AIM prospector write-ups on five AIM-quoted companies Profits, history and dividends The AIM company Warren Buffett would love Issue 6 August 2014 recent IPO offering big dividends fast-growing financial firm with great prospects in-demand IT provider free to private investors Supported by one of AIM’s best recovery stocks
Analysis on five AIM-quoted companies: Iomart, Jarvis Securities, NAHL Group, Plastics Capital and Portmeirion
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AIMprospector
write-ups on five AIM-quoted companies
Profits, history and dividendsThe AIM company Warren Buffett would love
Welcome to AIMprospector, the online magazine covering five AIM-quoted companies every month.If you are reading this on issuu.com then you are late. AIM Prospector is sent as a pdf to registered subscribers at least 24 hours before it goes public. If
you have not already signed up, you may do so free at www.aimprospector.co.uk. After featuring fashion manufacturer Boohoo.com in the June edition at 50p, I
reported that I was shorting shares in the company using Spreadex. I closed my
short in the middle of this month at 39p. I hope that any readers that followed my
trade have also made a handsome profit. The shares have since ticked up but along
with the fears I previously voiced on valuation, I would now add my concerns over
the effect that a stronger pound may have on the company’s profits.
Currently, I retain exposure to only one AIM company, the insolvency
practitioner Begbies Traynor. I have been a shareholder in the company since the
shares were priced in the mid-30s and continue to regard the company as one
of the very best quoted plays on the inevitable interest rate increases. The shares
have rallied recently and I think that they have further to go. It is worth noting that
before the financial crisis, when interest rates were much higher, Begbies Traynor
was making more than twice as much as it announced for the year to April 2014.
To the pages of AIM Prospector this month I welcome Mr Adam Hart. For this
edition and the next, Adam has kindly agreed to write the Executive Insight piece.
This new feature is a page of advice and perspective from an experienced operator
in the AIM market. Adam is a former chairman of the London Stock Exchange’s
AIM Advisory Group. He is today a corporate financier with London Bridge Capital,
helping growing companies to raise finance through both debt and equity. Adam
will be running through his ‘checklist for AIM companies’ and I hope that any
executive that is reading finds some useful guidance among Adam’s words.
If you feel similarly qualified to write such an article, please get in touch.
Finally, a quick note on Iomart Group. This month’s article, including my
conclusion that the company could be a takeover target,
was written well ahead of the recently announced bid
for the group. Rather than tear the article up, I decided
that it remained a story worthy of coverage.
“Enjoy this month’s AIM Prospector and good luck with your AIM endeavours.”David O’Hara, Editor, AIMprospector
Stockopedia is an online stock filtering and research community. I have been a customer of Stockopedia’s for several years and am happy to be able to tell AIM
Prospector readers about how I use the system to discover investment opportunities.
I described last month how the financial statistics website Stockopedia can be used to identify some of the very most successful companies on AIM.
This month, I have configured two new screens in Stockopedia to return a collection of AIM companies that may present an opportunity.
The first screen searches for all AIM stocks with a market capitalisation greater than £25m that are trading within 7% of their 52-week low. The aim is to quickly find companies that have been sold off sharply and may now represent good value.
This screen yields just 35 companies. A large number of these are operating in the resources sector. On AIM, these firms are typically less mature and harder to value. I often ignore them. From those remaining, I have picked out a few for further consideration.
Majestic Wine shares fell hard after the release of a disappointing trading statement in March. The shares now trade at their lowest price since January 2012. Although I have fears over the long-term trend for alcohol sales in the UK, the likely dividend yield should help prevent further share price falls.
DX Group appears interesting. The logistics firm joined AIM via an IPO in February, reaching a high of 146p before falling back to today’s levels. A recent trading statement confirmed that the company was on course to meet expectations for the year. According to Stockopedia data, the forecast 2015 dividend payout is 6p. This compares favourably with today’s price of 116p.
Of most interest is M&C Saatchi. The company is a marketing services business, just the kind of industry to benefit from a return of business confidence such as the UK is now experiencing. M&C Saatchi has a commendable dividend record. Apart from the three years 2008-2010 when the dividend was held, M&C Saatchi has been increasing its payout every year since 2005. According to Stockopedia’s data, more significant increases are forecast for this year and next.
Five AIM shares trading near a 52-week lowCompany Market
Cap
%vs. 52w
low
P/E Yield (%)
Majestic Wine (MJW) 263 5.5 15 4
DX Group (DX.) 234 2.8 11 1.3
M&C Saatchi (SAA) 162 4.1 16.2 2.4
IQE (IQE) 131 3.9 18.2 0
accesso Technology (ACSO) 95 6.1 26 0
In my second screen, I searched for AIM companies that have been increasing their annual dividend year-on-year for the last five years at an average rate of more than 15% per annum. This returns 24 companies. I have picked out the five that look most interesting in the table.
