My 2007 top stock pick is IIR (Independent International Investment Research plc)

Website: www.iirgroup.com
Share price: 20p
Capitalisation: 5.2 m
Year end: 28 Feb 2007

Overview

Independent International Investment Research (IIR) provides research on
global companies and currencies, for broker-dealers, investment banks, money managers and private clients.
The equity research business comprises wholly owned subsidiary Independent Financial Markets Research Ltd. (IFMR). The India-based (Chennai and Mumbai) equity research team now covers 300 companies, of primarily non-US with American Depositary Receipt programs.IFMR, established in 2002, has benefited from the 2003 Global ResearchAnalyst Settlement (GRAS) in the US, which required broker-dealers to provide independent research to retail clients.

Supplementing the equity research business, Pronet Analytics.com Limited
(Regulated and Authorised by the FSA in the UK and registered as an
Investment Advisor with the SEC in the US) offers investment advice and trading strategies to clients such as Standard Chartered and Citigroup. The ability to combine currency forecasts with the Group's fundamental equity research also offers an attractive product differentiator and has helped improve the performance of recommendations for US$-based investors in overseas stocks.


Insinger initiated coverage in September 2006 after the company finally turned a corner and became profitable with the new business model starting to bear fruit. The report provides a detailed background of the company & the new business model [far better than I could hope to write myself].

http://www.iirgroup.com/iir/docs/Insinger_research_note_Sep_2006.pdf

The forecasts were very conservative as you would expect at such an early stage of the companies turn around in fortunes, these forecasts have since been easily surpassed & a trading update was issued on the 20th Dec ;

http://www.iirgroup.com/iir/docs/Trading_update_11_December_2006_v1.7.pdf

Followed closely by an upgrade in forecast from Insinger showing a substantial increase of 261% in EPS forecasts ;

http://www.iirgroup.com/iir/docs/06-12-2-IIR.pdf

At the time this meant the company was trading on an 83% discount to research-oriented peers and as such has risen to today's price of 20p per share [was 13.5p when picked]. This is still very cheap and only puts IIR on a PE of 8 despite their exceptional growth - versus an industry average of 20 25.

Whilst the company does not have a history of earnings performance it is worth bearing in mind that the Insinger forecast only includes CONTRACTED business and does not take into account conversion of the strong existing pipeline or any new pipeline as the year progresses [see comments in trading statement + confirmed by CEO] Additionally any potential revenues from new product developments & other medium term growth drivers [see Insinger initial coverage & last finals] are excluded.

Furthermore the company is looking to break into new areas where independent research is beginning to take hold, in particular SE Asia & the UK. Market commentary is very positive for growth of the indies into these areas. A very useful source of industry specific information is;

http://integrresearch.blogdrive.com

To assist their major expansion plans they are currently strengthening the management team and looking to increase the research analyst heads in their Indian subsidiary from the current 60 to 200 staff during the .

As well as organic growth, earnings accretive acquisitions in the research space will be considered - Any acquisition would be paper based,

The current CFO for example is PT and cannot give any more time so a replacement is being sought, [any of you looking for an interesting role?] Details of which I attach as it gives an insight into where the company is heading in 2007;

http://jobs.efinancialcareers.co.uk/job-4000000000223293.htm

To conclude

+ Current PE is 8 versus industry average of 20 25.

+ Current EPS forecast is ultra conservative as based on contracted business alone, excluding the pipeline and likely additional business wins + growth into new areas.

+ Management & research team being strengthened to take advantage of the pipeline of deals.

+ Mr Smith CEO is planning a number of investor relations exercises [Insinger coverage was the start of this] early this year which is hoped will see the company more appropriately valued by the market.

+ Has very little debt, the company has been supported financially by Mr Smith & his trust over the last 2 years.

+ Significant taxable losses to utilise

+ Potentially a bonus of a multi million settlement from Google for Gmail trademark claim - talks are discussing after previous offer by Google was rejected.

- Liquidity is poor but will hopefully be addressed in some way as part of the investor relations drive and paper being issued for earnings accretive acquisitions.

http://www.iirgroup.com/products/GER/researchuniverse

The above is more detailed than the news item on the company website. I think it has maybe been posted on the integrity research thread by mistake.

I like the header on this thread - Except it should have clarified that this share was to fly DOWNWARDS!
UC.