No Pain, No Gain: Recruiting Proxama is a gamble which may pay off

 

I am considering a bold move for the No Pain, No Gain portfolio – enlisting the shares of a little blue sky, highly speculative company. If I do descend on Proxama it will be something of a gamble, but I feel there is a good chance it could be a rewarding experience.

One reason for looking at Proxama is that its chairman is former stockbroker David Bailey. He was the chairman and driving force behind DataCash, an online payments group that was a profitable investment for the portfolio. Eventually the company fell to a takeover bid.

I realise that it is not always possible for an executive to repeat an earlier success. In fact, the portfolio has come a cropper chasing businessmen who have failed to follow-up rewarding ventures. But I have a sneaking feeling that the Bailey involvement in this (very) high-tech operation enhances the chances of  an outperformance.

The business only arrived on the stock market in August via a reverse takeover. Its vehicle was called Longships, originally a natural-resources investor. Proxama was started in 2005 by Neil Garner, the chief executive and a significant shareholder. The company has some interesting mobile-phone developments that allow users to buy various items while enabling advertisers, if they pay for the privilege, to track the callers.

Already some intriguing links have been created with big names in this burgeoning “mobile wallet” business and there is talk that Proxama could enjoy revenue of more than £50m fairly quickly.

In the meantime it is, like so many high-tech players, absorbing cash. At the half year the loss was £1.4m and it is now calling for £8.6m at 2.5p a pop. The shares are just over 3p; they have topped 7p since their arrival.

If the portfolio does embrace Proxama it will push its membership to 15, which is near the strength I feel is ideal for small shareholders. Such a collection should provide a varied spread of interests that offer protection to counter the unexpected swings and roundabouts that investors usually encounter.

My share collection has a few winners but I am not particularly keen on locking in profits. After all, with or without the Christmas rally, the stock market has enjoyed a splendid year. I realise in most walks of life prediction can be a hazardous activity, but I feel next year will be another good one. Despite the usual array of doubts that question almost every official forecast, there are good reasons for believing – as the Government maintains – that this country’s economy is on the mend.

At the time of writing only two portfolio constituents have been in action. Avation, the aircraft-leasing group, has increased its order book by taking up five options and arranging another five. A total of 14 aircraft should be taken on before the end of 2015. In addition, two of the fleet are being sold. Revenue, including the proceeds from the aircraft sales, for the current year will be “significantly ahead” of last year. Avation also owns  61 per cent of Aim-traded Capital Lease Aviation that produced profits of $4m (£2.5m) in its last year.

Brightside, the insurance broker, has a new chief executive. Paul Williams has been recruited from Towergate Partnership, an insurance intermediary. The shares are only just above the portfolio’s buying price, but Brightside directors have clear views about recent performance. They describe the shares as an “undervalued, dividend-paying, growth stock with an enviable balance sheet”.

The shares are a little over 19p; Avation is around 129p against an 83.5p buying price.

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