from w-w-bb:

19.01.2007 - Total Rocketscience

The third and final company making up our Risk / Reward trilogy on shares for 2007 has so many investment negatives that most observers might not even give it more than a cursory glance. Although quoted on the London AIM market, it is based on the other side of the World, has reported revenues and cash flow of diddly squat and, more importantly, operates in an area of expertise so deep in boffinland that you need to be at least a 5 star techie to venture anywhere near it.

What originally persuaded us to give it a second look was the fact that legendary Stockmarket investor, Jim Slater, was pouring money into it via several successive rounds of financing. As we all know, Mr. Slater is a qualified accountant and hugely experienced corporate financier but clearly he is more at home in leafy Surrey than in the technologically rarified atmosphere of Southern California. However, he must have gleaned enough about what the company actually did to get extremely excited about it. In fact, by last Autumn, he had grown to like it so much that, to paraphrase the immortal Victor Kiam, he bought the remaining 51 % of the company that his vehicle, Original Investments, didn't already own.

The company in question was VIALOGY and, ever since it was fully reversed into Original just before Christmas, Slater's loyal band of followers have seen their highly speculative penny punt move on to the calculated risk category and been duly rewarded with a 50% shareprice improvement. We first latched on to this situation last April when we wrote a piece entitled The Cisco Kid ( see news archive ). To recap briefly, the company was set up by some brainboxes who had earlier worked together on supercomputing projects for NASA. Led by Dr. Sandip Gulati, the team appeared to have perfected software to detect and enhance extremely weak signals previously obscured by background noise. This may not seem particularly earthshattering to the layman but, apparently, the applications for this technology are not only revolutionary but almost limitless which suggests that an exponential rise in licensing income could well lie ahead.

Big news clearly travels fast on the Eastern seaboard because global behemoths Cisco and Boeing have already enlisted Vialogy to work on 2 major government inspired projects and these are just the ones that the company have been allowed to talk about publicly. As we reported in April, Cisco has contracted Vialogy to help with its IPICS programme which seeks to make sure that all emergency services and government agencies can communicate with each other quickly via computers and phones. The need to address this obvious requirement was highlighted by 9 / 11 when communications between different departments with different systems proved chaotic.

For its part, Boeing has recently confirmed that Vialogy has delivered a tenfold improvement in the accuracy and efficiency of the types of gyroscopes it uses in spacecraft and missile navigational systems. It is also known that both Cisco and Boeing see a major role for the technology in such areas as border controls and missile defence systems. Elsewhere a much smaller Texan company, Evolution Petroleum, is applying the technology to improving seismic evaluation of oil and gas deposits.

This initial clutch of applications is almost certainly just the tip of a very large iceberg that is going to float into view over the next few years and all that is required is a little patience. At todays price of 5.5p, Vialogy is valued at a mere 22m. To justify this valuation, the company would have to be earning say 2 million pretax. With cash reserves of 3 million and its heavyweight partners funding the projects it is involved in, Vialogy should be able to get through to breakeven without further recourse to shareholders. We would expect this stage to be reached sometime over the next 12 months. Thereafter, profits could / should escalate very dramatically as new applications and licensing income start to snowball.

On a two year view, shareholders could be rewarded extremely handsomely indeed. Vialogy is in so many ways akin to last weeks selection, CORAC. Both are now moving from the development stage to commercialization with the scales tipping away from blue sky risk towards the reality of cash flow. Both have mindblowing upside potential yet both have current shareprice action that makes drying paint look positively orgasmic. Although this presents an opportunity for latecomers, it is a frustrating byproduct of both companies involvement with highly sensitive technology and powerful, publicity shy partners. Moreover, the present lack of any meaningful numbers together with the sheer scale of future potential makes any serious stockbroker research well nigh impossible. All this will resolve itself in due course but, as they say in the Grolsch advert, all good things come to those who wait.

Good point. It's certainly a lot more liquid these days.

and is it a lesser % if it falls? .... or have i missed something?

No, you haven't missed anything Cynic - would you ever? I'm feeling Seller's Remorse - can there be such a thing? Got too bound up with this somehow; got too excited about possibilities that probably will take a long time coming.

It could be worse , you could have bought JRVS at mid day and been 75% down at close ! I see 2 mil buys after the bell .

Thanks for cheering me up, Fliper. I hope no one here got caught out with that!

or you could have been holding JRVS for the last 10 years in vain hope - rather like SEO but even worse!

Worth a punt friday ? at 20p

the scale up the side? is that 000's of pence??? was it really 15,000p a share once???!!! :)

OK - I get the picture. Thanks for the graphic illustration, Cynic!

no idea what the price was 10 years ago ... it was just the way it came up on the screen, but i think it was an awful lot!

At its peak it was 14,252p back in 1998 according to the Selftrade graph - that's scary!

so i was right...? lol and i was jesting...

it may well have split, but even if 10:1 ......

This stock is definately a mover-- I have been monitoring for 2 months now. But time has come for the big buys.

glad you are using your money and not mine!

well you can certainly see the reward for MY money since yesterday ! Up nearly 15 %

if that is clear - i.e. offer (what you bought at) to bid (what you can now sell for) and less other trading costs - you are clever bunny, or at least you are or will be when/if you ultimate bank a profit

I'm in for some time -- No quick bucks -- I believe in the company. I am already in serious profit at the current rate of nearly 7p( bid price )and very tempted but will wait for the real bucks at least 12p or more which is very likely. Already up 17 % -- what that telling you ?

that i'm glad i sold at 9.00 and not still holding at 7.00!

That all depends what price you bought at ?