Pick of AIM by Miles Nolan

Companies that have disappointed in the past are often written off as duds, but this can bring opportunity. The media sector is undergoing huge change so I have picked out three ideas that currently fly below the radar

Wind the clock back to November 2007 and little known independent television producer Boomerang Plus joined AIM with a £14 million valuation following a 158p a share placing. Based in Cardiff, the company has consolidated its market with acquisitions that have expanded its reach from extreme sports and music to areas such as children’s entertainment and factual programmes.

Unfortunately, project delays and cancellations led to a profit warning in 2009 and then another followed last year due to timing issues. Though warnings often come in threes I believe that Boomerang is now back on track and should have a strong first half to February. The sector is seeing signs of stability and Boomerang is lucky in that it has a secured pipeline of programming revenues worth over £50 million.

With budgets from the big channels under pressure it is seeing an increasing trend towards advertiser-funded filming. Boomerang has also invested heavily in its post-production capability, and with 60 editing suites boasts one of the largest operations outside London.

Balance sheet strength
The balance sheet is strong, with net cash of £3.1 million compared to a market value of just £4.7 million. Over recent years there has been a raft of takeover activity in its space, with Shed, RDF and local rival Tinopolis all falling to bids. Boomerang is arguably a better business now than when it floated, so at 52.5p the shares look significantly undervalued.

Motive Television was set up in 2005 to invest in the independent television space but decided on a volte face and shifted its strategy to focus on technology. Disposals have left Motive with one small non-core production operation in Dublin.

However, the real drive for Motive is in providing software and services to TV companies that allow enhanced TV through digital terrestrial television channels. Motive has acquired a 67 per cent stake in Barcelona-based Adecq Digital – the creator of BesTV, a technology that allows digital broadcasters to offer enhanced services without the need for the internet. This brings more revenue from targeted advertising, catch-up TV and video-on-demand.

Land grab
A major Italian broadcaster has signed up, and testing is under way in the Czech Republic. With more than 5,000 broadcasters worldwide, Motive is chasing the bigger players in a bid for land grab. A one-off fee is paid then revenues are secured on the number of set-top boxes sold with its technology inside.

Motive has also acquired some clever technology known as NX Vision that allows viewers to control their internet-connected home television from a computer or other wireless device such as a mobile phone.

By the end of 2012 all EU member states will be required to switch over from analogue to digital broadcasting, the global deadline being 2015. Though speculative, an investment in the shares could be well rewarded.

Finally, Avesco is a broadcast services business that does everything from audio-visual equipment for live events to technical support for conferences. So far so good, but in a David-and-Goliath story Avesco has inadvertently been in battle with US giant Disney.

This dates back to a past investment in CCCL, owner of Who Wants to be a Millionaire. On the sale of the business, Avesco retained its right to receive the benefit of a litigation case with Disney whereby it has been alleged that the show format was not promoted suitably.

A favourable verdict has been reached, with awarded damages of a massive $269 million. If paid, this would leave Avesco with a windfall of $60m for its share. This equates to 159p a share – not bad compared with the current price of 110p. Avesco also has a steady business that generated sales of £117 million for 2010 with a trading profit of £1.3. Interesting.