30.8 8.8 8.8 10.8 8.4 N/A
Actual 0.0 0.0 (15.3)
Relative* 0.8 (20.9) (23.5) 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
Analyst
2011E 36.0 7.8 7.3 10.6 8.6 N/A
Mark Thomas
2 December 2010 97
Edison Insight
Sector: Oil & Gas Range Resources (RRL)

Price: 6.3p
Forecast net cash (A$m) 7.4 Range has been one of the key junior E&P success stories of 2010. The stock has been driven
Market AIM, ASX by some savvy investments in production and development assets in Texas and Trinidad, and
Share price graph (p) 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
Company description
20% stakes in two onshore basins, Nogal and Dharoor, which are believed to be analogues of
Range Resources has a portfolio of
early to advanced stage prospective large hydrocarbon basins in the Yemen. The operator of the projects, TSX-V listed Africa Oil,
exploration licences, located in the
autonomous Puntland region of North raised $25m in recent months and also farmed-out some of its equity to Lion Energy and Red
East Somalia, Georgia and West Texas. Emperor Resources.
% 1m 3m 12m 2008A 0.5 (3.9) (3.9) (3.2) N/A N/A
Actual 10.2 8.7 188.9
Relative* 11.1 43.0 161.1 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
Analyst
2011E 5.9 (5.2) (6.2) (0.5) N/A N/A
Peter Dupont
Sector: Mining Red Rock Resources (RRR)

Price: 16.0p
Forecast net cash (£m) 0.1 Red Rock continues to advance its lead projects - most recently by increasing its exposure to
Market AIM MFP in Columbia, where the re-development of the El Limon mine is progressing ahead of
Share price graph (p) 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
Company description from a C$0.5m investment. In the UK, RRR has made a £1.5m investment in Ascot Mining.
Listed on AIM in July 2005, Red Rock
Resources is now a combination of a INDUSTRY OUTLOOK
junior gold explorer and a mineral
property investment company focused Red Rock's principle commodity exposures are to gold, iron ore and uranium.
on the discovery and development of
iron ore, manganese, uranium and gold,
primarily in Australia and Africa. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 1.3 (0.2) (0.2) (0.12) N/A N/A
Actual 155.0 553.1 966.7
Relative* 157.0 646.5 864.0 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
Analyst
2011E 2.9 1.8 1.8 0.27 59.3 47.7
Charles Gibson
98 2 December 2010
Edison Insight
Sector: Engineering Redhall Group (RHL)

Price: 133.5p
Forecast net cash (£m) 6.7 With Redhall's attempted acquisition of Mount Engineering trumped by the surprise bid from
Market AIM Cooper Industries, management will ensure the focus on the core business. The October
Share price graph (p) 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
Company description
other end-markets remains positive, with the MoD committing to build all seven Astute boats in
Redhall Group operates seven niche
engineering service businesses. Its main the SDSR. We also feel that the UK's budget highlighted further emphasis on the green
markets are: nuclear, oil and gas, food,
defence, safety and security, and agenda and the longer-term opportunity in nuclear aligns specifically with Redhall's core
transport infrastructure. business model.
% 1m 3m 12m 2008A 86.7 5.0 4.6 15.4 8.7 4.9
Actual 3.5 (0.4) (2.2)
Relative* 4.3 (18.9) (11.6) 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
Analyst
2011E 148.5 8.4 7.6 17.9 7.5 5.0
Roger Johnston
Sector: Pharma & Healthcare ReGen Therapeutics (RGT)

Price: 1.3p
Forecast net cash (£m) 0.0 ReGen reported half-year revenue of £134k compared with £9k in 2009, with gross margin of
Market AIM 66%. The company increased geographical penetration, launching Colostrinin in India (its
Share price graph (p) 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
Company description
Colostrinin is a nutritional supplement used to support healthy brain ageing and cognition in
ReGen Therapeutics is a UK biotech
company focused on the development humans. It is currently marketed in UK, Poland, Turkey, Cyprus, Australia and India.
of products for the prevention and
treatment of diseases associated with
ageing, particularly neurodegenerative
disorders.
% 1m 3m 12m 2008A 0.1 (1.2) (1.4) (11.5) N/A N/A
Actual 11.1 (23.1) (61.5)
Relative* 12.0 (59.7) (65.2) 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
Analyst
Robin Davison
2 December 2010 99
Edison Insight
Sector: Alternative Energy Renewable Energy (WIND)

Price: 45.3p
Forecast net cash (£m) 3.2 REG has a strong balance sheet and is well placed to exploit the growth opportunities that we
Market AIM see in the market for onshore wind. We forecast that REG will increase its operational wind
Share price graph (p) 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
Company description
continuity of energy supply. As a proven technology, with stable long-term cash flows and
Renewable Energy Generation’s core
business is the development and benefiting from attractive incentives, wind farms provide a financeable method of meeting
operation of onshore wind farms in the
UK. these challenges. We believe that, as a result, the market for UK wind energy will continue to
grow rapidly.
% 1m 3m 12m 2009A 5.6 3.9 (1.9) (1.5) N/A N/A
Actual (8.6) 9.0 (30.9)
Relative* (7.9) (15.6) (37.6) 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
Analyst
2012E 15.7 5.3 (0.6) (0.5) N/A 18.9
Graeme Moyse
Sector: Pharma & Healthcare Renovo (RNVO)

Price: 47.0p
Forecast net cash (£m) 50.1 Renovo has successfully completed its first clinical trial with Juvista Paediatric and the best
Market FULL dosing of adult Juvista has been confirmed. The former is important for the potential product
Share price graph (p) 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
Company description
million scar revision procedures carried out in the US and Europe each year, with the aim of
Renovo is a biopharmaceutical product
company and is a leader in the being used more broadly in the estimated 42 million surgical procedures performed per year in
discovery and development of drugs to
improve the appearance of scars and each of these regions. We estimate that it will achieve peak sales of $1.0bn.
enhance wound healing.

% 1m 3m 12m 2008A 7.6 (19.8) (15.2) (6.4) N/A N/A
Actual 51.6 123.8 82.5
Relative* 52.8 68.3 65.0 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
Analyst
2011E 14.3 (6.6) (6.5) (2.2) N/A N/A
Mick Cooper
100 2 December 2010

Edison Insight
Sector: Oil & Gas Rockhopper Exploration (RKH)

Price: 315.8p
Forecast net debt (US$m) 9.9 Rockhopper is currently participating in the drilling of the Rachel North prospect (RKH 7.5%
Market AIM WI) to evaluate oil bearing sands encountered in the recent Rachel sidetrack well. The Rachel
Share price graph (p) 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
Company description
industry as a whole. The £206m placing days after the CPR announcement is testament to
Rockhopper Exploration is an oil and
gas exploration company focused on investors' trust in RKH management. Diligent financial management has also been
the North Falkland Basin in the southern
Atlantic. demonstrated with the sharing of 3D seismic costs recently announced with Desire.

