Biotrace poised to cast out the bugs

SHARES CITY TALK

SHARES in Biotrace, the microbial testing equipment business, reacted strongly to the appointment of a new chief executive, rising a third by the end of last week, to 54p. Barely at his desk for over a week, Jim Keir has hit the deck running and already has a clear vision for where he wants to take the company. Expect news soon of a link-up with an American group to sell the company's firefly-based testing kits over there. This will be some comfort to shareholders who bought at the initial offer price of 130p when the company was floated in 1993.

Mr Keir, who joins after 13 years as a director at Amersham International, where he had an impressive track record, is confident of good growth in the company's main products. He could just crack what has proved a troublesome investment for shareholders. Worth a punt.

ON THURSDAY, Isotron announces figures for its half-year to 31 December 1995. Although something of a stock market tiddler, on a market capitalisation of pounds 37m, Isotron has built up a commanding niche in its chosen area as a provider of sterilization services, chiefly in healthcare. Turnover for the comparable period last year was pounds 4.16m, with pre-tax profits of pounds 1.46m, or a net margin of 35 per cent. There is no reason to suppose profits this time round will be any less compelling, while its strong cashflow has generated a pounds 3.47m cash pile.

It is unlikely there will be any news of an acquisition, but watch how its recently commissioned Irish plant has performed. Management has promised significant improvement over the course of this year. Barring accidents, the shares, at 298p, remain a buy.

INTERMEDIATE Capital Group is a relative stock market newcomer that specialises in funding management buy-outs. MBOs have had a fairly lucrative track record over the years, with the exception of the late 1980s, when recession and high interest rates drove many to the wall. That phase seems to be over, however, and ICG reported a good set of results last year. Pre-tax profits of pounds 18.1m, for a company with a staff of only 19, reflects a highly profitable niche.

The shares, at 366p, have performed exceptionally well over the last year - up 69 per cent in absolute terms, and 36 per cent against the market. But a slowdown in economic growth, coupled with the finer funding terms MBO teams can command, suggest the good news may be all in the price. Take profits.

KEITH WOOLCOCK, small companies technology analyst at Merrill Lynch, recommends shares in hand-held computer pioneer, Psion. European companies, including Nokia in mobile phones and Sap, the German software concern, have shown it is possible to compete successfully against the best of Japan and America. Psion needs only keep in step with the worldwide expansion of hand-held computing and mobile data to deliver "extraordinary returns for its investors over the coming years". Psion can now make 360,000 machines a year, up from the 250,000 it shipped last year. Mr Woolcock sees the company make pounds 11.54m of profits for the most recent financial year, from pounds 6.55m in 1994. In 1996 profits can beat pounds 15m. That leaves the shares on a forward multiple of 17 times earnings. Despite the surge in the shares from just over 200p at the start of 1995 to their current 905p there should be more to come. Buy.

SPECIALIST engineering and electronic systems group B Elliot, at 104p, has been to hell and back. Its shares, as high as pounds 19 in 1990, remain in the sick bay despite being rescued from collapse three years ago when orders in its core European machine tools business dried up. Devaluation and an upturn in the capital goods cycle helped take Elliot, led by chief executive Michael Frye, off the critical list but net debt remains stubbornly high at 87 per cent of shareholders' funds. That means any further expansion overseas, which currently accounts for 45 per cent of sales, is likely to require a rights issue.

House broker Beeson Gregory expects pre-tax profits for the year to March of pounds 5.5m (pounds 4.3m) rising to pounds 6.6m next year when the prospective p/e ratio falls from 13 to 11. There could be value in the shares but, given the feeble performance of the last few years, wait for concrete evidence of progress before committing hard cash.