City talk : Boffins invent a winning formula

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The Independent Online
There has been little news from PolyMASC Pharmaceuticals since it was floated on AIM last December at 100p. But the company - formerly a department of the Royal Free Medical School at the University of London - has not been standing still. In June it linked with the Hydro-Med Sciences Division of the National Patent Development Corporation of the United States, to produce the world's first cancer vaccine. Then in August, it signed a deal with biotech giant Genzyme of the US, which is capitalised at $1.7bn (pounds 1.1bn).

Last month, it also won a significant patent adjudication from the European Patent office, for its PEG-liposome technology, thereby giving it a strong position against a major rival, Sequus of the US. These developments, taken together, suggest that the boffins at the company have a good handle on the commercial development of their projects. At 115p, the shares are a buy.

Verity Group: once a disaster, now has fresh life, as our chart shows. The reason for the excitement over the maker of hi-fi equipment, including Wharfedale and Mission speakers, is its announcement of new technology for loudspeakers. Called NXT, it allows speakers to be produced as flat panels, which can then be hung on walls, or used in cars, taking up far less space than conventional designs.

It is a situation which has attracted some of the City's more speculative investors. At 34p, that is not to say the current excitement is unjustified. But investors should beware this doesn't turn into a game of musical chairs - after they have put down their money.

A consumer boomlet, inflation set to rise ... it augurs badly for the markets in the long- term. But in the meantime, the place to take advantage of the current rosy scene is the retailers. Nick Bubb, of Dutch stockbroker Mees Pierson Securities, likes Burton.

He sees current year profits hitting pounds 155m - significantly above most of his rivals, and even reaching pounds 200m in 1997. He argues that while the group under chief executive John Hoerner has worked miracles, there is still more to come, mainly from stronger sales growth - though there is less room for improvement for already fat margins. The shares, now 150.75p, can reach 180p, he believes.

Albert Fisher (42.75p), the food producer left stranded after the high times of the late 1980s, remains a share to avoid. Despite a maintained dividend of 3.75p last week, plus sale of its North American distribution business for pounds 74m, there is still too much risk to consider this a recovery situation. Profits were ahead marginally, from pounds 39.5m to pounds 40.1m. But all that vanished in a puff of smoke after a pounds 151m restructuring charge to cover the costs of withdrawing from Germany, Spain and North America.

It will be a long haul to improve operating margins from their current level of under 3 per cent and certainly back to the 7 per cent at which they started the decade. On a yield of 11.5 per cent, the market seems to have a similarly risk-averse view. This is definitely one to steer clear of.

Burn Stewart (70.5p), an own-label Scotch whisky distiller, caused no end of suspense when it postponed its results by a fortnight until last week over an accounting issue.

Needless to say, the news wasn't good, with pre-tax profits down 74 per cent to pounds 1m and earnings cut by 80 per cent to 0.94p. Because the auditors did not allow time for the problem to be treated as an exceptional item, Burns Stewart has refused to comment explicitly on the matter. It appears to be a mixture of profit which has had to be deferred, though, and a provision against a trade loan.

Without the item, profits would apparently have been unchanged at around pounds 4m. The shares have almost halved over the past year. Although there are a few positives, there is little sign of any immediate improvement around the corner. Avoid.

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