% 1m 3m 12m 2009A 0.0 (2.5) (2.7) (2.8) N/A N/A
Actual 5.3 1.4 479.4
Relative* 6.1 21.7 423.6 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
Analyst
2012E 0.0 (4.0) (4.7) (2.0) N/A N/A
Ian McLelland
Sector: Aerospace & Defence Rolls-Royce Group (RR.)

Price: 616.5p
Forecast net cash (£m) 1146.0 Following the Trent 900 incident on the Qantas A380, the last month has demonstrated that
Market FULL Rolls-Royce can cope both operationally and financially with the potential fall-out from the
Share price graph (p) 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
Company description
With the business well balanced across civil aerospace, defence, marine and energy markets,
Rolls-Royce is a global power systems
business with activities in Civil RR's long-term future is driven by the recovery in the economic climate. With civil air traffic
Aerospace, Defence, Marine and
Energy. The business supplies both recovering, new aircraft build rates set to increase from 2011 and global defence expenditure
original equipment (51%) and relatively stable, we view the outlook as encouraging.
aftermarket services (49%).
% 1m 3m 12m 2008A 9147.0 1127.0 880.0 36.7 16.8 9.7
Actual (2.4) 11.4 32.9
Relative* (1.6) (2.3) 20.1 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
Analyst
2011E 11423.0 1367.0 1082.0 43.7 14.1 8.8
Roger Johnston
2 December 2010 101

Edison Insight
Sector: Basic Industries RPC Group (RPC)

Price: 276.8p
Forecast net debt (£m) 80.0 RPC is poised between the tail-end of its business improvement programme and a more
Market FULL forceful growth profile to be defined by the cycle and/or the application of balance sheet
Share price graph (p) 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
Company description
years. With demand weakening, prices are expected to be depressed. Plastic as a packaging
RPC Group manufactures rigid plastic
packaging containers and related material is the fastest growing of the high volume materials. This appears driven by plastic's
products for a diverse range of
industries. It has manufacturing sites fundamental innovation potential and is a trend we expect to continue, with regulation the
across Europe and is c 60% exposed to biggest risk.
the food industry and related sectors.
% 1m 3m 12m 2009A 769.1 69.1 23.5 16.5 16.8 2.4
Actual (9.6) 2.7 28.3
Relative* (8.8) 8.6 15.9 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
Analyst
2012E 765.4 88.1 44.8 33.2 8.3 3.4
Toby Thorrington
Sector: Electrical Equipment Sarantel Group (SLG)

Price: 1.6p
Forecast net debt (£m) N/A Sarantel reported FY10 results on 22 November: revenues came in below our forecast but net
Market AIM losses were in line due to strong cost control. Sarantel has recently reported production orders
Share price graph (p) 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
Company description
well-designed antennas in handsets. The wireless market is forecast to show volume growth in
Sarantel develops and manufactures
miniature filtering antennas for mobile, CY10 and penetration of GPS in handsets is forecast to continue as smartphones continue to
wireless and handheld devices.
gain share. Demand for consumer GPS applications is returning to normal levels after a period
of weakness.
% 1m 3m 12m 2009A 2.8 (1.8) (2.8) (1.4) N/A N/A
Actual (13.3) (27.8) (31.6)
Relative* (12.7) (42.4) (38.2) 2010A 2.9 (1.7) (2.8) (0.9) N/A N/A
Analyst
Katherine Thompson
102 2 December 2010

Edison Insight
Sector: Travel & Leisure Sceptre Leisure (SCEL)

Price: 26.5p
Forecast net debt (£m) 13.0 Sceptre has just announced another bolt-on acquisition (for £1.2m cash and shares). The 925
Market AIM amusement machines being acquired (in 277 leisure sites) should slot straight into its national
Share price graph (p) 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
Company description
the forthcoming VAT rise will not help consumer spending. The industry is fragmented with 570
Sceptre Leisure is the second largest
supplier of amusement machines to the small operators, many financially stretched, presenting earnings accretive acquisition
UK pub sector. It also supplies lottery
vending machines and other gaming opportunities that can be easily integrated into Sceptre's national depot infrastructure.
products to UK social clubs.

% 1m 3m 12m 2009A 39.2 13.0 1.9 3.7 7.2 0.7
Actual (10.2) (18.5) (56.9)
Relative* (9.5) (44.7) (61.1) 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
Analyst
2012E 42.1 13.0 2.8 3.7 7.2 1.2
Jane Anscombe
Sector: Technology SciSys (SSY)

Price: 37.5p
Forecast net cash (£m) 3.0 Following the governments spending review, Defra, which includes the Environment Agency
Market AIM (one of SciSys's main customers), had its budget cut by 30%. However, the effect on SciSys'
Share price graph (p) 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
Company description
application support across these markets. Recent growth has been led by the government and
SciSys provides a range of professional
services in support of the planning, Media Broadcast divisions. SciSys now has a more balanced portfolio, with many of the
development and use of computer
systems primarily in the space, group’s public sector contracts in key priority areas where there is less scope for discretionary
government and media/ broadcast spending cuts and roughly half of group revenues now in Europe.
sectors.
% 1m 3m 12m 2008A 38.1 1.5 0.8 3.9 9.6 7.5
Actual (7.4) (23.9) (13.8)
Relative* (6.7) (30.0) (22.1) 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
Analyst
2011E 44.3 3.1 2.2 6.2 6.0 3.9
Richard Jeans
2 December 2010 103

Edison Insight
Sector: Alternative Energy SeaEnergy (SEA)

Price: 21.0p
Forecast net debt (£m) 5.9 The disposal of Sea Energy Renewables Limited (SERL) is said to be progressing well and is
Market AIM expected to conclude by the year end. Extending the loan facility with LC Capital Master Fund
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
SeaEnergy, is a UK-based company
with a 25% stake in three of the largest The Offshore Valuation Group estimates that the UK has offshore resources to support up to
scale offshore wind projects in
Scotland. The majority partners are 116GW of fixed and a further 350GW of floating wind farms.
Scottish and Southern Energy and
EDPR.
% 1m 3m 12m 2008A 0.0 (3.0) (3.3) (8.0) N/A N/A
Actual (2.3) (15.2) (44.7)
Relative* (1.6) (44.4) (50.1) 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
Analyst
2011E 0.0 (4.6) (5.3) (7.6) N/A N/A
Graeme Moyse
Sector: Technology Seeing Machines (SEE)

