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Tech stocks gain in past half-year

By Peter V O'Brien

Friday 10th October 2003

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Several stocks with a base in broadly-defined "technology" recorded solid gains in the past six months. The 20 companies in the table have technology associations, whether in computer hardware or software applications, telecommunications (often computer-based) or biotechnology.

Despite their lack of commonality, seven had a share price less than 10c and close to, or under, the level when The National Business Review considered the groups in April.

The eight companies whose prices improved since April were either already soundly-based operations or starting to benefit from reorganisations or acquisitions and/or reaching some "breakthrough" stage in development.

Prices last Friday for dental software specialist Software of Excellence and vending systems franchiser Vending Technologies were respectively 65.3% and 56.2% higher than on April 4 but 27% and 37.5% below those on October 7, 2002.

Software of Excellence has concluded contracts with European and US medical and dental organisations but there is a time lag between obtaining contracts and recognising income.

Chief executive Paul Weatherly said in August the company would report a net loss of between $800,000 and $1 million for the six months ended September, with a breakeven situation in the second quarter. Income from secured contracts was beginning to flow through and the process of clawing back the first-half loss was expected to continue throughout the second half.

Vending Technologies supplies and operates what it describes as "electronically enhanced" food and beverage vending machines. The preliminary report for the 15 months ended June said the group had transformed from a vending machine operator into an international vending systems franchise company.

It had developed a "proprietary computerised management system to enable tracking of all transactions, with complete revenue accountability and the ability to monitor the performance of each machine from remote locations."

The share price dip in October-April resulted mainly from a profit warning issued in January, after lower than expected sales in Australia and a later than planned entry into the US.

Net profit for the 15 months ended June was $3.3 million, compared with $5.4 million for the 12 months ended March, 2002. The market took on board comments about strong growth in the current year.

Other companies to lift share prices since April were Cabletalk Group (telecommunications), Cadmus Technology (payment systems), Finzsoft Solutions (finance sector software), Provenco (business systems and solutions, including Eftpos), Renaissance Corporation (hardware and education sector solutions) and Telecom.

A share buyback and revised profit forecast helped Provenco. Price gains for all six since April ranged from good to spectacular.

Cabletalk jumped 90.5%, Cadmus 116.7% (from a low base), Finzsoft 21.2%, Provenco 37% (also from a low base), Renaissance 115% and Telecom 10.2%.

Most of the remaining non-biotechnology companies in the table require little comment, particularly those languishing under 10c. Continual optimism is often sprinkled through reports, usually on an "about to turn the corner" basis.

Blis Technologies, Botry-Zen and Genesis Research & Development Corporation have varied activities but they can be generically described as biotechnological. Investment in such groups should be treated as long-term ventures, an approach the companies recommended when they came to market. Rewards take time, but can be spectacular if there are technological breakthroughs.

Some technology stocks may be on the way back but investors needed evidence of solid, continuing profit records before treating the companies with the euphoria seen at the end of the 1990s.

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