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.

Bramdean Alternatives - £250m sounds like a big ask!

I see that Bramdean Alternatives, a fund of funds vehicle established by Bramdean Asset Management is being promoted through ALL IPO.

Bramdean Asset Management was founded by Nicola Horlick who first hit the headlines in 1997 when she flew to Frankfurt (accompanied by numerous members of the press) and pleaded with the senior management of Deutsche Bank to keep her job (or something on those lines). I’m sorry to say that I remember this incident much more than anything relating to her investment prowess at SG Asset Management, a firm she subsequently ran, no doubt very skillfully. I also see that she hit the headlines again in 2005 when refusing to hand over her £50,000 diamond ring to an armed attacker.

You have to admire Ms Horlick’s determination and indeed her survival instincts, however, investors will surely be giving her their money to look after on the basis of her investment management prowess and not much else.

Bramdean Alternative’s principal activity is to invest in a diversified portfolio of private equity funds, hedge funds and specialty funds for the purpose of achieving long term capital appreciation. It’s looking to raise up to £250 million, which sounds quite a lot to me in the current market.

I’m not convinced how they intend to gain access to the best hedge and private equity funds, the majority of which are, I believe, closed to new investors. As a relative start up (Bramdean was only founded in 2005) I assume its existing hedge and private equity fund exposure is relatively limited and therefore they won't carry much weight with the better funds.

Finally (and the objectivity of this opinion is clearly questionable, coming as it does from someone offering access to new issues through their own firm!) I remain sceptical about the likely success of any new issue promoted through ALL IPO.

The best IPOs generally get well supported by their sponsoring broker who has the incentive of earning attractive fees. In my opinion those brokers willing to share their fees are clearly anticipating difficulty raising funds- otherwise why on earth would they agree to split such potentially lucrative fees!

Bramdean has seemingly chosen to market directly to the private investor using ALL IPO as one route. A fund raising of this size surely warrants the services of fully incentivised broker to support it. I see that Cenkos is the sponsoring broker but I’m not aware if they are actively promoting the issue.

The last significant main market issue promoted through ALL IPO was Vector Hospitality which failed to make it to the finish line. I’m not convinced that Bramdean will do any better!

TOREX - previous Directors were a disgrace!

So Torex has finally gone into administration with the business sold to private equity for £204m. With senior debt and transaction costs amounting to £212m, as suspected, the sale will leave nothing for creditors or shareholders. I agree with one broker’s view that this is an absolute disgrace considering the timescales and announcements made by the company as recently as January.

The new chairman’s statement that the company had “breathtaking corporate governance and financial issues at PLC level, the scale and extent of which neither I nor my board colleagues have seen in corporate life” was an absolute classic.

The results for FY06 were also finally released showing revenues of £246m and operating profit of £4.2m. This compares with the original consensus forecasts of £48m-unbelievable!

In addition to this quite diabolical operating performance, exceptional costs during the year amounted to £196m (inc. £158m goodwill impairment and £14m ‘restructuring’ costs) resulting in a headline loss before tax of £192m!

The question now is what course of action can or will be pursued against former directors responsible for this disaster

It looks an 'Essentially' costly deal!

Essentially Group, the AIM listed sports marketing and media group, announced the acquisition of two leading agencies this week, Frontiers and Athletes 1. I see that it even received some nice coverage in the FT-well done the PR boys!

Frontiers is a sports marketing business specialising in cricket and Athletes 1 is one of the leading cricket athlete management agencies in the world-I never really thought of cricketers (self included) as Athletes!

Frontiers generates income from Cricket Sponsorship, Other Sport Sponsorship, Corporate consulting and Event management. Cricket sponsorship sales predominantly relate to contracts to sell in ground advertising/sponsorship for the perimeter boards of all English Test Match Grounds-a very nice little number.

For the year to 30 June 2006, Frontiers had audited turnover of £4.0 million and audited profits before tax of £0.4 million (£352,000 to be precise). Net assets as at 30 June 2006 were £0.4 million.

Athletes 1 operates an international sports management business with a strong focus on athlete representation, sponsorship and rights management within professional cricket. Clients include Anil Kumble, Ricky Ponting, Liam Plunkett, Jon Lewis, Mark Butcher and Graham Thorpe.

For the year to 31 August 2006, Athletes 1 had unaudited turnover of £1.2
million and unaudited profits before tax of £0.2 million. Net assets as at 31 August 2006 were £0.02 million. So it sounds to me like a really a small player.

