Allergy Therapeutics (AGY)


Share of the week: Tipped to double again

Share this
Share of the week: Tipped to double again
In a week when the FTSE 100 finally made an all-time high there were surprisingly few big winners among either the large or mid-caps. A three-day losing streak for the blue-chip index clearly took some froth out of the market, which is why we cast our net a bit wider in search of our Share of the week.

In fact, we headed all the way to AIM where an old favourite was causing a stir.

We last covered Allergy Therapeutics (AGY) in September following full-year results. Revenue had risen fast, but heavy R&D spend meant big full-year losses and a possible delay to profitability.

However, one analyst reckoned an enterprise value (EV)/sales ratio of just 1.6 times made the shares "very cheap", with peers trading on a ratio of three times. It's why Paul Cuddon at Numis slapped a 37p price target on the shares.

That article - Allergy Therapeutics tipped to bounce back - was nearly three weeks ago, and things have really taken off since.

In the days following our write-up, directors opened their wallets, snapping up 280,000 Allergy shares at 17.75-19.25p. Chief executive Manuel Llobet kicked things off, buying 100,000 at 18p. Finance director Nicolas Wykeman picked up 150,000 at 17.75p, before chairman Peter Jensen bagged 30,000 at 19.25p.

This Friday, the share price peaked at 25p, up 45% since the results. It's also a five-month high, and just a penny from the 50% Fibonacci retracement of the decline from the October 2015 best at 35p.

Clearly, the market also liked news Monday that Allergy would present data at the World Vaccine Congress, demonstrating how its adjuvants can make "significant improvements" in the effectiveness of malaria vaccines.

Data also implies "highly significant" potential for this novel adjuvant system in infectious disease applications using Allergy's Bencard Adjuvant Systems (BAS) technology, we're told.

Panmure Gordon has been a fan for ages, and remains a buyer, believing Allergy could be worth 53p a share in time. The broker's sum-of-the-parts valuation is based on enterprise value/sales analysis of specialty pharma and allergy peers for calendar year 2017, estimated balance sheet cash and net present value of its Pollinex Quattro hay fever treatment.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.