Sunday share tips: Syncona, GYG
In the Sunday Times’ 'Inside The City' column this week, John Collingridge looked at biotechnology investment firm Syncona - a company that only joined the stock market last year.
Described by Collingridge as a “rare beast” for the FTSE, Syncona is both a fund of funds and an investor in biotech firms, which arrived on the market via the BACIT investment fund with a little help from the Wellcome Trust, which holds a 37% share.
The company is run by ex-Cambridge biochemist and investing veteran Martin Murphy, and currently holds seven core biotech companies in its portfolio.
Collingridge says that while they are at different levels of maturity, they all had a “common mission” to hit the market with a saleable product, all helped along by Syncona staff in exchange for it taking hefty equity stakes.
The company has seen success with Blue Earth Diagnostics, whose technology allows a physician to ‘pinpoint’ cancer using molecular imaging - an innovation sold in the US for almost $4,000 a pop.
Another portfolio company, Autolus, is said to be developing chimeric antigen receptor T-cell therapy - something Syncona is clearly behind, as it injected another £19.2m into the firm as part of an $80m fundraise last week.
Investors clearly like the strategy too, with shares in the company skyrocketing in the year or so since its debut.
They added another 10% just last week, as another of its portfolio companies, NightstaRx, - which develops gene therapies for the treatment of blindness - enjoyed a bumper listing on the Nasdaq.
So far this year, Syncona stock has motored ahead 40%, valuing it as £1.2bn - compared to its net asset value of £1bn.
Collingridge calls it a “hefty gain”, but he believes there is much more to come, with the board looking to do two deals a year to build up to a portfolio of around 20 investments.
He noted that the fund side of the business, accounting for around 61% of its value, was bringing the firepower, and could be converted into cash as and when required by other investments.
“There will be failures along the road, but if, as Syncona hopes, it can find three to five winners in this pack, that’s a decent prospect. Buy,” Collingridge concluded.
Over in the Mail on Sunday, Joanne Hart was focussing on superyacht firm GYG for the 'Midas' column - a newcomer on AIM, which recently showed off its wares at the Monte Carlo yacht show.
The company’s primary operation involves the painting and refitting of superyachts, and it floated in June at 100p.
Since then, its shares had already swelled to 137.5p, with the board intending to share the love from 2018 with generous dividends.
Hart noted the intensity of the product being sold, saying that coating and painting a superyacht could take between six and 12 months.
However, the market was anything but a small one, with both the number of billionaires and superyachts increasing globally.
In 2015, there were 1,800 billionaires in the world and 1,835 superyachts, with those numbers expected to jump to 2,500 billionaires and 2,285 superyachts by 2020.
Hart also pointed out the increasing size of these toys, with the average length of a yacht painted by GYG increasing to 80 metres from 54 metres 10 years ago.
On top of all that, the craft need to be serviced every five years if their billionaire owners want to keep them on the sea legally - meaning plenty of repeat business for GYG, which holds a 30% share of the service market and 5% of the new-build painting market.
Its interim results were released last week, with revenues up more than 19% at €33.9m and its order book standing at €41.8m for this year and next.
The company did make a small half-year loss, which it put down to the costs of floating on AIM and its traditional second-half weighting.
Analysts were picking underlying pre-tax profits of €7m this year, rising to €8.6m in 2018, off revenues of €66m for 2017 and €74m next year.
The stock was set to pay dividends, too, with a payout of 3.2p set for this year and 6p in 2018.
“The superyacht market is expanding and GYG is a well-regarded player,” Hart said.
“At 137.5p, GYG offers good long-term potential and a decent income. Buy.”