2015 AIM tips surge by 26%

Here is an update on the 2015 AIM tips published at the end of 2014. There have been three strong performers and none of them have done badly, with plenty of time left in the year for them to come good.

Journey Group (JNY)

128p

The Journey Group share price has not travelled far in the first quarter of 2015 and the airline caterer’s 2014 figures were in line with expectations, except for the bonus of a lower than anticipated tax charge. It appears that demand is improving thanks to airlines generating increasing profits and United Airlines added an international flight to Melbourne to its contract with Journey, taking the number of routes covered to five.

In 2014, revenues dipped from £40.3 million to £39.1 million, although they were higher in dollar terms. Pre-tax profit improved from £1.83 million to £2.02 million. The improvement in the core Air Fayre subsidiary's contribution is masked by higher patent royalty fees paid to the holding company - a way of changing where the profit is earned. Net cash was £4.28 million at the end of 2014 even though more than £800,000 was spent on share buy backs. The final dividend has been increased by 10% to 1.65p a share, taking the total for the year to 3.025p a share. There will be one dividend each year from now on.

A management incentive has been announced where the three executive directors and six other managers have been awarded options over up to 10% of the shares in issue at the then mid price of 129p a share. The award lasts until 4 July 2016 and in order for all of the options to vest the average share price over a 30 day period has to be in excess of 225p. The full details will be in the annual report.

Close Asset Management has increased its stake to 5.91% and Kestrel Partners raised its stake to 12.5%. WH Ireland upgraded its 2015 profit forecast by 9% to £2.4m, although the rate of growth of earnings per share will be held back by a higher tax charge. The shares are trading on ten times prospective earnings. The key to the company's progress is winning new contracts at additional airport hubs and news is still awaited.

Regenersis (RGS)

210p

The Regenersis share price has performed well at certain points during the first quarter but it has fallen back in the past fortnight even though the employee benefit trust has been adding to its holding.

Advanced services are taking over in importance for Regenersis and the latest interims show that warranty repairs are no longer the major profit contributor. The higher margin advanced services, such as remote testing and data erasure, have strong growth prospects.

In the six months to December 2014, revenues fell from £111.9 million to £101.9 million due to a combination of exiting from poorly performing operations and the movement in the £/€ exchange rate. Regenersis claims that underlying growth was 12%. Stripping out the discontinued activities, the underlying pre-tax profit moved ahead from £4.1 million to £5.4 million, thanks to the higher margin data erasure operations acquired last April. However, the shares issued to finance that acquisition of Blancco and raise additional cash meant that earnings per share were flat. Even so, the interim dividend was increased from 1.32p a share to 1.65p a share.

There was net cash of £12.1 million at the end of 2014, plus £30 million of unused bank facilities, which provides scope for further acquisitions. Regenersis is on course for a full-year profit of around £15 million, which puts the shares on just over 11 times prospective earnings, so the company still appears undervalued.

TLA Worldwide (TLA)

43p

Sports agency and marketing company TLA Worldwide made a significant acquisition in the first quarter. The purchase of agency Elite Sports Properties gives TLA a base in Australia and this will help it to grow in Asia Pacific and diversify the sports that it is involved with.

TLA is paying an initial $10.3 million in cash and shares for Elite and the deal is expected to enhance earnings per share by 10% in 2016. Up to a further $9.3 million (75% cash/25% shares) could become payable depending on performance. This is split equally between performance for the three years up until the end of 2017 and then performance for the five years up until 2019.

The recently completed Cricket World Cup tournament was a client of Elite as is the Rugby World Cup to be held in England later this year. Individuals represented include former cyclist Sir Chris Hoy as well as a large number of Australian rules footballers.

TLA has already moved into the Australian market through the International Champions Cup (ICC), which is being held in Melbourne, Australia next July. Real Madrid, Manchester City and AS Roma have been signed up to take part in the football tournament.

The 2014 figures are due to be reported on 14 April and a profit improvement from $6.8 million to $9 million is forecast. House broker Numis believes that there will be a limited benefit in 2015 from a nine month contribution from Elite and $/£ movements will hold back profit, while 2016 earnings per share have been upgraded from 7.4 cents to 7.7 cents - although that upgrade in sterling is from 4.6p to 5.1p. The shares are trading on less than nine times forecast 2016 earnings and yield 2.5% on an unchanged forecast dividend of 1.6 cents a share for 2015.

Eagle Eye Solutions (EYE)

200.5p

MXC Capital has sold its entire Eagle Eye (EYE) shareholding, but the share price has taken this in its stride. This disposal was completed at the same time as Eagle Eye raised £4 million at 200p a share. Five directors bought a total of just over 780,000 shares in the placing.

This cash will help to finance the recently won business with Asda as well as product development and sales and marketing. Eagle Eye has signed a contract with Asda for digital counting and reconciliation of own brand and suppler coupons. Coupons are still predominantly paper-based, which require time-consuming reconciliation, so this is a significant move for a major supermarket. This is a contract for a minimum of two years and it has been won through Eagle Eye's partner Toshiba Global Commerce. The deal will be a major revenue generator and help Eagle Eye to move into profit in 2015-16. In the six months to December 2014 revenues grew from £604,000 to £2.27 million, but the loss was much higher at £1.64 million.

Eagle Eye is making good progress in securing new customers, but it will take time to generate earnings from them. The cash raised will provide working capital until cash is generated from operations and finance further development of the business. Any further progress in the share price will rely on news of additional deals.

OptiBiotix Health (OPTI)

32p

Human microbiome-based health products developer OptiBiotix (OPTI) has gone from strength to strength since the end of 2014. OptiBiotix has identified a weight management formulation that can be used as an ingredient in yoghurts, which have a smooth taste and provide a feeling of fullness. OptiBiotix signed a 50/50 joint venture with Netherlands-based contract research firm Nizo Food Research back in February. The joint venture will develop, manufacture and distribute the weight management yoghurt and other dairy products. This opportunity is moving faster than envisaged and it has already attracted interest from around the world.

OptiBiotix has a close relationship with Nizo. More recently, the two companies have signed an agreement where Nizo will screen 360 strains of bacteria provided by Optibiotix and its commercial partners. These strains have the potential to manipulate the human microbiome to manage cholesterol levels, obesity and diabetes. The study should be completed by the end of April.

A cholesterol reduction treatment was originally envisaged as the likely first product and one has started human studies at Reading University and the results should be available in the third quarter.

The latest research projects will widen the range of potential strains that could become commercial and mean that OptiBiotix could have a number of potential products in its pipeline.

While estimates of the potential market for OptiBiotix's products run into the billions of pounds the most important thing for the company is to prove that it can launch a commercial product that can generate cash for the business. Once one product has proved a success it will transform the company. Jim Laird, who has a background in the food sector, has been appointed commercial director and his expertise will help in marketing any products.

There is around £2.7 million in the bank and this should last, at least, until the end of 2016. Joint broker Hybridan estimates an indicative valuation of 48.9p a share, which is heavily discounted. If a commercial product is developed then the share price could go much higher.