Blue-chip shares have dived today, but investors are piling into this trio of small-caps.
AIM-traded Tremor International (LSE:TRMR), Eco Animal Health (LSE:EAH) and hygiene services company React (LSE:REAT) gave another boost to the profile of the UK’s best-performing stock-market index of 2020 today.
The trio’s shares were up by at least 10% in a session when the AIM All-Share junior market showed its resilience against a FTSE 100 index down 1.3% due to ongoing Covid-19 worries.
The benchmark of blue-chip stocks is 22% lower across the year, whereas the AIM All-Share recently returned to pre-Covid levels thanks to the impetus of companies including online fashion retailer ASOS (LSE:ASC), Covid tester Novacyt (LSE:NCYT) and digital gaming firm Frontier Developments (LSE:FDEV). It was broadly flat at 973.03 points this afternoon.
Today’s AIM stars included Tremor International after the video advertising technology business boosted 2020 forecasts by revealing it expects revenues in the region of $340 million to $360 million and underlying earnings of between $30 million to $36 million.
The Israel-based company was created in April 2019 through the merger of Taptica - AIM’s International Company of the Year in 2017 - and RhythmOne, which will be better known to many investors as digital advertising firm Blinkx.
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Shares in the new entity peaked at 216p in January after it struck a deal to buy video marketplace technology firm Unruly from media giant NewsCorp. Under the deal, Tremor gained the exclusive rights to sell outstream video on more than 50 NewsCorp titles in the UK, US and Australia in return for giving NewsCorp a 6.91% stake in the company.
The deal was struck just as the Covid-19 pandemic resulted in the cutting of advertising budgets across all platforms, particularly the travel, hospitality, automotive and retail verticals.
Shares fell to 85p in March but are now back above 200p after Tremor today said the integration of Unruly was complete, with the group benefiting from a broader footprint and expanded technology stack.
Analysts at broker finnCap have a target price of 500p, adding that Tremor’s differentiated platform was well placed to capitalise on strong growth prospects in connected TV and digital video advertising.
Eco Animal Health, whose products include an antibiotic for the treatment of respiratory and enteric diseases in pigs and poultry, was another strong AIM-listed performer after revealing it is on track to exceed revenues forecasts for the year to 31 March.
Eco’s shares fell sharply towards the end of 2019 when an outbreak of African Swine Fever in China resulted in significant headwinds in its largest market.
China-US trade tensions exacerbated the effect, with US swine producers unable to capitalise on the anticipated export market created by the pork shortage in China. This led to overproduction and depressed prices and margins in the US.
The all-important Chinese market is now much stronger, supported by the rebuilding of pig herds and the high price for pork. The combination of this outperformance and in-line results from the rest of the group left revenues for the six months to 30 September well ahead of market expectations.
Shares surged 21% to 250p, but this is still short of the 357p seen a year ago.
Another AIM-traded stock enjoying favourable market conditions is React, which provides specialist cleaning and decontamination services to the public sector.
React’s shares rose 13% to 1.36p after it reported 42% growth in revenues to £4.4 million for the year to 30 September, driven by both Covid-19-related work and a number of other projects.
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The healthcare, rail and facilities management sectors performed well, augmented by incremental business in other areas such as education and residential care homes.
This was offset by a decline in the Swadlincote-based company’s work sanitising and decontaminating courtrooms, cells and custody vehicles. The sector has since returned to near-normal activity as Covid-19 restrictions have eased.
Chief executive Shaun Doak said: “The new financial year has started well with momentum continuing. The immediate outlook is positive, although we are mindful that the seemingly ever-changing environment in which we work can bring with it both opportunities and challenges.”
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