ferret's stock to watch: photon group ltd

Ferret's Stock to Watch: PHOTON GROUP LIMITED
09:45, Thursday, 17 March 2005

Sydney - Thursday - March 17: (RWE Aust Business News)
******************************************************

OVERVIEW
********

A small independent marketing services company called the Photon
Group (PGA), specialising in visual effects and animation for feature
films and television production, has become a market favourite on the
speculative counter.

Yesterday the shares, which listed last April at an issue price
of $1.80, touched a record high of $3.60 and settled 10c higher at
$3.45.

There are 49 million shares on issue with a market cap of
$169.17 million.

What has been making Photon run?

Well, Photon Group's first half year as a listed public company
enjoyed robust trading conditions, according executive chairman Timothy
Hughes.

Revenue for the six months to December was up 177 per cent to
$36.85 million, generating a net profit of $1.184 million, a rise of 119
per cent.

Much of market confidence can be attributed to a combination of
being in a glamour-type industry and making an astute acquisition
announced this week.

The sizable board has been making the right decisions and
includes Mr Hughes and managing director Matthew Bailey.

Other directors are Brian Bickmore, Paul Gregory, Susan
McIntosh, Edward Reynolds and Timothy Tighe, and all are happy with the
company's sharemarket success.

This week Mr Hughes announced the company has tapped into the
booming mobile phone marketing sector with a $25 million cash-and-scrip
purchase of the number one player, Legion Interactive.

Mr Hughes said the deal could push Photon's annualised revenue
well above $100 million and its earnings above $20 million, and could be
a precursor to other acquisitions in the market.

Downloading of ring tones, mobile phone "wallpaper" and games
have proved popular with under 35-year-olds, while the use of so-called
interactive promotions using premium-priced SMS has boomed since the
advent of reality TV programs such as Big Brother and Australian Idol.

"In terms of interactivity, I think it is here to stay," Mr
Hughes said.

SHARE PRICE MOVEMENTS
*********************

Shares of Photon reached a record high of $3.60 yesterday but
settled l0c higher at $3.45. Rolling low for the year is $1.90. Dividend
is 5c a share to yield 1.45 per cent.

Legion Interactive was previously UK-owned when it entered
Australia in 1993 in a joint venture with the Seven Network, before a
management buyout in 2001.

Photon is paying $17.45 million in cash for the group, issuing
1.7 million Photon shares worth about $5 million, and will make extra
payments tied to Legion's earnings to June 30, 2007.

It will provide Legion, which already earns revenue of about $25
million a year, with capital to grow the business and possibly buy some
of its competitors.

"We are trying to create some pillars in our business -
interactive communications and marketing for one, research is another,
and sales promotion and merchandising is a third," said Mr Hughes, who
has not ruled out more Photon acquisitions.

With the number of 14- to 17-year-olds in Australia who have
mobile phones expected to rise from 745,000 to 1 million this year, ring
tones and wallpaper downloads have proved lucrative for Legion.

But mobile phone games have proved the star performer, with
downloads from its services soaring 400 per cent in the 12 months to
December.

BACKGROUND
**********

Photon is an independent Australian VFX company specialising in
visual effects and animation for feature film and television production
for both international and local clients.

Photon's services include:

* Digital FX, including 3D CGI, 2D compositing & FX, and matte
painting.

* Motion Control.

* Total solutions for VFX combining traditional VFX and DFX.

* Project analysis, quotation and supervision.

* Concept development, design and storyboarding, model-making
and miniatures.

Photon has designed and crafted VFX and animation from its
facilities in Sydney and at the Warner Roadshow Movie World studios on
the Gold Coast for over ten years.

Some of its clients include Paramount, 20th Century Fox, MGM,
Disney, Columbia, Sony, Warner Bros. and Village Roadshow.

Recent productions include "The Matrix Revolutions" utilising
Photon's Milo motion control department, "Peter Pan" utilising Photon's
special builds dept for miniatures and "Anacondas" utilising all of
Photon's services.

Nominated for an Emmy award for VFX in the mini series
"MobyDick", and past winner of the AEAF international animation
competition, plus countless other national and international awards,
Photon offers expertise in all facets of recorded-image illusion-making.

Photon is equipped with the latest software and digital
technology for providing the most up to date VFX capabilities and
services.

ENDS

>>>>>>>>>>>>>

I don't hold PGA