No Pain, No Gain; A stark reminder of stock market unpredictability

A busy few weeks for the No Pain, No Gain portfolio has, unfortunately, failed to produce much cheer. Indeed, Access Intelligence, the only constituent to offer clear trading encouragement, went on to damage stock-market sentiment by producing a marginally bearish statement that created a surprising degree of share turbulence.

Admittedly, Access, a small computer-services group, has been a disappointment. The shares were recruited at 9p, touched 11p, but now bump along at just 5p. Yet the company appears to be trading well and looks to be capable of delivering on its promises.

At the interim stage, adjusted pre-tax profits came in at £200,000 against a corresponding loss last year of £8,000. The chairman Jeremy Hamer made positive noises about prospects, and the group appears to be heading for the signalled £600,000 year's profit.

Its performance attracted a kneejerk share advance to 7p, but a few days later, when it became apparent that a modest 1.2 million shares were likely to be unloaded following a divorce, the price slumped to 4.5p - illustrating that some fledgling stocks are uncomfortably fragile.

I am, of course, saddened to be in the red with Access. Still, I think it is worth hanging on as the stock market is underpricing the shares.

Georgica, the ten-pin bowling and snooker club group, managed to roll out particularly disappointing half-year results, with pre-tax profits emerging at £1.7m, against £3.8m last year. The shares have slipped from their 162p high, but with the possibility of takeover action swirling around, the price should not deteriorate too much.

There is no indication of corporate activity supporting Printing.com, hitherto one of the stars of the portfolio. It will have to rely on a trading revival. A surprise statement revealed that what had previously been described as "mixed" trading had deteriorated to "soft". A hiccup - or the first sign of more wounding difficulties? With the shares around 53p (after 77p), I will, for the time being, give it the benefit of the doubt.

We know that the stock market is an unpredictable place. The vagaries are underlined by the subdued performances of my three constituents. And, if further evidence were needed, Monday's shock from Interserve provided it. Accounting irregularities at the support-services group devastated the shares, delivering yet another blow to former shareholders of MacLellan. As I said last week, it was forced to accept Interserve shares as part of a takeover consideration.

At the time of writing, Interserve shares are 297p (after 265p), a distressing distance from the 382p when the MacLellan bid terms were struck. The portfolio sold its unwanted entitlement at 374.5p, but I suspect that many shareholders, seeking cash instead of shares, were not so lucky. So the rewards they deserved from the deal have been dramatically eroded.

To pile on the agony, it was the integration of MacLellan, a well-run business, that led to the accounting problems being uncovered.

Finally, a little portfolio cheer. Two constituents have been the subjects of favourable forecasts. Equity Development, a research group, has put an 80p target on shares of Myhome International, the franchising group planning to move from PlusMarkets (formerly Ofex) to the Alternative Investment Market (AIM). The current price is around 42.5p. And SQC Research suggests that IDN Telecom should hit 3p this year, 4p next. It's around 2.25p.

Myhome is expanding rapidly. This week it splashed out £200,000 in shares (at 45.5p) for Autosheen. Further payments totalling £300,000 are likely. The car-valeting company, with 15 franchise operators, has substantial contracts.

Russell O'Connell, the chief executive, is keen to increase the franchise spread, and believes the group can accommodate that. Autosheen won't affect this year's profits, which analyst Andy Edmond believes should hit £948,000. Next year, he expects £2.6m, though further deals could overtake his forecast.

The shares have risen from 5.5p at the start of last year, but they still look attractive.

Mark Watson-Mitchell, at SQC, says IDN shares "are clearly undervalued [and] could well attract a bid from another player in a consolidating industry". He sees profits this year hitting £1.175m, with £1.8m in sight next year.

cash@independent.co.uk

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