Shares digital

SCI Entertainment (SEG) 60p

The shares in the computer games publisher, famous for developing blockbuster Tomb Raider, staged a spectacular fall in the past month. They were trading at £5 until the beginning of July 2007 but a string of bad news, which included a profit warning and a failed takeover bid, saw the price plunge to the current 60p. The board stepped down last January and the company now has to get funding to meet its bank covenants, but before that happens a bid is likely to materialise. Press speculation last weekend suggested a bid could come in at 80p, and analysts at investment bank ABN Amro say that ‘it seems quite likely that a price of up to 100p would be achievable’. This is because according to analysts at the bank SCI’s enterprise vale (EV) to sales multiple is at 0.6 times against a standard industry range of 1.5–3 times. The management says it could achieve sales of £200 million if it secured the needed working capital, but ABN Amro pundits say that a buy-out is preferable as a larger rival could refocus SCI’s business. A high-risk punt now could reap big rewards if the bid materialises.

ACTION: BUY SCI Entertainment • Target 70p • Stop Loss 56p

TIME TARGET: 3 WEEKS