Our AIM tip soars 60% in 2016

There was a mixed performance from the 2016 AIM recommendations, which contrasts with the strong performance in 2015, when they surged by 84%. Two of the recommendations did well, but the other three were lower at the end of the year, with Zinc Media, the renamed Ten Alps, proving a particularly ill-timed 'buy' recommendation.

Most of the original arguments for the recommendations still hold, but the expected benefits have yet to come through for some of them. There was an improvement in the share prices later in the year, which improved the portfolio performance.

The overall portfolio of five AIM companies increased by 2.3%, but the volatility of Zinc Media means that this can change on a daily basis.

That contrasts with a rise of around 12% for the FTSE AIM All-Share index and a similar improvement for the FTSE AIM 50 index. This reflects a particularly strong performance by AIM in the second half of the year following a post-EU referendum slump.

Amino Technologies

Tip price: 109p  |  Current price: 174p  |  % change: +59.6

IPTV technology developer Amino Technologies had disappointed the market at the end of 2015, but it remained a strongly cash generative business so that was a great time to buy the shares. It took a few months for investor confidence to return, but the share price recovery gathered momentum from July onwards. The share price rise has been supplemented by dividends equivalent to 5% of the original recommendation price.

At the beginning of 2016 the 2015-16 profit forecast was £8.3 million and the 2016-17 forecast was £9.5 million. There has been more than one upgrade since then. The 2015-16 profit forecast has been raised to £10 million and the 2016-17 forecast is £10.5 million, with potential for a further upgrade when the figures for the year to November 2016 are reported on 7 February. The expected total 2015-16 dividend is 6.1p a share.

Amino has international revenues, with little in the way of sales in the UK, and it has been boosted by the weakness of sterling against the dollar but it would have done well without this.

The shares are trading on a relatively modest 13 times expected 2015-16 earnings and the prospective yield is 3.5%. There was £6.2 million in the bank at the end of November and the 10% annual increase in dividends is set to continue.

Getech

Tip price: 29p  |  Current price: 37p  |  % change: +27.6

The idea behind the recommendation of the oil and gas exploration information provider Getech was that there would be an upturn in the fortunes of the oil and gas sector during the year.

There has been some improvement later in the year due to action by OPEC and this has been reflected in the Getech share price in the past couple of months, but there is still a long way to go.

Getech reported a stronger second half – having made a loss in the first half. Pre-tax profit fell from £1.99 million to £671,000 as revenues declined from £8.64 million to £7.03 million. Net cash is £1.89 million but there is no dividend – one of the original attractions.

Dr Jonathan Copus became chief executive during the summer so did not have time to put his stamp on the business by the year-end. He provides a more commercially focused management approach and his appointment marked the final move away from the academic-based management team that started the business and developed its original products.

Getech is still well-placed to take advantage of a continued upturn in the oil sector but this may take some time to come through, especially as Getech is dependent on exploration activity.

New contracts are being won, including one in the nuclear sector, thereby providing some diversification of the customer base. There is also potential for add-on acquisitions.

Coral Products

Tip price: 20p  |  Current Price: 19.75p  |  % change: -1.2%

Injection moulded plastic products manufacturer Coral Products has made a lot of progress in the past year, but the share price has not.

Early in the year, Coral made two acquisitions. Rotolac was acquired from administrators for £160,000 and took the group into new markets, including aerospace and medical. Global One-Pak was acquired for an initial £3.6 million in cash and shares and it makes lotion pumps and trigger sprayers. The Manchester factory acquired with this business has been retained, alongside the main Haydock factory.

The latest interims show underlying pre-tax profit improved from £723,000 to £916,000 on revenues that had grown from £8.26 million to £10.8 million. There were additional shares issued to help finance acquisitions so underlying earnings per share were slightly lower at 1.03p. Investment in capacity has meant that net debt reached £5.2 million at the end of October 2016.

Full-year profit is expected to rise from £1.47 million to £2 million thanks to contributions from acquisitions, although this figure has been trimmed because of the weakness of sterling affecting the prices of products that are imported.

Earnings per share (EPS) are expected to grow from 2.2p to 2.3p, even though there is likely to be a small tax charge in 2016-17. The shares are trading on less than nine times prospective earnings with further growth set to come.

Anyone who bought the shares at the beginning of the year would have received 1p a share in dividends, which is a 5% yield. A dividend of 1.2p a share is forecast to be paid in 2017, providing a forecast yield of 6%. Further acquisitions are likely and this could help to utilise spare capacity at the Haydock factory.

Zinc Media

Tip price: 2.38p  |  Current price: 1.2p  |  % change: -49.6

Ten Alps has changed its name to Zinc Media, but that has done little to arrest its decline, although there has been a small bounce back in recent weeks.

Chief executive Mark Wood took the fall back in July and the chairman Peter Bertram took over executive control. The business has been predominantly refocused on the TV production operations and the range of programming made by these businesses is being broadened. Loss-making publishing operations were sold or closed during the year.

In the year to June 2016, the pre-amortisation loss fell from £1.07 million to £472,000, thanks to the removal of discontinued operations. TV and communications divisions made profits before central costs.

The positive thing about Zinc is it appears to still have the backing of investors, and non-executive directors Luke Johnson and Jonathan Goodwin took their fees in shares at 0.75p each. That is the same as the placing price when Zinc raised £840,000, which helped to pay deferred consideration for Reef TV. The repayment dates of the debt have been extended to the end of 2020.

Zinc is still at that point where it is moving towards profitability, but it has been threatening to do that for a few years. There is cash in the bank and there are good businesses in the group.

ANGLE

Tip price: 69.5p  |  Current price: 52p  |  % change: -25.1

ANGLE continues to prove the validity of the Parsortix circulating cancer tumour cells capture technology and further positive third party research has been published by universities and hospitals during the year. However, a lack of positive commercial news has led to the share price slipping back.

Patients are being recruited in Europe and North America for studies on the use of Parsortix in the detection of ovarian cancer. In the US, Angle hopes to get initial Food & Drug Administration (FDA) clearance for use in the diagnosis of metastatic breast cancer, a £1 billion market, and validation work is ongoing. FDA approval would provide a base to expand the approval to other cancers.

ANGLE raised £9.6 million net at 64.5p a share during May this year, which meant that it had pro forma net cash of £13.4 million. This cash is expected to last until at least April 2018, although that could depend on the pace of commercialisation and the opportunities that arise.

However, the company recently held a general meeting to enable more shares to be issued without offering them to existing shareholders.

ANGLE still has at least as much potential as it did one year ago but it is uncertain when this will show through in terms of deals for the use of the Parsortix technology for various cancers. Once these deals come through the share price will react.

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.