XL TechGroup reports deal with Kraft

The shares have done nothing since my last update in October, but there is plenty happening to encourage holders of XL TechGroup (XLT), the technology incubator group I tipped here in July. Last week, the company announced that its 64.8 per cent-owned subsidiary TyraTech had signed a co-development agreement with Kraft Foods, one of the world’s leading food companies, to develop compounds for preventing human parasitic infection. They would be included in food and drink sold in the developing world. TyraTech gets an upfront fee from Kraft and there will be milestone payments as the development progresses.

The news is encouraging in two respects. First, Kraft is understood to have hopes of blockbuster sales from the products developed in tandem with TyraTech – although they are some years off. Second, it lifts the likely value of Tyratech as a stand-alone business when it is floated off from XLT. There are hopes that this could come in the first half of next year. According to Charles Stanley’s Robert Corden, XLT reckons TyraTech should be worth a minimum £100 million when it is floated. That would lift XLT’s own net worth above the current share price – leaving its stakes in other fledgling hi-tech businesses in for free. Down from a 292.5p recommendation price to 223.5p, the shares remain a firm hold.