Smaller companies spotlight

EACH week, former Fleet Street City Editor Patrick Lay keeps This Is Money readers up-to-date with a neglected, but exciting sector of the stock market - smaller companies.

Terrace Hill share bonanza

REMEMBER a couple of months ago when the directors of property investment and development group, Terrace Hill, were offering small shareholders 'the opportunity' to sell their shares without charge, indicating they were doing them a favour?

I suggested not selling, adding that having supported the company through its early days, they should stick around now that things seem to be improving.

That seems like even better advice now. News reaches us that director Philip Leech has bought 30,000 shares in the company (raising his stake to 40,000), joint managing director Nigel Turnbull has raised his stake from 155,000 shares to 165,000, and although the other joint managing director Donald Macdonald has sold 10,000 shares to his retirement fund, he has bought a further 10,000 shares in the market.

Insure your studies

Aim-listed Pavilion Insurance Network has launched Studentguard to offer protection for students who, due to illness or accident, are unable to complete their education.

The policy pays out for each year, or part year, completed by the student as compensation for the cost of failing to conclude their degree due to illness, accident or death.

With one in five students failing to continue at university after the first year, why do I feel the number of drop-outs suffering from stress or having accidents as they leave the student bars could be about to increase?

Melts in the mouth

Melts in the mouth, not in the hands, was the claim of a popular chocolate-covered sweet in the past, and BioProgress, the Aim-listed provider of water soluble and biodegradable films uses the same argument to help people take medicines and drugs.

It has announced two deals this week. The first is an option agreement with Micap, for an in-the-mouth dissolving film as an alternative to gums, patches or other aids to help those trying to give up smoking. In the second they will use similar technology to Colgate Palmolive, adding to that company‘s new whitening toothpaste Max Fresh to give it additional freshness and appeal.

Clear as crystal

Having recently completed a contract worth some £450,000 to protect the glass of Terminal Buildings one and two of Changi Airport in Singapore, Pentagon Protection – whose window film protects against bomb blasts and other forms of attack – has won a further £750,000 of orders in the international market in the past two months.

The order book, which is now close to £1m, could double, or even treble, if discussions taking place in the Far East and Middle East prove fruitful or if the threatened terrorist attack on London takes place.

Pentagon broke even in the first half of this year and chief executive Graham Bannerman is hopeful of being able to report a move into profits in the not-too-distant future. A broker‘s note from Seymour Pierce, due in the next few weeks, may provide a clue.

New issue alert

Mediasurface
Mediasurface has finally made it to market.

Everything was in place for Goldman Sachs to launch this provider of software to operate sophisticated websites in the year 2000. A date had been set, the due diligence completed and major investors had all bought chunks of the super star of the dotcom boom; it was set to be valued at around £750m.

But, as we now know, boom went bust and the launch was sidelined.

This week Mediasurface has joined Aim with a market cap of a more modest £10m.

It is, of course, a much different animal. In the days when it was worth so much, and profit was a dirty word, losses totalled a mouth-watering £23m on sales of £11m - administration expenses alone were soaring away at £34.4m a year.

But a new management team took over in 2002 and turned the group around. Administration expenses are below £3m and pre-tax losses in the period from October 1 last year to March 31, 2004, were just £153,466.

The business is now breaking even and brokers estimate there could be £500,000 of profits in the year to September 2005, with perhaps double that amount in the following year.

The business has some major customers, including Associated Newspapers, EMI, NATO and Prudential. It also has accumulated several tens of millions of tax losses that will be useful in the years ahead.

Falkland Island Oil and Gas
IT was only two months ago that Falkland Islands Holdings announced it was forming Falkland Island Oil and Gas to search for oil on and around the islands.

Already it is planning to come to Aim, raise £10m to follow up targets next year and 'establish prospects for drilling in 2006'.

KBC Peel Hunt has been appointed broker.

Red Squared
Red Squared, the Ofex-quoted, IBM-managed services partner, has applied for admission to Aim by way of introduction. It is expected its shares will start trading on September 13.

Vert-Eco
Vert-Eco Group, a company with no trading businesses or investments, has started life on Aim after raising £3m from institutions and other investors to back the ambitions of buying businesses in the environmental sector.

It helps, of course, that the people behind the company include City big-hitters John Gunn, Nigel Wray and Nick Leslau, all of whose coat-tails it has proved worth hanging on to in the past.

Admiral
Admiral Group, the motor insurer, is on target for its stock market listing in the second half of September, despite difficult market conditions. The float is expected to value Admiral at just under £700m.

Some you may have missed

Britannia
BARCLAYS Bank has doubled to £20m the facility available to Britannia Finance Holdings, and reduced the rate of borrowing to 1.65% over LIBOR from 2%. Managing director Mark Burgess says: 'The terms and structure of the new agreement will allow Britannia to continue to grow the loan portfolio over the next 12 months.'

Asia
Barclays Capital has been appointed to provide advice and services to Asia Energy in connection with the financing of the Phulbari coal deposit in Bangladesh.

Crown
Crown Corporation, the investment and management company looking for high-return opportunities in emerging markets, has appointed IFC Metropol as financial adviser with the Russian market.

Chaco
Daniel Stewart has been appointed nominated adviser and broker to Chaco Resources, an oil and gas company listed on Aim.

Some to watch out for

Planit
PLANIT Holdings, which has just announced a £100,000 contract with the Jordan Formula One team and is about to exhibit in the key International Woodworking Machinery and Furniture Supply Fair in Atlanta, is a 'long-term buy' says David Johnson, analyst at Daniel Stewart.

He sets a target price of 35p for the shares that are currently trading at 26.5p.

Bodycote
Michael Blogg at Arbuthnot Securities has raised his recommendation for Bodycote International from 'hold' to 'buy' at 138p, while Stephen Rawlinson believes the very strong interim statement from Persimmon means there are 'exciting opportunities ahead'. He says 'buy' at 64p.

Even more convinced are Alastair Gunn who says there is 'massive hidden value' in Forth Ports, which he recommends as a 'strong buy' at £10 a share. Gillian Hilditch believes House of Fraser is also a 'strong buy' at 115p.