Verity speaking loud and clear

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The Independent Online
A heavyweight piece of research on Verity, the loudspeakers and hi-fi outfit, lands on my desk. Verity, as readers of this column may recall, owns the loudspeaker brands Wharfedale and Mission, as well as a drums and percussion business. But the attention has been focused on its revolutionary design for a new type of loudspeaker, using flat panel technology.

Analyst Ross Jobber, of stockbroker UBS, has looked closely at the prospects for Verity's NXT technology, and likes what he sees. He reckons that the shares - currently 55p - are worth 83p on a 12-month view. His analysis is based on a discounted cash flow model, and assumes the first royalty income will flow in 1999, with pounds 1.7m in sales. While his assumptions may be realistic, the questionable worth of discounted cashflow modelling has been seen in the likes of Eurotunnel. Nobody disputes Verity has its hands on some amazing technology; what needs to be taken with a pinch of salt is that one can assume the company - whose shares have jumped from 15p a year ago - is worth even more than its current demanding rating implies.

As the market hit yet another high, the number of companies who have announced they have been approached for a possible takeover continues to grow. On Friday, it was the turn of fresh food distributor Albert Fisher. It said it had received a bid approach, although from whom it did not disclose. The shares finished up 13.25p at 47.5p. Unigate is in the frame as the predator.

Like Fisher, many of the target companies have yet to state who has approached them. So the market awaits news from companies as diverse as travel retailer and tour operator Inspirations, to Appleyard, the car and trucks trader, and biotech player Anagen, where William Cairns , a Channel Islands-based private investor, has emerged as a potential investor.

One theory doing the rounds is that these are only the tip of the iceberg. A slew of deals are on hold, waiting for the Budget on 2 July, they say. If that is so, and Gordon Brown does not spring too many surprises, corporate activity could increase.

One deal not on hold is the flotation of Ionica, which was announced last week. The Cambridge-based telecommuni- cations operator has said it will come to the market via a placing, likely to value it at between pounds 600m and pounds 800m. About a quarter of the company will be floated, to raise about pounds 125m. To date, Ionica has raised pounds 400m to fund its development. Ionica is another one of those huge start-up operations, a la Orange and Colt Communications.

Ionica is expected to make profits by the year 2000. Its tariffs are cheaper than BT domestic rates, and it operates through wireless transmission.

However, the big flotation in the offing, if you exclude the Woolwich, is Formula One, which seems likely to be delayed until September. There have been difficulties for the lawyers, and it is clear it will need watertight agreements between the teams and the FIA, the motor sport's governing body. Questions have been raised as to whether F1's dominance is in breach of EU competition law. Salomon Brothers, F1's adviser, suggests the company is worth pounds 1.8bn.

Burn Stewart, (58.5p) the own-label Scotch whisky distiller, has seen its shares continue on a downwards trend for the last year, from over 140p at the start of last year. Much of the problem came from a change in accounting treatment for a disputed item, which saw pre-tax profits take a 75 per cent hit, falling to pounds 1.01m.

Full-year profits should recover to pounds 3m, and the net dividend could reach 5p. In October, the shares were best avoided. But talk of a merger with Grants being aired there is clearly support at these levels, and the shares could be due a rebound.

In cable land, Salomon Brothers are supporters of Telewest, the cable operator. The shares have almost halved from the 121p of March, on worries the company was about to breach its banking covenants. Rubbish, says Salomon. The company still has pounds 700m plus in untapped funds from its pounds 1.2bn bank facility. The shares are a firm buy, it says.

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