April 6, 2013 2:07 am

Small-cap week, April 6

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GW Pharmaceuticals was a hit among small-cap investors this week ahead of the medical marijuana group’s flotation on Wall Street.

The maker of Sativex painkiller spray bounced 37.3 per cent after saying its formulation had been granted US patent protection. Later this month GW is expected to float American Depositary Shares on Nasdaq, where cannabis-related companies have proved highly volatile: Medbox, a maker of drug dispensing machines, jumped as much as 3,000 per cent in November as speculators looked for ways to invest in the nascent sector.

Wincanton, the retail supply chain specialist, climbed 36 per cent after a reassuring trading update triggered a relief rally. The group said its logistics business remained robust with contract wins and renewals across a broad range of sectors, including convenience store distribution for Sainsbury and Wm Morrison.

“If the group can continue to whittle down its average debt levels, then a more interesting story could emerge,” said Investec Securities.

Electrical retailer Darty, the former owner of the Comet chain, gained 6.4 per cent after announcing the closure of its lossmaking Spanish business at a cost of €30m and 650 jobs.

IQE lost 16.2 per cent on talk that dealers were struggling to shift a large seller. The chip wafer maker has been hit recently by competition concerns after US group Qualcomm set out plans to enter its market.

Aquarius Platinum fell 12.6 per cent after a fatality at its Kroondal mine in South Africa led it to suspend operations.

Companies in the news


SeaEnergy continues to pursue its reinvention following the £39m sale of wind farm assets to Repsol of Spain in 2011.

The Aim-quoted company, previously known as Ramco Energy, swung into a full-year loss of £2.4m. But it ended December with a net cash position of £5.5m, in spite of a £7m return of funds to shareholders and the purchase of its Return to Scene 3D computer imaging business for an initial £5m.

The company also holds a 21 per cent stake in junior explorer Lansdowne Oil & Gas valued at £13.9m. Yet SeaEnergy’s own market capitalisation, based on a prevailing share price of 26p, stands little beyond this at just less than £14.5m.

Broker Edison is predicting a move into profit in the coming year, which could help tackle a share price that significantly lags a simple, sum-of-the-parts valuation of net cash balance and equity holdings.

But cash burn at the company, which last year consumed £3m in operating expenses, remains a concern.

Beowulf Mining

The Nordic saga continued this week for Beowulf Mining as shareholders in the Swedish mineral explorer saw the value of their investments fall by more than a fifth following disappointing drilling results. On Wednesday, the company announced long awaited findings from its Kallak North deposit, one of two the company owns in north Sweden, but shares fell 20 per cent to 9p as less iron ore was found than expected.

The results wiped out the gains Beowulf made at the end of last year: shares climbed to 14.5p in January after an industry wide drop in the second half of 2012 when shares fell to 8p. That compares to a high of 73p in 2011.

Early in 2012, shares fell hard after objections from the Saami – an indigenous community of reindeer herders – over the effects of drilling on their animals’ habitat.

Beowulf plans to continue drilling at Kallak for the rest of the year, which the company said is fully funded. It reported net cash of £3.7m at the year end amid a general paucity of funding for exploration companies.

Software Radio Technology

Shares in Software Radio Technology ended the week up 5.88 per cent, after sales of its marine identification equipment recovered due to demand from outside the EU.

Revenues reached an estimated £10m for the year ending in March, up from £6.2m in the previous twelve months, with ebitda expected to have risen from £0.7m to £2.2m.

A fifth of sales were directed to Mexico, where authorities are seeking to track the entry of all boats entering national waters. Less conventionally, around twenty identifier devices were fitted on icebergs in Norway to prevent collisions with passing ships.

SRT’s future orders grew to £4m from £3.2m in September, and the company expects revenues of £15m over the next year. However, future growth depends partly on the approval of national regulations.

“Visibility is limited. Governments are the same all round the world,” said Simon Tucker, SRT’s chief executive. “But the days when I just simply didn’t know [about future revenues] are over.”

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