Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Dobbies – vibrant growth

Much like the plants it sells, Dobbies is showing vibrant growth. In this weeks AGM statement they announced that sales for the 25 weeks to 1st November were ahead by 38.8% overall, representing a like-for-like increase of 12.6%.

The new centre in Dunfermline (48,000 sq ft of covered space) also opened this week and a centre in Sheffield (98,000 sq ft of covered space) is set to open in September. A greenfield site in York by the McArthur Glen outlet centre has just been acquired and subject to planning permission, this should, with the Lisburn site, lead to at least two openings in 2008.

A very positive announcement causing many to marginally upgrade their estimates for the current and following years, however, it’s not just trading that’s exciting everyone. With the Hunter still circling as well Dobbies’ shareholders are having a great ride.

RC Group – the CEO comes out buying

I see that the CEO and Chairman of RC Group today came out in support of the company’s share price purchasing 100,000 shares in the company at a net price of 111.45p per share. He now holds 18,270,000 ordinary shares or 7.8% of the issued share capital.

Having pocketed a tidy sum a few weeks ago after exercising share options I suppose he can afford for it.

Ocean Power Technologies - tax benefits lost

Ocean Power Technologies the wave power company has announced the pricing of its US initial public offering at $20.00 per share. The Company’s shares will begin trading on the Nasdaq Global Market today under the symbol OPTT.

The Company also stated that it plans to continue to list its common stock on AIM. However, as the shares are now listed on a regulated market I assume that any potential inheritance tax benefits previously enjoyed by UK shareholders (or their estates) will now be lost.

RC Group – should a stock like this really be on AIM?

In response to a dramatic fall in its share price I see that RC Group, a company whose valuation we have questioned previously, put out an announcement today.

The fall in share price appears to have been caused by the death of Nina Wang (often quoted in the media as being ‘the wealthiest woman in Asia') who indirectly owned 27.6% of RCG.

Mr. Tony Chan has filed legal papers staking his claim to the estate of the late Ms Nina Wang. The Chan family is one of the existing major shareholders in RCG and also holds 26.7% of voting rights in the company. Mr. Tony Chan's brother, Mr. Bobby Chan, is one of the founders of RCG. Dr. Raymond Chu, Chairman and CEO of RCG, has been an acquaintance of both Mr. Tony Chan and Mr. Bobby Chan for many years.

It all sounds a bit of a Hong Kong family affair to me which begs the question why on earth is it quoted on London’s AIM!

RCG has reaffirmed that business is progressing as usual and is confident that the Group's performance is on the course to meet market expectations.

With c2m shares being traded today many appear to have been spooked by the news.

Dobbies - Congratulations on a great Annual Report and Accounts for 2006

Congratulations to Dobbies Garden Centres for a wonderful Annual Report and Accounts for 2006.

Full of beautiful photos and bound in such way that ensures the pages don’t detach themselves the minute you start turning them, this lavish publication presents the popular garden centre group in the best possible light-the figures aren’t too bad either.

The report doesn’t just provide all the normal facts and figures bit also provides a history of the business, key gardening milestones in history, strategy, location maps of all Dobbies centres -in fact the complete Dobbies experience. They even point out that the mailing bag is biodegradable and should be put on the garden compost heap-all great stuff!

An enormous amount of effort seems to have gone into this excellent document and other AIM companies could learn a lot from this, not least that6 you hide a lot of bad news with presentation this good!

My one disappointment- unlike last year there was no pack of seeds attached to this year’s report. Maybe they consider that the seeds are already sown!

Claimar Care Group- another earnings enhancing deal is positive news but the shares look fully priced (to say the least!)

Claimar Care Group has started to use some of the £7m it raised in the placing at the beginning of March.

The provider of domiciliary care services to local authorities throughout the Midlands and the North-West has announced the acquisition of Jemma Care (nice appealing name!) for a maximum consideration of £1,170,000 to be satisfied by a cash payment on completion of £1,000,000 and the balance of up to £170,000 deferred for up to 10 months subject to certain performance criteria being met.

Jemma Care is a domiciliary care provider based in Deeside, which currently employs 60 care workers. The business was established by the current vendors in 2002 and currently delivers around 1,200 hours per week, which doesn't sound too taxing for 60 care workers. It contracts mainly with Flintshire County Council. For the year ended 31st March 2006 the unaudited accounts of Jemma show a profit before tax of £205,999 and as at 31 March 2006 the company had net assets of £162,320.

The acquisition will strengthen Claimar's position in the area following the acquisition of a branch in nearby Saltney in October 2006. The good news is that the management of Claimar expects the acquisition of Jemma to be earnings enhancing in the current year, with the full benefit coming through in the year commencing 1s October 2007.

