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.

cynic they may well pull back and I'll be in for more! hope you're not missing out on hawk today.

not buying hawk as much as anything else because it is a new issue and they tend to have a very exciting time for w few weeks and then go to sleep at best ...... think i would rather stick dosh in here ...... meanwhile SCHE keep ticking onwards and upwards!

Arf Dysg.


The latest Seymour Pierce forecasts for the year ending 31 March 2008 are:
Revenue:3.03m.
PTP:0.30m.
EPS:7.07p.
However,as far as I know ,these numbers were produced three months ago so they could be revised upwards in the near future!

andromeda

check the ptp ans the eps -- they do no match if think about the mkt cap. Move the decimal point sharply to the left

Price to sales looking chunky though

andromeda, thanks for the answer. I now wonder if Seymour Pierce have got their arithmetic right.

With about 400 million shares in issue, a profit of 0.3 million pounds means a profit of 0.075p per share.

I think Seymour Pierce have a decimal point in the wrong place.

Arf Dysg.

I see your point.Sorry about the pun!
Incidentally,Seymour Pierce forecasts for the year ending March 2007 are:

Revenue:1.51m.
Pre-tax:0.96m loss.

How accurate do you think these will be? Results due in the next month.

There may well be a loss reported, but it will be the outlook for the next few months which will be interesting. If they say they have loads of contracts signed, that will shoot the share price up.

Another top up .

Bread dipped again .

sp has just dipped below 25 dma but has been steady today .... rsi is undemanding ..... arguably a good time to buy, though just maybe 50 dma will be tested

positive noises on the other side that good news will be coming out very soon. I hope so!!

Buyers coming back , expect another sharpe rise soon . Last chance to buy under 13p .

have joined the merry throng with 100k at 12.75 ..... surprisingly small market, so i only mention the quantity i bought to highlight that it was quite diificult to buy that many, even though it is not much in terms

Cannot see your trade cynic ? did you do it on line ?

had to phone IG to place in the market .... no exact timing on the confirmation timed at 09:01, but it must have been about 08:40.

Hello, peeps! Well, I can't quite match Cynic for financial firepower (and some say, in many other departments too), but have finally clambered aboard.

Typically, the bid dropped right after I traded, but was interested to see that at the time the spread was VIY Bid: 12.5p Offer: 12.75p Change: 0.5 and the price I dealt at was right in the middle, all of which appeared very encouraging.

Currently : VIY Bid: 12.25p Offer: 12.75p Change: 0.375

Good luck to all.

ST.

Sorry, I should correct myself re the price I paid. Now that the trade has appeared on the live stream (unlike Cynic's, which is clearly under investigation by the FSA as we speak), I can see that the bid already dropped as I placed the deal for a quote, meaning I got a slightly better price. Well, it's an ill wind and all that . . . .

Cynic, to be precise 8:40:54 ;0).

Welcome on board.

MM short of stock , putting the sell price down to scare investers .

"Who's afraid of the big, bad . . . ??"