Questor: this tiny outfit’s invention could change the world, so take a punt on the shares

It’s not every day we can tip a company that has invented something that could supplant a technology in use for centuries. But London-listed Tirupati can make this claim.

Despite mind-boggling technological change in almost every part of life over the past 100 years we still transmit electricity and electrical communications over copper wires. Tirupati says it has produced a new substance, a mixture of aluminium and a type of graphite called graphene, that can be used to make wires with superior technical qualities – qualities that will bring benefits such as increasing the capacity of airliners.

If this all sounds a bit starry eyed, the company has attracted backing from one of Britain’s most experienced investors in smaller companies, Gervais Williams of Premier Miton, who also, to come down to earth a little, has said the stock’s valuation is well supported even if this particular project comes to nothing.

That view is based on the company’s day job of mining graphite, which it is doing profitably at a site in Madagascar. But it has also used its own graphite to make graphene, which is “the strongest known material, yet also stretchy – it can conduct electricity and heat incredibly well, but is only a single atom thick”, in the words of Manchester University, where it was first isolated.

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When Tirupati mixed its graphene with aluminium, it produced, Williams said, conducting wire that could be half the weight of its copper rival.

“There is so much cabling in an aircraft that switching to graphene-based wire could make it 5pc lighter – a saving that could be used to accommodate more passengers or freight. But it could be used wherever weight matters, such as in cars,” he added.

The firm has had preliminary discussions about the use of its new material with Rolls-Royce, the FTSE 100 engineering company told Questor. Williams said Tirupati’s £78m market value was supported by its graphite mining activities alone and “the wire is not in the valuation”. The forecast price-to-earnings ratio is less than 10.

“It is building a plant to make much bigger volumes and has issued a detailed technical dossier that impressed me. It told me one potential partner was amazed by the product,” Williams added.

The wires part of this business is inevitably a speculative bet but the rewards could be huge. Worth a punt.

Questor says: buy

Ticker: TGR

Share price at close: 90.5p

Update: GlaxoSmithKline

Our advice to buy GSK in April was published shortly before an activist hedge fund, Elliott Management, took a significant stake in the business, writes Robert Stephens.

Since then, rumours have swirled about possible management and strategy change, which Elliott has a history of forcing at the firms in which it invests.

The next couple of years were always likely to be a time of intense change for GSK. It is in the process of splitting into two companies: consumer healthcare and pharmaceuticals. Elliott’s involvement is likely to make that process more uncertain, which could lead to greater share price volatility over the short run.

However, in Questor’s view GSK’s long-term prospects remain sound. As our assessment in April highlighted, it has a strong pipeline of new drugs in spite of some recent disappointments in clinical trials. It is also likely to deliver significant efficiencies from the proposed split, while its first-quarter results confirmed that it was on track to meet full-year guidance.

Despite a 4pc share price rise since our tip, the stock trades at 12.4 times forecast earnings per share for 2022. This suggests that it continues to offer a margin of safety that should compensate investors for increased short-term uncertainty. Hold.

Questor says: hold

Ticker: GSK

Share price at close: £13.52

Update: Avacta 

We reported last week that Avacta had applied for approval in Britain for its lateral flow tests for professional use. The regulator has granted that approval, the firm said on Monday, so it can now sell its tests in this country. “The company expects product registration from a competent authority within the EU to follow shortly,” it added. The shares put on about 4pc on the news. 

Questor says: hold

Ticker: AVCT

Share price at close: 238p

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