Wednesday tips round-up: Astra Zeneca, Torotrak

23rd Apr 2014 07:46

When a company says that it is willing to pay an over 30 per cent premium for one of its rivals, investors should sit up and take notice. Well, that's exactly what Pfizer did yesterday by offering to purchase AstraZeneca. Simply said, the British company's stock is cheap although the firm readily admits that it does not expect to see a recovery in revenue until 2017. Nonetheless, the drugs giant is in transition and generates loads of cash. Despite the 25 per cent drop in its pre-tax profits last year, to 7.94bn dollars, its operating cash-flow, after interest and tax, increased from 6.95bn dollars to 7.4bn dollars, offering ample dividend cover. Hence, investors are getting paid a 4.5 per cent yield as they wait for the drug pipeline to bear fruit. This is where it gets interesting, yesterday's bid suggests that those in the industry itself are optimistic about the chances for success of the 11 drugs that are in final stage III trials. In fact, they believe now is a good time to get into the stock. The Daily Telegraph's Questor team "likes being paid to wait and is more than happy to retain the existing recommendation: Buy." Everything must change so that everything can stay the same, someone once said. In a nutshell, that seems to be exactly the case with Torotrak at the moment. The company, which was spun out of British Technology Group back in 1998, had the aim of adapting a process originally conceived for cotton mills for use in the automotive market. Such hopes took the share price to the stratospheric level of 545p in September 2000. Then, Toyota and GM abandoned plans to licence its technology and the shares duly dove lower. Fourteen years on, clients have taken up its technology for use in lawnmovers. The firm also recently purchased Flybrid, adding its kinetic energy recovery system to its armoury. This system is now being tested by Lotus and a bus company that wants to commercialise it. Torotrak has also won substantial funding from the Technology Strategy Board for a move into excavators. Down by a third over the last year the shares are worth a punt, even if only on the prospect of landing a top car-maker, writes The Times's Tempus. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB