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IG AIM portfolio update – is AIM over valued?

In the latest video with IG markets Chris Boxall provides an update on the AIM portfolio discussing 4 top performers. Chris also offers valuation thoughts on AIM, including those on a high profile company that has seen its share price soar on recent news.  Stocks discussed include AB Dynamics, Fulcrum Utility Services, MartinCo, Purple Bricks Group, Watkin Jones, and XL Media


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AIM’s big currency winners

Christopher Boxall, Manager of Fundamental Asset Management’s AIM portfolio service, has recently been featured in the Share Centre Blog and Yorkshire Post.

‘AIM’s big currency winners’ on the Share Centre Blog identifies four larger AIM companies with significant overseas earnings and predominantly UK based costs, who will be beneficiaries of Sterling’s current weakness. Click here to read this on the Share Centre Blog

An October 2016 Share Centre Blog post identifies former AIM underachievers that look set to blossom! This can be read here 

An article in the Yorkshire Post comments how Pension deficits are weighing on the shoulders of big business but are less of a concern for a large number of Yorkshire’s AIM companies. You read the article here 

 


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Do we really know what we are investing in? Time to reconnect with our investments

The latest investment fund offering from a company called Source, whose web site prattles on about something called Smart Beta, only serves to highlight to us the growing disconnect between investors and their investments. An investment maxim, followed by most of the great investors, was to always ‘invest in what you know’. Unfortunately, in today’s jargon filled investment arena most private investors probably haven’t a clue what they have actually invested in, given the growing prevalence of some bizarre Exchange Traded Funds (‘ETFs’), Structured Products etc. Wouldn’t it be better for investors to have a better understanding of what they were investing in and connect once again with their investments?

Source is yet another provider of ETFs whose product range includes a vast number of collective investment schemes following a diverse number of passive strategies, across sectors, regions, indices, commodities, currencies etc. So rather than invest in something the average person could mildly understand, like a ‘well-known’ index, they invest in baskets of stocks, bonds, or good knows what, largely around some newly created passive index of their own making.

We are all for index investing, which was originally intended to mean passive funds based on leading stock market indices, but, in creating an ever growing number of index based strategies, the financial services industry has managed to complicate a previously simple concept; now that’s a change!

  • Do private client managers outperform?

While many funds are criticised for underperforming the benchmark indices, we believe that many private client portfolios investing in direct equities with much broader investment mandates consistently outperform. Furthermore, with a full knowledge of every stock they hold, clients know exactly how their performance has been achieved.

Direct investment in equities and bonds means private investors have a full understanding of what they are holding. The ease of investing globally also means that private investors can easily build a nicely balance portfolio that isn’t geographically constrained.

Investing in AIM quoted companies for inheritance tax planning purposes necessitates investors holding the shares directly and not via a fund vehicle. This way investors get to know all of their holdings rather than the top 10 holdings of some bland fund, which is usually the case.

It therefore seems foolish for private investors (of more mature years in particular), to gain exposure to this exciting and high performing investment arena via investment funds. In adopting a fund approach private investors would fail to benefit from the attractive inheritance tax breaks that are only available via direct investment. The less liquid nature of small and micro-cap companies also means that funds have much greater difficulty buying and selling in this arena. Investors would also miss out on being better connected with some enticing high growth companies, some of which could be the blue chips of the future!

 

We advocate investing in what you know and there are plenty of terrific little companies on AIM to know more about!

 


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Flawless performance on AIM from this lovely business offers a great guide of what to look for from a micro-cap

A manufacturer of advanced testing systems to the global automotive industry has just delivered yet another set of fabulous results. While many seem intent on criticising AIM for its looser regulation (and ‘occasional’ problem case) this little business has delivered consistent excellence since arriving on AIM in 2013, with little fanfare I should add. It also highlights the potential to uncover some really brilliant businesses on the junior market if one undertakes proper research and displays a bit of patience. Our latest Blog covers this delightful Group’s journey from AIM Admission which serves as an excellent guide of what to look out for in the search for high performing micro-caps.

