Small Talk: Extract an oil bargain from GME

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The Independent Online

Investing in oil industry service providers has paid good dividends for most investors over the past few years as the price of oil has surged and associated industries have prospered. But it's the exception that proves the rule and GME has certainly been the exception in the oil services sector. The shares have collapsed over the past 18 months and now trade at an 82 per cent discount to the high of 84p.

A trading statement in March made unpleasant reading. GME revealed that delayed contracts and losses at its NIM subsidiary would lead to a £1.1m loss for the year. Since then its management, led by new chief executive Paul Findlay, has turned things around. Lost revenue last year is expected to come good this year.

However, there could be a major change for the better as the word in the market is that GME is about to sign a couple of major deals. At the current price of 14.75p the group trades on a miserly 3.3 times forecast 2007 earnings, a huge market and sector discount.

With a potential order book of more than £50m, a current order book at record levels and a market capitalisation of a little more than £10m, the shares look like they are being given away.

Thanks to a recent placing, the company has net cash of slightly more than £4m, meaning that the market is valuing the ongoing business at just £6m. Even taking into account the disappointing trading statement in March and the delay in the results, this makes the company a steal.

Red-tape burden

The ever-increasing burden of regulatory compliance is forcing more AIM finance directors to outsource key corporate functions, according to new research from Noble Corporate Management.

In a survey of 100 AIM finance directors, Noble found that 88 per cent of them would like to achieve best practice but that 75 per cent are growing increasingly concerned about the time spent on these matters. AIM regulators might be a little more concerned by the 12 per cent who appear uninterested in achieving best practice.

Even so, if management is spending more of its time on matters such as health and safety, human resources and management accounting rather than actually running and building the business, investors shouldn't expect much improvement on the performance front. So maybe being forced to outsource non-core functions isn't such a bad thing after all.

Now the Japanese turn to AIM

Global demand for advanced fingerprinting technology has brought Secure Design to the UK market, the first Japanese company to list on AIM. The company came to the market via an introduction by broker Charles Stanley at 47p per share, and closed at 62.5p on Friday, the first day of dealing, giving investors a tasty 33 per cent premium, after having raised £3m from Japanese investors prior to the flotation.

The global market for fingerprint technology and identification is expected to be worth $6bn (£3.3bn) by 2010, from $2bn in 2006. Satoshi Takahashi, Secure Design's chief executive, expects the company to grow rapidly.

Secure Design takes the number of countries represented on London's secondary market to 29.