A warm glow from insulation

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The Independent Online
SIG Group, the insulation, PVC window frame, ceilings and partitions distributor and merchant, looks undervalued. Although the shares made good progress through to 286p in 1994, they have since been stuck at around the 250p level. But there could still be plenty to go for. Sales of pounds 358.7m could rise to pounds 500m in 1997, according to stockbroker Teather & Greenwood.

The firm now dominates the UK insulation market, with a 30 per cent market share, while last year it built a 10 per cent share in the German insulation market on the back of acquisitions. Profits could jump to pounds 33m, from pounds 24.1m, to leave the shares trading on a prospective p/e of 12. Its ceilings business has also performed handsomely, and from a standing start in 1990, it has become the market leader in suspended ceilings and partitioning systems. A hardware and security business has been less lucrative.

But with continued talk of a bounce in the housing market, this could also change for the better. The shares, now 242p, are worth a flutter.

GEC's sale of its Satchwell Controls business to engineering group Siebe for pounds 80m was good news for both companies. At the former, it marks the beginning of George Simpson's reign as the new managing director, while at Siebe, it confirms the group is still well on the ball when it comes to snapping up suitable niche acquisitions. Although progress at GEC will be slower - and Mr Simpson has less room for manoeuvre - the shares, at 384p, should be returning to some brokers' buy lists.

SINCE we tipped shares in Northern Leisure in this column last April at 115p, the shares have had a fine run and put on a spectacular end-of- year spurt to take them to 200.5p. While the concept of the business remains valid - buying nightclubs in towns outside the ambit of the big quoted operators - the shares have begun to look overpriced. Time to take profits.

LAST year was an exciting one in the independent oil exploration and production sector. Its two stars, Enterprise (633.5p) and Lasmo (229p), both performed heroically, with Enterprise the stronger of the two. Sorting out their respective merits has always provoked fierce debate, but now may be the time to think about buying Enterprise, and switching out of Lasmo.

Stockbroker Charles Stanley argues that of the two companies, Enterprise seems the cheaper on virtually any measure. Enterprise, it notes, also has a better track record of adding value for shareholders and looks to have better immediate prospects.

CALLUNA is another British high-tech contender which has come up with a 520-megabyte 1.8-inch disk drive, which will go into volume production in this quarter. The company is funding the new business through a two-for-11 rights issue at 50p and an extension in its borrowing facilities. The market for 1.8- inch disk drives is set to grow strongly and has plenty of uses beyond computing, including in personal organisers, cars and digital cameras, where larger formats such as 2.5-inch are too bulky. Flash Memory, one potential competitor, is 10 times the price.

Calluna reckons initial demand is of the order of 10,000 units. The company is also at work on a virus isolator, and Calluna hopes sales of it can start in the next few months. It is also developing an encryption product for the government, based on a removable 1.8-inch disk drive.

On the basis of the 1.8-inch disk drive, Calluna should be able to generate sales of pounds 4m in 1997. Although the company will make a loss next year, of around pounds 4.5m, 1998 could be the year when it hits pay dirt. Then, sales could be upwards of pounds 50m, while profits could hit a respectable pounds 4m. With all the hallmarks of a highly speculative situation, the shares, at 55p, are a tentative buy.