– Far from the madding crowd

With its headquarters in the delightful town of Bradford-on-Avon, Wiltshire, AB Dynamics (AIM:ABDP) is engaged in the design, manufacture and supply to the global automotive industry of advanced testing and measurement products for vehicle suspension, brakes and steering both in the laboratory and on the test track. Customers include the research and development divisions of some of the world’s leading vehicle manufacturers, including Ford, Toyota, Daimler, BMW, Volkswagen and Honda. At a time when the automotive industry is under intense scrutiny following the VW (and more recently Mitsubishi) emissions scandal, AB Dynamics excellent engineering offering is in increasing demand.

– Background

Operating subsidiary Anthony Best Dynamics Limited, was founded in 1982 by current Executive Chairman Anthony Best as a design consultancy in mechanical vibration and vehicle suspension to the automotive and wider engineering industry. In 1983, Andrew Middleton joined the Group and added expertise in noise consultancy to the Group’s service offering.

In the 1980s and 1990s, the Group was involved in a number of consultancy projects, including the design of the suspension of the McLaren F1 road car, an active suspension system for Jaguar and the development for Land Rover of a measurement and analytical system for end-of-line noise vibration and harshness called PLATO.

Carontest

In the 1990s, as the UK automotive industry continued to decline, the Group shifted its focus away from consultancy towards the design and production of vehicle test equipment for automotive manufacturers and suppliers. This led to the design and manufacture of the Suspension Parameter Measurement Machine (SPMM), one of the Group’s key products. The SPMM measures the kinematic and compliance characteristics of vehicles by employing a method of moving the vehicle’s body in a manner that simulates the real motion of a vehicle on the road. This method also allows accurate measurements to be made of a vehicle’s inertial properties and centre of gravity.

Over the years the range of vehicle testing products was expanded to meet the growing demands of the industry. In 1998 it supplied its first steering robot for quantitative vehicle testing on the track and has, to date, supplied over 300 driving robot systems around the world. The Group was also a pioneer in using inertial GPS motion packs to control the path of a vehicle in 2003 and, in 2007, was one of the first manufacturers to sell a driverless system for testing vehicles on the track.

driverless

With founder and Executive Chairman Tony Best seeking to enhance the Group’s corporate profile and provide for some succession planning a listing on AIM was the preferred option. Despite his advanced years Tony remain very active in the business.

Tim Rogers joined the Group as Chief Executive in October 2012 in preparation for their launch onto public markets. Prior to joining ABDP Tim was CEO and Executive VP of Clean Diesel Technologies, Inc which specialised in vehicle emission reduction technology.

– AIM arrival

The Group arrived on AIM on 22nd May 2013 with a market capitalisation of a mere £14m having raised gross proceeds of only £2m (net) and with a flawless balance sheet. The founders and senior management also sold down a combined £2.5m on listing to offer a degree of liquidity. The market capitalisation has since grown to £84m, solely organically!

For the full year ending 31st August 2012 prior to arrival on AIM the Group reported revenue of £8.9m and pre-tax profit of £1.9m. Their most recent ‘half year’ results are now exceeding those numbers.

Not long after arrival on AIM came news of two significant contract wins and then a month or so later yet another significant contract win. By the time of the announcement of its maiden AIM results on 7th November 2013 covering the year to 31st August 2013 the share price had already more than doubled to 170p. This was supported by full year results which saw revenue up 37% to £12.2m and operating profit up 22% to £2.2m. Cash had also risen to £6.0m.

The only frustration during this time was uncertainty surrounding a new purpose built factory that they were hoping to build.

The good news continued throughout 2014 including a significant contract win for their Suspension Parameter Measurement Machine (“SPMM”) from China.

Having reassured on 10th September 2014 that results for the year ended 31 August 2014 were likely to be in line with market forecasts, by the end of that month they were saying that profits for the year were now likely to exceed market forecasts due to higher than anticipated profit on a number of contracts. There is nothing like under promising and over delivering!

