One to Watch: Your flexible friend

Published on Wednesday 30 December 2009 19:54

Stanelco 0.39p Unch Scotsman says HOLD

STANELCO has two distinct areas. The BioPlastic division produces a bio-degradable and sustainable range of products replacing oil-based plastics. This has diverse applications including flexible films, moulded products, extruded sheets and food wraps. The Radio Frequency division is involved in the design and installation of specialist furnaces, welders and induction equipment.

I am encouraged by the recent publication of a positive report from the well-regarded research house, Edison. Edison highlights the quest by many companies to identify alternative products with plastic characteristics which do not involve oil as their basic raw material. Stanelco's BioPlastic's division produces organic-based resins to produce plastics while its RF operations look to exploit the heat properties of high-frequency waves with applications in fibre optic cable manufacturing, the welding of diving suits and plastic films.

Edison emphasises that Stanelco's prospects hinge on the development of BioTech and here are other challenges. For a start, with oil at $70 a barrel, the Stanelco process is at least twice as expensive.

Moreover, the market leader in this area, Novamont, an Italian group, is pursuing a claim against BioTech for patent infringements in France and Italy.

Significantly, a new chairman and chief executive were appointed in 2007. Paul Mimes, the new CEO, is an experienced plastic hand while Sue Bygrave, who arrived in January this year, as the new finance director, is also well regarded.

Stanelco is obviously a high-risk proposition. However, the company is well financed and its technology confirmed. In the immortal words of Del Boy, "he who dares wins".

&#149 The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Petrofac

1,029p +19p

Broker says BUY

CHARLIE Menegatos, senior trader at Accendo Markets, believes the move by Petrofac into Turkmenistan, announced yesterday, will provide further drivers for growth. The brokerage has reiterated its "buy" rating on the stock for a return to year highs at 1,078p, with a three-week target timeframe.

Rio Tinto

3,375p -44.9p

Broker says BUY

THE mining giant is a key recommendation for 2010, according to Richard Curr, head of dealing at Prime CFDs, and Fairfax analyst John Meyer. They said: "We believe continuing high copper and aluminium prices combined with higher iron ore demand and benchmark pricing should lift Rio's profits to new high levels."