Price: 3.6p
Forecast net cash (A$m) 4.8 In November, SM announced a contract to install the DSS driver monitoring equipment in the
Market AIM haul truck fleet at a mine in Chile. The new contract, which is for an existing client, includes the
Share price graph (p) 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),
Company description
healthcare (TrueField Analyzer), and computer gaming (faceAPI). While the automotive fleet
Seeing Machines is a technology
company focused on designing opportunity has been deferred by the weak US economy, the mining sector deals have
vision-based human machine interfaces.
diversified the opportunity and we note the market size in both global road transport and
mining operations is substantial.
% 1m 3m 12m 2009A 4.9 (0.5) (0.5) (0.2) N/A 70.4
Actual 3.6 16.0 123.1
Relative* 4.4 (4.8) 101.6 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
Analyst
2012E 10.8 2.0 1.9 0.4 14.5 12.1
Richard Jeans
104 2 December 2010

Edison Insight
Sector: Financials Share plc (SHRE)

Price: 27.5p
Forecast net cash (£m) 11.3 Share plc has continued its multi-year market share gains and saw customer relationship
Market AIM income up 20% (H110 on H109). Q3 market share data saw particularly big gains. Returning
Share price graph (p) 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
Company description
many more years of above market growth. Its record shows the model delivers strong
Share plc owns The Share Centre and
Sharefunds. The Share Centre is a operational gearing. There should be long-term market growth from the demographics of an
self-select retail stockbroker that also
offers share services for corporates and ageing and higher net worth population. The retail market may also see a step change when
employees. A high proportion of income the government 'popularises' its holdings in banks.
is derived from stable fee and interest
based revenues. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 12.0 1.4 2.4 1.07 25.7 33.3
Actual (3.5) 3.8 (3.5)
Relative* (2.8) (8.0) (12.8) 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
Analyst
2011E 14.7 2.4 2.7 1.42 19.4 17.8
Mark Thomas
Sector: Financials Sigma Capital (SGM)

Price: 9.0p
Forecast net cash (£m) 2.9 Sigma’s FY10 interims showed that conditions in the group’s primary operations, venture
Market AIM capital and property, continue to be difficult. The H1 revenues decline from services reflects
Share price graph (p) 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
Company description
sustainable/renewable energy sector is receiving considerable investor and government
Sigma Capital is a specialist asset
management and advisory group that support. The IPD monthly index of UK commercial property has risen in each of the past 12
focuses on three areas: venture capital
(VC) fund management, property months to October 2010 for a total return of 20.4%, although the rate of increase has begun
investment management and university to slow.
IP commercialisation (IPC).
% 1m 3m 12m 2008A 4.7 (0.7) (0.5) (1.5) N/A N/A
Actual (25.0) (29.4) (40.0)
Relative* (24.4) (39.8) (45.8) 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
Analyst
Martin Lister
2 December 2010 105

Edison Insight
Sector: Pharma & Healthcare Sinclair Pharma (SPH)

Price: 30.8p
Forecast net cash (£m) 0.7 Sinclair is at a turning point in its recovery, having made headway on gross margin
Market FULL improvement as indicated by its November IMS. It has undergone radical change in the last 12
Share price graph (p) 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
Company description
The company aims to build European critical mass in the domains of dermatology and oral
Sinclair Pharma is a UK-based speciality
company with direct marketing health. Industry benefits from demographic growth trends and Sinclair has a mix of OTC and
operations in France, Italy, Spain and
Germany and distributors in c 85 other more specialised brands. However, it must align its costs with the industry average to
countries. It sells 45 products mostly in compete with peers.
dermatology, oral health and wound
care. Y/E Jun Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 30.4 2.8 1.0 1.5 20.5 N/A
Actual 13.9 14.9 (11.5)
Relative* 14.8 4.8 (20.0) 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
Analyst
2012E 36.6 0.5 0.4 0.4 77.0 N/A
Mick Cooper
Sector: Mining Sirius Minerals (SXX)

Price: 8.0p
Forecast net cash (£m) 0.3 Drilling commenced at the company's North Dakota project early last month. Drilling is
Market AIM expected to be completed by end-December, by which time the company will know the extent
Share price graph (p) 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.
Company description
INDUSTRY OUTLOOK
Sirius Minerals is a diversified mining
and exploration holding company with Vancouver FOB muriate of potash currently costs US$320/t.
salt and potash interests in North
America and Australia and initiatives in
Compressed Air Energy Storage and
Carbon Sequestration.
% 1m 3m 12m 2009A 0.0 (0.3) (0.3) (0.4) N/A N/A
Actual 12.3 93.9 28.0
Relative* 13.2 146.7 15.7 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
Analyst
Charles Gibson
106 2 December 2010

Edison Insight
Sector: Property Sirius Real Estate (SRE)

Price: €0.30
Forecast net debt (€m) 281.0 The trading update showed progress on targeted occupancy and efficiency improvements;
Market AIM lower overheads, better cost recovery from tenants and reduced voids. Recent investment in
Share price graph (€) 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
Company description
Sirius's properties are aimed at Germany's SMEs. The local economy has produced the
Sirius Real Estate is engaged in the
investment in and development of strongest eurozone performance, ie 2.2% second quarter growth on the back of resurgent
commercial property to provide flexible
workspace in Germany. export orders, assisted by domestic demand, leading to GDP growth forecasts of around 3%
for the current year.
% 1m 3m 12m 2009A 43.7 18.8 4.9 1.40 21.4 4.5
Actual (5.5) 20.0 5.3
Relative* (4.8) 2.3 (4.9) 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
Analyst
2012E 45.5 23.1 3.8 1.12 26.8 3.7
Roger Leboff
Sector: Pharma & Healthcare SkyePharma (SKP)

Price: 35.5p
Forecast net debt (£m) 106.4 SkyePharma’s near-term investment case hinges on the EU commercialisation of Flutiform; the
Market FULL MAA is under review and approval is possible in mid-2011. This is combined with its ability to
Share price graph (p) 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
Company description
Flutiform remains the possible fourth combination ICS/LABA to reach the market in asthma,
SkyePharma is a drug delivery
specialist, using its technologies to after GSK's Advair and AstraZeneca’s Symbicort. Merck & Co is due to launch Dulera after
develop new formulations of established
drugs, bringing clinical and life cycle receiving FDA approval in June.
management benefits.