I had an opportunity to participate in the placing supporting this deal (it was EIS qualifying so there was even some added incentive there) but shied away as I had the impression that the acquisitions, notably the Frontiers deal, were proving too costly.

As reported the initial consideration was £8.2million, with deferred consideration of up to £4.1million, depending on earn-out targets. Although some of the deferred in respect of the Athletes 1 deal doesn’t actually appear to be very deferred to me!

I understand that the acquisitions are expected to be earnings enhancing for the year ended 31st December 2007 and the Frontiers business in particular has great visibility, but it looks to me as if Essentially has paid through the nose for it.

Frontiers represents the largest chunk of the initial consideration of £7.9 million. Of this, £6.5m is in cash of which £5.2m is going to Pacific Investments, Sir John Beckwith’s private equity investment group. When has a private equity group ever sold out on the cheap! All the deferred consideration would be payable to management and not Pacific.

Despite the visibility, £6.5m initial sounds a lot for a business that has generated pre-tax profit of only £266,000, £164,000 and £224,000 in each of the years ended June 2004, June 2005 and June 2006 respectively. In support of the high price paid, the nature of the contracts with the Test grounds means that the group receives a lot of cash up front so operating cash flow is excellent andclearly a key attraction.

For the year ending December 2008 profit after tax for the Frontiers unit is estimated to leap to something in the region of £600,000 which goes somewhere to supporting the price. However, given the performance over the past 3 years I’m not sure how profits are going to leap so dramatically.

I think Essentially were desperate to do this deal to really beef up there business. It’s tough out there on the market for the tiddlers (even private investors prefer something a little bigger) and few seem to really worry about good old fashioned organic growth preferring to go for a business changing acquisition or two (or 10 or so in the case of SMC!).

The expenses of this tiny deal were incredibly £900,000 or just over 16% of the raising-wow that sounds a lot!

Although I did very nicely over the last 18 months through my holding in Formation Group, the other AIM listed sports agency, I’m never that keen on these small sports agency businesses where personal relationships between the client and the individual consultant are surely absolutely key. It’s not simply a matter of your business walking out of the door every night but rather your business operating on almost a virtual basis! Frontiers model appears to be different although the other businesses in the group appear to meet my virtual model.

Anyway, good luck to Essentially. I’m not too keen on the name (why do so many sports agencies have such stupid names, the biggest of the lot IMG has a nice simple name) but I hope all the acquisitions knit together as planned.

SUPERGLASS-main market new issue. The super returns for the private equity boys and high levels of debt they have left are surely unacceptable!

I had an interesting meeting today with the management of Superglass, ‘the UK’s number 2 manufacturer of glass wool insulation products’, as their strapline goes!

Superglass is a profitable cash generative business which is seeking to list on the main market at a market capitalisation of £100m. For the year ending August 2006, turnover was £41.7m, profit before tax was £6.5m, earnings before interest tax and amortisation was £10.1m and operating cash flow was £13.8m. Estimates for the year ending August 2007 (they should be reasonably accurate as August isn’t far away) point to top line turnover of £46.1m and profit before tax of £8.1m.

The business appears to have excellent growth potential supported by Government efforts to improve energy efficiency. The group has a strong market position, makes operating margins in excess of 20%, is highly cash generative (yield will be c3.0%), has a flexible manufacturing facility and excellent organic growth opportunities with high barriers to entry.

Everything therefore looks rosy then for prospective shareholders, or does it!
Well the business does indeed present a compelling investment proposition, however, wait for this.

Superglass was the subject of management buyout from Encon Group in 2005 at an Enterprise Value of only £40m. The MBO was backed by NBGI Private Equity Fund and Investec. For Enterprise Value read 'Cost' as net debt prior to the buyout was only £2.3m and the business had underlying cash flow of £8.1m in 2005, so one can assume that there was virtually no debt at the time of the buyout.

A glance at the cash flow statement for 2005 reveals that MBO funding was £39.2m and additional funds raised through shares issued were only £400,000.

In a nutshell, it looks like management and supporting private equity shareholders effectively acquired this business for virtually nothing in 2005. Some 2 years later the private equity supporters are now selling out for a total of £70m-that’s not a bad return in 2 short years, especially as they didn’t actually have to put in any equity.

The bad news is that poor old Superglass is currently saddled with c£32m of debt and obviously little in the way of net assets.

I like the following line from the broker’s note:

‘Our proposed indicative Enterprise capitalisation of £130m is significantly higher than the £40m Enterprise valuation paid by the current MBO backers’.