The most recent full year results for year ending August 2015 saw revenue leap again by 19% to £16.52m and operating profit up a whopping 41% to £3.74m. Net cash at year end stood at an impressive £7.97m.

This week they announced tremendous interim results for the 6 months ending 29th February 2016 with profit before tax up 50% to £2.26m on revenues up 34% to 10.11m.

In summary, up to now this business has delivered all that could be asked of it. More importantly it displays everything one would want from a small high growth business on AIM.

– What to look for in a micro-cap

Senior management receive reasonable salaries, commensurate with the size of the business, and more importantly, have plenty of ‘skin in the game’, via direct equity holdings and some encouraging options; they are therefore well aligned with shareholders. Since listing, principal shareholder Anthony Best has taken the opportunity to dispose of further shares, supporting better liquidity, though still retains a material 37.5% stake in the business.

The group is growing the top line at a terrific rate, supported by internally generated cash and without the need to return to the market for further funding. Growth up to now has also been all organic. Operating margins are a very healthy 22%, cash flow highly positive and a return on equity of 23% is just what one should be looking for.

Newsflow has been regular, if not overwhelming, resulting in regular earnings upgrades.

The Group is debt free and the cash pile has grown to just over £10m. In isolation this looks excessive for a small business of its size, but that will soon be put to good use in supporting the development of the new facility.

It’s worth also noting how, ever since listing, ABDP has reported its results in a timely fashion. Full year results for the year to August 2015 were announced on 12th November and the most recent interims to 29th February 2016 were announced on 26th April 2016. We are always surprised why other AIM companies can’t deliver in this timescale.

– Strong demand for its products

The Group continues to enjoy strong demand for its products and services, with both its established and newly developed range of products driving growth in revenues. Key markets in China, Europe, Korea and Japan remain strong and they see continued spend on R&D by the global automotive industry, notably in the areas of active safety systems and improved vehicle dynamics, where the Group’s products are particularly suited.

Two additional manufacturing units came on line this year more than doubling total floor area to 23,551 ft². The Company also confirmed they were making good progress in the design and build of the new facility which is targeted for completion during 2017 which will bring UK operations together again under one roof and create the necessary headroom for future growth.

A collaboration agreement with Williams Advanced Engineering is currently for a novel Driver in Loop Simulator which will help their car customers develop safer and better cars by combining the driver with computational car modelling.

– Broker estimates lifted again

In response to the latest results the house broker lifted estimates for the financial year ending August 2016 to sales of £20.2m, pre-tax profit of £4.7m and earnings per share of 21.6p. At the current share price of 485p this puts the shares on a fairly punchy current year rating of 22x, although stripping out the cash pile brings that down to a more manageable 19x. Earnings are anticipated to grow to 24.6p in 2017 (PER 19.7x) and as they start to reap the benefits of the new facility, forecast to jump to 32p for the year ending August 2018.

 

There are bound to be a few speed bumps on the road to further success, which may rock the share price, but AB Dynamics has performed admirably up to now. The move to a larger facility in 2017, increased sales in Europe and Asia and the recent strategic alliance with Williams suggests a very exciting future for this specialist engineer.


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Paul Scott’s Small Cap Snapshot – 24th March 2016

Results season is in full swing, so Paul is scrutinising the accounts of dozens of smaller companies each week. We offer below a few interesting stocks that caught his eye.

Paul Scott, the ‘UK’s most prolific small cap blogger’, provides research for Fundamental’s Small Cap Value Portfolio Service.

 

Laura Ashley (ALY) 24p

Results for the year ended 31 Jan 2016 were a tad disappointing, although delving into the detail revealed that the core UK retail business actually had quite a good year, with profits up. The fly in the ointment was Japan – a big earner for the overseas, franchised operations. Also a £1.3m loss was incurred from the insolvency of Laura Ashley’s Australian franchisee.

Ashley

Despite this, the business remained remarkably cash generative, and has maintained a dividend payout (for the 5th year running) of 2.0p per share. That equates to a stonking yield of about 8%. Moreover, the business generated enough cash to finance this generous dividend, and it has a relatively strong balance sheet too.
So a very attractive proposition for income seekers. Mind you, we cannot be certain the big dividends will continue, as after all the payout is a policy decision by management. The dominant Malaysian shareholders are certainly not disadvantaging minority shareholders by paying such generous dividends -–long may it continue!

