Green jet fuel produced with algae. (Photo Credit: Honeywell CC BY-SA 3.0)
Algae biofuel ventures flying high in the stock market
Thursday, May 23, 2013, 01:20 (GMT + 9)
Biotech ventures are soaring in Tokyo trading, especially those centering around making jet fuel from algae, as the central bank’s outgoing cash feeds speculative investments. Five of the 10 best-performing stocks traded on JASDAQ in 2013 are biotech firms.
“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 by the University of Tokyo, is creating single-cell algae based products including jet fuel, which it plans to supply steadily by 2018. This venture has jumped 10-fold this year for the second-best performance on the Tokyo Stock Exchange Mothers Index, President Mitsuru Izumo said, Bloomberg reports.
Euglena is worth some JPY 157 billion (USD 1.5 billion) and its work was mentioned at government meetings discussing government stimulus measures in the sectors of biotech and energy.
At the same time, these very biotech ventures prompting a lot of talk have not yet learned how to produce a steady profit, so the investors’ bets are speculative, noted Terao.
Euglena, for one, trades at about 335 times forecast earnings, while some counterparts have been incurring financial losses this year.
The JASDAQ index, which has lower minimum profit requirements than Japan’s main bourse, so far has had an average price earnings ratio of about 22, based on estimates for the year by analysts. In contrast, the Tokyo Stock Exchange Mother’s Index, of which Euglena is a part, averaged about 74 times earnings estimated by analysts, according to data put together by Bloomberg.
The multiples for several of these kinds of companies are not prohibitively high, added Tomohiko Ikeno, an analyst at Ace Research Institute.
By Natalia Real