Brokers' Views – Charles Stanley

Analyst Franc Gregori says a return to profit is in sight this year at corporate client Source BioScience, which provides products and services to the healthcare and life sciences research sectors.

In the midst of turnaround, the fully listed venture’s 2008 results showed a 53 per cent sales rise to £11.5 million and operating losses pared back by 41 per cent to £700,000.

Tight cost control coupled with organic growth of 11 per cent resulted in operating cash flow of £600,000, leaving £7.6 million of net cash in the year-end coffers. ‘This financial strength,’ writes Gregori, ‘should allow considerable scope for further earnings-enhancing deals within what is a still very fragmented industry.’

Forecasting a modest swing into the black on higher revenues of £13.5 million this year, he says buy and sets an 8p target for the 5p shares.

Healthy Chinese growth
Gregori is also bullish about £89 million market cap Hutchison China MediTech, known as ‘Chi-Med’ and traded on AIM.

Its 2008 numbers demonstrated growth across all divisions, with growth especially strong within the China Healthcare division.

Group sales grew by 34 per cent to US$87 million (£60 million) and Chi-Med delivered better-than-expected losses of $13.8 million, which should now have peaked after recent investment.

Charles Stanley considers that ‘the investment case remains attractive, with demand for healthcare in China set to outpace other major markets’. The broker says buy at 48p, while setting a 102p price target.