 

Focusrite (AIM:TUNE) 174p

I had not looked at this company before, but on an initial review a few days ago, I liked the look of it. This is another company with a dominant major shareholder. The company makes innovative electronic equipment for musicians. The organic growth since 2009 is highly impressive. The balance sheet is solid, with £6.2m in net cash.

Clarett Thunderbolt

The only thing I don’t like about this share is the price – at 174p the rating is quite high, at a PER of 18.5x August 2016 estimates. That said, sometimes you just have to pay up for quality. I’ll do some deeper research on this company over time. I find the research process is an ongoing thing – you get to know companies gradually, and build on your knowledge, rather than it being a one-off procedure.

Investor’s Champion has also covered Focusrite since IPO

 

Synety (AIM:SNTY) 82p

This is definitely not one for widows or orphans! Synety is a very speculative share, which has disappointed in the past – management over-optimism meant that they misjudged the amount of cash required, ending up doing a deeply discounted Placing at 90p last year.

However, the new Chairman, Peter Simmonds, seems to be having a very positive impact on strategy. He of course successfully built up DotDigital, so knows a thing or two about SaaS businesses.

I feel Synety has just reached a tipping point, where it is clearly now funded to breakeven, as set out in the recent results statement narrative. Organic top line growth is running at 103%, which together with cost cutting, means that cash burn has now reduced to approximately £200k per month, and falling. So it should reach breakeven in mid-2017, and has adequate cash + loan facilities, to get there.

Therefore I see potential for a step change in the way this company is valued. Once investors stop fretting about the cash running out, and instead begin to calculate the returns that 100% top line growth, combined with gross margins of nearly 80% can do to the bottom line, then it could get interesting.
That said, the company is not out of the woods yet. If current trends continue, and management sounded confident in a webinar this week, then there could be exciting upside here I think.

 

Eclectic Bar Group (AIM:BAR) 60p

Not really a sector that I want to invest in – nightclubs and bars often make very poor investments. However the interesting aspect here is that highly respected businessman Luke Johnson got involved last year, buying a stake personally, and becoming Exec. Chairman. Interim results this week show that the company is beginning to turn around, with a loss last year turning into a small profit this year.

ecelectic

So again a very speculative idea, but I like turnaround situations, and might possibly have a small dabble in this one. Although note that the share is horribly illiquid.

 

Disclosure: Paul holds personal long positions in Laura Ashley, and Synety.


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Paul Scott’s Weekly Small Cap Snapshot

Some of you may have seen Paul Scott’s daily small cap blog on Stockopedia. Paul also researches small caps for our Small Cap Value Portfolio service, which has been running since Jan 2014.

We appreciate that not everyone has the time to read a lengthy blog each day, so a summary of Paul’s best small cap ideas might be interesting. Here are some of his stock thoughts from the week…

Somero Enterprises (AIM:SOM) – 150p

This company is the world leader in laser-guided concrete screeding machines (to lay perfectly flat floors, particularly important for large warehouses). I interviewed the CEO recently, an interview which confirmed my view that this is a terrific company, with trustworthy management, and priced at quite a bargain level.

Machine

The company reported excellent 2015 results on 1 Mar 2016, which I reported on here. Not only is the PER low, but the company also has a sound balance sheet holding net cash, and pays a decent & growing dividend.

So why are the shares so cheap? Investors may be worrying about China, but reduced business overseas was easily compensated for by booming business in its main market, the USA. We are also aware of the fact that this is a highly cyclical company, so it will undoubtedly suffer in the next recession, but so will plenty of other companies too!

Recent economic data from the USA indicates that recessionary worries are receding, so we think this share could have really good continuing upside over the next couple of years – providing the US economy remains reasonably buoyant.

