Stream's executive chairman Gordon Robson had every reason to be exuding confidence when he introduced his company's interim results in mid-September. The group, a provider of mobile and fixed-line entertainment and information services, had not only managed to double profits to £912,000, but Robson also informed the market that business was booming to such an extent that he expected Stream 'to exceed market expectations' for the year to December 2004.

Much of the improvement is due to the company's switch away from providing low-margin 'white label' services to third parties and towards building up a 'Stream-owned' customer base to which it sells an array of mobile products and services – ring tones, pictures, games, text alerts and the like.

This customer base is now in excess of 300,000 and the provision of mobile data services now accounts for over 50 per cent of turnover. Happily, the group's historic business, the provision of psychic and astrology information services via fixed-line phones continues to thrive, as does its international interests.

On receipt of the numbers, tech expert Alex Jarvis, of house broker Peel Hunt, upgraded her 2004 forecasts. She now expects profits to roll in at around £1.9 million, justifying her stance by saying that 'in a difficult-to-call market, Stream seems to be on the ball with the right content and marketing message.'

The earnings per share forecast, however, stays the same at 2.1p per share (due to the dilative effect of share option dilution and various tax charges), putting the 37.75p shares on a forward p/e of 17.9p. With cash flow strong and net funds exceeding £3.6 million, Stream more than deserves this rating. If you bought on our advice at 19p in November 2003, you are sitting on a handsome gain of 95.6 per cent. But there is more to come. Our price target is 50p.

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