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April sees AIM surge higher as London’s growth market approaches GBP100 billion value

It was encouraging to see AIM welcome several high growth new arrivals in April 2017 with the market value of AIM creeping ever closer to GBP100bn – good news for those investing in AIM for Inheritance Tax planning purposes

At the end of April 2017 there were 967 companies on AIM with the total market value of London’s growth market GBP92.83bn. This compares with the same number at the end of March 2017 when the market value was GBP88.78bn; there were 5 departures and the same number of new arrivals. It was encouraging again to see newcomers match leavers

A notable departure was Sirius Minerals, the fertilizer development company, which moved onto the Main Market.

AIM’s total market value hit a high of GBP108bn in July 2007 with 1,673 companies on the market. The market value subsequently fell dramatically in 2008 to only GBP37bn, with the AIM Allshare Index tumbling just over 67% over that period. It will therefore be a huge achievement for AIM to breach the GBP100bn level once again, especially with over 700 fewer companies than previously, yet again highlighting the dramatically improved quality of AIM.

From our perspective two of the more interesting AIM news arrivals were as follows:

Alpha FX Group (AIM:AFX) is a corporate foreign exchange specialist with a strategic focus on helping its clients control the impact currency volatility has on their business.

For those faced with the challenge of hedging their cash flow forecasts, they provide hedging programmes that ensure they can price competitively, maintain profit margins and cash flow. For those who don’t need a hedging programme, they still provide a range of execution services designed to reduce the time, cost and cash flow constraints that come from managing FX.

This is a highly profitable and cash generative business.

The Group raised £13m of new money and saw vendors sell down £17m at a share price of 196p. The shares got off to a very strong start on AIM and are currently up over 60% on the IPO price at 321p per share pushing the market capitalisation up to £105m.

The shareholder register includes some well-known institutions including Soros Fund management, who should know a thing or 2 about Foreign Exchange!
K3 Capital Group PLC (AIM:K3C) is a business sales and brokerage business headquartered in Bolton with operations throughout the UK and another highly profitable operation.

K3C helps its clients with the presentation of their businesses for sale to market, sourcing potential acquirers, and project management of transactions to completion. The Group has three trading subsidiaries KBS Corporate, KBS Corporate Finance and Knightsbridge.

The AIM placing raised £15.7m of old money for selling shareholders and £2.1m of new money.

 

Fundamental Asset Management has provided AIM Portfolio Management for Inheritance Tax planning purposes for over 10 years and has an outstanding performance track record.  Further information on our AIM services are available from the link here


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AIM for the end of the tax year

AIM, the London Stock Exchange’s international market for smaller growing companies has delivered terrific performance over the past 12 months, highlighting its growing maturity and the hugely improved quality of its constituent companies. We would strongly encourage investors seeking exposure to growing, profitable, cash generative, dividend paying smaller quoted companies to take a closer look at AIM this ISA season. If one adds the Inheritance Tax benefits, especially in an ISA wrapper, many AIM companies make a compelling investment proposition.

While the FTSE100 has risen an admirable 20% over the past 12 months to date, the AIM All Share Index has eclipsed this with a rise of 29%. Inheritance Tax planning portfolios also continue to outperform and offer greatly improved liquidity compared with many years ago.

At the end of February 2017 there were 973 companies on AIM with the total market value £86.8bn, resulting in an average market capitalisation per AIM company of just over £89m. Looking back 12 months to February 2016 and AIM’s total market capitalisation was only £68.6bn but there were 1,029 companies, resulting in an average market cap per company of only £66.7m.

While there have been a large number of departures from AIM over the past 12 months, including several high quality companies like Fyffes, the importer of tropical produce, which was taken over in February, the vast number of leavers were perennial under-achievers whose time was up! For the first time in many months, February 2017 encouragingly also saw AIM new arrivals match cancellations with 5 departures and 5 genuine new arrivals.

Looking back again 12 months to 2016 and there were 4 AIM companies with market capitalisations over £1bn, with the aggregate market value of these £7.3bn. By comparison, at the end of February 2017 there were 8 AIM companies with market capitalisations of over £1bn with an aggregate value of £14.4bn.

A glance at the lower of end of AIM also supports our view of the improving quality of the market.
Back in February 2016 there were 232 companies (22.5% of the number of companies on AIM) with market capitalisations no greater than £5m. Fast-forward 12 months and this has fallen to 171 companies or 17.5% of the total at the end of February 2017.

However, the statistics don’t tell the true story. It’s the nature of AIM’s larger constituent companies that is really encouraging. Looking back further to 2011 and AIM’s Top 50 companies were dominated by mining and oil and gas companies, many of which were operating in faraway places and consuming vast amounts of cash. The Top 50 of 2017 is now dominated by profitable, cash generative companies that will be familiar to many, notably retailers ASOS and boohoo.com, the soft drinks groups Nichols (Vimto) and Fevertree Drinks and Breedon Group, the largest independent construction materials group in the UK.

While many companies in the Top 50 have significant operations overseas and are therefore currently enjoying a nice currency boost due to the weakness of Sterling, the management and centre of operations are predominantly UK based. This offers confidence to investors who may want to meet with management or carry out company visits – it’s certainly a lot easier assessing the investment merits of a retailer compared with that of an explorer in some far-off land!

The share prices of many of AIM’s largest companies have risen strongly over the past few months suggesting the valuations of some now appear somewhat stretched, however there are also plenty of more compelling opportunities among AIM’s smaller companies that are worthy of greater attention. Substantial AIM businesses like family controlled Watkin Jones Group, one of the UK’s leading construction and development companies or Smart Metering Systems who connects, owns and operates gas and electricity meters on behalf of major energy companies could have a very bright future.

Our AIM for Inheritance Tax planning portfolios can be accessed through our platform with Jarvis Investments or via the Elevate, Transact, Nucleus and Standard Life wrap platforms.

Take a closer look at AIM this ISA season!