PHC

A long wait continues but looks likely to reap big rewards for investors in the plant products company

by Timon Day

It’s still all jam tomorrow for Plant Health Care (PHC:AIM) but the signs look promising as its organic plant growth products Myconate and Harpin are being assessed by all the major agro-chemical companies. Patient investors with a high-risk appetite could eventually be rewarded with a trebling of their holdings, assuming the £137 million cap’s products prove able to command fat royalty payments.

The first launch of a Plant Health Care product should see US giant Monsanto coat Accleron seeds with Harpin to fight disease. Bayer’s field trials of Myconate, the growth product, are in their second year with a product launch expected in 2010.

Germany’s Bayer made a small milestone payment a few months ago after first-year test results on using Myconate for growing corn, cotton, soybeans and sunflowers were positive.

A trio of rival multinational companies are about to start testing Myconate on cereal crops for which use a different license will be granted. One of them is also testing a Harpin seed treatment in wheat.

Plant Health Care chief executive John Brady says he hopes to announce more deals next year, particularly for a patented herbicide glyphosate-Harpin crop spray. Tests have shown a 5-10% yield increase in soybean and cotton.

With the global population forecast to rise by half over the next 40 years a huge increase in food production is necessary. The main risk for Plant Health Care is its products are not quite good enough to command top dollar in royalties from the agro-chemical majors. This is why the shares languish at 300p well below their 410p 12-month high and house broker Evolution's (EVO) 12-month target of 500p. Evolution is optimistic saying Harpin and Myconate could be ‘deployed on over hundreds of millions of acres of crops in a few years time.’ The broker has a long term target of £10 a share.

Shares says: The shares will remain at a big discount to Evolution's valuation until more facts and figures emerge to justify a trebled market value approaching £500 million. Buy

The writer holds shares in Plant Health Care