Interactive Investor

Two stocks in demand on a dull day for stock markets

As sellers forced share prices lower both here and across the pond, our City writer covers a pair of smaller companies with plenty to cheer about after rallying 20% today.

19th October 2023 15:54

by Graeme Evans from interactive investor

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A £70 million investment in Oxford Nanopore Technologies (LSE:ONT) and a big profits upgrade by McBride (LSE:MCB) today provided cheer in an otherwise bleak stock market session.

The DNA sequencing firm, which listed in September 2021 at a price of 425p, jumped as much as 22% to 229p as it emerged that one of its commercial partners had paid a big premium for an initial 3.5% stake at a price of 238p.

The commitment of BioMerieux SA (EURONEXT:BIM), a global diagnostics leader with a market valuation of $11 billion and $4 billion in sales, included a pledge to purchase an additional 3.5% of shares dependent on price and timing.

Oxford Nanopore boss Gordon Sanghera said the partnership would help to accelerate the development of nanopore-based solutions in the field of in vitro diagnostics.

He added: “This investment will enable us to deliver rapid, accessible, and affordable clinical tools more quickly to address unmet needs and improve healthcare worldwide."

In a landmark session for the company, Oxford Nanopore also unveiled a multi-year collaboration with US health provider Mayo Clinic to develop new clinical tests for diseases and to improve patient care.

The moves came as senior leaders updated investors and analysts on the company’s short-to-medium and medium-to-long term growth strategies and the pathway to adjusted earnings breakeven by the end of 2026.

Sanghera added: "Since our IPO two years ago, we've delivered strong, above-market growth relative to our peers, and today we are excited to talk about our next phase and our long-term vision.”

The shares topped 700p a few weeks after the high-profile listing but the unwinding of Covid support for biotech stocks has contributed to a subsequent low of 176p in March.

Numis Securities has a price target of 400p, noting that the shares trade on an enterprise value of seven times sales compared with the closest peers on over 10 times.

It added: “We continue to think the shares represent a compelling value proposition. Clearly so does bioMerieux, one of ONT's key commercial/channel partners willing to pay a 20%-plus premium for an initial 3.5% equity position.”

For McBride, shares jumped 7.25p to 39.9p as the supplier of cleaning and hygiene products to many of Europe’s major supermarkets said its first quarter earnings were £8 million ahead of internal forecasts.

The performance comes against a more favourable backdrop as consumers look to offset price pressures by switching to own label brands. Raw material and packaging material costs have also steadied, although other costs such as labour, energy and indirect cost inflation continue to be a source of upward pressure.

Peel Hunt responded to today’s upgraded guidance by raising its recommendation from “add” to “buy” and increasing its price target from 50p to 85p.

The broker added: “There has been a marked change in market conditions, and the current trends should sustain. In our view, the rating is ridiculously low given the improved profits and balance sheet.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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