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Small Talk: Premier Bionics looks poised for healthcare tonic

Andrew Dewson
Monday 20 November 2006 02:03 GMT
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One small cap story that passed under the radar screens last week came from Premier Bionics. It is an interesting business, quite apart from being one of the very few Australian companies listed in London that has nothing to do with the mining industry. Premier Bionics designs software and hardware which is used to train surgeons. It also provides ongoing consultancy and helps to develop medical skills training facilities. Think "PlayStation Open Heart Surgery" with interactive controls.

One of the problems facing training hospitals is the lack of corpses to practice on, a problem dating much further back than Burke and Hare. Obviously, letting students practice on a live patient carries certain risks, not just restricted to the death of said patient. Premier's simulators allow surgery students to practice away to their hearts' content without killing anyone. The company announced another significant deal in China last week, worth A$830,000 (£337,000), its second major contract in the country, to supply its simulators to Southern Medical University in Guangzhou province.

Before any Small Talk readers start thinking about filling their children's stockings with a Premier Bionics simulator this Christmas, it is worth knowing that the latest kit will set you back £35,000 per unit. But the Chinese contract could be the tip of the iceberg for Premier Bionics in an area of technology that has huge scope for expansion with very little in the way of competition.

It can be tough for small companies to impress the market - Premier Bionics' shares remained unchanged at 8p despite confirmation of the Chinese contract. However, Small Talk hears that the company is on the verge of signing its next major contract, this time with a household name in UK healthcare. The shares are unlikely to stay at 8p for much longer.

Small cap liquidity

The issue of free floats is crucial to quoted smaller companies if such companies want to avoid volatile trading patterns. Small Talk has discussed large shareholdings in small cap companies several times in the past, and Bristol & London is turning into a classic example of the issues at stake. It also raises important questions about listing regulations on the Alternative Investment Market, AIM.

Richard Abel, the chief executive, owns 88.7 per cent of Bristol & London, a company that provides luxury car replacement for anyone rich enough and silly enough to prang their Lamborghini or Ferrari. This is creating serious liquidity problems and volatility. The company is worth only £13m, and according to the last published list of shareholders the company's second largest investor owns shares worth just £38,000. Bristol & London did not return calls.

While this is not a criticism of Bristol & London as a business, any investor, private or institutional, considering buying shares in the company needs to be made aware of the ownership structure. At a time when AIM is under close scrutiny, there must be serious questions about the value of having listed companies in which a single shareholder owns almost 90 per cent of the stock. Incredibly, Mr Abel has recently reduced his holding from over 93 per cent in an attempt to improve liquidity, but market makers still find trading the shares very difficult.

AIM has stated in the past that it does not intend changing its listing regulations with regards to share ownership and there is no minimum free float requirement for a listing. AIM does recognise that such limited free floats could impact volatility and does urge all potential shareholders to examine such issues before making an investment. The real question is, what is the point of a company with this kind of ownership being listed? AIM should not be used to give what is essentially private equity a public quote.

Kasbah Resources

Next week sees the great and the good from the global mining industry descend on London for the annual Mines & Money shindig. Among those in attendance will be Kasbah Resources, which is seeking to gain admission to AIM in December.

Apart from being a godsend to headline writers who are fans of the Clash, the company is looking to raise funds to develop tin projects in Morocco, after signing options to purchase two prospects from the Moroccan government.

Tin has been mined in Morocco since 1,000BC, although the areas Kasbah operate in have only been mined since the 1600s. They must have some evidence that there is plenty left. Feasibility drilling is due to start in the new year, with a view to beginning production before the end of 2008.

The company is hoping to raise £6m through an institutional placing organised by brokers WH Ireland in the UK and DJ Carmichael in Australia. The management will begin a roadshow following the conference and the company will become the first publicly listed company to exploit metal deposits in Morocco.

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