Financial services firm Brooks Macdonald appeals, especially as its shares have been falling recently, from around 1700p in April to as low as 1380p in the last week of July. That puts one of AIM’s most successful companies on a 2015 P/E of 14.6, with an expected yield of 2.1%.
Gooch & Housego has also caught my eye. The company is a provider of optical laser parts to industry. Turnover at the firm has doubled since 2008 and the dividend is up more than fourfold. Like many AIM companies, shares in the company have fallen recently. With a P/E of 17.8 and 28% earnings growth forecast this year, the valuation is not unreasonable.
Dart Group looks the cheapest of the candidates. However, the company did profit warn with recent full year results, which naturally undermines confidence in any new profit forecasts. That said, the company does have a very respectable five year record. The current low might be an opportunity to pick up the shares cheaply. More research would be vital here, to try and gauge whether recent problems are only temporary or likely to continue depressing profits.
Unless you are planning on running a diverse, mechanical portfolio, a tool such as Stockopedia should never be the sole source of investment decisions. For investors that base their decisions on company fundamentals, it is an invaluable source of facts and investment ideas.
A collection of AIM companies that have increased dividends by at least 15% a year on average in the last five yearsCompany Market
Cap (£m)
DPS 5y
CAGR %
P/E Yield %
Dart (DTG) 307 31.0 8.7 1.3
Staffline (STAF) 269 16.4 34.3 0.6
Brooks Macdonald (BRK) 190 45.1 19.6 1.6
Gooch & Housego (GHH) 149 33.2 25.1 1.1
Cohort (CHRT) 83 19.3 14.0 1.8
AIMprospectorThe annual subscription to Stockopedia is dwarfed by the gains I have made from shares that it has helped me to find and research. If you think that this comprehensive data product could help you, click here for more information.
NAHL is the plc behind the National Accident Helpline. The company acts as an aggregated marketer for personal injury lawyers across the UK. NAHL does this through its advertising campaigns, usually fronted by its bandaged mascot ‘Underdog’.There is some unease about this
type of business. NAHL’s activities
are frequently dismissed as part of a
‘claim culture’ or ‘ambulance chasing’.
However, I believe that its core
activities are an essential part of the
UK’s justice ecosystem.
Much of the population is less
familiar with the legal system than the
claims management industry’s critics.
Many people lack the confidence
to approach a solicitor, or may not
realise that they have a legitimate
compensation claim due to an
injury or medical negligence. To a
lot of people, the legal profession is
frequently alien and remote. To the
sort of person typically presenting a
claim to NAHL, their understanding
of the workings of the law may be
limited to its portrayal on television.
Lawyers are typically not common or
familiar to the kind of person most
likely to suffer a workplace injury.
NAHL Group (LON:NAH)
FOR
Dominant market position
Strong dividend forecasts
AGAINST
Unpopular sector
More mature health and safety environment could reduce claims in long term.
TOPpick: Portmeirion: over 250 hundred years of brand heritage Listed since 1988, tableware distributor and manufacturer Portmeirion has leveraged its brands to become one of AIM’s most successful companies. Today the company embodies many of the characteristics so loved by US super-investor Warren Buffett.From its Stoke headquarters,
Executive Insight Executive Insight is a new AIM Prospector feature. Each month, AIMprospector brings a collection of advice and insight targeted at company directors. The first contribution to this series comes from Mr Adam Hart.
Iomart: profits raining from the cloudGlasgow-based Iomart has reinvented itself to become an internet infrastructure partner for public and private organisations across the UK.
Primarily an online stockbroking operation, Jarvis Securities is a successful dividend-paying AIM company. Recent changes and forthcoming events make the profit outlook extremely favourable.
the government’s stakes in Lloyds
and RBS mean that an even greater
bonanza awaits. Given the private
investor community’s predilection for
trading AIM shares, the lifting of the
ban on AIM shares in ISAs alone would
be expected to have a significantly
positive impact on the 2014 year.
According to the consensus
forecasts available, Jarvis will post
5.1% EPS growth for 2014 and
another 6.2% advance next year. The
dividend is expected to continue rising
in-line with earnings.
Recent half-year numbers showed
a 9.7% increase in EPS and a 23.1%
dividend hike. Existing forecasts appear
to be conservative.
Jarvis Securities: big dividend payer in a booming market