Small Talk: 'Show me the money', broker tells Pursuit Dynamics

Pursuit Dynamics is a stock that continues to polarise opinion, principally over its potential to generate revenues compared to its actual turnover. This has led to the disparity of one analyst setting a price target of 550p, and another of 119p. The stock took a big step forward to realising potentially huge profits last week, but some still want to see the money.

Pursuit was set up in 2000 and is run by the former UBS banker, John Heathcote. It develops technology for various industries, but the system exciting the market last week was PDX FireMist. FireMist is an advanced water mist system designed to suppress fires and explosions.

Pursuit announced on Thursday that Factory Mutual, a research agency for the insurance industry, was set to grant approval to sell the technology in the US. One analyst called the announcement "one of the most important milestones in the company's history." When regulatory approval is finally granted, the company can press ahead with marketing the system as part of a deal with Tyco Fire & Building Products.

It signed a licensing agreement, 18 months ago, to fit FireMist into Tyco's extinguishing unit and has negotiated great terms. Rather than getting a royalty from each FireMist kit, it will take about a 15-per-cent royalty from the whole Tyco package.

However, a dissenting voice emerged last week, just days before the announcement. Investec released a note titled "Show me the money," in which it called for the company to deliver on long-given promises. The broker said: "Our concern is that market expectations have decoupled from reality for a company that has consistently over-promised and under-delivered."

The company has failed to record a profit since its creation and "the lack of revenue visibility is problematic," Investec added. While Pursuit does seem to be heading towards a bright future, it will have to deliver soon to keep investors happy.

China Stocks

China-focused AIM stocks have taken a bit of a hammering of late. Only last week, China Biodiesel tanked off the back of a profit warning, adding to the decline that has seen it lose more than half its value since April. Just days later, EBT Mobile China released a warning of its own, driving the stock down 12 per cent from a high of over 130p in 2003.

On Friday, traders were warning investors to pick the AIM-listed Asia stocks with great care. There are a few success stories - Griffin Mining has enjoyed a steady growth since listing in 2002 - but many have suffered. Among the companies that have endured recent high profile problems are Bodisen Biotech, the manure producer. It was forced to de-list from the American Stock Exchange earlier this year after incomplete filings, causing the stock to fall 68 per cent.

Another one that has had, as one trader put it, "a horror show" is Betex Group. The software company is currently suspended after two senior managers were arrested in April. Its chief executive and finance director resigned the following month.

Others are struggling to maintain their value. China Wonder, which peaked at 110p in 2004, was valued at 17p on Friday. London Asia Capital, which no longer operates with a chief executive, has fallen from last year's peak of 25.5p to 7.5p.

Traders said the value was out there but investors need to be careful. One suggested it would be better to trust the experts and invest in a fund that picks a diversified portfolio of Asian stocks. One such fund, Fidelity Asian Values, has almost trebled since 2002.

Plan to bring mines back to Valleys

Energybuild Group floats on AIM today as it continues its efforts to revitalise the South Wales coal industry. With coal prices on the up, the group is set to raise the full market capitalisation of £26m.

Energybuild's goal is to develop mines in the Neath and Dulais Valleys and sell to the nearby Aberthaw power station. Aberthaw currently relies on imported coal, and has signed a two-year contract with Energybuild.

Chairman Colin Cooke is bullish about the group's prospects. "The Welsh mining industry has changed dramatically over the last 25 years, but the fundamentals for success remain highly favourable with the infrastructure and operational knowledge in the region.

"This, in tandem with the rising coal price and our dedicated work programme gives me great confidence in the group," he said.

British Coal closed the mines following the miners' strikes in the mid-1980s, leaving considerable unworked seams. Rhidian Davies, the group's chief executive, is aware of the perception that coal mines' time is finished.

"But given higher coal prices and the fact that China and Britain are both now net importers of coal, the time is right to revitalise Welsh mining," he said.