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Frenkel Topping Group (FEN)
12 AIM shares in the 1,000% club
By Andrew Hore | Fri, 2nd June 2017 - 14:42
It is nearly a decade since the FTSE AIM All-Share index (AXX) has been at its current levels and the last time it reached 1,000 was during 18 June 2008 - before the global economic crisis took a grip on markets. Many companies have come and gone since then, but a large number are still around, and many have enjoyed impressive share price rises.
Remember, the share price rises we're interested in are since the last 1,000 print for the index, not some subsequent low point. If the lowest point of the index had been taken, then many of the rises could have been even better.
The low point of the index was 377.01 in early 2009, although it is unlikely that most of the better performers would have fallen by that much because they have profitable bases.
One thing that should be noted is that, although they have all been quoted for the whole period, not all of these companies have been on AIM all of that time because some were on the Main Market back in 2008.
Identity management services provider GB Group (GBG), one of the best performers, did not move to AIM until 2010. Of the other top 12 performers, budget airline and logistics services provider Dart Group (DTG) moved in 2005, and industrial bonding and adhesive products supplier Scapa (SCPA) moved in 2006 - and flirted with moving back in 2014, but decided against it.
There are companies that have moved from AIM to the Main Market that will have performed well, but they are not in the list. There are also companies such as GW Pharmaceutical (GWPH) and Lombard Medical Technology (EVAR) that have moved to Nasdaq. Others missing from the list are companies that have been taken over, and some of those may have locked in substantial gains before the end of the period.
Others have gone bust, or just decided to leave AIM and not gain another quotation so their performance cannot be tracked.
There are 115 companies out of 790 where the share price has at least doubled over the period. The vast majority of these companies pay dividends and even some of the companies that do not pay dividends are profitable.
Good IHT investments
One of the additional attractions of these profitable dividend paying companies is they make good IHT investments. This means that the most popular IHT-focused investments have high ratings and are difficult to buy without pushing up the price.
It is arguable that a company such as Dart would be more low-rated if it moved to the Main Market because it would no longer be eligible for IHT relief. Demand would thereby reduce and existing holders who wanted to retain IHT benefits would have to switch into an IHT eligible company.
That may be why some of the larger AIM companies decide not to move, even though they are of a size to go straight into the FTSE All-Share index - there are 10 AIM companies with a market capitalisation of more than £1 billion.
Back in June 2008, it was not a time to be investing in companies that are consistently loss-making, or with no visible likelihood of moving into profit. The highest ranked resources company is Pan African Resources (PAF), where the share price has more than trebled over the nine years, but it is 83rd on the list. Oil and gas producer Amerisur Resources (AMER) is not far behind. In total, there are eight resources companies that have doubled their share prices.
In the past couple of years there have been some impressive performers in the resources sector. Oil and gas explorer Sound Energy (SOU) has soared, but much of this rise was clawing back the decline in earlier years. Sound is 127% higher over the nine-year period and it had trebled when the share price reached its peak last year, but the price has drifted lower.
An exclusive club
There are 12 companies that have risen by more than 1,000% over the past nine years. Nine of those companies pay dividends. The three that do not - ticketing and queuing technology provider accesso Technology (ACSO), online fashion retailer ASOS (ASC) and healthcare investment company Hutchison China MediTech (HCM) - are in the top four performers.
Hutchison China MediTech stands out because it is losing money. The company has reported a profit on some occasions, but this is due to one-off factors. It is consistently loss-making, in contrast to the other 12 companies which are profitable, because it is investing in research and development of oral oncology and immunology drugs.
A Chinese medicines business does generate revenues, but this is a cash hungry business. There is potential news from drug trials in the next 12 months, including from cancer drug Savolitnib, where Hutchison is partnered with Astra Zeneca (AZN).
The best performer is accesso Technology, which was formerly known as Lo-Q, moved into profit in 2006 - excluding exceptional charges. In June 2008, the share price was around one-quarter of the original flotation price in 2002, but it was already well off its all-time low. The company has been built up into a major player in its sector.
ASOS has consistently been profitable and the profit has grown significantly over the years. Like any high-growth company there have been some disappointments, but these have mainly been slower than expected growth rates. The share price peaked in 2014 and it is currently around 10% below that high.
Electronic and battery technology supplier Solid State (SOLI), which is one of the longest serving AIM companies having floated in the first year of the junior market, had drifted downwards in share price terms over the decade prior to 2008.
Management focused on growing the business, helped by acquisitions, and improved the liquidity of the shares so that they would be more attractive to investors. Major shareholders reduced their stakes and institutional investors were brought in.
After problems with a Ministry of Justice contract - not its fault - the share price is less than half the peak, but it is still the sixth-best performer. Despite the share price rise Solid State is valued at a modest £36.4 million.
Best of the rest
Best of the Best (BOTB) appeared to be a forgotten business until it decided to start paying special dividends. The airport-based and online promotional competitions organiser had built up a significant cash pile over the years.
A 14.5p a share special dividend was paid in December 2014 followed by another special dividend of 19.5p a share in March 2016 and 10p a share at the end of 2016. These are on top of the regular dividend payments.
There was £2.28 million in cash at the end of October 2016, but that was reduced by £1 million after the latest special dividend. Strong cash generation means that the cash pile will already be heading back to the October 2016 level.
Specialist IFA Frenkel Topping (FEN) is an example of a company where one major decision has led to an increase in value. Frenkel was growing strongly as an IFA, but the decision to move into managing the assets of its clients is significantly improving profitability. The full benefits of this are still to show through and it is potentially the best value of the top 12 performers.
There is a belief that acquisitions rarely add value to a business, but the top AIM performers have predominantly combined organic and acquisitive growth. ASOS stands out as one company that has not, but recruitment and training firm Staffline (STAF) and scientific instruments manufacturer Judges Scientific (JDG) are examples of highly acquisitive companies that have generally made good acquisitions.
Judges transformed itself from an investment company to a manufacturing business via its first acquisition in 2005. The economic slump did hamper progress though. In November 2008, Judges said that it could not obtain finance for a significant acquisition that would have constituted a reverse takeover. Even so, it continued to make smaller acquisitions.
The performance of companies since the previous peak shows that choosing growing and cash generative investments makes more sense than chasing unprofitable, speculative punts. This is particularly true when there is economic uncertainty.
|BEST AIM COMPANY PERFORMANCES SINCE 18 JUNE 2008|
|Company||Code||% gain||Mkt value (£m)|
|Hutchison China MediTech||HCM||2,450||1895|
|Best of the Best||BOTB||1,050||40|
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.
|HUTCHISON CHINA MEDITECH LTD||5,262.50p||1.94%|
|PAN AFRICAN RESOURCES||14.50p||-1.69%|
|FTSE AIM ALL SHARE INDEX||£1,022.19||-0.12%|
|ACCESSO TECHNOLOGY GROUP||2,080.00p||0.48%|
|BEST OF THE BEST||275.00p||0.00%|
|FRENKEL TOPPING GROUP||46.50p||-1.06%|
|LOMBARD MEDICAL INC||0.00||0.00%|
|All data 15min delayed as of: 00:53:22 21/11/17|