The Investment Column: Time to vacate Quintain Estates

Wait for clear bill of health on Protherics
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The Independent Online

The bulldozers have finally begun work on the much-anticipated regeneration of Wembley, one of Quintain Estates' mammoth "special projects". Quintain's redevelopment of the huge area round the Millennium Dome in Greenwich is also close to starting, and these 10-15 year regeneration projects will be home to retail, office and housing space. Quintain will add to its rental income by providing advertising, telecoms and utilities services for its tenants, and Wembley is also bidding to host the country's one supercasino.

The bulldozers have finally begun work on the much-anticipated regeneration of Wembley, one of Quintain Estates' mammoth "special projects". Quintain's redevelopment of the huge area round the Millennium Dome in Greenwich is also close to starting, and these 10-15 year regeneration projects will be home to retail, office and housing space. Quintain will add to its rental income by providing advertising, telecoms and utilities services for its tenants, and Wembley is also bidding to host the country's one supercasino.

The company - which also runs a property fund management business, Q3P, alongside its core portfolio and its special projects - has always been a consistent outperformer in the sector over the past decade. Net assets per share have grown 22 per cent to 495p over the year to the end of March, thanks to some shrewd selling of low-yielding assets. And with debt down, it still has plenty of financial firepower for new projects.

The question for Quintain, though, is how much more growth it can find in the short term. The commercial property sector is set to come off the boil after a period in which institutional investment in property has swollen valuations, and Quintain itself yesterday said it was expecting the market to plateau.

On the plus side, property as an asset class is opening to a growing band of investors, following a relaxation in pension fund investment rules and with the birth of real estate investment trusts in prospect. Also, Quintain has now sold off most of its retail assets, shielding it from the high street slowdown.

The shares are trading above their net asset value, a feat that is unusual in this sector and reflects Quintain's energetic investment in regenerating its assets. They look toppy, though, and much of the immediate benefits from Wembley and Greenwich have been priced in. Until new projects are brought on, there will be little to really drive the shares. The company's track record on delivering reliable returns means shareholders should hang on to some, but take profits.

Wait for clear bill of health on Protherics

Andrew Heath, chief executive of Protherics, faces a few months that will challenge his reputation as one of the most trusted and conservative biotech bosses.

It is crunch time for a long-awaited licensing deal for CytoFab, its experimental treatment for sepsis, or severe infection. Protherics is back in the red this year because it is upgrading its manufacturing plant, in part to convince potential licensees that it can make enough CytoFab to satisfy demand.

Mr Heath said CytoFab will be canned within a year if a deal is not forthcoming, with resultant stock write-offs and redundancies. But he also predicted it will be signed by the end of 2005. It is a crucial event for the share price, and buying Protherics now is a bet on a good deal being done. Many investors were burnt by Mr Heath's bullishness six months ago, when a resolution seemed close, and the shares have drifted.

Another worry is that sales of Protherics' existing products - including an antidote for rattlesnake bites - came in below forecasts yesterday, although profit margins will be improved when the new manufacturing plant kicks in in 2007.

Aside from CytoFab, the other big upside comes from Voraxaze, a product to be given to cancer patients on methotrexate to reduce side-effects. Much will depend on whether regulators allow Voraxaze to be used very widely or only in cases of severe side-effects. We find out this time next year.

Given the long waits for major news, Protherics is one to watch, rather than buy for now.

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