Heads you win with penny shares


RISK AND reward are opposite sides of the same coin as far as the market goes. Investors looking for above-average returns have to accept that if things go wrong they may stand to lose the lot. The shares I have selected here offer way above-average potential but are certainly not for widows and orphans.

First on the list is Media Business Group (MBG) at 4.5p. Its chairman, Allan Rich, would probably take exception to being put in such a "high- risk" category. The group, which is a specialist media buyer of advertising space, has been around for 20 years and is solidly profitable. But the company is small - two years ago profits only reached pounds 383,000 - and the recent flotation at a penny dreadful price of 3p by little-known stockbrokers leaves a certain air of vulnerability over the shares.

Against that are solid attractions. The group is one of the largest independent operators in one of the fastest-growing areas of the advertising industry. Billings this year could be around pounds 155m from an impressive client list, including the likes of Direct Line, Mercury, Polygram, Roche Consumer Healthcare, and Revlon. MBG uses its expertise and buying muscle to buy space cheaply and guide its clients through an increasingly complex maze of advertising outlets.

Industry growth is more than amply reflected in barnstorming results from MBG. Pre-tax profits have grown from pounds 383,000 for the 13 months to April 1993 to pounds 631,000 for 1994 and pounds 920,000 for this year. Interims due in January are likely to show the group on course for pounds l.2m or better for 1995-96. That would leave the forecast price-earnings multiple at 15 or less, cheap by comparison with its quoted rivals, CIA group and Aegis.

A warning, though: low- priced penny shares typically have wide buy-sell spreads, so investors should set a limit within the range when they deal.

Several notches more speculative, but offering excitement in equal measure, is IES Group at 835p. The company develops products based on proprietary hardware and software, mainly for the security industry. One drawback is that the shares are "quoted" only on the Offex matched bargain facility, so marketability is poor. London-based readers can find a price in the Evening Standard; otherwise ask your broker. The plan is to join the AIM market, probably early next year. Buyers now will qualify for a one-for- one bonus issue on 4 December.

Its chairman, Roy Ricks, who sold an earlier electronic security venture to BET, believes IES is poised for take-off in the next few months, with sales and profits likely to soar next year and 1997. There are three main product ranges. In hardware, it offers audio verification of burglar alarms and tagging systems for retail displays. The tagging or Asset Monitoring System (AMS) allows retailers to display items so that customers can touch but not take. Among big AMS customers so far is electrical group Dixons.

The second key business area is managing security for large retailers including Texas Homecare, House of Fraser and Somerfield. This provides high-quality recurring income and is growing dramatically.

Third, and possibly most exciting, is the group's range of digital imaging software. Triggered by movement, these systems provide a cost-effective way of capturing and storing images, with big security implications.

Of great potential, for example, is security at cashpoints.

Figures for the year to end-September are due shortly, but will not set the world on fire. But the current financial year should see more action. Conceivably sales could hit pounds 20m, up from pounds l.6m in 1993-94, with profits topping pounds 2m, perhaps by a substantial margin. Current market capitalisation is pounds 24m, and the shares have already risen 16-fold from 55p at the time of the first quotation in 1993.

My main criterion with penny shares is that something should be about to happen. Two where the action is are Black & Edgington at 8.5p and Platignum at 8p. The former is backed by two entrepreneurs, Nigel Wray and Ian Gowrie-Smith - the latter helped make Medeva, now capitalised at pounds 805m, a great success. There are hopes that he will do something similar with his new vehicle, with a deal believed to be imminent.

Black & Edgington is already capitalised at close to pounds 50m, though, so penny share aficionados may feel happier with Platignum. Asset value is perhaps pounds 4.5m to pounds 5m against a market capitalisation of pounds 6.5m, again with a significant deal expected shortly from a new management team led by Nick Smith, formerly president of Kimberly-Clark Europe.

Start your day with The Independent, sign up for daily news emails
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific