September 2010’s Penny Shares to Watch…

This month’s penny shares to watch:

• Two tech stocks that will thrill penny investors…

SERVISION (SEV), MOTIV TELEVISION (MTV)

• How you could profit from the coming drug revolution…

IMMUNODIAGNOSTIC SYSTEMS (IDH)

Two tech stocks that will thrill penny investors…

(This article first appeared in Penny Sleuth in August 2010. Penny Sleuth is an unregulated free e-letter written by Tom Bulford and published by MoneyWeek Limited)

DHL has a problem. Over the last few years, it has noticed an increasing amount of its parcels going missing in its South American markets. A parcel will go undelivered. And when the driver is asked why, he casually replies that he has been the victim of an armed robbery.

Now maybe these trucks are getting targeted by gun-wielding gangs - some of these districts are quite violent. But DHL bosses suspect that their driver’s friends and families are taking regular delivery of a large number of cardboard boxes. The trouble is that DHL has had no way of proving it.

But now, thanks to advancing technology, AIM-listed penny share SERVISION (SEV) reckons that it can solve this problem. ‘Technology’ does not quite have the same power to thrill penny share investors as it did ten years ago, but it is still the basis of many exciting young businesses. Today I want to tell you about two of them.

One is MOTIV TELEVISION (MTV), which could radically change the way TV is transmitted to your home – a potentially great penny share.

But first let me continue with Servision, a company facing a remarkable series of opportunities in the security sector.

“Put that down - we are watching you!”

What Servision has come up with is a way of transmitting live streamed video over cellular networks. And this has a serious range of applications in security.

Take DHL. Servision’s solution is to fit tiny cameras to the van, which do more than just record events for later viewing. They actually transmit live images to a remote monitor. And it has some clever extras. For example, rather than running continuously the cameras can be prompted to run by a specific trigger. If somebody drives through a red light, the camera can switch on instantly, recording the offending driver.

Servision is also working with providers of cash dispensing ATMs. As soon as the ATM vibrates as perhaps somebody tries to rip it out of the wall, a tiny camera lodged inside the ATM starts to run. And an audio channel can be attached so that the ATM-buster suddenly hears a voice saying ‘We are watching you!’ When I spoke to Servision’s Chairman and Chief Executive Gideon Tahan, he made the obvious point that people tend not to commit crime if they know they are being observed.

Servision has fitted its digital video cameras onto buses, police cars and trucks but a big hope for the future is the home. If you are about to go on holiday you might like the idea of being able to see what is going on inside your home, especially as the direction of the cameras can be guided via your mobile handset which also will display the pictures.

Mobile phone operators are keen to offer this as an additional service and T-Mobile, Verizon and Orange are already testing the system. Servision is not alone in this field but its claims to have superior technology are to some extent validated by recent contract wins. After six years on AIM has just reported its first profit. This could be a hugely rewarding story – and I’ll be following the progress of this company very closely over the next few months.

Another great penny share I’ll be following is Motiv Television….

How the Ryanair of Pay TV could treble you money

When I met Mick Pilsworth, chairman of MOTIV TELEVISION (MTV), in the suitably media-land surroundings of Soho’s Groucho Club, he told me how a chance encounter with American TV entrepreneur Leonard Fertig had changed his life.

As a result Motiv was able to give up the unequal struggle of making television programmes for cash-strapped broadcasters and invest instead in the development of Fertig’s software platform, BesTV®.

Developed in Barcelona. And already rolled out in Spain and Italy, the BesTV overcomes a competitive weakness of traditional broadcasters who have to send programs from the TV station to the home via the TV aerial.

Unlike transmission via cable or satellite this does not offer a ‘return path’. So viewers cannot call up programs that they wish to watch at the time they wish to watch them. The way that BesTV® works is to ‘push’ programs via the TV aerial into a set-top box.

The selected programs – probably films - are regularly refreshed and can be viewed at any time. The viewer simply has to pay via a text message or by inserting a card into the box, with BesTV® receiving fees from the manufacturers of the set-top boxes as well as from the broadcasters.

Describing this as ‘the Ryanair of Pay TV’ Pilsworth told me that this is suitable for the many countries that do not have transmission networks with a return path, including such giants as China, Russia and Brazil. I understand that Motiv has a promising list of potential customers and that Pilsworth believes that it could sell the software to almost one hundred broadcasters over the next five years. A tentative forecast from Equity Development suggests that Motiv could make earnings per share of 0.08 pence for 2011. If it does so the shares, now trading at 0.32p, could easily hit the heady heights of one penny.

