The Investment Column: Smash and grab the chance to take some Securicor profits

SECURICOR, NOW shorn of its 40 per cent stake in BT Cellnet, is one of the stock market's best plays in that unfortunately growing industry - law and order. But while the group has some fine prospects in its electronic tagging, prison management and security guards businesses, only repeated rumours of impending takeover are enough to hoist the share price. Where's the justice in that?

The City delivered a harsh verdict on Roger Wiggs, the chief executive, for selling the Cellnet stake at a price lower than valuations of other mobile phone companies would imply. The group yesterday argued that no other company would have been interested in coming to the table. Mr Wiggs, having bid farewell to his critics among telecoms investors, meanwhile set upon an all-day "teach in" about Securicor's core businesses.

Takeover speculation aside, Securicor's near-term valuation depends largely on Mr Wiggs' commitment to the loss-making communications division breaking even by 2001. The division links up the communications of emergency services. Heavy investment is behind the losses, but invoices are about to arrive in Whitehall. There, equivalent US business is back on track following some minor regulatory delays. Still, any suggestion that communications won't break even on schedule would pummel the shares.

The outlook for the core security business is also looking up. Increased controls on the security-guard industry, in which Securicor competes with Rentokil, is creating opportunities to acquire smaller players. The business of carting around suitcases of cash to stock up cashtills is doing well and the group sees scope for expanding its European operations here.

Securicor is even staring to make money from its assorted prisons businesses after being fined for failing to make enough cells available in HMP Parc. The difficulty is the distribution business, which is having a tough time in the UK because of sluggish high-street demand. Mr Wiggs is pushing into home shopping, but is not excessively bullish about the returns achievable handling products in that crucial last mile.

Investors banking on a takeover should beware. Williams, the widely tipped candidate, would have to break up the group to extract the guarding business. Still, the expectation has helped the shares hit an all-time high of 178p. On Merrill Lynch's forecasts of pounds 56.5m pre-tax profits this year and earnings of 6p per share, rising to pounds 73m and 7.7p in 2001, the shares trade on a rather expensive multiple of 30. The shares run the risk of drifting and investors have the opportunity to take some profits.