AIM prospector write-ups on another five AIM companies Global agriculture price bonanza The AIM company profiting from this mega-trend Issue 5 July 2014 recent IPO that is perfectly poised ambitious restaurant group smallcap engineering recovery play free to private investors Supported by fast-growing healthcare manufacturer
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
AIMprospector
write-ups on another five AIM companies
Global agriculture price bonanzaThe AIM company profiting from this mega-trend
Welcome to the July edition of AIMprospector, the online magazine for investors in AIM-quoted companies.As always, the magazine is sent to registered subscribers 24 hours before it is published on issuu.com.
To be among the very first people to read AIM Prospector, register your email address at www.aimprospector.co.uk for a monthly email notification and no spam. Blackthorn Focus (publishers of AIM Prospector) will not share your details with any other organisation.
Much has happened since the last AIM Prospector.WYG, the engineering consultancy that featured in the May edition, reported
final results at the beginning of June. This was a watershed announcement, heralding WYG’s development from recovery to growth. Dividends were resumed as operating profit increased threefold. The results inspired one broker to increase their 2016 forecasts for the company by 37%. Since results, WYG has announced its appointment to a framework agreement for the Ministry of Defence. This will see the company consulted by the MoD on the delivery of any major site facilities.
Majestic Wine’s (May edition) results were perhaps the least impressive that the company has delivered in the last ten years. Nevertheless, the dividend was increased and like-for-like sales were broadly steady. According to Stockopedia, the shares today trade on a 2015 P/E of 15.4, with a prospective yield of 3.8%.
The biggest AIM story of the month was Quindell and its failure to secure a premium listing on the Main Market. The company raised £200m from the market in November last year. However, having now taken a kicking from Gotham City Research and the UK Listing Authority, the share price tells me that deep-pocketed investors are deserting the company. Shareholders have to ask themselves what Quindell’s future will look like if it has lost the market’s faith forever.
RWS, the company featured as Top Pick in the April edition and described as one of the very most successful on the entire market, reported interims at the beginning of June. Sales were 28% higher, assisted by an acquisition. Adjusted EPS was flat but the interim dividend was raised by an impressive 9%.
This month’s Top Pick is farm supplies and retail business Wynnstay Group. The company has been selected as one of the best listed plays on agricultural inflation trends. Results in recent years have supported this strategy. Only 34 UK-listed companies can better Wynnstay’s record in the last five years for sales and dividend
increases.As for Boohoo, the fast-growth fashion firm, the
company announced profit for the year of £8.4m. That puts the shares today on a P/E of 67 times last year’s earnings. With revenue growth of just 24% reported for Q1 of this year, that valuation still seems too rich. I am staying short
using Spreadex.
“Enjoy this month’s magazine”David O’Hara, Editor, AIMprospector
TOPpick: Shareholders in clover at Wynnstay Wynnstay Group is perfectly positioned to benefit from rising global food demand.Headquartered in Wales, Wynnstay
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.Stockopedia is a dream for investors who prioritise a company’s corporate performance in their investment decision-making process. The product is driven by a comprehensive database of corporate account statements. The Stockopedia system enables stock-pickers to seek out investments based on almost any financial criteria.
For example, growth investors can simply screen for companies that have delivered year-on-year earnings growth for at least, say, five years. Income investors can filter on dividend yield and growth etc.
I credit Stockopedia with helping me discover some of my most successful recent investments. Good examples include Robert Wiseman Dairies (which popped up on a yield filter around one month before its takeover), T Clarke, Barclays and my one AIM-quoted shareholding, Begbies Traynor (up 35% plus dividends so far).
To demonstrate the value of the system I have run two investment screens through Stockopedia to highlight some of the best companies on AIM.
