On the Fringe of hit or miss

NO PAIN, NO GAIN: OUR MAN'S PORTFOLIO

THE FRINGE, lightly regulated Ofex (off exchange) share market is attracting increasing attention, with a steady flow of newcomers happily joining its ranks.

Montana, the restaurant group that was one of the early No Pain, No Gain portfolio recruits, now has only a token presence and will soon disappear, after the reverse takeover by AIM-listed Hartford. The Hartford share price has weakened since, reducing the bid value from 340p to nearer 300p. Still, readers who followed my 182.5p tip have reason to be grateful for Ofex's existence.

Since the Ofex launch four years ago it has enjoyed spectacular successes, and absolute disasters. Although it embraces established and substantial groups, such as breakfast cereal-maker Weetabix and our oldest brewer Shepherd Neame, most activity features fledgling, even start-up, companies.

The risk is so high most new issues carry a warning, emphasising the possible dangers of an Ofex investment. Ofex punters must be prepared to accept that a venture could damage their wealth; it is a market for the experienced investor who has a few bob to spare.

But the fringe market, run by a Stock Exchange member firm, JP Jenkins, has made a useful contribution to the investment scene and provided a conduit for small companies to raise cash, which would not have been possible through the more regulated stock market.

Disasters include a computer group called Display IT, which soared into the stratosphere only to burn out, and Woodstock, a pubs chain that went belly-up shortly after flotation. Many companies failed to last the pace.

Yet the flotsam should not detract from the stars. Robotic Technology Systems, with a computerised technology for robotic automation, went from a flotation price of 20p to around 330p before switching to AIM in May. The shares are now 295p.

And Po Na Na, running late-night North Africa-themed bars which is to move to AIM, rose from its 10p offer price to around 175p and is now 164p. Other winners include Advanced Technology, a communications group, now 230p from a 24p sale price. So, with some trepidation, I offer a handful of Ofex constituents, which could appeal to the more adventurous.

MILS Technology, floated last month by Ruegg, the small issuing house that produced Robotic, was sold off at 25p and is now 41.5p. It developed an underfloor lighting system for emergency evacuations that is cheap and easy to fit in aircraft, entertainment centres, hotels and ships. The company raised pounds 2.3m, selling 16.5 per cent of its capital.

And consider Motion Media, which joined Ofex in 1996. It designs and produces video telephones and video conference equipment. MM has undergone a long gestation period. But in this year's first half, sales doubled and there was an pounds 802,000 gross profit against pounds 217,000. After costs, the loss was pounds 242,000 (pounds 687,000).

The group is making progress. But it is a tiddler in a fiercely competitive market, dominated by giants with deep pockets and it is linked with such powerful players as BT, Orange and Philips. If it continues to go it alone a cash call must be a possibility. Recently, the entrepreneurial stockbroker Colin Blackbourne of Shore Capital lifted his stake to more than 3 per cent. He has a high reputation for alighting on obscure shares with potential. MM shares were floated at 67.5p, once nudged 300p and are now 90p.

Another Ofex possibility is Cardington, which signed a five-year marketing deal with the Public Record Office at Kew and has deals with London's Royal Parks. The company, still loss-making, recently raised pounds 685,000; the shares are 30.5p.