Rubber company could bounce upwards

 

Keep an eye on Avon Rubber (AVON) over the next four to six weeks as the stock advances almost to a sure fire promotion from the FTSE Fledgling index to that of the FTSE Small-Cap index

Avon Rubber PLC chart

The company which designs and manufactures protective respiratory masks for the defence industry along with rubber tubing for the dairy sector, is rapidly growing, almost to the level where you can safely say that it will gain inclusion to the FTSE Small-Cap index.

The current market cap is circa £84 million. Even if the shares halved, which I do not expect, it looks like a nailed-on certainty that the company will gain inclusion to the aforementioned index by early-mid June, when the FTSE Fledgling/Small-Cap/250/100 shuffles commence.

This implies that tracker funds, that are obliged to own an appropriate weighting in any small-cap entrant, must adjust their positions, most probably upwards accordingly.

Expect a scramble for the shares between now and mid June and trackers fight for what little stock is available.

If you ascribed 15 times earnings for a company that gains long term contracts and has excellent transparency of earnings, then if it is to achieve the near 25 pence per share in earnings for 2011, then you could arrive at a price of 375p. I would be content with 320-330p

Update

Immupharma (IMM) – tipped as a buy at 87p, the stock closed yesterday at 82p. It announced last week it had published a paper in Cancer Research, a US medical journal for one of its cancer compounds. Although the announcement was good, the market was and is more focussed on the development of its Lupus treatment, Lupuzor.

Hambledon Mining (HMB) – tipped as a buy at 4.875p, the shares closed yesterday at 5.125p.

Biofutures (BIP) - suggested to buy at 6p, the stock slipped to 5.625p – continue to hold for now.

Geong (GNG) – suggested to buy at 34p, the stock closed at 42.25p, a 24 per cent gain since the tip. Sit tight as the stock is still undervalued and should update us with a pre-close trading statement fairly soon.

GTL Resources (GTL) – suggested to buy at 88.5p, the stock closed at 77p yesterday. I cannot explain the fall apart from a bit of profit taking from those who bought lower down. Hold for now.

Avanti (AVN) – suggested buying at 454p, the stock closed at 450p- continue to hold for now.

Globo (GBO) – suggested as a buy at 17.25p, the stock closed yesterday at 26p. Expect newsflow this month that will hopefully enlighten the market about its current product offering

Optare (OPE) – tipped as a buy at 3p, the stock closed yesterday at 2.625p: the company is now exiting its Leeds plant as planned and moving to one site, hopefully by September that should ramp up production for its eco-friendly buses.

Lochard Energy (LHD) - tipped as a buy at 15.13p the stock closed at 13.13p. A number of North Sea oil stocks are getting hit this week, including Encore and Xcite Energy. This will not help Lochard's cause but for now continue to hold.

Evolution Group (EVG) – tipped as a buy at 78.5p the stock closed yesterday at 72.25p. Keep the stop based on a close below 70p.

OMG (OMG) – tipped as a buy at 43.75p, the stock closed yesterday at 39p. The company has now stated that it will release its interim results on 19 May – continue to hold.

ZincOx (ZOX) – tipped as a buy at 60p, the stock closed at 53p. The company announced its full year results today, revealing that its Korean Recycling Plant is on schedule and has £38 million cash. Continue to hold.

Cyan Holdings (CYAN) – suggested to buy at 1.325p, the stock closed at 0.845p. Unfortunately the stock appears to be drifting to an uncomfortable level, so I would be inclined to cut the position.

GB Group (GBG) – suggested to buy at 36.75p, the stock closed yesterday at 42p. Sit tight and enjoy the current rerating as the share price catches up with the profit upgrades.

SocialGo (SGO) – suggested to buy at 3.55p, the shares closed yesterday at 2.15p. The company has gone a bit quiet as it focuses on launching its Version Two of its SocialGo offering. Sit tight for now.

Active Energy (AEG) – suggested to buy at 6.13p, the stock closed yesterday at 3.25p. Having suggested to sell half at 6.625p two weeks ago, the company raised £1.8 million at 2.75p to help, initially, fund Red Line Engineering's quest to win lighting management business with the London Underground. Sit tight for the balance and await developments.

Edenville (EDL) – mentioned as a buy at 1.1p, the stock closed yesterday at 1.12p. Having already suggested to sell one's investment stake out at 2.51p, the balance should be in for free. Continue to hold.

Weatherly International (WTI) – suggested to buy at 8.1p, the shares closed yesterday at 9.75p. The shares are weak along with the copper price, yet the company has hedged about 35 per cent of its production at circa $9,600 per tonne versus $8,900 on the current spot market. Hold or buy on any further weakness.

Toumaz Holdings (TMZ) – tipped as a buy at 8.625p, the stock closed at 7p. Continue to hold as the company addresses some time and cost saving technology as well as making life much easier for patients with wireless nodules contained in the plasters it provides.

Renewable Holdings (REH) – tipped as a buy idea at 15.25p, it closed yesterday at 15.5p. Its Carnegie Wave Energy investment, in which it holds 25.8 per cent of it, is starting to show commercial success in its trials and this could lead to a much larger deployment further down the line as it showcases its wave energy installation.

Bowleven (BLVN) – tipped as a buy at 177.25p, the stock closed at 284.75p yesterday having already suggesting to sell half the investment after it doubled several months back. Hold the balance for now and use the current weakness to consider buying back the other half.

Tissue Regenix (TRX) – suggested as a buy at 16p, the stock has picked up from its lows and is now trading at 12p. The company now has £5.9 million in cash which should see it through another 12 months. Sit tight for now.

The material for this report comes from Sharescope. The writer does not hold any shares or derivatives in the above mentioned companies except Globo, SocialGo and Weatherly International. Some clients of Optiva Securities may hold shares in the above named mentioned companies.