MARKET COMMENT
Dotcoms For Recovery

By Maynard Paton (TMFMayn)
July 31, 2003

Surfcontrol (LSE: SRF) up 107%, lastminute.com (LSE: LMC) up 106%, nCipher (LSE: NCH) up 94% -- this year has seen many Internet shares make substantial recoveries. But are there any other dotcoms set for a rebound? Here are four potential re-rating candidates:

(Wealth warning: All four are AIM-listed tiddlers)

1. Online Travel Corporation (LSE: ONT)

Owner of onlinetravel.com and pioneer of 'build-your-own holiday technology'. Although clouded a little by acquisitions, latest half-year results showed gross sales up 34% to £48m and transactions up 49% to 272,000. Still losing money, but profitability forecast in the current year. The sole earnings estimate for the year to October 2004 puts the shares on a price to earnings (P/E) ratio of 6.5.

2. Ingenta (LSE: IGA)

Describes itself as the "global market leader in creating Internet versions of professional and academic research publications". Company also operates a 15m-article pay-per-view database, with content supplied by the likes of the International Phenomenological Society and the Chemical Society of Ethiopia. Remains a loss-maker and recent six-month sales were up just 7% to £4m. But a P/E of 8 is on offer if you believe the September 2004 profit estimate.

3. Hemscott (LSE: HEM)

Supplier of financial data and tipsheets to private investors and provider of investor relations services to blue chip businesses. Continuing a good record of double-digit growth, this month's interim results showed revenues up 29% to £3m and noted signs of a recovery in business and investor confidence. Red ink will dog the accounts for a few years yet, though net cash in the bank equals the present share price. Recently saw off a 15p per share bid.

4. themutual.net (LSE: TMN)

An e-mail marketer with 433,000 subscriber names on its books. Almost unique in dotcom-land due to its current profitability. In fact, operating margins are an incredible 40% and turnover growth last year was 67%. With £0.7m in the bank and pre-tax profits anticipated to triple to £1.5m this year, a £4m market cap looks extraordinarily cheap. However, the firm's free share giveaway to customers regularly dilutes any holding.

Details

Share                 Price          Market value

Online Travel         26.75p           £32.6m
Ingenta               11p              £11.9m
Hemscott              19.75p           £6.4m
themutual.net         0.11p            £4.2m