Companies: ARTA    CDT    CUS    PHRM   

The second annual International Companies on AIM survey from Growth Company Investor reveals that well over a third - 642 to be precise - of the near 1,700 ventures listed on the market are based or focused overseas. In a trend that will be unsurprising to seasoned AIM watchers, management teams from Belgium to Bangladesh are choosing the UK's growth market over those in their own jurisdictions due to the favourable tax regime, the perfectly pitched regulatory regime and the deep pools of institutional cash available.

As well as enticing US companies (23 have floated in the past 12 months), it is now a much more attractive place for global players that might have listed on Nasdaq (largely due to the excessive red tape imposed by US regulators). Moreover, over the past few years AIM has supplanted Toronto as the leading destination for oil and exploration companies looking to raise money. As for Chinese and Asian ventures, the global respectability AIM confers on businesses is proving compelling.

Manifest destiny

Table 1 shows that there are now 92 US firms on AIM - more than any other country. In third position - squeezed between two countries with which AIM has had long, durable relationships - Australia and Canada - we find the up-and-coming presence of China, with 48 companies. If you add in the Special Administrative Regions of Hong Kong and Macau, China actually has 58 junior market firms.

The reputation of companies hailing from or operating in China took quite a hit last year after concerns were raised about their quality and many investors remain warier than ever. But the People's Republic has produced a number of AIM successes and in the past 12 months they have delivered a mean 25 per cent share price gain, with the performances of home shopping product buyer ResponzeTV and anti-cancer compound producer Taihua particularly dazzling. Over the longer term, silicon wafer recycler ReneSola has received much attention. Its recent downgrade from over 600p to below 300p has left it trading at a more reasonable value again.   

Likewise, companies from across the pond have not always been the best of investments. Research by GCI in February found more than half of them had negative price movements since arriving and an average gain of only 6.9 per cent. This has improved markedly since, though, as can be seen in table 2. They nevertheless still lag their rivals in Europe and China.

The most outstanding performer from the USA has been Phorm (eighth in table 4), which raised £1.72 million when it floated as 121 Media in December 2004 at 245p a share. Phorm's technology tracks the online behaviour of computer users to allow advertisers to precisely target their wares online. Chairman and chief executive Kent Ertugrul has made agreements with a number of large internet service providers, setting the shares soaring despite the fact that the company lost $16.3 million (£7.96 million) before tax in the half-year to June. It looks fully valued to us, though keen followers of the online advertising space may disagree.

Connecticut-headquarted Clean Diesel Technologies, a producer of filters and fuel additives that clean automotive fumes, has signed its first major licence deals – with German car parts giant Bosch and US emission control products supplier Tenneco. Although also loss-making, its interim results to June showed losses shrinking 16 per cent to $2.3 million as revenues rose 166 per cent to $1.5 million. An exciting prospect for the company is the looming enforcement of low-emission zones in London (in February 2008) and the rest of Europe. The company is cash rich after a placing and warrant issue, and is presently ramping up its marketing efforts to capitalise on
these opportunities.

The second-best gain of all AIM's international legion is the 35-fold ascent of communications software group Artilium. It was floated as Future Internet Technologies in 2000 by colourful entrepreneurs Robert Bonnier and John Morley as a software and telecoms play, although it subsequently became a cash shell before further deals were struck. Although it is actually headquartered in the UK, two of the company's main businesses are based in Belgium. The share price gain has taken the market value to £144 million and it is forecast to to make just over £7 million this year.

International broking

In table 7 we chart the leading brokers to international companies in terms of the performance of their clients. Panmure Gordon's performance is partly due to the aforementioned Artilium, although it's worth pointing out it was only appointed broker in August this year. Deloitte, the nominated adviser partner of the company, deserves only slightly more plaudits as its tenure began the August before, when the shares had already ascended over 30 times. Since the data was taken for the report, the shares have gained another 100p to around 280p.

At the top of the broker table, JP Morgan's pre-eminent position is due in the main to its association with mining stars Sibir, Consolidated Minerals and Peter Hambro. That said, even discounting these three, the average price gain of its remaining clients is 51.57 per cent.

Poor performers

In table 8, we provide statistics for advisers whose clients have not performed so well. Of Hichens Harrison's entrepreneurial batch of 19 overseas companies, only five have made share price gains since floating, leaving it with an average share price loss for its clients of 27.6 per cent. Another, Charles Stanley, has eight of its nine foreign charges in negative territory - including Japanese biometrics play Secure Design and Chinese biofertilizer outfit Bodisen. Further down Table 9 is John East, a broker whose international clients sport a 45 per cent average share price loss. However, it is worth pointing out that John East's performance has been negatively affected by, amongst others, CustomVis. This venture, which has lost 95 per cent of its value since flotation in 2003, was originally brought to market by Collins Stewart and the shares had already collapsed by the time John East was appointed broker in 2006. In addition, John East was actually the broker and nomad behind the flotation of Phorm, whose shares have soared 886 per cent since its IPO in 2004. Canadian-based Cannacord Adams took over as broker and nomad of this firm in mid-2005 when Phorm (previously called 121 Media) was already trading at a small premium to its issue price. JEP continued to act as nomad to Phorm until December 2006.

Notes to the report
1. For the purposes of this report,
companies incorporated in the UK
butconducting the majority of their
business abroad are classified as
international.
2. In measuring the average share price
performance of brokers, nomads,
accountants and solicitors, we have
measured the share price performance
of the their current international clients
since flotation.
3. All company share price data takes
into consideration share consolidations
and share splits.

Sources:
The AIM Guide, www.growthcompany.co.uk,
LSE AIM statistics.
Definition of an international company is one
incorporated, or operating largely, overseas.