Leeds Group 17.75p

Leeds Group was tipped in early 2007 when the share price stood at 22p.

Since then it is no surprise that the share price has drifted back in terrible stock market conditions for smaller companies.

The performance of the business itself has remained reasonably good and the factors which led to our recommendation remain intact, which means that it is worth revisiting the story again.

Some readers will remember either through our coverage last time or their own experiences that Leeds Group was a successful textile business which moved into leasing.

Having disposed of the leasing business, the company's only trading business became a small Germany-based operation engaged in the import, warehousing and wholesaling of fabrics.

The key attraction remains that the company has a very strong balance sheet relative to its market capitalisation and the share buy-backs which we mentioned as a positive factor last year have continued.

Results for the six months ended March 31, 2008, were released at the start of June and profit before tax was £361,000 versus £393,000 in the same period one year earlier.

The sole operating business being in Germany meant that the strength of the Euro against Sterling was helpful and a lower effective tax rate helped earnings per share increase from 0.7p to 1.0p.

Net assets at the end of March were in excess of £12 million, which compares very favourably with the market capitalisation of just £5.4 million.

The company has made use of its strong cash position to take a 29 per cent stake in Dawson International, which is also listed on AIM, and also bought a million shares of European Equity Tranche Income Ltd.

This type of deal could ultimately mean that further value is driven into Leeds Group and we believe that this remains an attractive investment for those with patience. It would be very surprising if there is not further corporate activity of this type going forward.

The fact that it is difficult to predict exactly what the company's strategy will be means that we would still consider the shares a SPECULATIVE BUY.

It is impossible to tell exactly how and when shareholders will be properly rewarded but the company has a very solid base to build from and even in the current economic environment would have to make serious mistakes to reduce the fundamental value of the shares below 17.75p.

WARNING: Opinions expressed are the writers' judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.