SCAPA GROUP (243p) is a supplier of machinery to the paper industry but seems to have some protection from the sector's vicious cycles. While paper prices rise and fall abruptly, demand for paper continues to grow - and with it, demand for Scapa's products. Its latest results leave its shares on a modest 12 times 1997 earnings - scope for further growth. Buy.
ELECTRONIC Data Processing has some solid qualities: pounds 8.8m of cash in the bank following its last interim results, and some good products, such as Merchant and WinLink, software systems for distributors. But the five- year track record continues to worsen. Sales have fallen from pounds 17m in 1991 to pounds 12.6m last year, and while the first half was off to a good start, at pounds 7.89m, that was in part due to the acquisition last year of BML. A new product launch, an open architecture system of its UniVision programme, has potential. But marketing costs could be high - to kick-start the market it may have given away as many as 13,000 copies out of a total of 20,000 copies that have been released. The shares, at 89p, remain a sell.
MOTOR DEALER Reg Vardy announced a 1 for 5 rights issue to raise pounds 27.3m last week, at 300p a share, against the current price of 327p. The money raised will be used to pay down debt, and it is selling three BMW dealerships to raise another pounds 8m. An excellent set of results confirms the group as one of the leaders in its sector. It is well placed to capitalise on the trend for motor manufacturers to appoint dealerships on a regional basis. As this gathers pace, further consolidation will be inevitable. The news was also significant because it sees chief executive Peter Vardy's stake reduced from just over 50 per cent, to around 33 per cent. Institutions will like the increased liquidity, while his relinquishing absolute control could be seen as a mark of faith in the senior management he has assembled to take the business in to its next phase of growth. Take up the rights.
MUSKETEER brings to mind tales of derring-do, and perhaps that is what AFA Systems will provide its shareholders with. Musketeer, its chief product, is a sophisticated software programme for the treasury offices of multinational corporations and banks. It can monitor trading in all currencies, tie up risk management, and perform back-office functions. AFA is itself a brave venture: it only began trading in October, 1995. A placing at 120p a share values the company at pounds 12m. There are risks, but the company predicts a profitable future. Buy.
A NUMBER of City pundits are warming to BAA (463.5p), the airports operator. The shares have had a rough time over concerns that the regulatory regime will turn nasty, a la British Gas. But many are coming round to the view that such fears are overdone. For a start, the main beneficiaries of any price review will be the airline industries - a different category altogether from individual voters as is the case with gas and electricity. The Civil Aviation Authority is in the midst of its review of BAA's pricing - currently set at RPI minus 1 per cent - and is due to hand over its findings to the Monopolies and Mergers Commission any day. Paribas rates the shares a buy, and reckons they can rise 16 per cent before they reach fair value.Reuse content