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Sunday share tips: Ergomed, Johnson Matthey

The Mail on Sunday’s Midas column recommended readers ‘buy’ shares of pharmacovigilance specialist Ergomed.
All drugs, even already tried and tested ones, such as aspirin, are monitored on an ongoing basis to monitor their continued safety.

That certainly also applies to new ones, such as the Covid-19 vaccines whose rollout is imminent.

Critically, that is not because they are deemed unsafe, it is simply a matter of medical ‘best practice’ and Ergomed is a leader in the field, the tipster explained.

As well, in a typical year, hundreds of clinical trials take place which require firms capable of organising the entire process and most trials take several years to complete.

Ergomed’s founder, Miroslav Reljanovic, has strengthened has strengthened the management team over the past two years and is looking to continue expanding.

Its finance chief, Richard Barfield, is another experienced hand and has a track record of success at other firms within the same sector, having pursued of both organic and inorganic growth, which Ergomed is likely to follow, Midas added.

Sales are expected to grow 14% in 2020 to reach £85m alongside a 58% surge in profits to £14.6m, with further “substantial” gains likely in the year ahead, according to analysts.

“Ergomed shares have done well this year, benefiting from increased investor interest in almost all healthcare stocks.

“However, the company is profitable, its balance sheet is robust and the shares should continue to rise as Reljanovic and Barfield roll out their strategy. Buy.”

The Sunday Times’s John Collingridge believes shares of specialty chemicals maker Johnson Matthey are best avoided.

Writing in the newspaper’s ‘Inside the City’ column, the tipster cited the Prime Minister’s move to bring forward the ban on the sale of new petrol and diesel cars by five years to 2030 as the reason.

Catalytic converters account for roughly 60% of the manufacturer’s sales and over half its profits.

Yes, the engineer had been shifting towards less endangered markets but the process was like turning an oil tanker, he added.

Johnson Matthey rival Umicore had moved more quickly to dodge the extinction threat by investing heavily in battery materials.

And while the company was now also moving into batteries, as well as hydrogen, analysts at Investec judge that it is “well behind its peers” on the former, not to mention the costs of scaling up its battery materials factory in Poland.

“The company must show that car giants share its enthusiasm for its battery technology by signing up some big names. If not, investors may lose patience.

“An activist could emerge to insist on running the business for cash, or a break-up. In its current form, it risks falling behind in the race to zero emissions. Avoid.”

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