NextGen Group PLC: Reiterate Speculative Buy at 83p with a 345p target price

A report by Growth Equities & Company Research

NextGen Group PLC (NextGen), the AIM listed biomarker discovery and assay development group, announced the commercialisation of a new assay for the discovery of brain disorder protein biomarkers in cerebrospinal fluid (CSF) on 16 th May 2012. This assay adds to NextGen’s current offering of biomarker discovery assays from its contract research subsidiary, NextGen Sciences Inc. Further, this release has led to the group entering new talks with potential clients who wish to gain access to its growing product offering.

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Market Mayhem

by Tom Winnifrith

It was an eventful week for me. More on that can wait for another day. The markets have not been kind to any of us.

Plus Markets announced it was closing. And then that it was not. Its failure should be laid at the doors of its directors. There should be an annual prize awarded (the Plus prize) for those directors who take out in fees the greatest percentage of annual turnover so driving a company to its knees. The 2012 winner of the Plus prize is the board of Plus Markets. Shocking.

Certain newspapers assumed that if Plus shut it would be death for all of the companies on it. That if course was not true. Some (Ascot) have quotes on other markets and well advanced plans to go to AIM. Others are profitable and need no cash and so could cope perfectly well with a matched bargain market (Chapel Down). Others have rich chairman who can provide finance if needed (Rivington). Those companies with no rich backers, no secondary quote and which are loss making would have struggled. But it looks as if Plus will survive with new owners who – we must hope – are not as clueless as the current board.

On the wider markets investors have just sold in blind panic. In three years you will look back and kick yourself for not buying shares offering great yields or trading at a discount to cash. But as you read of Greece, Spain, etc, etc I guess few of us are able to think in that way. Nigel Wray would at this point say: “ Do you think a Spanish bank crisis will affect sales of Domino’s Pizza?” The answer is no. Yet its market cap is 10% lower today than it was three months ago. My guess is that Domino’s sales are actually higher today than they were 3 months ago and that it is still generating forecast beating earnings and cashflow. And if one reads RNS statements every day, as I do, it is odd that there are an awful lot of companies out there that are in the same boat as Domino’s.

Of course if your main customers are Spanish banks or if you need to raise capital you have a problem. But most companies are not in that boat. That is not to say that share price may not go lower this summer. Sentiment is truly dire and I can understand why investors are fleeing for cash. But with hindsight it is when there is blood on the streets that one can buy at the most attractive prices. I would not be buying every share in London. But if you pick up a basket of those with:

a) cash on the balance sheet

b) a large degree of pricing power

c) good earnings visibility

and you can buy shares in such companies on low double digit PEs or better or on a yield of 4% or better I suspect that in a few years you will be smiling.

Best wishes

Tom Winnifrith

Larks With Marks and Sparks

Hello Share Gang,

Marks and Sparks have announced their latest figures – and they are disappointing. But this does not surprise me.

I am rather cagey about High Street shares. I know some of the big stores have not done quite as badly as everyone expected, given the loss of jobs and lack of wage rises and so on – but I find the future for High Street chains not that rosy.

My family is doing more and more of its shopping over the internet. And we are not using the sites of High Street chains very much. You get the feeling you would be better off going to the stores in person to check the quality of what you might be interested in.

But then you get lazy and decide not to go to town after all. In this way, you are more likely to chose from an internet store where you cannot go to town. Then you don’t feel guilty about not getting out of your armchair and going to the city centre, anyway. If you see what I mean.

Yes, I know Britain is a nation of shoppers. Some of us – not me – actually enjoy going round the shops. But we don’t necessarily buy very much – and that is going to be even more true in a double dip recession. So I might invest a bit more in purely internet shops – but then again, I might not even do that. Spending could go down even further, as people still continue to struggle with high credit card debt and inflation.

So retail shopping shares – either internet or High Street or both – are are not on my hit list. But you, of course, must make up your own mind. Rocking on.

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