Interactive Investor

Best and worst AIM shares in Q1

19th April 2016 15:45

Harriet Mann from interactive investor

It's common knowledge that companies listed on London's junior AIM market can get wiped out quicker than the blue chips. But it's equally true that they have the potential to rise much faster and further than their large-cap cousins. The first quarter of 2016 illustrated both outcomes quite neatly.

A handful of small-caps crashed and burned - stand up Edge Resources, Litebulb Group, Origo Partners and Petroceltic - but of the companies still trading on AIM, the worst performer was Independent Resources, which collapsed 81% to 0.13p.

Now trading at 0.08p, it's begun to seek shareholder approval to reorganise its share capital so it can raise money at a later date. As companies can't issue shares worth less than their nominal value, IRG was to reduce its par value to 0.01p rather than the current 0.1p.

Triggered by a profits warning many thought was inevitable, Plexus Holdings collapsed by 70% after warning that a number of customer projects had been delayed or cancelled. Sales more-than halved to £6.76 million in the six months ended 31 December, while the group crashed to a loss of £1.97 million and dividends were suspended.

A number of blue-chip companies work with the oil services company for its POS-GRIP technology. Its hiring model was thought to give it a leg up in the struggling sector, while the group made waves diversifying away from the North Sea. At least we know it could have been worse and its international reach could aid a recovery.

TickerNameSectorCurrent Market Cap (£m)Month Close (p)% change since 31/12/2015
 IRGIndependent Resources Oil & Gas  0.3 0.13 -81
 SGI Stanley Gibbons General Resources 29.1 18.1 -79
 HER Herencia Resources Mining 1.4 0.02 -75
 POS Plexus Holdings Oil Services 59.6 50 -70
 SEA SeaEnergy Support Services 1.3 1.125 -68

Another oil services company, SeaEnergy suffered in the first quarter. After expanding internationally and diversifying into different sectors, its recently acquired Return to the Scene business is loss-making after the torrential downturn in the oil sector. Again, a number of projects have been delayed and the firm is after cash having stretched its loan facilities as much as possible. The company has now put itself up for sale.

It doesn't help that Lansdowne Oil and Gas, in which SeaEnergy has a 18.67% stake, has been ordered to pay any liabilities arising from a court battle between Providence Resources and Transocean. The long-running legal dispute relates to a drilling operation at the Barryroe field in 2011 and 2012, which Lansdowne has a 20% interest in. The group said it will need to raise capital to pay these charges and for on-going working capital. Its shares are currently suspended while it works out its cash position.

Stanley Gibbons didn't have the best starts to the year, either, warning that it needs cash, and fast. While the stamp and coin dealer has been trading at a discount to its net asset value, desperate times call for desperate measures and management admitted asking the market for £13 million was the most "expedient and efficient" way to fundraise - £6 million will be used to pay off a loan. Of course, an urgent review has been launched.

First quarter superstars

The good thing with penny shares is that they can rocket as fast as they crash. Herencia Resources nose-dived in the first quarter, falling by three-quarters to 0.02p at the end of the period. But the shares have since bounced to between 0.5-0.6p, up as much as 200%.

So, there is the chance to make a killing on the fledgling market. In fact, the top five performers rocketed nearly five-fold on average in the first quarter.

A regular on Interactive Investor's list of most-traded stocks, 88Energy surged by 720% to 3.58p in the first three months of 2016. Progress at its Icewine#1 exploration well in Alaska smashed expectations, showing "outstanding" permeability in two of its core samples - it could be up to twenty times larger than first thought.

TickerNameSectorCurrent Market Cap (£m)Month Close (p)% change since 31/12/2015
 88E88 Energy Oil & Gas  80.2 3.58 720
 AST Ascent Resources Oil & Gas 2.2 6.01 480
 MTR Metal Tiger Finance 21.9 3.8 330
 KBE Kimberly Resources Real Estate 0.8 0.79 310
 KRS Keras Industrial Metal and Mining 14.5 1.46 260

After the period-end, the group increased its independent resource estimate for the HRZ (also known as the GRZ or Gamma Ray Zone) shale target to 1.4 billion barrels of oil equivalent, with the chance of success increasing from 40% to 60%. The group reckons there could be around 3.6 billion barrels of oil equivalent. Understandably, the shares rocketed again, but this was partly unwound with a correction release the next day.

The first quarter was all about Eastern European residential property developer Kimberly Enterprises working around the clock to pay down its €25.1 million (£19.8 million) debt. It made around €12.1 million by offloading two Canadian residential developments at the beginning of the year, followed by the sale of Palace Engel Vokovice. It later agreed to borrow €2.2 million and there were some big controlling shareholder changes.

A lot's been happening at Metal Tiger, too. It soared by 330% in the quarter as target drilling began in Botswana, the group raised cash, and an opportunity for a gold project tie-up emerged. Since period-end, positive test results from its target three drilling programme revealed a 52 metre intersection at 1% copper, including a 14 metre section at 3.4% copper and 7.7 grams of silver.

Ascent Resources soared 480% to over 8.5p, a two-year high, after Ukrainian explorer Cadogan Petroleum said it was thinking of buying the firm. But second thoughts in April sent the shares plumetting. They're now worth just 1.35p.

News that Keras Resources had started gold production ahead of schedule at its Grants Patch Gold Tribute in Western Australia sent the shares up 260%. They even won over some broker hearts.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.