% 1m 3m 12m 2008A 62.2 17.1 1.9 11.2 3.2 0.8
Actual 3.6 (8.4) (60.9)
Relative* 4.5 (10.1) (64.7) 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
Analyst
2011E 60.3 22.6 7.6 27.2 1.3 0.4
Robin Davison
2 December 2010 107

Edison Insight
Sector: Pharma & Healthcare Sosei Group (4565:JP)

Price: ¥97000.00
Market cap: ¥11438m INVESTMENT SUMMARY
Forecast net cash (¥m) 1558.0 Partner Novartis has confirmed that key value drivers NVA237 and QVA149 are on track to
Market JSE meet market expectations for launch (2012 and 2013 respectively), with first top-line results
Share price graph (¥) 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
Company description
Emergency contraceptive SOH-075 may provide further upside as Japanese approval is
Sosei Group Corporation is a
Japan-based biopharma focused on possible in Q111 (NDA filed Sept 2009); Sosei currently generates over ¥130m pa from
R&D and drug re-profiling. It is active in
licensing – both its proprietary Norlevo (SOH-075) sold by Sandoz in Australia.
programmes, and external rights for the
Japanese market.
Price performance (¥m) (¥m) (¥m) (¥) (x) (x)
% 1m 3m 12m 2009A 153.0 (2106.0) (2067.0) (19938.8) N/A N/A
Actual (3.3) 33.2 15.2
Relative* (8.7) 5.4 10.3 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
Analyst
Lala Gregorek
Sector: Travel & Leisure Sportingbet (SBT)

Price: 59.1p
Forecast net cash (£m) 36.0 Q1 results (24 November) showed further progress with EBITDA up 17% despite
Market FULL unexceptional sports margins. Our full-year estimates are unchanged. Sportingbet continues to
Share price graph (p) 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
Company description
specifically regulate and license online gambling (including Denmark, Germany, Spain and
Sportingbet is an online sports betting
and gaming operator. Its main markets Greece) and while this may produce a temporary dip in profits (due to tax and marketing
are in Europe and Australia. In October
2006 it sold its US-facing business and costs), rapid market growth should soon offset this, as in Australia. Economies of scale also
stopped accepting bets from US suggest the sector is likely to see continuing M&A activity.
residents.
Y/E Jul Revenue EBITDA PBT EPS (fd) P/E P/CF
% 1m 3m 12m 2009A 164.0 39.7 31.5 6.0 9.9 15.6
Actual (9.1) (3.8) (18.7)
Relative* (8.3) (13.0) (26.5) 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
Analyst
2012E 230.0 52.5 40.0 6.7 8.8 7.1
Jane Anscombe
108 2 December 2010

Edison Insight
Sector: Technology SQS Software Quality Systems AG (SQS)

Price: 192.0p
Forecast net cash (€m) 3.7 H110 results showed that SQS has returned to revenue growth, with demand strength in both
Market AIM the traditional project-based business and managed testing services. Investment in headcount
Share price graph (p) 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
Company description
failure rate of IT projects. Market surveys suggest that around two-thirds of IT projects either
SQS is the largest independent provider
of software testing and quality fail or fall behind time and budget, partly reflecting that around 90% of testing is carried out
management services. The majority of
its revenues are derived from in-house. As the global market leader in independent testing, SQS is well placed to benefit.
consultancy services to a client base
including a long list of blue-chip
customers. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 142.9 17.3 13.1 43.2 5.2 3.0
Actual 4.1 7.9 (2.8)
Relative* 4.9 (9.2) (12.2) 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
Analyst
2011E 159.7 16.9 11.4 28.8 7.8 4.1
Katherine Thompson
Sector: Technology StatPro Group (SOG)

Price: 117.0p
Forecast net debt (£m) 4.4 In a short trading update in October, StatPro announced that Q3 trading was in line with
Market AIM management’s expectations. This is despite challenging market conditions. The company also
Share price graph (p) 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
Company description
lower interest rate environment should help underpin retail demand for equities and bonds, and
StatPro Group provides asset
management software and asset pricing therefore the longer-term industry growth profile. In addition, competitive, cost and regulatory
to the global investment industry.
pressures all require asset managers to maintain and upgrade their reporting and risk
management systems.
% 1m 3m 12m 2008A 27.9 6.8 4.7 7.0 16.7 7.8
Actual (3.7) 6.4 14.7
Relative* (3.0) (4.4) 3.7 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
Analyst
2011E 34.7 9.5 8.0 9.9 11.8 6.0
Richard Jeans
2 December 2010 109

Edison Insight
Sector: Support Services Stobart Group (STOB)

Price: 143.2p
Forecast net debt (£m) 91.1 Interims demonstrated Stobart’s ability to sustain growth through the recession despite
Market FULL changes in customer behaviour and with challenging conditions in areas such as Network Rail.
Share price graph (p) 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
Company description
pretty insensitive to the UK slowdown. With a greater focus on more environmental
Stobart Group operates a multimodal
transport business, including Eddie transportation and the creation of a Biomass JV, we believe Stobart's multi-modal model is set
Stobart (road haulage, 82%), Stobart
Rail (14%), Stobart Ports (3%) and to become increasingly attractive, supported by asset developments.
Stobart Air (1%).
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF

% 1m 3m 12m 2009A 431.8 40.9 23.1 7.7 18.6 14.0
Actual (1.2) 2.8 14.6
Relative* (0.5) (11.1) 3.5 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
Analyst
2012E 558.0 59.2 39.2 10.8 13.3 7.4
Roger Johnston
Sector: Pharma & Healthcare SuperGen (SUPG)

Price: US$2.78
Forecast net cash (US$m) 113.1 SuperGen has confirmed plans to initiate a Phase II study with its DNA repair
Market NASDAQ suppressor/multi-tyrosine kinase inhibitor, amuvatinib, in small cell lung cancer (SCLC). The
Share price graph (US$) 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
Company description
kinase, cell signalling and DNA methyltransferase inhibitors. Such compounds are attractive as
SuperGen is a NASDAQ-listed biotech
firm focused on the development of licensing candidates to major pharmaceutical companies and can often be licensed at high
kinase, cell signalling and DNA
methyltransferase inhibitors for cancer values at a relative early stage.
indications.

% 1m 3m 12m 2008A 38.4 (1.0) (3.0) (5.1) N/A N/A
Actual (1.4) 39.0 2.6
Relative* (1.7) 5.3 (4.2) 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
Analyst
2011E 52.7 10.1 9.4 14.9 18.7 16.8
Robin Davison
110 2 December 2010

Edison Insight
Sector: Basic Industries Symphony Environmental Tech. (SYM)

Price: 13.5p
Forecast net debt (£m) 0.5 Symphony shares fell 10% over the last month, after a strong run that saw shares up 35%
Market AIM over the last six months. The company exhibited its d2w product at the K Show in Dusseldorf
Share price graph (p) 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.
Company description
Symphony designs and globally markets
a special formulated additive that makes
polythene and polypropylene
oxo-biodegradable. The company also
sells oxo-biodegradable finished
product, such as carrier bags.
% 1m 3m 12m 2008A 5.4 (0.1) (0.4) 0.3 45.0 N/A
Actual (8.5) (1.8) 14.9
Relative* (7.8) 14.0 3.8 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
Analyst
Neil Shah
Sector: Pharma & Healthcare TopoTarget (TOPO)

