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Derek Pain: Transport firm may go faster witha better name

No Pain, No Gain

A fellow I know is a transport nut. He travels the country just to examine and watch buses and trains. No journey is regarded as too long and he happily wanders around bus garages and train depots, peering at the various facilities on show. He regards any bus or train ride, particularly if it adds to his vast collection of identity numbers, as a joyful occasion, and ranks as the most enthusiastic train (and bus) spotter I know. So when I contemplated adding a bus company to the no pain, no gain portfolio, I felt obliged to tap his vast store of knowledge.

"Rotala," he repeated, "never heard of it." And that could sum up the company's problem. Not a great many people are aware of its existence. My transport chum was nonplussed, a reaction repeated by some people in and around the stock market.

Probably such a lack of appreciation is unfair. After all, it is happy to put through takeover deals and has moved into profits. But the simple fact that an uncomfortably large number have yet to stumble across the group has helped to deter me, at least for the time being, from adding the shares to the portfolio.

A low profile is a problem confronting many small caps. Whether fully listed, AIM-traded or on the fringe Plus market, most are consigned to near oblivion unless they have some outstanding connection or become involved in an intriguing headlined scandal.

Such a state of affairs is relatively new; a creation of AIM which attracted at one time a veritable flood of newcomers. There are still so many small caps floating around that many investors cannot be bothered, or find it a near impossibility, to keep track of them. But some gems lurk. And I believe it is foolish to ignore the stock market undercard.

So what is Rotala, besides an exotic aquarium plant? It has bus, chauffeur car and coach interests, operating, in the main, from Birmingham and Bristol. The vehicle fleet is approaching 600, helping to capitalise the group at around £10.5m. But its shares have failed to perform. At one time they topped 80p. As I write, they are 30p, having been as low as 25p.

The group sees itself as a bus and coach consolidator, intent on mopping up small public transport players, pointing out that many owners who took advantage of bus deregulation are now approaching retirement.

Like many other aspiring businesses, Rotala has sprinkled its shares around to finance a string of acquisitions, following the private placing route.

Its last and biggest deal was the takeover of Preston Bus. Rotala snapped up Preston after the Stagecoach bus and train group was forced by Whitehall pressure to sell the business on monopoly considerations.

Stagecoach is a former portfolio constituent. The shares were acquired at 80p, caused increasing anxiety as they were sold down to 10p, and then enjoyed a veritable ticket to ride, allowing the portfolio to bank a handsome profit.

John Gunn, Rotala's chairman and 16.2 per cent shareholder, believes the transport group will enjoy quick returns from the Preston deal. He has headed the company since it arrived on the stock market as a cash shell six years ago. The Stock Exchange authorities were none too happy about quoted companies that had a bagful of cash but little, if any, trading activities. However, Rotala did not present a problem. It made its first acquisition shortly after its flotation, which had raised £4.3m.

Mr Gunn is a well-known City figure. He has headed some famous names, including British & Commonwealth, a once powerful group that came a cropper after buying a business called Atlantic Computers. The serial investor Nigel Wray is also on board, with a 6 per cent stake.

When the stock market experienced a rush of cash shells, some unusual names were used. Rotala was one. Many shells enveloped businesses and quickly acquired a new name, probably more in keeping with the chosen industry. But Rotala has stuck with the original choice.

Perhaps it's time to change. Ditching the rather flamboyant moniker in favour of something more in keeping with its activities could, perhaps, improve investor awareness (as well as that of my bus spotter) and give the shares a more upbeat ride.