The Investment Column: Honeycombe

LIKE COMPCO, Honeycombe, the 23-year-old pubs group that listed on AIM in November, has two chief executives - one for day-to-day operations and one to do the deals - and is looking out for undervalued properties away from London. Honeycombe's deals, however, start out with a night on the town; it sends out teams of "researchers" on pub crawls to conjure up a shortlist of the prime boozing sites in town.

Yesterday's maiden results bear out Honeycombe's claim that it has found a niche business and that the nocturnal excursions are not an excuse for a jamboree at shareholders' expense. The strategy is to acquire unbranded pubs in market towns, take responsibility for their marketing and to delegate mundane staffing matters to the landlord, who is incentivised by sales commission.

The group is biased towards the Midlands and the North. Its sites cater for office workers during the day - obviously it believes people don't work in the North - and for students in the evening. Honeycombe says larger pub groups have overlooked the potential of market towns, leaving them with little competition.

Last year's like-for-like sales growth of 4 per cent, and 6 per cent since the year end, is impressive - Bass and Allied Domecq recently reported like-for-like sales down by 4 per cent.

Honeycombe also has the blessing of Sandy Anderson, who owns 50 per cent of the business. Mr Anderson made a tidy sum selling to Stagecoach the train leasing business he picked up for peanuts in the Government's rail privatisation.

Honeycombe wants to acquire about 10 new pubs a year, and is on track to achieve that this year. Analysts expect pre-tax profits of pounds 2.1m this year and earnings of 7p per share. At 76.5p the shares trade on a multiple of just 11 - cheap for a stock with 20 per cent forecast earnings growth. However, AIM stocks can be volatile and investors should treat Honeycombe as a risky punt.