Biome Technologies not receiving the market recognition it deserves, says Daniel Stewart

The past year has been one of transformation for Biome Technologies (LON:BIOM).  

The strategy put in place by chief executive Paul Mines appears to be a resounding success. 

Revenues are predicted to rise by 47 per cent this year to £19.8 million and then a further 28 per cent in 2012.

By that time the biodegradable plastics firm should have recorded its first profit.

However the company’s share price fails to reflect these stellar prospects, according to Richard Nolan of City broker Daniel Stewart.

The analyst rates the stock a buy all the way up to 0.41 pence a share, which is almost double the closing price of 0.21 pence.

And even then Biome is being valued at a bargain-basement 1.24 times 2011 sales.  “Our sales multiple is significantly below peers such as Symphony Environmental (LON:SYM) which trade at over two times and yet Biome Technologies has far superior growth rates,” Nolan points out.

A change of name and a move to the AIM market were two initiatives last year designed to rehabilitate the company formerly known as Stanelco.

The Stanelco name itself dated back to the mid-1940s and originally stood for the Standard Electrical Company – so it was definitely time for a change.

But the corporate makeover also ditched some ‘baggage’ from the company’s more recent history.

In the mid-noughties the business garnered a substantial and fervent private investor following impressed by the firm’s biodegradable plastics technology Greenseal and ground-breaking packaging tie-up with Asda.

Biome is now focused on bioplastics and radio frequency (RF) equipment used in welding, heating and sealing. 

Neither are complementary other than they are highly innovative, research led businesses. 

The group is a close second in the market to market leader Novamont in bioplastics, but the sector isn’t exactly bubbling over with competition.

At the moment Biome’s big products are in the horticultural sector, though the range is broadening with consumer electronics starting to figure.

It is a hallmark of the US in particular, that marketing of household gadgets is now increasingly focused on that product’s green credentials.

May’s trading update showed both arms of the Biome business were in rude health.

Overall, revenues grew 113 per cent to £5.6 million in the three months to March 31, with sales from the biolplastics business up 96 per cent and Stanelco’s turnover ahead an impressive 179 per cent.

With £3.5 million cash and a £2 million debt facility to meet its working capital requirement, Biome seems primed for growth. 

“Biome Bioplastics is growing in to a growing market with significantly differentiated products,” Daniel Stewart’s Nolan points out. 

“Biotec appears no longer constrained by raw material supply issues and is growing strongly. 

“Many of Stanelco RF's markets are in the beginning or in the middle of an infrastructure build out and performing very well. In essence, all parts of Biome Technologies are growing at exceptional rates in strong markets.”