The first screen attempts to identify the largest and most successful companies of all on AIM. To qualify, companies must pass the following tests:
market capitalisation > £25m
dividends growing year-on-year for at least 3 years
average annual EPS growth > 5% per annum over the last five years
average annual sales growth > 5% per annum over the last five years
sales increasing year-on-year for the last three years at least
average annual per share dividend growth > 5% per annum over the last five years
EPS forecast to grow by at least 5% for the next year
Only fourteen AIM companies pass all of the tests. They are:
Company P/E Yield (%) Mkt Cap (£m)
Abcam (ABC) 22.8 1.9 780
Nichols (NICL) 22.0 2.0 371
RWS Holdings (RWS) 22.5 2.7 330
Prezzo (PRZ) 20.4 0.2 311
Brooks Macdonald (BRK) 21.7 1.5 211
Idox (IDOX) 19.3 1.6 157
Craneware (CRW) 29.5 1.6 149
Caretech Holdings (CTH) 9.5 2.8 136
Judges Scientific (JDG) 51.3 1.0 126
Mattioli Woods (MTW) 22.5 1.7 90
Portmeirion (PMP) 14.7 3.1 83
Jarvis Securities (JIM) 23.7 2.9 56
Maintel Holdings (MAI) 17.9 3.0 56
Solid State (SSP) 19.5 2.0 33
Of these, RWS, Caretech, Portmeirion and Brooks Macdonald are particularly noteworthy. RWS’ ten year sales, profit and dividend record makes it unique among AIM companies. Recent half-year results from the company showed a 28% increase in sales, 6% rise in operating profit and a 9% dividend hike. EPS for the full year is expected to come in 8% above last year’s figure (Stockopedia also contains consensus forecast data).
Caretech appears to be the last expensive of the lot. According to the Stockopedia data, the care home provider is trading on just 8.5 times forecast profits for the year, with an expected dividend yield of 2.9%.
As for Portmeirion, Stockopedia shows that the shares are currently priced at 13.9 times forecast earnings for the year and come with an expected dividend yield of 3.3% (the figures in the tables are ‘smoothed’ ratios).
Brooks Macdonald shareholders have enjoyed the fastest dividend growth. Payouts from the investment management business have increased, on average, by 47% a year in the last five years.
My second filter is much simpler and lists all those AIM companies that have delivered average annual growth in earnings per share of more than 5% a year over the last five years. Of these, I have picked out five companies that look particularly interesting in the table below. Young & Co may be worth further research. While all the current comment around pub chains is negative, Young’s is proving that it is possible to thrive.
Company P/E Yield (%) Mkt Cap (£m)
Young & Co's Brewery (YNGN) 21.3 1.9 394
Anpario (ANP) 22.0 1.2 57
Jarvis Securities (JIM) 23.7 2.9 56
Crawshaw (CRAW) 38.7 1.0 32
Getech (GTC) 17.4 4.6 14
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.
by David O’Hara, Editor, AIM Prospector
advertisement feature
AIMprospector
8 www.aimprospector.co.uk
shares in fund managers perform
well. I expect this effect would be less
marked with a wealth manager like
European Wealth Group. Its customer
base will be savvy enough to realise
that in the short term, investment
returns can disappoint. Wealth
management clients are also more
expensive to market to, making them
more difficult for rivals to poach than,
say, an ISA investor would be.
As the regulatory burden
(particularly anti-money laundering
requirements) has become increasingly
burdensome, smaller players
are finding it tougher to remain
operational. European Wealth Group
expects that its stock-market listing
will help it to play a role as an industry
consolidator. This could be achieved by
issuing shares to make acquisitions.
The regulator’s Retail Distribution
Review (RDR) is also expected to
Documents accompanying its May IPO
revealed that the company is looking
to capitalise on changes to the fund
management industry and pension rules.
The UK has a longstanding and
diverse wealth management industry.
It essentially serves people with so
much money that they need a high
degree of professional advice to
properly manage it. A typical customer
of a wealth manager might a be retiree
who wants to ensure that they pass
on as much as possible but does not
have the financial nous to self-direct
their investments. Yet, just as providers
are diverse, so is the customer base.
Wealth managers might be acting for
schools, charities or other institutions.
This exposes European Wealth Group
to the classic investment manager’s
double-whammy. If investment returns
are good, the fees being earned rise and
new business can be won more easily.
However, if returns falter, fees fall and
customers can depart.
For a large fund manager like
Schroders or Aberdeen, it is often wise
to first take a view on likely future
market returns before trading the
shares. Obviously, in rising markets,
Will annuity changes bring soaring sales to European Wealth Group?European Wealth Group is a wealth management provider.