The deal equates to a post tax multiple of 7x which certainly looks good value relative to Claimar’s own valuation!

With the prospect of certain overhead savings generated from improved critical mass in this region the house broker has increased their 2008 profit before tax forecast by a conservative £0.1m to £2.8m and projected earnings per share to 6.8p.

There is plenty of cash of left for further deals following the March placing and management are apparently currently exploring a number of further opportunities. Assuming the right targets are found the sooner the better really as the substantial placing will be earnings dilutive in the short term.

Interim results for Claimar are due to be announced at the end of May. The January 2007 AGM statement highlighted a good start to the current year and trading in line with expectations. On the basis of the current rating many will surely be anticipating that expectations are exceeded in quick time!

The house broker has set revenue targets of £20.5m in 2007 building to £24.3m in 2008.

Having raised £7m at the beginning of March at a price of 105p the shares have soared over the last 5 weeks to the current level of 151p-quite a result for a business in the seemingly rather staid market of domiciliary care.

Shares in Claimar have clearly caught the imagination of many investors and I for one like the model, but following the recent meteroic rise in share price the current rating of 22x 2008 earnings surely looks fairly rich for a business of this nature. It is indeed hard to believe that this is already a business with a market capitalisation of c£44m!

Aqua Bounty - told you so!

AIM quoted Aqua Bounty Technologies Inc, a biotechnology company that develops products to manage health and increase productivity in the aquaculture sector, today issued a positive statement in response to the recent dramatic fall in its share price.

The group confirmed that it is not aware of any operational reason for the fall in price and reaffirmed that the expectations contained in the trading update issued on 9 March 2007 remained valid.

As we pointed out in our note on 29th March, with the shares having cut in half for the simple reason that one poor soul was over stretched, there was a massive opportunity for smaller retail investors to benefit. With the shares having risen over 20% since then we appear to have been proved correct!

Since management confirmed on 9th March (only 20 days earlier) that the Company had cash and investments totalling more than US$22 million (equivalent to the market cap of the company at the time) and negligible debt, it looked a bit of an obvious trade to us!

RC Group – scarier by the day!

RC Group the provider of integrated biometrics and RFID security solutions, announced on 30th March that it is raising approximately £43.7 million by way of a placing.

The group stated that the net proceeds of the Placing will facilitate the Company accelerating its growth and acquisition strategy which entails:

- Strengthening the Company's market position through acquisition.
- Developing strategic partnerships and/or Joint Venture arrangements in the Middle East and Greater China.
- Establishing a regional headquarters in Malaysia.
- Funding R&D and working capital to enable the Company to customise its existing products and solutions to meet market demand.

The Company has apparently identified both acquisition opportunities and potential joint venture partners and is optimistic regarding consummating transactions during the year-please just concentrate on managing the working capital demands for the time being!

The Placing Shares represent a whopping 17% of the current issued share capital of the Company. You can see why they changed broker to Investec who have probably done very nicely out of this deal.

Raymond Chu, the Chief Exec also appears to have exercised options and sold 2,350,000 shares and then, one day later, purchased 100,000 shares at a price of 132.5p per share. Perhaps someone can enlighten me on the reasoning behind this strange move. Having enriched himself through exercising and selling c£3m of shares are we supposed to be taken in by Mr Chu’s apparent subsequent support for the company at 132p per share by ploughing back a miserly £132,000 into the shares.

In our small cap review on 12th March we expressed concerns about RC’s cash management.

Ignore all the waffle about ‘strengthening the Company's market position through acquisition’ and ‘developing strategic partnerships and/or Joint Venture arrangements in the Middle East and Greater China’

In my view, the key driver for raising all this cash is to support the increasing working capital demands.

It will be interesting to see how this all plays out.

Cape - as I feared, the deal hasn't happened!

I wrote on 23rd March how I was far from impressed with Cape’s recent fund raising and how I sensed that management and the new broker (Collins Stewart) simply chose a good moment to raise additional funds without any real certainty of the core acquisition (PCH Group) ever happening.

As I feared, Cape has now announced that they have been ‘unable to have any meaningful engagement or constructive dialogue with PCH or its advisers on a price which could lead to a firm, recommended offer’.

Cape is continuing to pursue other potential acquisition opportunities, however, there are no current negotiations in respect of any of the alternative acquisition opportunities identified above and there is thus no certainty that any of these opportunities will be executed.

My view remains the same. What do they need all the cash for if nothing happens for several months or never at all-I would prefer my money put to good use rather than simply line the pockets of the broker.

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