Investors are hardening their attitudes to high technology company valuations, demanding evidence of cash flow and profitability, in response to the volatility of the fledgling Growth Enterprise Market (GEM), according to BNP Prime Peregrine. Managing director Frank Slevin said investors were more discerning after the recent correction of stock prices in the GEM. At a seminar on the development of the GEM, Mr Slevin said the performance of GEM-listed stocks so far was not encouraging, with the GEM index under-performing the Hang Seng Index. There were only five GEM-listed companies that had not fallen below their issue prices since listing, he said. They included Tom.com, a unit of Hutchison Whampoa and Cheung Kong (Holdings), and Smartech Digital Manufacturing Holdings. Smartech listed on the GEM board last Thursday. There are 25 companies listed on GEM so far. Instead of relying on revenue multiples, investors were looking at earnings before interest, tax, depreciation, and amortisation, said Mr Slevin. Investors were looking for quality companies, focusing on criteria such as management expertise, he said. Timothy Sun, director of BNP Prime Peregrine's Internet research division, said investors were also concerned over the cash flow of technology companies. Mr Sun said companies with strong shareholder back-up could lure investors.