Smaller Companies: Computer firm is set for a surge

MMT COMPUTING has a broad base of activities, covering consultancy, systems design and implementation, and project and facilities management, writes Richard Phillips. Unlike some recent new issues, MMT has the benefit of a long track record by which to be judged. And with some of the more risque arrivals trading on very toppy multiples, MMT has the benefit of being more conservatively priced.

It should repay closer examination. Currently at 1,087.5p, the company has been growing both organically and through sensibly priced acquisitions. Its most recent was Webbins, which supplies pricing software to electricity companies. That year it also bought Cortex, the largest supplier of trading software to the London Metal Exchange. Operating profits have grown from pounds 2.7m in 1995, to pounds 5.1m in 1997. Sales last year were pounds 24.6m. Granville's, the stock broker, estimates the company can continue to grow at a similar rate, which would imply that sales should hit pounds 30m in the current year, with profits of pounds 7.4m. On that basis, the shares trade at around 24 times earnings, but even so, they could be worth 1,200p in a year's time.

As well as the problems of the year 2000, and EMU conversion, the overall rise in demand for IT should fuel the sector's growth well into the next millennium. For a company like MMT, staffing will be a recurring problem but most customers have been extremely loyal; Marks & Spencer has been a client for 20 years, and it has a string of other blue-chip clients. A bullish annual general meeting suggests earnings per share could grow by 30 per cent this year. Buy.