Price: DKK3.35
Market cap: DKK444m INVESTMENT SUMMARY
Forecast net cash (DKKm) 202.3 TopoTarget's prospects are closely tied to those of its lead drug, belinostat. It is in a pivotal
Market OMX Phase II trial for peripheral T-cell lymphoma (PTCL) and could be approved in 2012. The drug
Share price graph (DKK) 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
Company description
(HDACi), which have considerable potential as oncology products because of their epigenetic
TopoTarget is a Danish drug
development and marketing company effects. Two such drugs have been approved and nine others are in clinical development.
focused on the field of oncology. Its lead
product is belinostat and it has However, belinostat has a favourable safety profile and could be the first HDACi approved for
out-licensed its North American and the treatment of solid tumours.
India rights to Spectrum.
Price performance (DKKm) (DKKm) (DKKm) (DKK) (x) (x)
% 1m 3m 12m 2008A 43.9 (192.9) (306.1) (4.68) N/A N/A
Actual (9.5) (4.3) 29.3
Relative* (11.2) (24.1) (1.5) 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
Analyst
2011E 90.6 (42.2) (50.2) (0.36) N/A N/A
Mick Cooper
2 December 2010 111

Edison Insight
Sector: Oil & Gas Tower Resources (TRP)

Price: 4.0p
Forecast net cash (US$m) 1.4 Two key items of Tower newsflow are eagerly awaited. The first relates to securing a farm-in
Market AIM partner for the Ugandan interests with a view to undertaking a 2-D seismic survey in early 2011
Share price graph (p) 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
Company description
south Atlantic. Arguably, there are positive implications, albeit tentative, for Tower offshore
Tower Resources plc is an AIM-listed,
London-based, independent oil and gas Namibia. More drilling success in the Falklands could stimulate interest in offshore Namibia
exploration company with a regional
focus on sub-Saharan Africa. plays. Significantly, the Brazilian junior HRT has recently raised $1.5bn partly to finance
exploration activity offshore Namibia.
% 1m 3m 12m 2008A 0.0 (1.3) (1.2) (0.2) N/A N/A
Actual 17.4 33.9 65.3
Relative* 18.3 176.2 49.4 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
Analyst
2011E 0.0 (2.8) (2.8) (0.3) N/A N/A
Peter Dupont
Sector: Travel & Leisure Travelzest (TVZ)

Price: 17.5p
Forecast net debt (£m) N/A Travelzest looks to be managing its restructuring successfully in uncertain conditions and
Market AIM without detriment to top-line growth. In the half to April, sales at its North American operations,
Share price graph (p) 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,
Company description
there is renewed concern that the massive capacity cuts of recent years may not deliver the
Travelzest is an online travel group
offering specialist travel programmes. 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
% 1m 3m 12m 2008A 44.3 5.4 3.9 6.3 2.8 N/A
Actual (18.6) (31.4) 75.0
Relative* (18.0) (12.6) 58.1 2009A 41.5 5.8 4.1 5.8 3.0 11.0
Analyst
Richard Finch
112 2 December 2010

Edison Insight
Sector: Property Treasury China Trust (TCT)

Price: S$1.57
Market cap: S$377m INVESTMENT SUMMARY
Forecast net debt (S$m) 575.0 Operational progress in Q3 included an increase in aggregate portfolio occupancy to 86.9%
Market Singapore Exchange (end Q2: 83.6%). Other news included refinance of the City Center debt facility on improved
Share price graph (S$) terms and including development debt for CC3. It also reported 68% occupancy for its newly
refurbished retail podium at Central Plaza, with the property well on track for full occupation. In
November, TCT secured a new strategic partnership that will extend the portfolio into mainly
retail property in central and western China. A commitment to pay 2.5c quarterly dividends put
the units on a 6.4% prospective yield which, with the steep discount to NAV, adds weight to
the case that TCT is undervalued.
INDUSTRY OUTLOOK
Company description
The PRC government's determination to curb inflation pressure and property speculation
TCT's main objective is to maximise
capital growth from a portfolio of prompted its fifth increase in capital reserve requirements this year. This followed October's
properties in China. The focus is on
large scale development opportunities in 0.25% increase in the benchmark interest rate. Much of this is aimed at residential property,
the commercial sector and on income outside of TCT's business model.
producing assets such as office,
logistics and retail properties. Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
Price performance (S$m) (S$m) (S$m) (c) (x) (x)
% 1m 3m 12m 2008A 80.9 4.3 (49.4) (29.0) N/A N/A
Actual 0.0 4.7 N/A
Relative* 0.1 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
Analyst
2011E 85.0 26.8 (15.5) (7.7) N/A 11.9
Roger Leboff
Sector: Support Services Tribal Group (TRB)

Price: 35.5p
Forecast net debt (£m) 29.6 Bid discussions have been terminated and we are now reinstating forecasts, albeit at
Market FULL substantially lower levels. This reflects the materially reduced UK government advisory work
Share price graph (p) 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
Company description
Post the CSR, efficiency in service delivery and intelligent investment in technology remain key
Tribal provides consultancy, support
and delivery services focused on priorities given curtailed budgets. Radical changes to the role of the state in the provision of
improving the delivery of public services,
primarily within the UK. public services could present Tribal with myriad opportunities, such as working with GP
practices in their envisaged commissioning role.
% 1m 3m 12m 2008A 234.0 24.1 18.6 14.7 2.4 1.2
Actual (42.5) (53.6) (44.3)
Relative* (42.1) (53.5) (49.7) 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
Analyst
2011E 170.1 13.5 9.0 6.8 5.2 2.9
2 December 2010 113

Edison Insight
Sector: Engineering Trifast (TRI)

Price: 51.0p
Forecast net debt (£m) 5.1 As emphasised by the recent interim statement, Trifast is well past the early phases of its
Market FULL restructuring. The new management team, reinstalled 18 months ago, is now looking ahead
Share price graph (p) 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
Company description
developing their own local facilities or supply routes. They have also created effective logistical
Trifast is a leading global manufacturer
and distributor of industrial fasteners. services and shifted the emphasis towards more complex products to increase value added.
Principal operations are in Europe and
South-East Asia, with a toehold in the The global recession has caused pain across the sector, but provides consolidation
US. opportunities for stronger businesses.
% 1m 3m 12m 2009A 104.9 4.5 2.5 1.15 44.3 7.3
Actual 23.6 27.5 114.7
Relative* 24.6 64.4 94.1 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
Analyst
2012E 108.0 5.9 4.0 3.40 15.0 9.6
Nigel Harrison
Sector: Aerospace & Defence Ultra Electronics (ULE)

