New Issues Examined by Oliver Haill

While the AIM new issues market has effectively shut up shop certain of last year’s debutants are making very credible progress.

Offering an impressive yield and with fundamentals in its favour is Norwegian telecoms consultant Norcon, which has strong links with Saudi Arabia, where the government has been rapidly deploying ever-improving telecoms infrastructure and relying on this company as a principal project manager.

An upbeat update in January confirmed trading for 2008 was in line with expectations, with the board expressing confidence about the year ahead. A business with a solid recurring revenue base, Norcon also said all its clients had been retained in 2008.

Results are set for release shortly and the board has assured that it will pay a dividend of ‘at least 50 per cent of 2008 net income’ in the second half of this year. Analyst Charles Pick of house broker FinnCap calculates this payment will be 9.0 US cents per share, which at today’s 68.5p, means the shares offer a healthy yield of around 9.1 per cent.

OPG – outstanding potential growth
Another of last year’s newcomers offers even greater potential growth, namely the already profitable Indian power plant operator OPG Power Venture.

Joining AIM by way of a £65.1 million funding last May, in order to capitalise on the chronic power shortages in the subcontinent, the company made £1.96 million pre-tax from £2.9 million sales in the half to September, delivered via a single 30 MW gas-fired plant.

And managing director and major shareholder Arvind Gupta says he wants more – a lot, lot more. On top of the £52 million in the company coffers in December, Gupta has also secured sufficient banking arrangements to complete the construction of a new 77 MW coal-fired plant (currently expected, according to Peter Read of house broker Cenkos, to complete in ‘mid-to-late summer’) as well as a far larger 300 MW coal-fired plant which should be producing energy by early 2011.

The genius of Gupta’s business model is that OPG bypasses the open market by selling energy via a ‘group captive agreement’ that allows him to charge a higher price, selling any surplus energy to the grid.

Read foresees sales ramping up from $13 million this year to a massive $326 million as the 300 MW plant hits its straps in 2012, which should deliver profits of $157 million. Investors willing to take a punt on OPG could share in their portion of those substantial rewards.

A trio to track
Three further 2008 AIM newcomers are similarly worth keeping on your radar, among
them Middle East-focused engineer Kentz Corporation, which has apparently enjoyed a buoyant 2008. Based on expected earnings for last year of 25c (17.3p), the 111p shares are selling for less than six and a half times earnings – an attractive rating.

Selling pharmaceuticals and associated items to veterinary surgeons and livestock farmers is Animalcare, which, according to latest forecasts, should furnish investors with £2.9 million of profit and 6.9 of earnings for the current year to June. Based on a 75.5p share price, a sub-eleven forward multiple offers good prospective growth with a defensive bent.

Looking rather oversold is turnaround tale ServicePower, the outsourced engineering service and field management group that skipped down from the Full List last year. Recently released annual results, showing a move from losses into profits of £600,000, are very encouraging.

The company says it has an increasingly strong pipeline, with the recession driving increased demand for its cost saving outsourcing service and chief executive Mark Duffin says ‘with this demand showing no signs of abating we are excited about the opportunities for 2009 and beyond and look forward to the remainder of the year with confidence’.