Tuesday 17 January 2017

Banks the worst performers but small stocks leave others in ha'penny place

Published 31/03/2011 | 05:00

THE first quarter of 2011 is already a memory, so how did Irish shares perform? Not very well is the simple answer.

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Stocks listed in Dublin are up just 5.5pc so far this year -- a pitiful performance compared to most stock exchanges and a good reflection of just how persistent and intractable our economic problems are.

The three worst performers so far this year have been the banks. Irish Life & Permanent, hit by worries about cash injections or a State takeover, is the very worst followed by Allied Irish and Bank of Ireland.

Rounding off the bottom five are Aer Lingus (one of last year's star performers) and Conroy Gold. No real surprises there then, but the top performers probably will surprise you.

In fact, you may well not have heard of some of them, because they are all penny stocks with little real following either here or overseas.

AGI Therapeutics is the best performer so far in 2011. The shares are up 112pc following results last week which saw the Dublin-based pharmaceutical minnow reduce its net losses to $3.6m last year from $10.6m in 2009.

The company has suffered some setbacks with its drug development plan, but the few investors out there -- including Irish Life which recently upped its stake to 6.9pc -- seem to like the company.

Chief financial officer David Kelly also likes his company and bought 550,000 shares last week. Yet despite all this, the company is worth just €3.7m.

Next up is Zamano, the computer games and app company which was among the worst performers on the Dublin exchange last year as it struggled to get financing in place. Shares in Zamano have gained 85pc since then.

The shares surged 48pc in a single day back in January after Zamano agreed an amended loan facility with Lloyds, which dispelled some of the doubt hanging over the company.

The amended facility "contains a waiver of the covenant test", as well as a "revised capital repayment schedule which reflects the current trading of the company," Zamano said at the time.

Despite these gains, Zamano remains a penny stock with shares trading between 2c and 17c in the past 12 months -- a fraction of the all-time high of 56c.

The company said this week that business was stable in the second half of last year after a poor first half.

"2011 will be another challenging year, but the board remains confident that stability has now been achieved and the capacity to grow again will follow," chairman Mike Watson said.

Still, with pre-tax losses of €13.3m on sales of €15.8m, Zamano would want to see improvements fairly soon, even if the bulk of the losses came from writing down goodwill.

Balmoral International Land, the land company spun off from banana importer Fyffes, has been the third best performer this year -- another company that has been plagued by problems with covenants, banks and slumping land values.

The company's shares are up 53pc despite net assets falling to €30m at the end of 2010 from €60.3m a year earlier. Balmoral chairman Carl McCann didn't sound too happy about 2011 either when he unveiled results earlier this month, but perhaps investors believe the company has faced up to problems following two writedowns and signs of stabilisation in the commercial property market here and overseas.

TVC Holdings, the investment company which is UTV's biggest shareholder, has also done relatively well.

Like many other companies at the top of the performance pile, the shares fell off a cliff after the dual shock of Lehman Brothers and the Irish bank guarantee scheme in September 2008, but the shares have been doing far better of late as some of the company's investments came to fruition.

The shares jumped 30pc in a single day in January after the sale of Norkom became non-conditional.

Other signs of faith in the company were seen last year when Shane Reihill bought stock to increase his stake to more than 20pc -- a rare sign of confidence among Irish executives these days. AIB holds a 13pc stake.

TVC is the biggest company by market cap among the top five and probably the most diversified. It is also profitable from time to time.

The company reported a pre-tax profit of €28.3m for the year through March 2010, compared with a prior-year loss of €66.2m; a reasonable performance for a company with a market cap of €83m.

Rounding off the top five is Datalex, another company with a technology bias that is no stranger to bad news.

The Howth-based producer of computer software for travel agents has seen its shares jump 20pc this year to return to levels last seen in 2009.

Like many of the other companies listed above, Datalex saw its share price obliterated in the September 2008 bloodbath and has never really recovered, despite having what looks like a good business model and many clients overseas.

Datalex said earlier this week that it had achieved "good progress" last year as earnings before interest and tax grew and its cash performance improved, although the firm reported an overall loss for 2010.

Like Zamano, it seems 2010 was a year of two halves, with problems in the first half and a 6pc rise in sales in the second half. Unusually, the company said it was "optimistic" about the present year.

So there you have it. An unscientific list of five companies with little in common except better-than-average performance on the stock market.

With the exception of Balmoral, they do have a couple of things in common, however: staying power, along with the capacity to develop new products and overseas markets. A mixed bunch, but an interesting one.

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