Price: 1638.0p
Forecast net cash (£m) 1.8 Ultra Electronics is a steady-growth business that has provided a 17% CAGR in total
Market FULL shareholder return since flotation in 1996. This has been delivered through both organic and
Share price graph (p) 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
Company description
frequent upgrade cycles. In addition, we feel the key themes to come out of the UK's SDSR
Ultra Electronics is a global specialist
aerospace & defence electronics play to Ultra's strengths surrounding Battlespace IT and security. We also feel that Ultra
company with operations across three
divisions: tactical & sonar systems (43% benefits from its geographic strategy with 53% of sales to the US and only 6% direct to the UK
2009 sales); aircraft & vehicle systems MoD.
(24%); and information & power
systems (33%). Y/E Dec Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 515.3 84.1 72.2 80.1 20.4 11.8
Actual (11.5) 0.9 33.6
Relative* (10.8) (6.1) 20.7 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
Analyst
2011E 765.0 125.7 112.2 116.3 14.1 9.4
Roger Johnston
114 2 December 2010

Edison Insight
Sector: Aerospace & Defence Umeco (UMC)

Price: 450.0p
Forecast net debt (£m) 80.3 Umeco's interims saw revenue increased by 9%, PBT by 12%, EPS up 18% and the dividend
Market FULL raised by 4%. There was some margin pressure during the period due to higher raw material
Share price graph (p) 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
Company description
60% of the business is in the higher visibility Supply Chain. While 2010 results were hit by
Umeco is an international provider of
supply chain services and advanced lower composite revenues, with delays in aerospace and automotive and wind energy markets
composite materials primarily to
aerospace and defence (70%), wind essentially grinding to a halt. The recent interims highlighted these markets have moved into a
energy (5%), motor sport (7%), marine strong recovery mode.
(4%) and other industries (14%).
% 1m 3m 12m 2009A 410.9 39.7 28.5 39.7 11.3 7.9
Actual 3.9 4.7 52.5
Relative* 4.7 13.3 37.9 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
Analyst
2012E 459.3 45.1 31.5 46.3 9.7 5.6
Roger Johnston
Sector: Pharma & Healthcare Vectura (VEC)

Price: 68.5p
Forecast net cash (£m) 58.3 Vectura’s strategic focus is on developing respiratory medicine/inhalation technologies and
Market FULL securing new partners for these assets. The investment case remains geared to the success of
Share price graph (p) 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
Company description
Vectura offers exposure to potential generic ICS/LABA asthma combinations (despite US
Vectura Group is a product
development company focused on the regulatory complexity) and novel LAMA (NVA237) and LABA/LAMA combination (QVA149),
development of a range of inhaled
therapies, principally for the treatment of which could become the first such therapies to reach the blockbuster COPD market.
respiratory diseases. Its goal is to
improve patients’ lives and generate
value for its stakeholders. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 31.2 (7.2) (7.5) (1.4) N/A N/A
Actual 10.5 38.4 (6.4)
Relative* 11.3 57.7 (15.4) 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
Analyst
2012E 23.4 (18.8) (19.6) (5.0) N/A N/A
Lala Gregorek
2 December 2010 115

Edison Insight
Sector: Pharma & Healthcare Vernalis (VER)

Price: 31.5p
Forecast net cash (£m) 28.8 With £33.6m in cash at end-October, Vernalis remains well positioned to progress and expand
Market FULL its R&D pipeline through licensing and acquisition. However, the announcement that
Share price graph (p) 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
Company description
entry of in-house programmes, V158866 and V158411 plus Biogen’s A2A antagonist back-up.
Vernalis is a UK company with an early
to mid-stage development pipeline of AUY922 proof of concept and full recruitment of the V3381CC chronic cough Phase II is
projects targeting indications in the CNS
area and cancer. expected by end-2010. Additional projects could be generated from the Cambridge research
facility.
% 1m 3m 12m 2008A 54.8 (9.3) (19.5) (128.0) N/A 1.0
Actual (33.0) (3.1) (61.7)
Relative* (32.5) (24.5) (65.4) 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
Analyst
2011E 8.9 (6.5) (6.6) (4.9) N/A N/A
Lala Gregorek
Sector: General Retailers Vertu Motors (VTU)

Price: 28.5p
Forecast net cash (£m) 15.1 The Vertu strategy is to develop regional clusters of franchises with chosen OEM partners in
Market AIM the volume sector of the motor distribution market. The franchises are led by motivated teams,
Share price graph (p) 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
Company description
Vertu was established to build a major
motor vehicle distribution group. This is optimistic, but used car values have recently started to drift downwards. Nevertheless,
being achieved through the completion
and subsequent improved performance indications from most leading groups suggest they will deliver profits progress in both 2010
of a series of acquisitions. and 2011.
Y/E Feb Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 760.8 7.9 3.5 3.3 8.6 1.4
Actual (12.3) 8.6 (26.0)
Relative* (11.6) (27.8) (33.1) 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
Analyst
2012E 1000.0 12.0 8.1 3.0 9.5 4.2
Nigel Harrison
116 2 December 2010

Edison Insight
Sector: Pharma & Healthcare Vivus (VVUS)

Price: US$6.34
Forecast net cash (US$m) 129.3 Vivus remains focused on its response to the FDA for Qnexa following concerns raised relating
Market NASDAQ to teratogenicity (both a risk assessment and a mitigation strategy) and cardiovascular issues
Share price graph (US$) (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
Company description
Contrave, it is currently unpartnered. In Phase III it showed the most impressive efficacy
Vivus, Inc is a pharmaceutical company
dedicated to the development and (placebo-adjusted weight loss of 9.4% vs 5.2% for Contrave and 3.6% for lorcaserin).
commercialisation of next-generation
therapeutic products addressing Lorcaserin also received a CRL, while Contrave will face the FDA AdCom on 7 December.
obesity, diabetes and sexual health.

% 1m 3m 12m 2008A 102.2 0.2 (5.2) (8.19) N/A N/A
Actual (1.9) 17.4 (25.0)
Relative* (2.2) (51.2) (29.9) 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
Analyst
Robin Davison
Sector: Electrical Equipment Volex Group (VLX)

Price: 313.0p
Forecast net debt (£m) 8.1 Initial recovery phase benefits were clearly visible in strong H1 results, which triggered another
Market FULL round of upgrades primarily driven by higher revenues. The trading environment is considered
Share price graph (p) 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
Company description
remains the most active region.
Volex Group is a leading global provider
of power products and interconnect
cable assemblies. It supplies data and
telecom equipment and healthcare and
industrial products to large OEMs of
consumer electrical and electronic
devices. Y/E Mar Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 265.1 14.0 8.3 10.9 28.7 10.3
Actual (2.8) 34.6 233.0
Relative* (2.0) 115.9 200.9 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
Analyst
2012E 322.0 21.3 17.5 22.4 14.0 10.0
Toby Thorrington
2 December 2010 117

Edison Insight
Sector: Pharma & Healthcare WaferGen (WGBS)