You are telling me it’s higher, some £100m higher and unlike those prospective shareholders intending to support float they didn’t even put up their own money!

The key reason for this amazing deal back in 2005 appears to be down to former parent Encon’s forced sale. In the first place the Competition Commission blocked the sale of Superglass to Knauf and then Encon needeed to swiftly dispose of its manufacturing operations to facilitate its sale to Wolseley.

The business has clearly performed exceptionally well since the MBO and the outlook looks very positive. Valuations of all insulation stocks have apparently also increased materially over the past 2 years. However, I find it really hard to believe that new investors are prepared to support the float given the high level of debt the business now carries and the value that has effectively been stripped out of the business over the last 2 years. It’s easy to say that interest costs are easily supported but cash that should be there to support growth and expansion is simply there to pay down debt that wasn’t actually there 2 years ago.

Given the highly supportive market environment this business should surely be actively looking for ways to expand outside its current market. The excellent cash flow would ordinarily be there to service debt built up to support acquisitions. For the most part acquisitions will now need to be funded by future equity raisings.

I’m not sure of the solution here. The private equity boys (and management) are hardly likely to pay down the debt before they sell. Wouldn't it be lovely if they did!

Key institutions could decline the opportunity to invest which could force the company to pull the flotation. They could also dramatically cut the current valuation (and their own cut) and raise new money at the same time for the business to pay down debt. This will also give new shareholders encouragement for the future and provide some headroom to support expansion. However, institutions largely seem to be lapping up these private equity dumps on the market, high debt levels notwithstanding.

When will they conclude that the greed has become excessive and that enough is enough!

DOBBIES GARDEN CENTRES (AIM: DGC) The fat lady hasn't even entered the hall!

Thank goodness, the Dobbies story is still alive and kicking and the Hunter is once again moving in for the kill, or so he hopes. The only problem now is that an even larger hunter, the T-Rex (dinosaur and not singer) of the retail world is lurking ready to strike.

The Scottish Hunter has now raised his stake to 20.6% by purchasing shares at 1750p and the boys from Hertfordshire (just around the corner from me) are having a little think about things. Hopefully the key decision makers on both sides will at least visit a garden centre or two this weekend to get a better feel of what they are letting themselves in for.

Having originally started building his stake at under 1200p Hunter could simply be playing with the Herts boys and be quite prepared to walk away with a nice profit-not anywhere as nice as mine though, at least in perecentage terms anyway!

I just can’t see the Hunter will be happy with Tesco in his garden centre space (he has stake in all the other big groups) and will endeavour to keep them out if possible.

The other possible scenario, which would take a bit of organising, is for the inheritance tax (IHT) planning investors to frustrate both predators. Alright, I’m dreaming a bit, but I reckon there is so much IHT money in Dobbies hidden in nominee names that these wise, more mature (diplomatic aren’t I !) investors should have a say in things. They might need a little encouragement to rise out of their rocking chairs (less diplomatic) but should be a force in this deal.

Let’s just hope the 2 big predators don’t mess it up altogether because Dobbies has been a truly great IHT stock .

Geong share placing - that's what I call management support

Geong International announced its placing at the end of last week which raised £3.4 million to principally support the development, sales and marketing of its SmartBoxTM product range for SMEs across China and internationally.

It is very pleasing to note from the announcement the material share purchases by Directors and most encouragingly by management in general.

Chief Exec Weidong Wang applied for 62,051 shares £40,333), Chairman Henry Tse applied for 100,000 shares (£65,000) and Non Exec Peter Williamson applied for 38,461 shares (£25,000).

Members of the Company's Management (all Chinese remember!) acquired an eye watering 870,214 shares raising approximately £0.57 million. I consider this to be a material sum, and not just because they are Chinese and clearly earn substantially less than us overpaid folk in London and the South East, but for management in any small cap £22m market cap business.

That’s what I call a vote of confidence!

Geong International, little IBM in big China-it looks a great story!

I recently had a very interesting meeting with the senior management of Geong International (AIM:GNG), a market leader in China in providing Enterprise Content Management (‘ECM’) solutions. I know it’s a tough one for most of us to understand!

It’s not your usual offering from China where manufacturing related activity is more the norm but the growth potential for this business appears to be phenomenal. I know that applies to many Chinese businesses but this is a little different!

Geong floated on AIM in June 2006 raising just £750,000 to cover float costs (yes, they can be that high). Unfortunately due to the errant ways of its first ‘supporting’ broker it saw its share price initially fall c20% from the float price (30p) in a matter of weeks. Since then it hasn’t disappointed and the shares have risen to the current level c70p with a current market capitalisation of c£22m. Thankfully it has also changed broker!