Investor’s Champion also covered Somero in a recent Blog

 

Lakehouse (LAKE) – 51p

We generally keep away from IPOs, because so many seem to go wrong! However, there can be rich pickings once the price has crashed after bad news. It’s too early to be 100% sure, but we think Lakehouse exhibits characteristics which may see the shares recover somewhat in the future.

Revised broker forecasts might yet prove still too optimistic, but there’s bags of headroom within the price – at present the PER is only about 4, based on this year’s forecast earnings.
We waited until the share had put in a bottom, and begun to establish an up-trend, so this combined with our fundamental analysis, gave us the confidence to buy an opening position for the FAM Small Cap Value Portfolio this week.

Investor’s Champion also covered Lakehouse in a recent Blog

 

H&T (AIM:HAT) – 198p

Not everyone will want to own shares in a pawnbroker. However, the figures here really do look good. Not only are the shares rated on a modest forward PER of about 11, and paying a generous dividend yield of about 4%. However, there is also bulletproof balance sheet support – so the share price is backed up with solid tangible assets. There’s minimal bank debt, compared with the pledge book and inventories.

shop front

It’s very rare to find a share where investors can have a modest valuation on all three criteria at the same time – earnings multiple, dividend yield, and tangible asset backing.

Fund manager and CFA Charterholder Graham Neary recently produced an excellent research note on H&T Group for Investor’s Champion which can be download here 

 

Pennant (AIM:PEN) – 36p

This simulator company had a dreadful 2015, but is now well set up for a return to profit in 2016 and 2017, based on a strong order book, and reduced costs.
Whilst we have some concerns on corporate governance issues, we think there could be scope for a say 50% profit on this share, more as a trade than a long-term investment. It sounds from a recent announcement as if the company is close to reporting a major contract win, which could be the catalyst for a recovery.

 

Disclosures: Paul holds personal long positions in LAKE, SOM, and PEN.


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When a £1bn business sees its share price rise more than 200% in a couple weeks it’s time to take notice

The oil price has staged a surprise (at least to many!) recovery over the past few weeks with Brent up nearly 50% from the January lows to just over US$40 and WTI up just over 34%. Russia’s talk of a production freeze and, more recently, news of Ecuador hosting a meeting of Latin American crude producers has evidently offered encouragement. The smaller-than-expected build in stockpiles at the Cushing, Oklahoma delivery hub for U.S. crude is also helping.

The encouraging news has also offered support to the beleaguered oil services sector with several stocks in our universe seeing material increases, one of which has seen its share price rise more than 200% in a matter of weeks. If we were talking about some micro-cap minnow this wouldn’t be remarkable, however the stock in question is one of the giants of the sector and a business which generated revenues of over £5bn and an operating profit of near £1bn in the last reported financial year. We think it’s time to take a closer look at the fraught oil services sector.

The giant in question that has seen its shares rebound so materially is the US and Norwegian listed offshore driller, Seadrill (SDRL) whose shares have now risen more than 200% over the past 2 weeks, more than doubling in a single day on huge trading volume, yet no company specific news. That’s a mighty move for a business with a market capitalisation of approximately US$2.5bn currently. Seadrill evidently has plenty of issues, including a decidedly less rosy forward outlook and US$billions in debt maturities coming due over the next few years. However, it highlights the potential opportunities in a sector that has had little to cheer about over the past few years.

The press has also once again dug out the possibility of Weir Group (WEIR), the UK listed manufacturer of pumps and valves, being a possible target for US listed General Electric or Flowserve. We think cash rich US industrial buyers will be inclined to sit on the sidelines for the time being, especially with continuing sterling weakness on Brexit fears. In the meantime Weir has a tough job ahead.

Recent full year results from Hunting (HTG) were predictably awful with the reported loss for the year ending 31st December 2015 US$227m including heaps of impairments. More positively free cash flow of US$118.0m was quite good and net debt of US$115m quite modest and extremely manageable. We struggle to see the value in Hunting at current levels and are very surprised how the share price has bounced so strongly.