Price: US$1.41
Forecast net cash (US$m) 1.8 WaferGen has launched its SmartChip system with 11 early-access customers, including
Market OTC prestigious universities such as Pittsburgh Medical Centre, Kyoto and Ghent and a distribution
Share price graph (US$) 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
Company description
enabling high-throughput quantitative analysis. Multi-sample 384-well capabilities are now
WaferGen Biosystems Inc. is a leader in
the development, manufacture and sale available (at an extra $75k). Two gene expression profiling SmartChips were launched on 10
of state-of-the-art systems for gene
expression, genotyping, cell biology and June: a cancer pathway chip and a miRNA chip (miRNA are gene regulatory molecules). Each
stem cell research for the life science chip tests 1,000 genes using sensitive quantitative PCR.
and pharmaceutical industries.
% 1m 3m 12m 2008A 0.6 (7.7) (8.0) (33.0) N/A N/A
Actual 2.9 10.2 (21.7)
Relative* 2.6 (20.9) (26.9) 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
Analyst
2011E 5.4 (9.8) (10.4) (31.2) N/A N/A
John Savin
Sector: Pcare and household prd Walker Greenbank (WGB)

Price: 40.3p
Forecast net debt (£m) 2.6 Trading conditions remain challenging, especially in the US and continental Europe, but the
Market AIM Walker Greenbank brands continue to progress as a result of consistent investment in design
Share price graph (p) 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
Company description
manufacturing facilities have closed down. Manufacture for the volume segment of the market
Walker Greenbank is a vertically
integrated producer and distributor of has largely moved overseas. However, success is being delivered delivered by operators able
high-quality wallcoverings and furnishing
fabrics. Leading brands include Zoffany, to differentiate themselves from competition by consistently offering innovative and high-quality
Harlequin, Morris and Sanderson. design and products.
Y/E Jan Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 63.7 5.8 3.2 4.29 9.4 6.2
Actual (5.8) 36.4 117.6
Relative* (5.1) 12.4 96.6 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
Analyst
2012E 71.5 7.0 5.0 6.43 6.3 5.8
Nigel Harrison
118 2 December 2010

Edison Insight
Sector: Support Services Westminster Group (WSG)

Price: 20.8p
Forecast net cash (£m) 2.1 In October, Westminster announced it had raised £1m from a new strategic investor through
Market AIM the issue of 400,000 shares at 25p/share, representing 16.49% of the enlarged share capital.
Share price graph (p) 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
Company description
UK and overseas customers, a core activity that represents two-thirds of turnover, which we
Westminster is predominantly an
established niche player in the provision believe will remain robust. The balance comprises the provision of close protection services
of advanced technical security solutions,
along with close protection services and and training, as well as a 24/7 alarm receiving centre and control room.
training.

% 1m 3m 12m 2008A 5.5 0.2 0.2 1.5 13.9 N/A
Actual (9.8) (5.7) (34.1)
Relative* (9.1) (34.3) (40.5) 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
Analyst
2011E 11.0 1.3 1.2 3.6 5.8 4.3
Roger Johnston
Sector: Pharma & Healthcare WILEX (WL6)

Price: €4.99
Forecast net cash (€m) 2.7 WILEX’s recent acquisitions of Heidelberg Pharma and Oncogene Science have created a
Market FRA larger entity and should pave the way for a fundraising, which should put it in a strong position
Share price graph (€) 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
Company description
tumours. Rencarex is targeted at adjuvant treatment of non-metastatic kidney cancer,
WILEX is a biopharmaceutical company
listed on the Frankfurt Stock Exchange. following surgical removal of the kidney. Rencarex is the leading product in development for
Its aim is to develop drugs and
diagnostic agents with a low side effect this specific indication, for which no product is currently approved.
profile and targeted treatment of
different types of cancer as well as for
early detection of tumours. Y/E Nov Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2008A 3.2 (20.9) (20.0) (167.4) N/A N/A
Actual 2.9 16.7 14.1
Relative* (0.6) 1.2 (6.4) 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
Analyst
2011E 1.5 (25.0) (25.2) (137.1) N/A N/A
Robin Davison
2 December 2010 119

Edison Insight
Sector: Technology Xaar (XAR)

Price: 226.0p
Forecast net cash (£m) 21.5 As a pivotal figure in the global transition to digital printing, Xaar’s growth story should have a
Market FULL long way to run. The ceramics market is embracing the technology most aggressively at
Share price graph (p) 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
Company description
ceramics market is the primary driver, where manufacturers are looking to make significant
Xaar designs and manufactures inkjet
printheads. Its Platform 1 products are investments in expanding their digital production capacity. This opens up significant
used primarily for outdoor advertising.
Platform 3 widens the addressable incremental revenue streams for Xaar.
market to include industrial, labelling
and other applications.
% 1m 3m 12m 2008A 42.0 6.8 2.8 3.0 75.3 26.7
Actual (3.6) 52.0 145.7
Relative* (2.9) 72.2 122.0 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
Analyst
2011E 57.5 14.6 8.2 8.6 26.3 12.9
Dan Ridsdale
Sector: Oil & Gas Xcite Energy (XEL)

Price: 274.5p
Forecast net cash (£m) 23.6 Xcite's strategic aim is to become a significant heavy oil producer in the North Sea by 2014,
Market AIM through developing its Bentley field. All eyes are currently on the 9/3b-6 well flow test with
Share price graph (p) 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
Company description
Xcite plans a unique alliance financing structure to both incentivise partners while retaining a
Xcite Energy is an oil exploration and
development company, which is 100% WI. Success with Bentley could make it one of the North Sea’s largest independent
focused on the exploration and
development of heavy oil resources in players.
the North Sea on the United Kingdom
Continental Shelf.
% 1m 3m 12m 2008A 0.0 (0.9) (0.5) (0.9) N/A N/A
Actual 70.5 302.2 603.9
Relative* 71.8 248.9 536.1 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
Analyst
2011E 66.4 30.6 30.8 20.8 13.2 17.5
Ian McLelland
120 2 December 2010

Edison Insight
Sector: Electrical Equipment XP Power (XPP)

Price: 1003.0p
Forecast net debt (£m) 18.0 XP's 4 October IMS confirmed that the company continued to see robust trading through Q3
Market FULL with business strong across the board. XP continues to gain market share as customer
Share price graph (p) 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
Company description
The three end-markets supplied by XP are showing differing rates of recovery. Healthcare
XP Power is a developer and designer
and manufacturer of power control equipment manufacturers are reporting bookings growth and improving book-to-bill ratios after
solutions with a production facility in
China and design, service and sales many quarters of weak bookings. Technology customers have rebounded strongly after a
teams across the US, Europe and Asia. dismal 2009, while the industrial sector is starting to show signs of improved activity.
% 1m 3m 12m 2008A 69.3 10.9 8.0 34.8 28.8 20.0
Actual (2.1) 30.3 157.2
Relative* (1.4) 49.7 132.4 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
Analyst
2011E 95.0 20.8 17.5 74.6 13.4 9.8
Katherine Thompson
Sector: Pharma & Healthcare YM BioSciences (YM)