Geong focuses on the development, implementation and maintenance of Enterprise Content Management software solutions in China. It sells two products – PortalAge and SmartBox – to a wide spectrum of clients, and in addition supplies consultancy services.

Management possess excellent experience with a number having been with IBM China.

I met Henry Tse (Executive Chairman) and Weidong Wang (CEO) both of whom have been with the company since its founding.

Mr Tse (aged 60 but a youthful 60) worked for IBM for 30 years and his last position was General Manager of Personal Computer Group of IBM China/Hong Kong. From 1997 to 1999 he also served as the Managing Director of Compaq China. He was named The Man of Honour of Chinese Software Industry by the China Centre for Information Industry Development, China Software Industry Association, and Software World Magazine in 2006.

Mr Wang (aged 40 and also youthful!) was one of the founders of Geong and previously worked for the Peoples’ Bank of China, which he joined after graduating from the University.

Directors and staff currently hold 55% of the shares with the balance seemingly spread across numerous private client accounts in nominee names i.e. there don’t appear to be many real institutional holders, although that could change following the recent placing.

Almost 40% of Geong’s revenue is recurring with the other 60% from one-off customised contracts.

Blue-chip clients include the top 5 Chinese banks and 3 out of the top 4 futures exchanges in China. The top 10 clients generate 65% of the revenue with a dominance of blue chip names such as IBM China, Motorola, Air China, Shanghai Bank

Twelve months ago, Geong’s revenue stream was dominated by the financial sector. Over the last six months, Geong has not only increased its presence in the financial industry but has developed a presence in the automotive, transportation and technology industries.

Geong’s growth is looking assured as Chinese companies make enormous strides to catch up with western organisations in terms of systems and processes. The house broker is of the view that the 20% pa profit growth should begin to look ‘timid’ (interesting turn of phrase!) as Geong begins to expand within China.

Currently it generates all its revenue from Beijing and Shanghai and there are significant opportunities for Geong to expand in the new cities springing up in China. Broker’s forecasts currently assume no such growth, and they are taking an extremely prudent view in terms of cash conversion.

The 2007 full year results highlight the increased expenditure on R&D – from $95k a year ago to $181k this year. It is likely that such expenditure will be maintained as Geong begins to roll out new products over the next twelve months.

The headcount also increased from 240 to 304 within twelve months and this is likely to grow by another 20% over the next year.

Whilst the valuation looks fairly rich for a business of this type, especially relative to a UK peer group, one has to consider how fast this market is growing, largely from blue chip clients.

If one simply adds back the exceptional costs of cUS$400,000 incurred in 2007 in respect of the flotation I calculate a PEG for 2007 of .62 and based in the broker’s estimates a forward PEG for 2008 of 0.79. Ok, you can never really trust estimates but it still looks encouraging!

For 2008 the house broker is currently forecasting revenue of US$11.44m, operating profit of US$2.63m and earnings per share of 7.3 cents. This is after prudently allowing for a 15% tax rate although realistically it’s likely to be a lot less than this.

With the speed of change in this market I think it’s irrelevant to look further ahead than 2008.

The house broker’s full year forecast looks all the more achievable since Geong secured a contract with Lenovo Group to design, build, deploy and operate a bespoke dealer management and communications systems, based on PortalAge. The contract is to be completed within one year and the value is in the region of $2m.

Investor’s Champion Opinion

Geong has done fantastically well since floating in June 2006, having extricated itself from a potentially disastrous relationship with its first broker. It also effectively raised no new money, other than something to cover the exorbitant broker costs, to support the business and has managed things well given the rapid expansion experienced during the period.

The current shareholder base with Directors and 30 senior staff holding 55% of equity surely gives confidence to UK shareholders. Relative to UK peers one can also assume that salaries are extremely fair-to say the least!

More cash is needed to help with research and development, expand the sales force and market SmartBox so the recent placing which raised £3.4million will support this. Surely the sky’s the limit if this business can really make the most of all the potential in the Chinese SME market and keep a tight rein on increasing working capital demands.

Please send me an email if you would like to receive the full note on Geong.

DART Group - has the FD had enough of Big Phil?

Dart Group announced today that the Group Finance Director, Mike Forder, would be leaving, apparently in light of the Group's recent relocation of its head office operations from Bournemouth to Leeds. No reflection on the business itself but it’s my humble opinion that long suffering Mike saw an opportunity to get away from Chief Exec Philip Meeson and went for it!

