News

Speech recognition specialist Eckoh moved into profit after a restructuring, which included the sale of non-core businesses and overhead reductions.

The firm said revenue visibility remains 'excellent' as it continues to retain customers on long-term renewals.

While revenue in the six months to September 30 fell to £10m from £16.3m over the same period the previous year, the firm posted a pre-tax profit of £121,000 compared with a loss of $1.3m the year before.

Marine services group James Fisher said its focus on recession-resistant industry sectors left it well-placed to continue growing. Trading in the offshore oil service business in the period from 1 July was encouraging, with new contracts won in the North Sea and elsewhere. The company's technical and defence divisions clusters provide niche services which our customers need irrespective of the economic climate, the firm said.

Indus Gas, an oil & gas exploration and development company with assets in India, said the management committee of Block RJ-ON/6 has upgraded the commercial scenario for the SGL gas discovery.

Following the analysis of new 3D seismic data, the management committee approved an 100% increase in the original gas in place estimate of 328bn cubic feet, with 'Proven plus Probable' well head gas reserves of 246bn cubic feet.

Island Gas Resources said an independent evaluation of its Gas Initially In Place (GIIP) resources has risen by 74% to 1,554 billion cubic feet (bcf) since the company's admission to AIM in December 2007.

China-focused oil and gas project manager Fortune Oil reported a strong rise in natural gas sales and said it expects this to continue despite slowing GDP growth in the country.

However, the company said that slower growth, along with oil price volatility, may impact revenues in the company's oil related divisions. Natural gas sales were up more than 40% year on year, Fortune said, adding that growth was restricted by infrastructure limitations rather than any let-up in demand.

Sports marketing and management firm Essentially Group has bought the management contracts and management team of 40 South African rugby players. The deal cost Essentially 4m South African rand (£258,000), of which 3m rand will cash and the rest in shares.

Stephan Weyers and Gerrie Swart, two qualified sports lawyers who established and managed the players, will head up Essentially's rugby and cricket athlete management business in South Africa.

Qualifications and assessment firm Education Development has launched its partnership with J Sainsbury to award National Vocational Qualifications (NVQ) in Retail Skills as a part of Sainsbury's in-house training programmes. EDI has mapped Sainsbury's in-house training programmes to the national occupational standards for retailing.

Operating losses at computer aided disease diagnostic group Medicsight rose to £7.3m from £5.45m in the nine months to September. Net revenue from external customers was £57,000. Cash at the end of the period was £20.6m.

"In line with our strategy, we continue to bolster our network of distribution partners and are currently in discussions regarding additional commercial agreements," Medicsight added.

Flash memory specialist OCZ slumped into a first half loss despite revenues rising 55% $79.6m (2007: $51.3m). Losses in the six months to August came in at $1.84m compared with a profit of $902,000. Flash based product sales rose by 500% to $13.8m (2007: $2.3m).

Revenues to forecast to continue to grow in the second half of the financial year but OCZ remains cautious. "In order to widen the opportunity for specialist North American investors, both institutional and retail, we plan to seek a listing of OCZ shares in the US," it added.

Leander has extended its partial offer for Retail Office until 14 November after receiving valid acceptances representing approximately 44.26% of its shares.

Retec Digital has acquired the contract to supply photo booths to Wm Morrison Supermarkets from the administrators of the Consolidated Vending group. Retec has paid a consideration of £450,000 in cash for the trading assets associated with the Morrisons' contract.

3i Quoted Private Equity called a drop in net asset value per share to 93p at the end of September from 102.3p in March "disappointing".

The firm lost £37.2m during the first half versus a £15.3m increase during the previous six months and a £2.3m gain the same time last year.

Technology transfer firm UTEK Corporation said third quarter income rose to $7.1m from $3.7m in the same period last year.

Shares in Zenergy rose after the specialist materials firm said it successfully completed testing its first commercial HTS Fault Current Limiter, a device that monitors electricity surges and prevents outages.

The global market for the product is worth up to $5bn per annum, says the group.
Imperial Energy
Neutral
IEC.L, IEC LN
Acquisition approved by government - likely event
arbitrage - ALERT
Price: 883p
06 November 2008
Exploration & Production
Andrey Gromadin, CFAAC
(7-495) 967-1037
andrey.gromadin@jpmorgan.com
J.P. Morgan Bank International LLC
Nadia Kazakova, CFA
(7-495) 937-7329
nadia.kazakova@jpmorgan.com
J.P. Morgan Securities Ltd.

??Acquisition of Imperial by ONGC approved by FAS, Interfax reported citing government officials. Special Government Commission on foreign investments in the strategic industries, headed by Prime Minister Vladimir Putin, has reportedly approved the deal and stated that Imperial Energy did not hold strategic reserves. The deal has been under review by FAS for the last couple of weeks.

??The approval and timing are in line with expectations. We did not see any major obstacles for the deal approval, as Imperial Energy was clearly not a holder of strategic oil reserves and relationships between Russia and India are in a good shape. So the news should not be a significant surprise for the market. Yesterday Indian Oil Minister Murli Deora and Vladimir Putin had a meeting, where they discussed energy cooperation between the countries. They seem to agree on the Imperial Energy deal and a day after the meeting the acquisition was approved by Russian state authorities.

??Event arbitrage opportunity? The approval of the deal means that no major barriers for the deal exist and only technical issues remain. Both ONGC and the Indian government are interested in the deal and it probably will be closed by the end of this year. We believe this news is quite supportive for Imperial Energy shares, as they were under pressure from fears that either ONGC might decide not to proceed with the deal or its parameters might be altered due to financial market turmoil. Both risks seem to have diminished at this stage. Though the spot oil price has dropped more than 55% since the deal announcement, the LT oil price (one of key variables in valuation) consensus forecast decreased by only 10-15% - so the overall impact on valuation should be moderate. Moreover the British pound has depreciated 21% since that time further supporting our view that the deal's initial valuation of GBp1,250 will not be modified. With exit pricing implying 16% upside, we highlight clear arbitrage opportunity.
Figure 1: Imperial Energy share price performance (GBp)

The recent share price fall has prompted UBS to upgrade its rating on bus and rail group Stagecoach to 'neutral' from 'sell'.

Stagecoach is now trading on an earnings multiple of 8.6, compared with a sector average of 8.2, making the company look less expensive versus its peers.

UBS said the outlook remains uncertain, with UK rail revenue growth slowing down. 'We believe this trend will accelerate in the next six months, as job losses and economic slowdown have their effect,' UBS said. The Swiss bank is currently forecasting rail volumes to decline by 2% next year for all companies, with Stagecoach suffering more than most.

The 12-month price target has been trimmed from 218p to 210p based on a sum of the parts valuation.

'Stagecoach remains one of the best companies in terms of operations and financial returns in our view. However, we cannot overlook the fact it is highly geared into volumes,' UBS analyst Robert Joynson concluded.
Consumer, Non-Cyclical

Latin American energy group Andes Energia said traces of hydrocarbon were encountered in the drilling of its first exploration well, Kil.ch.EB.x-1001.

The Castillo Formation, the main objective in the well, was encountered deeper than expected, the company said.

Drilling data now needs to be analysed to better define the local structure.