Small Talk: Soaring games group Sci can go higher still - Business Analysis & Features - Business - The Independent

Small Talk: Soaring games group Sci can go higher still

Durlacher cash denial - Cape of good hope - Zi needs sales cure - Egdon takes AIM

Given the recent share price performance of Sci Entertainment, today's annual results from the computer games publisher are very unlikely to disappoint. In the past month alone the stock has soared by more than 50 per cent, while since April its share price has more than doubled.

Sci is the company behind games such as Conflict Desert Storm 1 & 2, The Great Escape and Richard Burns Rally. Its broker KBC Peel Hunt expects profits to come in at £4.3m, up from £3.5m a year earlier, but word has it they are likely to top this figure.

Meanwhile, 2005 looks likely to be a great year for Sci. It has an impressive pipeline of new releases including Constantine, to be based on the forthcoming big budget Keanu Reeves film, Battlestations: Midway, which recreates the Second World War naval and air battles between Japan and the US over the Pacific island of Midway, and the action game Rogue Trooper.

Peel Hunt forecasts pre-tax profits at Sci to have easily reached £5m by the end of next year, which translates into earnings per share of 21p and leaves the group's stock trading at just 9 times earnings.

Durlacher cash denial

Even after last Friday's statement from Durlacher, rumours that the stockbroker is looking to raise fresh cash refused to go away. The company was forced to put out the statement after a sharp drop in its share price, but the update failed to spark much of a rally. This is partly because Durlacher's rather wordy release to the Stock Exchange failed to deny the fund raising speculation outright. So here it is on the record from a spokesperson for the broker: "Durlacher is not looking to raise new money. "

Cape of good hope

Is the building materials group Cape a takeover target? A gaggle of City brokers are convinced it is. From a distance, Cape certainly looks an attractive proposition. It trades at just 9 times next year's earnings, boasts real estate assets worth 120p a share - compared with Friday's share price of just 143.5p - while its operating business seems to be booming. In September, the group said it was very optimistic about the remainder of its financial year.

Schroder Investment Management and Merrill Lynch Investment Managers have both been busy building up stakes in Cape in recent months. There also seems to be a large bull position in the stock held in the form of a contract for difference through Cantor Fitzgerald. At the last count it stood at 4.3 per cent of Cape's share capital. Given the company's lowly valuation, even without a bid its shares look set to continue their march higher.

Zi needs sales cure

Zi medical stock jumped 10 per cent on Friday to close at 8.25p. But with a valuation of £6m it looks to be a risky proposition for investors. The firm, which is developing a new type of drip for hospital patients, is in desperate need of securing sales of the product. A look at Zi's September interims reveal that the company generated sales of just £51,000 for the first six months of its financial year.

Meanwhile, it is burning through its cash at quite a speed. Zi spends £100,000 every month, leaving it with enough money to keep going only until June. If Zi fails to win some major deals before then, it will face a cash crunch.

Egdon takes AIM

The march of companies from Ofex to AIM continues. Expect to see the oil and gas explorer Egdon Resources move up from the lightly regulated exchange within the next few weeks and raise some fresh cash on the way. Egdon hopes to strike it big at one of its 16 onshore UK licences.

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