No Pain No Gain: The portfolio's star player doubles my money
Saturday 20 May 2006
DataCash, the online payments group, has emerged as a star player in the No Pain, No Gain portfolio. A reverse takeover proved to be the catalyst for a sudden advance, sending the shares to almost 200p; as I write, they are 184.5p against a 77.5p buying price.
Even before the sudden burst of exuberance they were, at 137p, clearly in the nice-little-earner category. And there seemed every chance they would continue to progress on the back of the group's niche role in the mushrooming plastic money business when cardholders are not actually present as a transaction occurs.
Online gambling provides its main revenue stream with retail sales making an important contribution. There is also a possibility it could reap rich rewards from the chip-and-PIN revolution. On top of such potential comes the acquisition of something called Proc Cyber Services. It is mainly involved in providing payment services for internet gambling but has also added fraud prevention to its activities.
The deal values Proc Cyber at about £83m. DataCash is handing over almost 45 million shares, which will represent half of its enlarged capital, to Ashley Head, the 55-year-old chief executive. He can, if he wishes, top up his holding to retain his 50 per cent interest when share options are exercised. Head will become chairman, with the present incumbent, ex-stockbroker David Bailey, stepping down to become deputy chairman.
To an old Luddite like me, more comfortable with the so-called old economy, this hi-tech world is very confusing. I actually climbed aboard DataCash for the simple reason that adding chip and PIN to its more remote and already successful online payments service represented a splendid growth opportunity. Well, the chip-and-PIN excursion hasn't, so far, been an outstanding success. But there is still a chance that it will hit the jackpot.
The DataCash display came at an opportune time for the portfolio. For, as I undertook my performance update, the stock market suffered one of its periodic bouts of deep depression. A recent strong portfolio advance was blunted and, even allowing for the online group's progress, the overall gain is only marginally higher at £86,000.
The total amount invested now stands at £195,000. I intend to cap the outlay at £200,000 with the cost of any further share buys met from profits. So there will be just one more purchase under the old system.
Investors should not be too worried by the abrupt stock market retreat. Shares have enjoyed a great run and setbacks must be expected. I would not be surprised if in the months ahead shares merely meander around, more or less marking time.
MacLellan, the subject of takeover action, is in the portfolio departure lounge. The offer document, with its mix-and-match facility, has yet to materialise. As soon as I can, I intend to make an all-cash exit. Lennox, distributing food and drink in Spain, could also leave. But whereas MacLellan, a support services group, represents a profitable investment, Lennox has accumulated wounding losses. My inclination is to unload what has been a disastrous investment rather than hang on hoping for recovery.
I am also growing anxious about Wyatt, offering online services. It has failed to perform during its three-year membership and seems to be making precious little headway on the trading front. Access Intelligence, another loss-maker, only arrived in June. It has yet to display the sort of enthusiasm I expected but these are early days.
Printing.com, due to report year's figures in a couple of weeks, is taking on an air of permanency. It has been one of the portfolio's more successful ventures and I would be surprised if its coming results disappoint. Indeed, the franchise printer has already said that trading in the year to the end of March was generally robust. It could also have details of its first overseas master franchises.
Myhome International, another franchise operation, is due to produce interim figures next week. The Watshot.com share-tipping site has put a "strong buy" tag on the shares.
Scottish & Newcastle, one of my two Footsie stocks, continues to score on the Russian beer front where it is in partnership with Carlsberg of Denmark. Although there are signs their Baltic Beverages operation is facing increasingly stiff competition and margins are under some pressure, it is still recording impressive progress. The shares are worth holding on trading grounds. And there is always the chance of takeover action.
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