Tadpole returns from the depths

City Talk
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The Independent Online
TWO sorts of people get excited by the laptop computer specialist Tadpole Technology: those who buy its products and those who buy its shares. The latter, however, particularly those who bought when it was floated in 1992, have had less and less to be excited about in recent months. At 68p, it is barely above its 1992 flotation price. Meanwhile, those who bought into the stock after speculators had whipped it up to 440p are nursing hefty losses. Those giddy heights were unsustainable, and optimism gave way to gloom as setbacks emerged.

Its recent AGM statement, however, suggests the difficulties may be under control. In the first quarter, sales rose 62 per cent to pounds 7m, while it has cut losses from pounds 2.5m to pounds 750,000. Psion, the computer company leading the way in personal organisers, makes a good comparison. Like Tadpole, it claims to be a world leader in portable computers and has made the breakthrough, after initial disappointments, and seems on the way to becoming an established success. It is still early days for Tadpole, but like Psion, its products are undoubtedly ahead of the pack. Now is a good time to buy.

VEGA is one of the few businesses with a significant exposure to the European Space Agency, the European equivalent of Nasa. So far, Vega has profited from the association, but with 50 per cent of its sales from the ESA, it is clearly at risk if the ESA's funding is cut. At present, the association has been only good.

Its other chief client is the Ministry of Defence, with the RAF signing two big contracts for Vega's software systems engineering. It announced spark- ling interim figures on Thursday, with profits during the half year to October up 25 per cent to pounds 1.2m. Chairman John Rigg will step down at the end of February and will be replaced by Robert Drummon, a non-executive director. That should not alarm investors. A healthy return on capital employed of 67 per cent and good organic growth suggests this tiddler has room to grow further. At 348p, the shares are a buy.

STOCKBROKERS BZW and Granville Davies have turned their attention to the textiles sector. While cheap Asian imports still dog the industry, it has had some startling successes since the dark days of the early 1980s. Sadly, last year was another annus horribilis, but both firms are cautiously optimistic for 1996. As BZW points out, the sector is grossly oversold on all yardsticks. Trouble, in the shape of a triple whammy - rising raw material prices, which producers were unable to pass on to the consumer, declining demand and unseasonal weather - dismayed investors.

High-street stocks remain high, suggesting the first half of 1996 will see only moderate easing. Even so, BZW likes Courtauld (420.5p). The shares are unduly depressed, with good opportunities in lace. Sherwood, (108p) is also rated a buy, with its profits this year looking to emerge unscathed from the depredations of 1995.

Granville Davies prefers Dewhirst Group (181p). Despite what it calls a staggering performance over the past year, it remains the best play in the sector. Although sales growth may slow by 1997, margins should hold up.

MUCH has been written on Granada's bid for Forte, with City press coverage beginning to run back in Granada's favour. But little has appeared on the consequences of the bid for holders of Forte convertible shares.

With Granada's shares now up to 694p, Forte's convertible holders have two options: accept Granada's all-share offer for the bonds, or go for the paper-and- cash alternative. The paper-and-cash offer currently values the convertibles at 173p, 3 per cent above Friday's closing price of 168p. But the all-share offer values the bonds at closer to 181p. So the best bet is to go for the all-paper offer. But it is still possible that investors will receive some cash, as Granada has said it may pay out in cash if there are too many share-only applications.

THE stock market debut of John Cleese is upon us, or at least, the business he co-founded in 1972, Video Arts. It has been bought by Mediakey, a company set up by Richard Harman to buy the Monty Python star's old firm and Marshall Information, a packager of consumer reference books. The two acquisitions will cost pounds 20m and will leave the business capitalised at roughly pounds 30m. Despite a capable management team, the attempt to forge an alliance between the two companies is untested. Steer clear.

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