Fool's Eye View

[ February 17, 2000 ]

Dotty Durlacher

By Rob Davies (TMFEssex)

In the last few months there have been any number of wonder stocks with a dot-com relationship that have delivered stunning performances. But few have matched the returns given by Durlacher (LSE: DUC). A year ago the shares were 52p, and even as late as September the shares were "only" 325p. Today the shares are 3995p, so they are a "ten-bagger" in just 5 months.

What has the company done to deserve this stellar performance? The interim results for the six months to December 31st released today show that.

                  1999   % Change
                   £m
Turnover         11.589    124
Gross Profit      6.975    208
Operating Profit  4.774    975
PBT               5.061    782
Net Profit        3.441    895
EPS  (p)          6.82     722

Durlacher is a strange mixture of stockbroker, venture capitalist and investment bank specialising in Internet companies. Its speciality is putting in seed capital and then bringing the company to the market and thus crystallising value. The proof of that is the increase in investments from £1.8m to £14.359m, and that has helped push shareholders' funds up 640% to £31.661m. Even so, that is a lot less than the current £2.1 bn market capitalisation of the company.

Perhaps the most interesting part of the press release is the disclosure of the companies it has investments in, and their size. Some of these will be familiar to our readers.

Aerial Camera Systems (25.09%)
365 Corp plc (6.58%)
Bizzbuild.com plc(16.15%)
Boxman plc(0.75%)
Channelfly.com (1.02%)
Dating Direct.com Ltd(15.65%)
Elite Sports Asessessment plc (8.94%)
Epoch Software plc (6.89%)
Desktop Lawyer
Global Communications Ltd (11.22%)
icollector plc (4.07%)
iDesk Ltd (0.67%)
Interactive Communications Ltd (27.64%)
Ipoints.co.uk (9.83%)
Mirror Image Communications Ltd (14.92%)
NetImperative.com (28.5%)
Online Travel Company Ltd (12.74%)
RME Entertainment plc (13.95%)
Shopsmart Ltd (4.51%)
Talkcast Corp (8.62%)
The Digital Village Ltd (4.49%)
Wapit OY (6.6%)
Web Weddings Ltd (22.7%)
WinVista Corp Inc (3.14%)
Wise Monkeys (26.88%)
Wowgo Ltd (15.24%)
Zetters Group plc (8.00%)
Zeus Technology Ltd (5.2%)

That list is long and impressive, but seems rather unfocused. Given the intense competition in some of these markets, like sports and weddings for instance, it seems doubtful that all will be a success. Indeed, the stock market performance of 365 Corp (LSE: TSF) since its float in December 1999 shows that not all Internet investments are "no brainers". The shares were issued at 160p and are now 228p, although trading started at 260p.

Nevertheless, sector momentum is certainly favouring the stock at the moment. There will come a time when investment logic, rather than investment emotion, will drive the shares, but that clearly isn't yet.

Don't forget to check the Durlacher message board for the latest thoughts and opinions on this company.