The midstream energy sector in the US received a blow yesterday from the US courts as a judge allowed Sabine Oil & Gas, a shale energy producer under Chapter 11 bankruptcy protection, permission to break contracts with two pipeline companies so it could pursue better deals. The midstream sector encompasses the gathering, processing, transportation and storage of oil and gas and has been viewed as a ‘safer’ sub-sector of the oil and gas arena in the US (although share prices have still tumbled) with the view that long term contracts were virtually unbreakable, thereby offering greater certainty over the large dividends that midstream players pay out. This latest ruling therefore brings that whole rationale into question and saw investors subsequently selling out of the pipeline companies. With the share prices of pipeline operators decimated over the past 12 months, largely due to fears surrounding their large debt burdens, this sub-sector could offer some interesting pickings……for the brave.

A research note from energy specialists Simmons & Company highlighted the growing forward supply challenge in the oil sector. Simmons & Company observed that since the July 2014 peak, the international rig count has declined in 15 of the preceding 19 months and is now 26% lower from the recent peak. With the exception of the Middle East, all of the other major international regions have contracted by 30-43%. Simmons & Company believes that “imploding exploration will have grievous consequences to forward supply.”

 

We continue to believe that the struggling energy sector will offer meaningful investment upside over the next few years for investors willing to look beyond the current uncertainty.

For the latest fact sheet on our energy, equipment and services fund please visit our Publications page here


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Blue chips start the year in bearish mood but AIM continues to deliver

It has proved to be a torrid start to 2016 for equity investors with the Bears out in force and some commentators concluding that now is not a time to be exposed to equities, in any form. While some of these so-called experts are questioning the growth prospects of global equities and, more significantly, the affordability of dividends, several AIM stocks we follow have started the year in strong form, delivering positive trading updates. Many of these companies may also come with compelling inheritance tax reliefs offering another excuse to buy shares in good quality businesses which now trade at more modest valuations. We offer our thoughts below on 10 of the best to kick off 2016.

Majestic Wine (AIM:MJW), one of AIM’s old guard and a business that has seen its share price decline substantially from previous highs, issued its usual Christmas period trading update with like for like sales up an impressive 12.2%. Evidently the efforts of the team from Naked Wines are starting to bear fruit with the core Majestic Retail business delivering like for like sales of 7.3% in the period versus a decline of 1.7% in the prior period.

Global people management business Penna Consulting (AIM:PNA) has attracted a growing following over the past 12 months with its shares rising over 100%. A trading update early in 2016 confirmed that profits for the 9 months to end December 2015 were up 51% and management’s expectations for the full year to 31st March 2016 materially increased. While the shares have had a great run, the forward earnings multiple remains relatively modest and, with cash generative attractions, the shares still look interesting, especially if more indiscriminate selling takes hold.

Another AIM high flyer from 2015, Breedon Aggregates (AIM:BREE), announced that it has been jointly awarded a contract valued at up to £55m to supply and lay asphalt on the £745m Aberdeen Western Peripheral Route/Balmedie-Tipperty project, the longest roads construction project currently under construction in the UK. It’s also the Group’s largest-ever contract award and will provide the backbone of work for their contracting division over the next two years. While shares in Breedon seem richly valued, the nature of its activities and regional positioning means it has the much sought after protective moat to its business.

Hornby (AIM:HRN) is a relative newcomer to AIM, but a business that will have touched many of our lives through one or more its iconic brands, including Hornby model railways, Airfix and Corgi cars.  Having disappointed over the past few years the Group is going through somewhat of a transformation with the start of 2016 heralding the launch of a number of new products. With debt much reduced following a refinancing in 2015 and evident value in the Group’s brands it could be an interesting year.

Two of AIM’s leading suppliers of tabletop products, Churchill China and Portmeirion, both based in Stoke on Trent, delivered positive trading updates for the year to 31 December 2015.

Churchill China (AIM:CHH), which was established in 1795, is a leading supplier of tabletop products, primarily to the worldwide hospitality markets. The trading update confirmed that trading in the second half of 2015 was ahead of earlier expectations resulting in operating performance ahead of current market estimates and well ahead of 2014. The news saw the house broker lift 3 year pre-tax profit forecasts by 6%-11% with scope for further outperformance.