How you could profit from the coming drug revolution…

(This article first appeared in Penny Sleuth in August 2010. Penny Sleuth is an unregulated free e-letter written by Tom Bulford and published by MoneyWeek Limited)

Big Pharma gets a bum rap.

Year after year its highly educated staff toil away inventing the medicines that keep us alive. It takes years of effort and a billion dollars to bring a new drug to the market.

But if that drug has an unexpected reaction, something that the extensive testing has not predicted, then all hell breaks loose. The drug company is pilloried by the media, chased to the end of the earth by avaricious lawyers and forced to pay out millions in fines and compensation.

Now though there is reason to hope that such episodes may become a thing of the past. It is due to an advance in one of the world’s major medical industries, diagnostics. A field that presents some of the most exciting penny share opportunities of any industry today.

How a simple test spawned a $45bn industry

70% of medical treatment is determined after some form of diagnosis. We have all had to give a urine sample or a pin prick of blood, so that the doctor can see what might be the matter with us. These are both examples of diagnostic tests.

But today the term ‘diagnostics’ usually refers to immunodiagnostics. Immunodiagnostic tests introduce antibody generators (or “antigens”) into a sample of body tissue or fluid, stimulating an immune response. The concept of using immunology as a diagnostic tool was introduced in 1960 as a test for serum insulin, and is now the basis for a $45bn global industry.

This is a rapidly growing market - powered by the ageing population, the ambition of developing countries to match western healthcare standards and widespread pressure on healthcare budgets. And it is bringing about a radical change in medical treatment.

Why diagnostics are a major money-spinner for Big Pharma

Traditionally diagnostic tests have involved a visit to the surgery, where the doctor takes the sample and then sends it off to a distant laboratory. The results are received days later, after which the patient may need to make a second trip the surgery. This is an expensive and time-consuming process.

But now health policy makers are doing all they can to keep people away from the surgery and the hospital. And new diagnostic tests offer the chance to assess patients in their own home. Today diagnostic tests are devised for the ‘point-of-care’ market. According to Frost & Sullivan the point-of-care testing market is growing at some 10% per annum in the USA, Europe and Japan.

Healthcare companies are attracted by this growth but also by the ‘razor blade’ business model. Point-of-care diagnostic tests require a small device that can be sold, rented or leased, but the real money-spinner is the supply of the consumable reagents required for each test.

But while Big Pharma has had great success developing these traditional tests, a new discipline – molecular diagnostics – could dwarf these efforts in the space of a few years.

The new industry that will transform drug development

It was the sequencing of the human genome that made this new discipline possible. By deconstructing the human body cell by cell, scientists believe they will be able uncover the genetic roots of complex diseases such as cancer and diabetes. And that is a hugely exciting prospect for the diagnostics industry.

While traditional diagnostic tests can only measure the response of the body to random antigens, the new molecular tests look directly at the make up of the body. They can help identify the portions of genes responsible for chronic genetic disorders. And they could also be used to determine the optimum dosing of a drug for each specific patient – heralding a new personalized approach to drug development.

Molecular diagnostics is already used in forensics and paternity testing and is also popular in genetic screening, for instance when testing newborn babies for genetic disorders. But it’s this shift towards personalized medicine that is the fastest growing area for molecular diagnostics.

The aim is to achieve the right dosage of the right drug at the right time for each patient, and it promises a major advance on the ‘one-size-fits-all’ approach that has traditionally characterized drug development.

Having initially been wary of a potentially disruptive threat to their traditional business model, pharmaceutical developers are now realizing that molecular diagnostics offers a better way of treating people. But there is another important consequence...

Over the years the industry has discarded hundreds of therapeutic drugs because a handful of people might suffer adverse consequences.

If molecular diagnostics can identify the latter in advance, then a large number of those abandoned drugs could yet be brought to market.

How to tap the most exciting medical breakthrough in decades

This is a high growth industry that has already produced several stock market successes.

Shares in IMMUNODIAGNOSTIC SYSTEMS (IDH) have soared from 50p in 2005 to 750p today – a 1,400% return for early investors.

Good investing,

Tom Bulford
Editor, Red Hot Penny Shares

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(This article first appeared in Penny Sleuth in August 2010. Penny Sleuth is an unregulated free e-letter written by Tom Bulford and published by MoneyWeek Limited)