Since this healthcare devices company chief executive was appointed two years ago, he has instigated a miraculous recovery. And it could be just the tip of the iceberg.
Maelor (Aim:MLR)
Maelor supplies pharmaceuticals and medical devices to the specialist hospital sector, focusing primarily on critical care, neurology and cancer treatment.
Current chief executive Tim Wright was appointed two years ago to turn-around the business and he has instigated a miraculous recovery. But this could be just the tip of the iceberg.
Firstly, Maelor has an envious portfolio of treatments already on the market. For example, its flagship critical care product, Volplex (a blood plasma substitute, which is used in operating theatres when patients sustain heavy bleeding and require fluid replacement), managed to increase its market share from 16% to 26% last year.
Maelor also sells Cryogesic, a leading anaesthetic freeze spray; OptiFlo,a catheter maintenance aid, with 54% of the market; and Mysoline, an epilepsy drug.
On top of these established treatments, Maelor also has an excellent stable of exciting late-stage development medicines, such as Aloxi, which combats acute nausea in cancer patients and is due to launch in March 2008. Other new products being developed are for applications relating to blood plasma, varicose veins, antidepressants and hospital-acquired infections.
With regard to the numbers, turnover jumped 132% to £3.1m in the first half of this year, while gross margins and earnings per share (EPS) came in at 57% and 0.48p respectively. Net cash was a healthy £1.7m as at September, although this excludes £5m of future deferred payments for its £13m acquisition of Acorus in April, which was part-funded via a £8m placing at 10p.
Going forward, investment research group Edison expects full-year sales and EPS of £6.5m and 1.1p respectively, rising to £8.7m and 1.4p in 2008/2009. So at 13.5p, the shares look a steal, trading on corresponding p/e ratios of only 12.7 and 10.0 for the next two years.
But what are the potential pitfalls? Well, as a small company that has to fund the substantial development costs associated with new treatments, there is a chance that Maelor will have to raise fresh capital. And being largely dependent on the UK health service is a concern, although overseas expansion is being explored (by selling Volplex in China, for example).
Yet with all this taken into account, the stock trades at attractive levels for such a science-rich firm in possession of defendable positions in niche markets. In fact, Mr Wright seems to agree, after snapping up 145,000 shares in November at 13.75p each.
Recommendation: LONG-TERM BUY at 13.5p (market capitalisation £16.8m)
• Paul Hill also writes a weekly share-tipping newsletter, Precision Guided Investments