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

Too right Queen!! Will break thru recent highs on any positive news. Rumours that there will be a TU soon .

well we had to get rid of the weak holders at some point - couldnt carry on forever like that. Back to business as usual now I reckon, knocking on 60p's door sooner rather than later !

Nice to be blue in such a sea of red!! Shows real strength imo.

Whooooosh!! Testing those highs soon. Preclose TU is confirmed as happening in nxt few days- a positive spin and this will really go.

just in had to pay 57p for 2364 ,broker had to go to the market,looked at this one for ages missed out on a fair bit of the rise ,but took some profits from tad,

Im sure you wont regret it cop! TU in nxt few days should tell us what progress is being made behind the scenes. YE results will be as predicted imo. Progress for 07/08 year is what will be impt. Hopefully will see nxt leg up in SP.

jdubb what do you make of the news,all good to me and ebitda poss this year,dissapointed in the sp,then again all buys so far and mm mark it down,spoke to shane smith on wed things are going very well ,china is starting to take off,the goggle case will be taken all the way as they are 100%sure they will win ,copshaw

Nice recovery today- maybe the google thing is finally registering with people! Have to say though that its the fundamentals that make this company a little gem!!

Now they have the pipeline & management team to scale up the business we will see some significant top line growth, but the impact on earnings will be huge given the operational gearing. Look at the last 2 broker notes to see what impact the increased revenues had on the bottom line - a 50% increase in revenues gave a 261% in EPS.

Look at the likes of IND to see what operational gearing can do for a SP, they are trading on a forward PE of 100 ! Sounds pie in the sky but if you can see the growth the earnings will flow. We have the pipeline & are expected to treble coverage which if converted to revenue on the same basis as today [coverage of 300 = 2m revenue] will see revenues climb to over 6m & being conservative 1/2 of the additional revenues will flow to the bottom line.

I say 1/2 as despite 85% of the last increase in revenues hitting the bottom line, growth of this scale will need additional resource [ie additional analysts at the Indian subsidary + the management team thats just been put together].

This would leave us with a FY run rate of approx 2.8m earnings giving EPS of 10p. These are fag packet calcs but there are alot of other opportunities the company have bubbling away which are in the above numbers for free - although replicating the model for the Asian market is probably going to be worth a few Quid so if my calcs below are a little OTT penetrating new geographies will more than make up the difference.

My price target is 2.50 [not to sell at but my expectation of the management & opportunities currently on hand] which I will revise as the company gives more visibility, which they are planning at the moment eg Growth company investor show.

All the best

jdubb,good to see that they are happy to take shares at 50p as a renumeration,also looks good when a supplier does the same,happy to be in would like to buy more but waiting on some more funds,copshaw

Sorry wheres my manners, hello nice thread by the way. Just started trying moneyam out & was pleased to see an IIR thread already set up.

hi,scotty its a good board this, jdudd is well ahead of me in his research and his posts make good reading ,as was yours ,well have to say that i was surprised with the drop today,will see what tomorow bring,when is the growth company investor show,copshaw

Hi copshaw, having read the thread it appears me & jdubb have crossed posts before. I also regularly post on the advfn BB, but new to moneyam so thought I would add my thoughts here as well whilst I was looking in.

The growth company investor show is in June, Mr Smith hasn't confirmed 100% that we will present but did ask a few investors there thoughts.

Nice to have you on board Scotty- you seem familiar LOL! I'd recognise that analysis anywhere! Shame we are stuck in this volatile period at the moment. Volume is very low and the SP will continue to swing on small trades. Scotty within what time scale do you percieve the SP to reach the 2.50? Incidently that gives a market cap of 65mil!! Not that im complaining as by that time i'll be a millionaire!

hi scotty,never used advfn just usualy post on iiiample would have thought it would be well worth their time to go to the roadshow,unles of course they are going to keep the posetive newsflow coming and dont think they need to,

jdubb, its my expectation [hope] for the LT I have no timeframe in mind as such but feel if the demand is there to push coverage to 1000 international stocks we will be laughing, also that same coverage as you know can be adapted quite easily for Asia at a small cost so again chunky margins. How long this will take I don't know, when the new website with dynamic updates of stocks under coverage is launched we should be able to track the increase.

See how satish gets on at the Indian subsidary, but you don't just employ an extra 100+ analysts overnight. Unless they use a 3rd party agent until recruitment levels are built - they did this before creating our own Indian subsidary.

It is a fag packet calc & I hope to add more meat to my forecasts once I have more visibility of the numbers either through meeting the management &\or newsflow from the company. Remember its only a few months since we got the news to kick all this off, so there is some gut feel in there too.

IN research will help identify earnings accretive acquisitions as well, whilst dilutive will help the business scale quicker but also challenging to ensure a smotth transition.

A mkt cap of 65 million isn't alot for a already profitable growth stock with no debt & huge margins + 5 - 6 million of tax losses to utilise, just need more visibility which the 'ultra' conservative 1 year Insinger forecasts don't give.

copshaw, I think they will go to be honest, which is good because tickets are free :o) You havn't missed anything not using advfn imo.

thanks scotty.

Obviously keeping the price down to get rid of stock on hand imo. Will go back up soon no doubt.

jdubb, nice and quiet on this stock once again which is normally a positive sign as you know.

Looking for news of this google initiative soon per the companies recent statement in the Trading update, should wake a few up imo :o)