Bio firm blossoms into beauty

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The Independent Online
Biocompatibles is a small healthcare company specialising in coatings technology. Its patented phosphorycholine process has all sorts of interesting applications, in products as diverse as heart valves and contact lenses. It is discovering even more uses, such as in cosmetics and anti-fouling paints for the hulls of ships. The company seems hopeful on the outcome of research into the latter in a market that has seen one of its most potent anti-fouling coatings, tributyltin, run into environmental problems. There are also uses in cosmetics, especially in anti-wrinkle creams. Biocompatible's product can be absorbed into the skin, where it improves moisture retention - thereby keeping your face looking young and beautiful. That is the theory, anyway. This is a large market, and human trials are progressing well. At 550p, the shares look pricey but remain an interesting play in the emerging biotech sector.

Gerrard Group (270.5p) last week announced a deal to buy discount house King & Shaxson. Terms are 17 shares in Gerrard for every 25 shares in Kings. The story is part of the continuing mini-revolution in retail stockbroking. Whether it will prove good news for Gerrard's shareholders is another matter. Although management is well considered, the shares have hardly done much for investors over the last few years. Recent problems have been compounded by lack of volatility in commodity trading in futures and options. With commodity markets dull, there just has not been the interest - or need - from investors to trade futures so much. But Greig Middleton, the stockbroking arm of Kings, and Gerrard Vivian Grey, should dovetail neatly. The shares look better value now than they have done for a while. Buy.

A NICHE media company, Radio First (6.5p), listed on Ofex, is raising up to pounds 2m to build up its Mellow Radio business, acquired in April. Mellow, based in East Anglia, has been granted permission to enlarge its area from 160,000 listeners to 260,000. The company also has two acquisitions on the go, a station in the Midlands, and another in the South. The company is keeping mum on the names of the targets but says both deals have reached agreement stage. The purchases will cost pounds 700,000, with pounds 500,000 in a deferred consideration, depending on future performance. Radio First plans an AIM float in the Spring. The company could be in profit within two years. An interesting each-way bet.

SCOTTISH Television looks overpriced, says stockbroker Salomon Brothers. Takeover speculation has left the shares trading at a 14 per cent premium to the underlying value of the business. This is too much; even if there is a bid, the offer might disappoint many speculators. After a 70 per cent increase in the last year, the shares, at 753.5p are due a correction. Sell.

IT HAS fallen to Rupert Murdoch to exploit the overvaluation at BSkyB. He has mortgaged part of his 40 per cent stake in BSkyB to raise new funds for expansion. The shares, off 85p to 593p, will take a while to recover from their 12 per cent fall. Avoid.

COMPOSITE insurers are building up their capital surpluses, as some stability returns to the market, with some 20 per cent - or pounds 3bn - of the sector's capital in surpluses. Most of this is concentrated in Guardian (258.5p), and Royal & Sun Alliance (422p). On these prices, the market is valuing the surplus at no more than 70p per pound. It looks as if there is a certain scepticism that the money will be usefully deployed - hardly surprising, given the sector's previous forays into other types of business. However, it could be returned to shareholders, in which case there is an argument that the two shares are seriously undervalued. However, investors tempted by this should remember that the sector has been notorious for its disastrous ventures into unrelated businesses. Avoid.