Investment: No hurry to buy Surrey

No Pain, No Gain Our Man's Portfolio

THE STOCK market can be a baffling place. Ask any punter who has taken a shine over the years to Surrey, the betting shop group. Through this decade its investment merits have been close to zero. The last dividend was eight years ago and since then the shares, which arrived on the now- abandoned Unlisted Securities Market at around the equivalent of 14.5p, have rarely managed to top 2p.

I remember a reader a few years ago asking if there was any hope for Surrey, which he described as a "real basket case". At that time it was impossible to offer him any joy; Surrey seemed on a racecourse to nowhere.

But in recent weeks stirrings have been evident. The shares, now fully listed, have climbed from 1p to 3p. putting a pounds 13.7m capitalisation on the seemingly perennial racing has-been. It is not the group's mundane chain of betting shops or its more promising golf enterprise which has created the sudden flurry.

Surrey has caught the Internet bug and, in these days of off-shore betting, its Alderney office has assumed intriguing possibilities. A potential bidder has appeared. It is Sports Internet, a veritable high-flyer created by Chris Akers, the former investment banker who turned Leeds Utd Football Club into a quoted company. Its shares started market life less than six months ago at 79p; they have been up to 345p.

In its short life Sports Internet, developed to take advantage of logging various sports (including football) on to the Internet, has put through intriguing deals. In share price terms, if the preliminary talks were to lead to something, it would look like a merger of the tortoise and the hare. And even if Mr Akers backs away it would appear Surrey has at last thrown off its image as one of the market's walking wounded.

Many will find it strange that the group, with a long history of losses and a tendency to throw shares around like confetti to raise cash and buy betting shops, has achieved a pounds 13.7m valuation. A great many companies similar to Surrey seem to drift along, eventually disappearing into the corporate graveyard. But the bookie, without any apparent trading uptick, illustrates just how industry and stock market fashions change.

There is no doubt bookie Victor Chandler's move into Internet betting and switching his unquoted operations to the more tax friendly Gibraltar has transformed the betting outlook. Other major bookies are campaigning to go abroad and save their clients betting tax, and the temptation to play the Internet race game is looking increasingly attractive. ENIC, the sports group bankrolled by the international currency speculator Joe Lewis, has put a pounds 70m valuation on the Chandler spread in its agreed offer to pop the inventive bookie in its satchel.

But the transformation at Surrey is not a signal for slipping the shares into the no pain, no gain portfolio. The thrills and spills created by high-risk shares often generate some much needed investment excitement but I feel Surrey is too much of an outsider to deserve any portfolio consideration.

It does serve as an illustration of the uncertainties of investing. Surrey's long history of under-performance must have left many shareholders nursing losses. Still, those who moved in at around 1p this year have clearly struck a winning bet. And I hope The Independent reader, who seemed to accept Surrey's misfortunes with remarkable stoicism, has at least benefited from this year's sprint.

Any deal with Sports Internet is likely to be largely a share exchange exercise. So those who alighted on a sluggish, loss- making bookie (who said they always win?) may find the switch to surfing the Internet a little uncomfortable.

If the bid goes ahead, the Akers operation is unlikely to retain the betting shops and golf development. After all, such run-of- the mill activities are unlikely to appear to the more virtual reality world where Sports Internet features.