Small Talk: If you want to act like a hedge fund manager, get into Get

Click to follow

Anyone can be a hedge fund manager. Can't they? These days, the City's richest professionals seem to spend all their time punting on bid situations. If they get it right, it can prove to be hugely profitable. The key, as with all business, is a proper understanding of the risks and rewards associated with each trade.

Interesting takeover situations are by no means limited to big-cap stocks. Presently, there is plenty of corporate action in the smaller companies arena. Take Get Group, for instance. On Monday, the company admitted to having received a takeover approach after a sharp jump in its share price. Before the whole saga kicked off, Get stock stood at around 135p. On Friday, it closed at 157.5p.

City sources say that if the offer is to have any chance of success it will have to be pitched at 250p or above.

Get is the UK's leading designer, manufacturer and wholesaler of electrical appliances. Controlled by the Joseph family, who own 60 per cent of the group, it floated 10 years ago and moved down to AIM eight months ago.

Get made a profit of £3.1m last year. This is forecast to rise to £3.2m this year and to £3.6m in 2007. It leaves the company trading at 11 times next year's earnings with a prospective dividend yield of 4.5 per cent.

The bottom line is that the Joseph family, which has built the business up over the past 50 years, is unlikely to sell it at anywhere near this valuation.

Of course, there is no guarantee that a deal will end up being done. It is possible that negotiations will come to nothing. Nevertheless, on a risk-reward basis the stock looks interesting at present levels.

If a takeover is agreed, anyone buying into the Get Group now should make a profit of at least 92.5p a share. If talks fail, the stock is likely to fall back to 135p (the price at which it stood before the saga kicked off) and investors will lose around 22.5p. So in order to win 92.5p an investor must risk losing 21.5p. Now that seems like a pretty good bet. At least that is how a hedge fund would look at the Get Group situation.

Dolphin Capital

Maiden interim results from Dolphin Capital Investors on Friday showed good progress from the residential resorts developer. The group posted a 36 per cent jump in its net asset value to 107p. Of the €104m (£71m) it raised from its December float, Dolphin Capital has invested €91m in five projects in Greece and Cyprus.

So far so good. But readers should not be surprised to see the group come back to the market later this year in search of extra funds.

It has a huge pipeline of potential projects in south-eastern Europe. The group will have no problem raising more money from the City. Dolphin already boasts the likes of Henderson Global Investors, Lansdowne Partners, Framlington and M&G as shareholders.

It is headed up by Miltos Kambourides, who used to work at Soros Real Estate Partners, and was founded with seed capital from Fortress Investment Group, the US private equity giant. Fortress retains a stake.

Zenergy aims for a powerful listing

Tomorrow sees the float of the world's largest superconductor group. Zenergy Power will list on London's junior exchange at around 84p, valuing the business at £30m. It is developing a new generation of superconductors using low-cost base metals such as nickel.

These are compatible with mass production techniques, something that is yet to be achieved.

Superconductors, first discovered in 1911, are materials capable of conducting 100 times the electrical current of copper with no resistance.

Once listed, Zenergy hopes to unlock the value of its technology by developing products for the fast-growing renewable energy sector as well as for the more traditional power industries.

At present, roughly 60 per cent of electrical energy is lost during its distribution due to the resistance of copper wires. Using superconductors made by Zenergy cuts this down to zero.

The company has operations on three continents - Australia, North America and Europe - and has received over €40m in grants from various government bodies including the European Union.

Although it will not raise any new money, the group feels that an AIM listing will raise its profile, which is important when dealing with large industrial players, national utility companies and governments.