He will be replaced by Andrew David Merrick (aged 45 but sure to age quickly with increasing exposure to Chairman and Chief Exec Big Phil!) who will takeover as Group Finance Director from 24 July 2007.

Andrew joins the Group with seemingly a wealth of expereince gained as Director of Finance at Bradford & Bingley -no experience will have prepared him for Big Phil's attitude to shareholders, analysts and anyone remotely interested in 'his' business ! He is a Fellow of the Chartered Institute of Management Accountants and he’ll certainly need all the management experience he can muster to handle Phil and the bizarre attitude he brings to City meetings.

I would like to express my thanks to Mike Forder in his efforts in communicating the Dart story in the face of the huge communications jamming device that is Philip Meeson. I really don’t know how Mike put up with things for so long -he’s been suffering since ’98 after all!

Have a nice break Mike.

Phytopharm (PYM) - It looks like it could have a potential block buster

There was very encouraging news this week for sufferers from Parkinson’s Disease with a positive announcement from Phytopharm (PYM), the pharmaceutical development and functional food company.

Pre-clinical data has shown that one of the group’s products, Cogane, reverses the changes in the area of the brain involved in Parkinson's disease. This data will be presented by Dr Jonathan Brotchie, an internationally recognised expert on Parkinson's disease, at 'The 11th International Congress of Parkinson's Disease and Movement Disorders' on 5th June in Istanbul.

This latest study was partly funded by The Cure Parkinson's Trust which was founded by four men with Parkinson’s to fund research, to hasten a cure for this debilitative neurological condition.

Commenting on the findings, Tom Isaacs, co-founder of The Cure Parkinson’s Trust said: “Cogane’s ability to induce a person’s own neurotrophic activity offers a very real prospect of a better treatment for Parkinson’s disease.”

The Cure Parkinson’s Trust has been funding a variety of research projects globally. For further details see:

Phytopharm appears to be on the verge of something really big with Cogane, however, there must be a concern that a business of its small size (mkt cap c£33m) and with the distraction of other drugs under research (E.g. Myogane) has the resources to run with this.

Further funding will obviously be required to support the next phase of study and Dr Brotchie’s work will help support this.

Let’s hope Phytopharm can remain focused on what looks like could be a potential blockbuster product and not take the route of least risk by spreading its resources too thinly across a broad portfolio.

From an investment perspective isn’t the point of investing in micro cap pharmaceutical stocks the hope of finding a real ‘ten bagger’. After all, if we want security we can all simply invest in a blue chip.

Global e-Network Holdings - another dubious pre-IPO offering (and a stupid name to boot)

Another one of these pre-initial Public Offerings (‘pre-IPOs’) opportunities landed on my desk last week. Much like all the others I have seen over the past few months there was little to commend this to the private investor, but naturally quite a lot for the supporting finance house, which in this instance was Arc Equities.

According to the literature, Global e-Network Holdings (stupid name and spelling for a start!) ‘offers investors an opportunity to gain access to a company operating in three growing technology niches’. Given the level of funding that is required to grow in just one ‘growing technology niche’ this is already a questionable business model.

It is existing shareholders in Global-e who are selling, notably Arc Fund Management Limited, Monument Capital Partners Limited and Troff Limited.

So investors can forget about any potentially interesting EIS tax breaks for a start, as no new money is actually being raised. It also begs the question how they are going to finance these 3 high growth ventures, clearly they have a lot of cash in the bank! I suggest you read on.

Questionable financial projections

Page 21 of the glossy document reveals that management expects Global e to start making a trading profit in July 2007 and that one should have a look at the financial projections on page 24. I was expecting page 24 to reveal a page covered with numbers, however, the financial projections in question consist of just 2 lines! One line covers the projected Turnover for 2007, 2008 and 2009 while the second line presented the profit before tax for those respective years.

If you thought the financial projections were brief, the Accounts section in Part IV occupies just half a page. Only a Balance Sheet at 31st March 2007 is presented and half a Balance Sheet at that, with no information on the Share Capital and Reserves and no supporting notes.

The balance sheet does reveal that they only had £100,782 in the bank at end of March so there isn’t much to support the growth of the business

In seeking to sell their shares at a price of 3p / share they will therefore be making a huge gain in just 6 months. It is hard to calculate what progress has actually been made in this time, other than a nifty bit of financial engineering. But more importantly is this of any help to potential investors?

