The Investment Column: Admiral is still looking shipshape

Oxford BioMedica has further hurdles to cross; Keep hold of Forth Ports for its long-term potential
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The Independent Online

Six months on since Admiral, the motor insurer, successfully floated on the London market, and the company is still looking in incredibly good shape next to its major rivals. As it reported its first full set of results as a public company yesterday, there was barely a blip - with turnover up 28 per cent, and customers and core profits up 29 and 30 per cent respectively.

Six months on since Admiral, the motor insurer, successfully floated on the London market, and the company is still looking in incredibly good shape next to its major rivals. As it reported its first full set of results as a public company yesterday, there was barely a blip - with turnover up 28 per cent, and customers and core profits up 29 and 30 per cent respectively.

With motor insurance premiums some 2 to 4 per cent lower than 12 months ago, and the cost of meeting claims for accidents rising, the worry for investors is whether Admiral's performance can be sustained.

Henry Engelhardt, the chief executive, concedes that the next two years will be tougher for the insurance market as a whole, but that Admiral can cruise safely through. The company focuses on specialist lines - such as female drivers with Diamond, and younger drivers with its Admiral brand - where it has scope to raise rates, he says. And marketing plays a much more important role in winning customers than it did when the world was controlled by insurance brokers. Admiral's brands are strong, its adverts memorable.

Mr Engelhardt also makes a convincing case that the low point for premiums will not be as bad this time as in previous cycles. After recent consolidation - during which Royal Bank of Scotland and Aviva have gained 50 per cent of the motor market between them - there is simply less price competition.

It may appear a risky point in the cycle to be investing in a motor insurer, but Admiral comes with the added bonus of a healthy dividend and the promise of further special dividends if the company is sitting on excess capital.

At yesterday's close of 349.75p, the stock is up 20 per cent since we tipped it at the float. It has lower costs than rivals and a solid strategy, which would indicate there is further outperformance to be seen. Buy.

Oxford BioMedica has further hurdles to cross

Ten years ago this month, Oxford BioMedica was created to commercialise some of the biotechnological know-how of Oxford University. Now a quoted company, it has been methodically progressing work on an exciting vaccine that causes a tumour-attacking response by the immune systems of people suffering cancers including of the colon. It has tested this product, TroVax, on 70 people and the company argues it is as close to completely safe as a drug can get. Better still, recent trial results showed it extended patients' lives.

Too good to be true? Possibly not, since OXB has a great scientific track record, with no trial failures to date. But a larger and more expensive trial will have to be conducted before TroVax could be considered for approval, and the UK biotech industry's specialist investors will await the appointment of a bigger company as co-funder and development partner before getting carried away. Private investors should do the same.

There are still many significant hurdles to be overcome before TroVax, or OXB's other self-funded cancer drug, MetXia, can be commercialised. With the shares puffed up thanks to recent abortive merger talks, it is not the time to buy in.

Keep hold of Forth Ports for its long-term potential

Forth Ports, as you can guess, runs five ports on the Firth of Forth, plus Tilbury on the Thames and, excitingly, a port in St Petersburg. The company made the acquisition of a 50 per cent stake in a RussianFinnish ports operator at the end of last year and hopes are high that its management nous and extensive contacts with container shipping firms, combined with the gradual emergence of Russia as a global trading partner, will dramatically improve performance its new venture over the coming years.

It adds another string to a bow that is already playing beautiful music for investors. Shipments of goods into and out of the UK have been moving to Forth's advantage away from the congested south, and the company itself has made some big investments to ensure lucrative, long-term business.

Best of all, the company has freed up its unused land on the Edinburgh waterfront for redevelopment. The master plan has been agreed, with perhaps 17,000 homes to be built, and profits will be unlocked over more than a decade.

This column has been routinely positive on Forth Ports shares over the past few years, but the share price graph is enough to make one gulp. Surely the latest upward spike has taken the stock too far, too fast? There is an element of froth in the most recent performance, since the bid for its peer, Mersey Docks and Harbour, focused speculative attention on this sector. But Forth Ports was undervalued before. Investors now have a share fairly priced for its long-term potential and its short-term predictability, with a 3 per cent dividend. Hold.

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