AIM's best performers in 2018 so far

by from interactive investor |

Home to some of the most dynamic and exciting companies around, former AIM writer of the year Andrew Hore analyses potential for the AIM stocks which have already doubled in value this year.

There are 28 AIM-quoted shares whose share price has at least doubled over the course of 2018, the best of which has seen its share price balloon by seven times since the beginning of this year!

Four of the companies have floated in the past two years and most of the rest have been quoted for more than a decade. More than two-thirds of these companies have higher share prices than three years ago, although 11 out of the 21 companies have a lower share price over five years.

Some of the companies have been on AIM for a longer period and, over a decade, the majority of these companies' share prices have fallen.

The best performer over five years is video localisation and dubbing technology and services provider Zoo Digital, where the share price has risen by 146% this year, and by 23 times over five years.

In contrast, Tower Resources has fallen by 99.5% over five years so, in historical terms, the 106% rise this year is relatively minor despite the recent positive news about its Cameroon oil and gas prospect. The share price fell to a low last November when Tower raised £2.1 million at 1p a share – less than one-half of the market price prior to the fundraising. The share price has recovered since then but is still below the 2.375p a share when trading was suspended prior to the placing.

A great Tern

Of course, many of the companies in the list are very different to what they were even a few years ago. Tern, the top performer so far this year with a 644% share price rise, was previously Silvermere Energy, an oil and gas company focused on the Gulf of Mexico. In August 2013, the company underwent a creditor voluntary arrangement (CVA), reorganised its capital and changed its name to Tern and its investing policy to technology investments.

That is why the Tern share price has risen by 97.1% over five years, but it has fallen by more than 90% over six years. The Tern share price has been volatile in recent years and it is around one-third of the high late last year. Tern raised £2.9 million at 26p a share during July. There is a portfolio of investments, but the main one is a majority stake in Internet of Things security technology developer Device Authority.

Source: interactive investor      Past performance is not a guide to future performance

Another example is SalvaRx Group, which was previously 3Legs Resources and is 270% higher over this year, but 97% lower over five years. There were cash distributions to shareholders by 3Legs of 18.5p a share at the end of 2014 and 1.33p a share in 2015 (prior to a 100:1 share consolidation). The share prices do not seem to have been adjusted for those distributions. The share price is more than double the 35.5p placing price at the time of the reversal of the cancer immunotherapy business in March 2016.

The share price, though, was lower at the beginning of July prior to the announcement that SalvaRx Group is selling that immunotherapy business to a Toronto-quoted company in return for shares, most of which will be distributed to shareholders.

The 94.2% stake in cancer drugs developer SalvaRx Ltd is being swapped for 757.9 million shares in Portage Biotech Inc, which are deemed to have a value of $67.5 million. SalvaRx shareholders will receive 18 Portage shares for each SalvaRx share they own if they approve the disposal. SalvaRx will retain around 100 million Portage shares and become a shell yet again. 

Healthy gains

Four of the 25 companies are healthcare related and they are all loss-making.

Skin health company SkinBioTherapeutics and surgical endoscopy devices developer Creo Medical floated in the past two years, while respiratory treatments developer Synairgen has recovered after AstraZeneca returned the rights to one of the company's treatments after it decided not to go ahead with its development.

AIM gushers

Resource companies make up nine of the 25 companies. Five of those are oil and gas companies and the other four are mining companies.

Bahamas Petroleum Company was, until this morning, the best performer in 2018, up 681%, sparked by the signing of an exclusivity agreement with an unnamed international oil company to evaluate the company’s licences in The Bahamas.

This agreement was extended until 1 September - a total of $1 million has been received from the oil company for the exclusivity. That is one day before the tenth anniversary of BPC being admitted to AIM, having reversed into Falkland Gold & Minerals Ltd, and the share price peaked at more than 24p in 2011.

However, news Friday that the international oil company has pulled out of discussions shows how fragile some of these rises can be. The share price fell by two-thirds on the news, although it has still more than doubled this year. 

Source: interactive investor      Past performance is not a guide to future performance

North Sea-focused i3 Energy floated just over one year ago and was one of the poorer performing new admissions in 2017. This has changed in 2018 and the share price is 371% ahead. This is because joint venture discussions were started with a potential partner for the Liberator oil field, which could start production in 2019. The exclusivity lasts until 24 September and the outcome will determine what happens to the share price.

