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.

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 . . . ??"

Welcome onboard ST and Cynic, I feel this is a longer term hold as still embryonic but potential (speculative!) is huge. PDYOR.

Better late than never ST and Cynic--this is one of my long holds as jim slater is a large backer and I have everything crossed that this one will be massive!!

Thanks, Silver, MP! Have to laugh at "Better late than never" - I hope so :o)

Good luck to all.

referring back to my post 71, i am sorry to see that forecast being proven, especially so quickly ..... sp needs to bounce sharply of 50 dma, though there seems no cause for today's sharp decline.

Results expected soon so maybe a little shake to gather in some cheap shares before they go up again. they are recovering already and the rumour is that some good news is coming with the results.

Looks interesting, MP. Chunky volume today, but makes sense if the MM's are shaking out the weaker holders/early PT'ers.

From the co's FAQ page:

2. When does the company report financial results?
The companys year-end is March 31st 2007 and we will report full-year results 10-12 weeks after that date. We will report half-year Interim results approximately six months later. We plan to change the companys financial year to coincide with the calendar year from January 1st 2008.

So results should indeed be due any day.

I'm hoping there will be news of another contract and an upgraded broker's note too.

Not too much to ask, is it?! ;-)

no indication of figures being announced up to 15 June ..... there is also usually an rns beforehand warning of same

Paulo, I think we should picket Hanson Westhouse's offices until they produce an upgrade :o)

Cynic, I take your point, but some of these little co's announce their intention to anounce results only a day before.

I'm painting my placard as we speak.