Net gains are hard to predict

THE INVESTMENT COLUMN

If surfing the Net or getting wired means nothing to you, a huge cultural phenomenon is passing you by. You are almost certainly not a shareholder in Unipalm, provider of access to the Internet, the worldwide network of computers, and one of the country's fastest-growing companies.

That is a shame because you have missed out on one of the stock market's most successful recent placings. Priced at 100p when shares came to the market in March 1994, they have since soared to 248p.

The Internet, essentially a means of talking to any other computer anywhere in the world, is growing at such a phenomenal rate - some estimate 10 per cent a month - that the challenge facing companies such as Unipalm is not generating sales or nudging up margins but simply stopping the whole thing spiralling out of control.

Staff numbers at Pipex, the subsidiary that provides big corporate customers with the hardware and software to link up to the Net, have jumped from 110 to 187 in a year.

They have been taken on to cope with the explosive growth in customers signing up. With 255 subscribing to Pipex last June, there are now 654 on the books, all chipping in an average of pounds 10,000 a time for unlimited e-mail access and all the other benefits of being hooked up.

The company is confident that with a target market of 50,000 companies in the UK, the current rate of growth can proceed if not accelerate for the foreseeable future. In March, a record 61 customers signed up, a figure that is expected to be 100 a month by the end of the year.

This sounds, and indeed is, exciting, but what does it mean for the potential investor? It's hard to say, because the numbers make as little sense as much of the jargon pervading the industry. Profits in the year to April of pounds 442,000 (pounds 272,000) put the shares on a meaningless historic p/e. Even on the basis of forecasts of pounds 1.5m this year, the rating is 80 or so. There is no dividend.

Bulls of the stock take heart from the massive multiples of sales currently being applied to similar quoted companies in the US. But make no mistake - this is high risk/high return investing and, of course, this sort of growth comes with a strongly worded health warning attached.