Digging up profits

Bushveld Minerals is the best performing mining company with a 194% share price increase. The other shareholders in Bushveld Vametco were bought out at the end of 2017. This means that Bushveld has a controlling stake in the Vametco vanadium mine. Investment in the mine infrastructure means that capacity has been increased from 3,035 million tonnes to 3,750 million tonnes with plans for further capacity increases.

However, first half production was lower than expected due to lower grades, the disruption from installing the new plant and industrial action. Higher vanadium prices mean that profit margins have improved. There has also been positive drilling news at the Brits vanadium project.

The development of vanadium redox flow battery technology is an important part of Bushveld’s strategy. The first utility scale battery has been delivered and progress here could spark further interest in the shares.

Tech tiddlers

There are five technology companies in the list. The most notable is software provider Sopheon, which is one of the longest-serving AIM companies, having joined the junior market as Polydoc 22 years ago this September. The share price has risen by 178% this year and it is 832% higher over five years.

Better than expected fourth quarter trading in 2017 propelled the share price at the beginning of the year and there have been further forecast upgrades since then. In May, the directors and other shareholders raised just over £3 million by selling shares at 986p each.

Again, looking at the share price chart over the company's history on AIM shows that the share price was much higher in 2000 at the height of the technology boom, at one point trading at around £35.

Broadcast software provider Pebble Beach Systems, formerly Vislink, is another company whose share price has slumped by more than 90% over five years, so the 124% rise this year is not that impressive to a long-term holder.

Having sold the original Vislink broadcast equipment business, Pebble Beach still has net debt of £10.3 million, more than double its market capitalisation, but it appears investors are becoming more optimistic about its survival and Kestrel Partners has been building up its stake.

A £350 million winner

Boku is the newest company on the list. It is also the largest company. The direct carrier billing technology provider raised £45 million at 59p a share when it joined AIM last November. Boku has risen by 123% this year and 254% since flotation.

Boku is growing rapidly and its interim figures will be published on 4 September. First half transaction volumes increased 153% to $1.5 billion. Boku is set to move into profit this year, but it is trading on nearly 70 times prospective 2019 earnings. The business is cash generative and there could be scope for upgrades.

Online gaming company Webis Holdings benefited from the legalisation of online sports betting in the US and the share price has risen by 140% this year. The Supreme Court of the United States decided to overturn the Federal prohibition of sports betting. It is estimated that US online and onsite sports betting could be worth $6 billion by 2023.

Webis has a US subsidiary called WatchandWager, which is based in California, a strong potential market for sports betting. It will take time for revenues to show through and the existing business made a modest profit last year.

There should be further news from Webis about progress in the US in the next few months. GAN, which provides online gaming technology, is just below the 28 companies that have more than doubled because it has risen 99.2%, but there is scope for further rises.

Company Ticker Share price (p) % increase in 2018
Tern TERN 16.75 644
i3 Energy I3E 113 371
SalvaRx SALV 73 270
Bushveld Minerals BMN 25 194
Sopheon SPE 997.5 177
Bahamas Petroleum BPC 2.125 166
Elektron Technology EKT 47 165
Versarien VRS 155.5 155
Zoo Digital ZOO 144 146
Webis Holdings WEB 2.7 140
SkinBioTherapeutics SBTX 21.5 136
Creo Medical Group CREO 157 126
Pebble Beach Systems PEB 3.75 124
Boku BOKU 163 123
Biome Technologies BIOM 470 119
Water Intelligence WATR 355 118
Eurasia Mining EUA 0.485 116
Borders & Southern Petroleum BOR 4.035 115
Hydrogen Group HYDG 57.5 113
Baron Oil BOIL 0.625 108
Tower Resources TRP 1.6 106
Ormonde Mining ORM 4.35 105
Arcontech ARC 141 104
Instem Life Science Systems INS 292 103
Arc Minerals ARCM 4.8 102
Synairgen SNG 21.8 100
Argos Resources ARG 6.25 100
Elecosoft ELCO 84 100
Source: Sharepad as at 24 August 2018      

Andrew Hore is a freelance contributor and not a direct employee of interactive investor.

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