The 55 million shares they are trying to dispose of in this exercise equates to 22% of the issued capital. If a price of £1,650,000 is achieved this assumes Global- e has a total current value of £7.5m. Madness, total madness!

I fail to see why anyone in their right mind would entertain investing in this business, at least on the strength of the documents that I have seen.

In our opinion there needs to be better protection for potential investors in this sort of venture. Many are bound to be tempted by the glossy front cover and enticing quotes.

Please get in touch if you would like to receive a copy of the entire note.

SMC Group - The colourful tie departs!

Following the recent trading statement SMC Group came out with an update to shareholders this week regarding the findings of the recent internal business review.

The review provided a series of recommendations to improve the profitability of the Group including the way the Group approaches the winning and execution of projects, the management structure, resourcing and the cost base of some business units.
It actually sounds like the whole business needs fixing!

It reported that whilst some (very few I suspect!) businesses within the Group continue to trade well, others have overheads which are out of line with revised revenue projections. So there is a lot of dead wood and they are all paying themselves too much!

Here comes the big one!
Following the Board meeting (as I said in my earlier blog, I thought it was going to be an interesting meeting) Stewart McColl the founder (and colourful tie man) has resigned and left the Group with immediate effect!

Gordon Watson (Stewart’s right hand man) has also stepped down from the Board with immediate effect but will continue working in a business development role in the Company

The bankers are apparently supportive but they always say that to begin with!

Sir Rodney Walker, the new Executive Chairman appears to be getting stuck in, but given the speed with which SMC has been cobbled together he could have a tough job ahead.

The shares were initially up c9% on the news so clearly there are some out there who welcome the news of Mr McColl’s departure.

RC Group - is it all hot air or is their real substance to this business

RC Group, a provider of integrated biometrics and RFID security solutions (products the potential for which I have difficulty understanding) came out with a trading update this week. Although this was claimed to cover the Group's ‘financial performance’ in the first half of the 2007 financial year, no actual numbers appear to have been given which strikes me as somewhat strange.

It reported that it has experienced a strong start to this financial year, but what does ‘strong’ actually mean? Apparently this is attributable to the successful launch of several of the Group's products into the Chinese consumer market, and the launch of BioMirage (what on earth is this) into the South East Asian and Chinese consumer markets.

It has also successfully entered into ‘potentially lucrative’ joint venture and partnership agreements in the Peoples Republic of China ('PRC') and South East Asia to drive future growth. So, lots of potential but again no numbers!

There appears to be immense potential for this business but also what looks to me like an immense amount of hot air as well. The volume of regulatory news flow reminds me a little of Stanelco.

I understand that biometric products are really big in South East Asia but as I look out over the English countryside I'm sure you can imagine that it’s hard to relate to the potential of biometrics and RFID security solutions. All I do know is that if there is potential it’s bound to be a crowded market!

Dobbies – it’s actually happened!

So after months of speculation and a soaring share price a buyer has actually come out of the shadows and made a bid for Dobbies, the garden centre group.

According to the retail specialists Seymour Pearce their trade sources are suggesting that the bid approach was not from the obvious suspect, West Coast Capital, Tom Hunter’s vehicle, but probably from a VC and possibly Apax.

However Seymour’s points out that Hunter (West Coast Capital) has a 10.6% stake and this is enough to prevent a compulsory acquisition of shares if he so wishes.

So there are now two possible scenarios. First Hunter forces the predator to pay through the nose, or, secondly, he blocks the take-over.

I just can’t see Hunter giving up now he has the prey in his sights. I am sure he has grown quite attached to Dobbies over the last few months!

I for one will miss little Dobbies when it leaves AIM.

Zytronic – Director comes out buying

Following the recent c10% fall in its share price I see that Sir David Chapman, Non Executive Director of Zytronic, has seized upon the opportunity to acquire a few shares in the company.

While the purchase of 5,000 shares at a price of 210p per share is hardly likely to encourage wholesale buying it's a vaguely positive sign.

Zytronic the specialist manufacturer of touchscreens and optical filters for electronic displaysis has always appeared to me as a great little business and precisely the type of business for which AIM was really created.

The issue regarding the de-stocking by the group’s largest customer is obviously disappointing but apparently a temporary blimp in the grand scheme of things. Furthermore sales of the group’s key ZYPOS touch sensor product, appears to be going swimmingly and ahead of expectations. The current valuation is really supported by the huge potential for Zypos which seems to have the market to itself. I expect them to really start delivering on all the early promise over the second half of the year.

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