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TyraTech Inc has sizeable opportunity in animal health market, says Whitman

TyraTech Inc is undervalued and has a sizeable opportunity in the animal health market, says house broker Whitman Howard, which rates shares a 'buy'.
TyraTech Inc has sizeable opportunity in animal health market, says Whitman
The firm has launched a new line of animal health biocide products branded 'PureScience', which will initially be aimed at poultry producers and be distributed in the USA

TyraTech Inc (LON:TYR, LON:TYRU) is undervalued and has a sizeable opportunity in the animal health market, says house broker Whitman Howard, which rates shares a 'buy'.

The firm has developed nature-derived insect and parasite control products and its flagship offering currently is the Vamousse headlice treatment, which has gained significant traction.

The anti-lice remedy and preventative shampoo has found its way into mainstream US retailers - notably Wal-Mart -  and is making progress within the drug stores and in the UK market, said analyst Chris Wickham.

But earlier this year, TyraTech unveiled the launch a new line of animal health biocide products branded 'PureScience', which will initially be aimed at poultry producers and be distributed in the USA.

The range currently includes three formulations to control adult flies, immature flies and mites in industrial poultry production though Tyratech eventually expects to expand the range to cattle and pigs.

"TyraTech’s animal health opportunity is sizeable and probably not appreciated fully by the market," said the analyst, adding that animal health and agribusiness was a preferred growth “hot spot” within the broker's overall coverage of fast moving consumer goods (FMCG) stocks.

"There is a clear case for sustained growth in both the companion and production animal markets.

"The latter should be driven by higher consumer protein consumption. Avoidance of parasites infestation is important as, in our view, TyraTech’s products should succeed in aiding farms’ output and profitability."

The broker also applauds the group's business model, which outsources manufacturing and sales, so is structured to maximise flexibility and ensures scalability when launching new products and entering new geographies.

From 2016, the company will be able to finance expansion internally with sales and, ultimately, profit growth benefits accruing directly to shareholders, it also notes.

"TyraTech operates in the highly prized area of consumer health, in addition to having a substantial opportunity with animals."

Wickham argues this 'elegant combination' is not borne out in the group's current valuation and bases its potentially conservative 11p price target (current price: 3p) on 4.5 times' the average of 2016 and 2017 net sales.

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