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LIKE a campaigning politician drawn to a mewling baby, Criterion is attracted to overlooked small caps trading at close to cash backing.

QRSciences (QRS) 5.3c

The second-biggest provider of security cameras behind Hills Industries, QRSciences, has flown undetected -- but now is on the prowl. QRS chief Rick Stokes says management is close to signing off on an acquisition that will double the size of the business. "We'll be able to talk about it in a week or so," he whispers.

QRS currently turns over $20 million, but unlike your average pollie, Stokes can't be accused of lacking long-term vision. His non-core promise? "My aim is to be a $100m business in three years and make $10m of EBIT a year."

With a market cap of $7.5m backed by $7m of cash, QRS has started to attract brokers' attention, especially as the underlying business is expected to report EBIT of $1.5m for the year to June 30. The headline net number will be more like $4m, mainly because of a $3.2m gain on last year's sale of QRS's 20 per cent stake in an airport screening business, Spectrum. QRS also rid itself of a "crap" R&D business that chewed up $40m of shareholders' funds over 10 years.


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Trading arousal needs closer "The underlying story is we have cleaned up the sins of the past and have a more focused management team," Stokes says.

QRS surfs on both the paranoia about increased security and the digital revolution, which means analog cameras are being replaced by analog web-based versions.

QRS sells to a mid to high-end customer base of retailers, banks, commercial buildings and airports. Mums and dads seeking to pry on the babysitter are not the target audience: "It's not a Dick Smith type product," Stokes says.