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.

GTE (LSE:GTE) - placing demonstrates there is life on the secondary AIM market

Gas Turbine Efficiency, the AIM quoted provider of proprietary cleantech systems for enhancing the performance of industrial and aviation turbines, announced the raising of £7m at 24 pence per share (current price 28p). In the current small cap climate this represents quite a vote of confidence in this small AIM industrial group, although it also results in quite a large dilution with the raising representing c28% of the enlarged share capital.

The net proceeds of the Placing will be applied to accelerating the Group’s growth in four principal areas:-

(a) Supporting physical European and Middle Eastern expansionThe Group is expanding its Swedish facility by three-fold to meet increased demand from Pratt & Whitney as well as handling new combustion and industrial product lines.

(b) Adaptation of the Group’s products for new turbine customers

(c) Accelerating selected development programmes for specific customersThe Group’s strategy had anticipated the development of certain combustion, power augmentation and controls products in 2010 and 2011. However, given the recent successes of advanced solutions in the US utility market, the Board believes that it would be in the best interests of the Group and Shareholders to bring forward these developments into 2009 and 2010.

(d) Funding potential small acquisitions and market entry mechanismsThe Company has identified several small teams and businesses whose activities would complement the Group’s business and the Board would like sufficient financial resources to potentially align with or acquire these teams if and when the opportunities arise.

With cash of US$5.4 million at 31st December 2008 I must admit to being somewhat surprised by the timing of the move. However, clearly if the money is there it’s a good idea to take it as who when markets might dry up again.

The shares are now well off their lows of c16p but still 50% off the float price.
The earnings benefit from the new funds will take a while to come through but this leaves GTE well placed to realize the dream - GE look out!.

Revised broker estimates are for earnings of 3 cents / share for the financial year ending December 2009 and for 6 cents / share for 2010 which leaves the shares trading at c15x 2009 estimates and c7x 2010.


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