Euglena soaring on Japanese stock exchange
May 20, 2013
atoshi Kawano & Kanoko Matsuyama report for Bloomberg.com that a Japanese biotech venture focused on making jet fuel from algae is soaring in Tokyo trading as cash being pumped into the economy by the central bank cascades into speculative investments.
“The market expects quantitative and qualitative easing to continue long term, boosting liquidity and drawing investors to speculative shares like biotech,” said Kazuyuki Terao, chief investment officer at Allianz Global Investors Japan.
Euglena, a venture formed by the University of Tokyo, has soared 10-fold this year for the second-best performance on the Tokyo Stock Exchange Mothers Index. The company is developing single-cell algae based products including jet fuel, which it expects to supply steadily by 2018, its President, Mitsuru Izumo, said in an interview.
The venture is currently valued at about 157 billion yen (15.35 million USD) and trades at about 335 times forecast earnings. Still, Japan’s fastest-rising biotech companies have yet to produce steady profit, so the investors’ bets are speculative, said Terao of Allianz Global.
The JASDAQ index had an average price earnings ratio of about 22, based on analyst estimates for the year, while the Tokyo Stock Exchange Mother’s Index, which includes Euglena, averaged about 74 times earnings estimated by analysts, according to data compiled by Bloomberg.
The multiples for many of the companies aren’t prohibitively high, said Tomohiko Ikeno, an analyst at Ace Research Institute. “It is still a good time to invest in some Japanese biotech ventures to hold long term,” Ikeno said. “The stocks will be volatile in the short term, but still have great potential for gains.”