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The Investment Column

If Elliott Bernerd, the property developer, were not behind the proposed flotation of Alea, announced yesterday, it is hard to imagine many investors taking a second glance. A riskier proposition it would be hard to imagine than this one - facing up to the Mafia on their home patch, Alea plans to launch an on-line lottery in 10 Russian cities via a Bermuda-registered, AIM-quoted vehicle.

If that sounds like a recipe for disaster, the fact that new investors are to stump up the total cost of the $39m project, while Mr Bernerd's family retains a 30 per cent stake and operator Essnet keeps 20 per cent, does little to soothe nerves. If you are going to take risks, it usually makes sense to do it with other people's money and all Mr Bernerd stands to lose is his reputation.

But therein lies the cushion. It is hard to imagine anyone less willing to risk his name on a speculative overseas venture when he has built up such a reputation in the UK property market through his quoted vehicle Chelsfield, owner of Wentworth golf course, the Merry Hill shopping centre in Dudley (bought at a knock-down price) and a stake in the proposed redevelopment of a derelict site in White City.

The prospects for a Russian lottery are certainly enticing. There are 150 million people in a country with a penchant for a flutter, where the quoted average salary of $2,000 a year vastly understates the true figure thanks to a thriving black economy. Almost half the Russians polled in a recent survey are already playing off-line lotteries (scratchcards and the like).

The management, in the form of former Lonrho and Vestey man Terry Robinson, knows the patch and has linked up with a strong Russian partner and one of the world's leading lottery operators to run the show. The funding structure, raising most of the cash in the form of debt, should leave plenty for equity holders once the borrowings are paid off. The placing price of 33p a share compares with a projected earnings per share figure for 1999 of 39.7p.

This will either make a fortune for its investors or lose their shirts for them. Alea is a Latin word for "a game of chance" - only the individual shareholder can know whether he is prepared to play that game. He should do so with his eyes open.