Portmeirion Group (AIM:PMP) focuses on higher quality homewares, with its Royal Worcester brand dating back to 1751. Its trading update for the year to 31 December 2015 confirmed that pre-tax profit would be slightly ahead of market expectations on record revenues, being the seventh consecutive year they have achieved record sales.

Both stocks have delivered consistent growth over the past few years and a growing dividend covered more than twice.

UK specialist value footwear retailer Shoe Zone (AIM:SHOE) saw its shares flounder in 2015, with warm weather being one of the causes. Thankfully 2016 started more positively with full year results in line with revised estimates, cash flow attractive and a special dividend of 6.0p per share particularly appealing. With the online offering starting to accelerate, a compelling yield and relatively modest valuation, the shares could attract renewed interest.

Quartix Holdings (AIM:QTX) has excelled since arriving on AIM in November and it’s recent trading update didn’t disappoint with revenue and profits both anticipated to be ahead of market expectations. The high performing Group, which is one of Europe’s leading suppliers of subscription-based vehicle tracking systems, finished the year with more than 73,000 fleet vehicles under subscription with notable increase in the USA and France. Trading at approximately 23x earnings estimates for the year ending December 2016, the shares look fully valued on this over-used measure but this business, with its proven model and efficient capital structure, has got off to a great start in the US and France, and both markets offer huge growth potential.

The announcement of new domestic smart meter contracts for Smart Metering Systems (AIM:SMS) could herald renewed interest in the shares of the highly regarded integrated metering services company.  SMS will provide domestic smart meters as part of the UK Government programme, requiring domestic energy supply companies to provide all of their customers with a smart meter in homes and small businesses across the UK by 2020. Energy suppliers will be required by regulation to appoint a MAM (Meter Asset Manager) in respect of these assets, and SMS is one of only four market participants currently performing that role. Delivering annuity like returns and with a huge market opening up in the form of domestic smart meters, this business would appear to have an exciting future.

Flowtech Fluidpower (AIM:FLO), the distributor of technical fluid power products is a another lowly rated AIM stock that found little support in 2015. However, its recent trading for the year ended 31 December 2015 will hopefully dispel the doubters, with trading confirmed to be in line with estimates and a commitment to a final dividend which implies a yield of just over 5% at the current share price, covered more than twice. Net debt is modest and the valuation at just over 7x 2016 earnings estimates looks very modest.

Fundamental Asset Management’s dedicated AIM Portfolios have been producing outstanding results for more than 10 years, significantly outperforming the FTSE100 and other major UK stock market indices – to find out more visit www.fundamentalasset.com/aim-shares-inheritance-tax-planning/


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Advanced Medical Solutions (AIM:AMS) FDA approval enhances the appeal

​The surgical and advanced woundcare company and one of AIM’s star performers has announced that the FDA has approved two new product claims for the Group’s product. The news moved the shares up another leg to new highs.

Download Advanced Medical Solutions comments

The FDA has approved two new product claims for the Group’s octyl formulation product, LiquiBand Exceed™ giving it a competitive advantage in the topical skin adhesive market.

The two new claims include the use of a single device to cover wounds of up to 30cm, as well as a single device being suitable for intraoperative reuse for up to 90 minutes on a single patient. Both claims are unique FDA approved claims for the US Topical Skin Adhesive Market.

Following testing, LiquiBand® Exceed™ was found to deliver best in class yield to support coverage up to 30cm of wound length, twice the amount advertised by market leading topical skin adhesive products.

This is yet another example a high quality AIM stock that is continuing to deliver highly positive news.

The valuation looks rich but this business addresses a huge market and has delivered handsomely over the past few years.


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Where to find good value on AIM?

With much of the market looking quite fully valued it’s increasingly tricky to uncover decent value opportunities. Many high quality (and highly priced) small caps continue to deliver excellent results, seeing their shares climb ever higher and pushing up valuations. Continue…