Three winners in tech stocks bounce
Article Date: Jun 08 2000Interest in high technology companies with real value has been reviving. Peter Shearlock identifies three poised to make more headway.
There has been a slew of winners here in the past week as activity in high-techs and smaller companies generally revives. The increased bid for RCO materialised, as I suggested it would, and Columbus has come clean about plans to float off Dateline and deliver up the rest of the business to Highbury House. I predicted a two-way deal of this kind in the Growth Company Investor Weekly Digest in mid-May when the shares were 27p. They have since been up to 37p. Don't sell now.
Hold on too at Fortress if you bought on my recommendation three weeks ago at 34.5p. The shares have been creeping up - to 40p - and word is the delayed announcement of a deal is coming shortly.
Radstone Technology, a pick in the Digest at 130p in January, also produced some super figures. The shares are now 171.5p, but remain excellent value. The figures - in line with expectations - were struck after a biggish jump in development costs and sales and marketing. New orders jumped 70 per cent over the year and the year-end order book was double the equivalent figure a year ago. Brokers will have to revise their projections on these numbers.
My main selection in last Friday's Digest has already run up, but I reckon it still has a way to go. It is internet service provider Easynet.
The key to the Easynet valuation is the price Dixons' Stanley Kalms achieves for Freeserve. He is asking £6 billion - for a business that turned over just £7 million in its last half year. Granted, the business has a 30 per cent-plus market share in the UK, but its ability to turn that into profit remains questionable.
But if a trade buyer does stump up anything like that sort of cash for Freeserve, it will unquestionably make Easynet, the ISP that already generates £28 million of turnover, look cheap - even after the recent rally.
Easynet, up from £4 to a recent 832p (and tipped in last week's Digest at 677p) is now valued at around £250 million - or about six times anticipated sales for the current year. It is increasingly focusing on the higher margin corporate sector, is moving into Germany and other parts of the Continent, and, although not yet profitable, is growing without racking up silly losses (it is expected to lose about £0.5 million this year).
The current price compares with a peak of around £30. One of the market makers picked up a line of 847,000 shares at 410p recently, so there may be some stock to come out. But, if the Freeserve deal pans out as expected, there is scope for Easynet to double from here.
I also like the look of Turbo Genset, the Ofex-traded Canadian company that is developing a low-weight, high-power turbogenerator, and where former British & Commonwealth boss John Gunn pulls many of the strings. I understand it has done a deal with BP Amoco that will serve as something of a shop window for its technology.
BP is to take a Turbo Genset system for its Wytch Farm site in Dorset, using flared-off gas to power what will then pump up the oil. This comes just ahead of a move to Aim in July, and similar progression from the Vancouver market in Canada to Toronto.
I tipped the shares last Friday in the Digest at 1075p, and they have since run to 1225p. But there is further to go.
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