Medeva takes the road to recovery

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MEDEVA was one of the great boom'n'bust shares of the first half of the 1990s. Promoted as a super-trendy pharmaceuticals growth stock, it dropped like a stone following a profit warning in July 1993 and has still not recovered its pre-bust levels. But a fundamental re-rating is under way. Richard Marshall of Investment Research is forecasting that profits for 1994, to be announced on Tuesday, should be 30 per cent up at £60m pre-tax. This would put the shares, at 176p, on an undemanding p/e of just over 13. Medeva's growth formula is sound, since it is.based on relatively low-tech drugs without the usual over-reliance on new products. Even ignoring rumours of bids after the Glaxo bid for Wellcome, the shares are good value for money.

SHARES in Lloyds Chemists dropped from 280p to 210p after Wednesday's interim figures revealed a gaping hole in the drugstore division. The conversion of up to 100 Supersave outlets into health or beauty outlets merely raised further questions. The chemists' business seems sound and the wholesale pharmaceuticals business is on a roll. Nevertheless, the market is going to take a lot of convincing that Lloyds is not headed for a future of muddle and vain attempts to salvage unsuccessful formulae. Don't be tempted by the price. Avoid.

REFUGE is one of the insurance groups in the firing line over the mis- selling of personal pension schemes, although the losses are largely confined to the main life assurance fund and will not impinge too badly on shareholders' profits. The shares have been strong recently, up to 327p from a 1994 low of 239p in the confidence that Refuge will be able to pay a dividend of at least 17p in 1995, against a likely 12.2p for 1994. But there is really very little to go for in medium-sized insurance companies without any unique features. The shares should be forgotten even if, as is likely, profits for 1994, announced on Tuesday, are well ahead of the previous year.

OVER the past few years MAI has craftily reduced its dependence on money and securities broking by investing heavily in television (Meridian and Anglia) and credit sales of motors. NatWest Securities is bullish, forecasting profits from broking for the last six months of 1994 down to £20m from £33m, a fine result in troubled times. The reduction should be more than balanced by increases elsewhere, with total profits up by 15 per cebt to a healthy £55m. At 226p the shares do not reflect the group's sensible strategy.

BZW is one of many market watchers puzzled over the lowly rating of the mining giant RTZ at a time when the papers are full of stories about the increase in commodity prices. Yet, as BZW points out, RTZ "has underperformed the UK market by 17 per cent over the past five months, and underperformed `cyclical stocks' in general". RTZ is not only expanding capacity in mining and smelting copper. It is also investing in updating facilities in core activities such as alumin-ium. Despite their recent rally from 736p to 753p, the shares remain a classic opportunity.

THE SELLING of shares in pump maker, Weir, has been greatly overdone, argues the broker Bell Lawrie White. Since November 1992 it has underperformed the engineering sector by a terrifying 46 per cent and ended this week at 230p. A rights issue last August to finance the purchase of US pump maker, EnviroTech, and subsequent gloom over prospects accompanied by significant redundancies at a cost of £7m have helped the slide on its way. But Bell Lawrie reckons that this year's pre-tax profits should bounce by more than 60 per cent to £53m. An excellent punt.