Price: C$1.82
Forecast net cash (C$m) 18.5 CYT387 is the most advanced unpartnered JAK1/2 inhibitor in development. Initial data from
Market TSX the Phase I/II MPN study has been positive, with more detailed results to be presented at ASH
Share price graph (C$) 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
Company description
Erbitux. Nimotuzumab has shown a reduced incidence of side effects common to Erbitux and
YM BioSciences is an oncology-focused
business developing compounds Vectibix: a potential competitive advantage. Phase I/II data from Incyte/Novartis’s twice-daily
licensed from academia and acquired
through company takeovers. Its stock is JAK1/2 inhibitor INCB18424 is promising; although preclinical data review suggests CYT387
listed on Amex and the Toronto stock has comparative potency but with potentially an improved therapeutic window and dosing.
exchange.
% 1m 3m 12m 2009A 4.5 (12.6) (11.6) (20.1) N/A N/A
Actual (14.9) 35.8 46.8
Relative* (16.3) 15.6 30.2 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
Analyst
2012E 0.4 (23.9) (23.7) (28.1) N/A N/A
Lala Gregorek
2 December 2010 121

Edison Insight
Sector: Media & Entertainment YouGov (YOU)

Price: 45.8p
Forecast net cash (£m) 17.8 YouGov is now back on a growth trend after a difficult couple of years, with the new CEO
Market AIM focusing on building on the group’s core strengths. Investment in a technology platform and
Share price graph (p) 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.
Company description
Buyers’ and providers’ confidence, though improving, is still brittle. There has been a little
YouGov is a professional research and
consulting organisation, pioneering the M&A, mostly earlier in the year (Ipsos/OTX, IMS) and much noise around the development of
use of the internet and information
technology to collect high quality, opportunities in social networking. WPP's Q3 statement also talks of the need to focus on "the
in-depth data for market research and application of technology and analysis of data, to the benefit of our clients and people".
stakeholder consultation.
Y/E Jul Revenue EBITDA PBT EPS P/E P/CF
% 1m 3m 12m 2009A 44.3 3.5 3.5 2.3 19.9 8.3
Actual 11.6 15.8 (10.7)
Relative* 12.5 4.0 (19.3) 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
Analyst
2012E 57.1 6.7 6.1 3.9 11.7 6.6
122 2 December 2010

Edison Insight
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 Finals

Treatt
Plastics Capital Interims
Sirius Real Estate
Tricorn Group
HarbourVest Partners Edison event, London
Tuesday 7 December Andor Technology Finals

Innovation Group
Pressure Technologies
Southern Cross Healthcare Group
Victrex
Bglobal Interims
Brulines Group
Daisy Group
Focus Solutions Group
NewRiver Retail Ltd (Reg S)
Cloud computing roundtable Edison breakfast, London
HarbourVest Partners Edison event, Edinburgh
Wednesday 8 December ATH Resources Finals

MedicX Fund
Interims
International Greetings
Kesa Electricals
Micro Focus International
Stagecoach Group
HarbourVest Partners Edison event, Glasgow/Manchester
SQS Software Quality Systems Edison event, Leeds/Manchester/Liverpool
Matchtech Edison breakfast, London
Thursday 9 December Caretech Holding Finals

Titon Holdings
Ashtead Group Interims
DS Smith
HMV Group
Park Group
Photo-Me International
HarbourVest Partners Edison event, London
Management Consulting Group Edison event, South West
Friday 10 December Ocean Power Technologies Interims

Polar Capital Holdings
Monday 13 December AssetCo Interims

Spice
2 December 2010 123

Edison Insight
Date Company Event
Tuesday 14 December 2 ergo Group Finals

Domino Printing Sciences
Infrastrata
Renovo Group
RWS Holdings
Interims
Carpetright
European Nickel
Imagination Technologies Group
Private and Commercial Finance Group
Scott Wilson
Wednesday 15 December eXpansys Interims

Supergroup
Thursday 16 December Sports Direct International Interims
Friday 17 December Jersey Electricity A Shares Finals

Alpha Strategic Interims
124 2 December 2010

Edison Insight
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
2 December 2010 125

Edison Insight
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
126 2 December 2010

Edison Insight
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
2 December 2010 127
Edison Insight
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
128 2 December 2010

Edison Insight
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Insight

Market Overview • Sector Focus • Company Profiles

Published by Edison Investment Research

Prices as at 26 November 2010 Published 2 December 2010

We welcome any comments/suggestions our readers may have.

Equity market overview and strategy

Set for a repeat

Exhibit 1: A volatile year for equities

Source: Bloomberg, Edison Investment Research

Gold MSCI World

Market review: Still stumbling

Exhibit 4: Relative performance of major European indices (in percentage points)

Outlook: Six key questions for 2011

When does the world start growing again?

2010 2011 2011 2010

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

When does the BRIC bubble burst?

Will we be best by inflation or deflation?

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

Source: Office for National Statistics, Edison Investment Research

Wither the consumer?

Could M&A help restore investor confidence?

Towards a sector ranking: Key considerations

Telecoms Basic materials Healthcare Utilities

Source: Edison Investment Research

Exhibit 9: Edison sector rankings, key valuation and performance data

Basic materials: Momentum, growth and value

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

Exhibit 10: Defensives screen well on value and yield

Source: Datastream, Edison Investment Research

Industrials: Risks to rise

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

Technology: More downside potential to come

Financials: Performance disappointing, outlook uncertain

Consumer goods and services: underweight on fundamentals

Sector focus: Technology

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

Fundamental technology shifts are usually presented as an opportunity with the

Sector performance Sector P/E Key sector data

Sector focus: Oil & gas

Sector performance Sector P/E Key sector data

Bowleven 92 Rachel well results for Desire December

Stock Year end Movement FY1 ch

Ablynx Dec p N/A N/A (93.9) (94.9)

Sector: Pharma & Healthcare 4SC (VSC)

Sector: General Retailers Abcam (ABC)

Sector: Property Ablon Group (ABL)

Sector: Pharma & Healthcare Ablynx (ABLX)

Sector: Financials ACM Shipping Group (ACMG)

Sector: Technology Active Energy (AEG)

Sector: Pharma & Healthcare Addex Pharma (ADXN)

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF

Sector: Oil & Gas ADX Energy (ADX)

Sector: Pharma & Healthcare Agennix (AGX)

Sector: Financials Ai Claims Solutions (ACS)

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF

Sector: Pharma & Healthcare Algeta (ALGETA)

Sector: Mining Alkane Resources (ALK)

Sector: Pharma & Healthcare Allergy Therapeutics (AGY)

Y/E Jun Revenue EBITDA PBT EPS P/E P/CF

Sector: Pharma & Healthcare Alliance Pharma (APH)

Y/E Dec Revenue EBITDA PBT EPS P/E P/CF

Sector: Mining Allied Gold (AGLD)