BULL POINTS:
■ Need for better agricultural yields
■ Deals with major companies
■ Milestone payments could shift share price
BEAR POINTS:
■ No certainty on timing of trial results
■ Profits some years off
The recent spike in the price of corn and other grains on the back of a forecast that 2010's harvest would be disappointing has revived both fears of the food-price inflation that sparked riots in the developing world in 2008 and the worry that the world will be unable to feed its burgeoning population within a few decades.
With growth in crop yields slowing, the supply-demand balance looks on a knife edge. Hence global agriculture and chemical giants are striving for ways of improving yields and disease resistance among crops, but in an environmentally-friendly way. And this is where Plant Impact (PI) is hoping to grab a significant niche of a huge global market.
The company's four key products are CaT, a calcium uptake improver; PiNT, which delivers nitrogen efficiently and reduces leaching; Speedo, which accelerates plant growth; and BugOil, a pesticide. All are derived from natural sources and improve stress resistance. Trials so far have proved their efficacy. Syngenta is trialling CaT and PiNT on soya beans in Brazil. Arysta has signed a licence for BugOil for the next 10 years, with registration expected in the UK and US either late this year or early in 2011. The Arysta deal attracts milestone payments that could be the catalyst to get PI's share price moving.
| IC TIP RATING | |
|---|---|
| Tip style | Speculative |
| Risk rating | High |
| Timescale | Long term |
| What do these mean? Find out in our | |
In Brazil, PI products could be used on soya beans, corn, cotton and coffee, which together take up almost 40m hectares of land. PI is targeting Brazilian farmers with more than 4m hectares. PiNT has been trialled by the US Department of Agriculture on turf, where it does 25 per cent better than established products. In September, PI signed a development and distribution deal with Agrimatco, an agricultural products supplier in 50 countries principally in the Middle East and North Africa. This means PI’s products are now available in 73 countries across the globe, with heavyweight backing from industry suppliers in key territories.
| ORD PRICE: | 21p | MARKET VALUE: | £9.6m | |
| TOUCH: | 18-21p | 12-MONTH HIGH: | 36p | LOW: 14p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 7p | NET CASH: | £2.1m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 0.3 | -1.9 | -7.0 | nil |
| 2009 | 0.8 | -2.5 | -8.6 | nil |
| 2010 | 1.4 | -1.7 | -4.5 | nil |
| 2011* | 3.5 | -1.3 | -2.5 | nil |
| 2012* | 7.3 | -0.2 | -0.4 | nil |
| % change | +112 | – | – | – |
Normal market size: 1,000 Market makers: 4 Beta: 0.1 *Allenby Capital estimates | ||||
Clearly PI's shares are high risk, as its products have to pass regulatory hurdles. That said, if just one of its technologies succeeds, the upside is significant. But Plant Healthcare, which is in a similar line, provides a tough lesson: its share price was hit hard by disappointments concerning a contract with Monsanto.
So far Plant Impact has been a slow burner, but its bosses reckon that its maturing portfolio of products will finally get commercial traction in the next two or three years. A series of announcements in recent months suggests PI’s products are moving in the right direction, having been tested successfully for several years on small-scale fruit and vegetable crops in the UK and Europe.
