SHARES:ML proves that bio is still a buy

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The Independent Online
Back to that perennially intriguing stock market chestnut: ML Laboratories, and its future prospects. At a market capitalisation of pounds 370.5m, clearly great things are expected - given that sales are currently running at a little over pounds 5m a year. However, many now believe the last year has seen all the ingredients put in place for a successful future. Its kidney dialysis fluid, Icodial, has been signed to world leader Baxter, while it has sold European distribution rights for a dry powder asthma inhaler to Medeva. No doubt, there is still some risk, with future income still something of a mystery. That said, the shares, at 275p have fallen substantially in recent months, in line with the shake-up in the biotech sector. Given that ML is well ahead of the pack, in terms of getting its products to market, the shares look better value than for some time. A tentative buy.

The food sector has hardly been the place to have your money invested over the last year - as one wag pointed out, it's not so much a case of picking the winners, as avoiding the losers. Perkins Food at least shows some faith in its future prospects, with a 1-for-6 rights issue for pounds 15.5m, to buy the Dutch Disselkoen Group. The attraction to Perkins is that the business, one of the largest fresh food exporters from the Netherlands, gives it instant access to Germany, including a toehold in the country's supermarket chains. With European borders disappearing, the deal should shore up the group's competitive position, while it can also sell its own fresh produce into Disselkoen. Although the Dutch group's margins are, like most fresh-produce suppliers', razor thin, the deal should be earnings neutral in 1997. While the shares, at 81.5p, are making a gradual recovery from the setbacks of 1992, now seems the time for a more whole- hearted commitment. Buy.

More food. If Perkins has yet to fully regain the confidence of investors, that old warhorse Associated British Foods (417p), continues to keep pace with the market. While the business rarely dazzles, nor does it let down shareholders. Tomorrow, it posts its final figures for 1996. Operating profit should come in at around pounds 378m, a gain of 13 per cent, with sales of pounds 5.64bn, up 15 per cent. The shares remain a buy.

A company that is listed over there - on Nasdaq, to be precise - is obtaining a listing over here. Through a placing on the London Stock Exchange, Xenova Group, the UK-based biotech company that develops drugs from natural micro-organisms, hopes to raise pounds 25m. Its first product should be ready for market by 2000. The XR5000 anti-cancer drug should enter clinical trials early next year. Other products include XR9051, to overcome multidrug resistance in cancer chemotherapy, with up to a pounds 1.4bn market. It also has tie-ins to Genentech, Genzyme and Warner-Lambert. Listing details will be published later this month, but the company has some exciting products, and could be worth following.

Tough times at car dealer Evans Halshaw, which announced it was closing a fifth of its dealerships, and taking a pounds 19.8m restructuring charge. To add to its woes, the group said August and September had been difficult for trading, with a consequent impact on full-year results. Although the shares were off only 5.5p, to 248.5p, the prospects are mixed. While the intention is to improve the return on capital, clearly the business is lagging behind its competitors, who have stolen a lead on it in many areas. EH professes it wants to build up its presence "in the larger conurbations, like Birmingham, Leicester and Sheffield". But there, of course, is where the competition is fiercest - although volumes, for successful sites, are far higher. That said, the final impact on full-year results could even be neutral, given the benefit of margin enhancement from the restructuring. Nevertheless, there are better value shares elsewhere in the sector. Sell.