Can Superscape thrive in the real world?

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THE VR in Superscape VR stands for virtual reality - as any cyberspace watcher knows. It also reflects the company's share price performance. A few weeks ago, based on little more than hope, shares were at 400p.

Then last week they surged another 30 per cent, to close at 625p on Friday following news of a tie-up with IBM.

Big Blue will market Superscape's software and consultancy services around the world. But there is little prospect of profits much before 1998, when some watchers have tentatively pencilled in pounds 5m. That still leaves the shares at well over 20 times earnings for that year, a remarkable act of faith by investors. Superscape is worth pounds 50m, enormous against its last reported annual sales of pounds 1.75m. Way to go, you could say.

Superscape's main software product, a virtual reality authoring tool, can be run on standard personal computers and has won plaudits from professionals. The conundrum is figuring out a sensible valuation for future sales. With little in the way of hard facts to go on, many must feel they are at the mercy of the company.

Superscape, rightly, refuses to forecast how sales may develop, although it has a proselytising zeal for its products. However, hopes that it can gain a consumer following are ambitious; rivals may emerge with better products. Whatever the reality, now may be the time to take some profits.

CASH is king, or so goes the gospel according to legendary investment gurus such as Warren Buffett.

If so, Reuters Holdings must remain an attractive share. Results out last week showed yet another rise in profits, up 17 per cent to pounds 599m. But to the cash devotees, news of the profits rise was less important than the pounds 316m growth in the cash pile to pounds 850m. It is forecast to grow to pounds 1bn by the end of the year.

The icing on the cake was news that Reuters would reward investors by means of a share buy-back. The shares reacted strongly and are up by more than a quarter over the past six months, at 692p. If that wasn't enough, the directors passed a 23 per cent increase in the dividend to 9.8p. Buy.

THE LATEST bad news to afflict insurance stocks concerned the Christmas weather, prompting stockbroker Credit Lyonnais Laing to revise its forecasts for the sector.

The analysts at Credit Lyonnais Laing estimate that the Christmas freeze will have cost insurers up to pounds 150m in claims. The broker still likes Commercial Union (606p), but even so it has cut its 1995 pre-tax forecast to pounds 480m from pounds 509m, and the 1996 forecast to pounds 525m from pounds 535m.

On the rest of the sector, it has remained broadly neutral. Only Royal Insurance (375p), a long-term sell, remains in the doghouse. The broker has reduced its 1995 profit forecast for Royal Insurance by 9 per cent to pounds 402m and left it unchanged at pounds 370m for 1996.

VARDON, a rapidly growing leisure business, lived up to expectations last week when it unveiled improved figures.

The company's ability to shrug off the detrimental impact of the National Lottery on its bingo division was impressive. With sales ahead 74 per cent at pounds 52.6m in 1995, and pre-tax profits up 24 per cent to pounds 9.1m, the company is coming on in leaps and bounds. Crucially, Vardon remains strongly cash generative, which will help fund its acquisition programme. The shares, at 121p, are a buy.

AIM, the Alternative Investment Market, has proved a useful source of cheap equity for small and start-up companies.

However, the market has always carried a health warning, and one such should apply to Optical Care (Bermuda). The first foreign-registered company to list on the market, it hopes to develop a chain of opticians in Central Europe, Russia and India, licensing technology from the US company Morrison. The Bermudan connection was to encourage US funds, which gain from the tax benefits. Optical says it now has four big institutions on board, owning 62 per cent of the equity.

Whatever the US institutions may see in the business, steer well clear of it.

The founder, Rupert Galliers-Pratt, was previously better known as chairman of this country's leading pawnbroker. But Lightship, the holding company, went down in 1994 - a point made in the prospectus, which also mentions problems for three other directors and companies that they have been involved with previously.