New Issues on AIM by Oliver Haill

Recent Growth Company Investor research found there was an exceptionally warm reception for shares in new AIM admissions in the first six months of the year, with prices having risen by an average of 16.3 per cent. This was ahead of both the AIM index’s otherwise-impressive 13 per cent gain and the FTSE All-Share’s 5.7 per cent accrual during the period. What’s more, even though the total number of floats was lower than the equivalent period in 2006, our research has found these newcomers raising ever-larger sums of cash: an average of £31.2 million each compared with £21.2 million last year and a much lower £7.6 million in 2005.

Brokers to back?
Drilling down into the numbers, we found entrepreneurial broker Beaumont Cornish had one of the best records in the half year, somewhat of a surprise considering its clients’ average share price performance from 2001 to 2005 was in negative territory.

The broker’s four new clients put together an average price increase of 118 per cent, mainly from the respective 305 per cent and 125 per cent leaps of property developer Commercial Group Properties and explorer Leni Gas & Oil. Another adviser with a reliable record is Numis, whose seven broking clients posted gains in the wake of their market debuts, producing an average rise of over ten per cent. Brazilian property play Itacare took the sheen off the record, however, as its shares were recently suspended over disclosure issues.

Most of the brokers and advisers with the worst share price records represented only one client during the period in question, so it is unfair to judge them on their consistency. However, Seymour Pierce and Davy each saw two of their four charges slip below their float price and Investec saw three of its four, most notably miner Noventa, down 31 per cent, and former Nasdaq banking counter Monitise, 28 per cent lower.

Pristine and profitable
The best- and worst-performing company categories are often two areas of popular interest. Of the highest risers, Chinese petrochemicals specialist HaiKe Chemicals, a former state enterprise, looks promising. One of the most profitable companies to float on AIM during the period, having made pre-tax profits of around £4 million in 2005 on £100 million sales, the company possesses an annual oil refining capacity of 7.54 million barrels and the capability to produce 100,000 tonnes a year of speciality chemicals and biochemicals. Its shares have gushed 136 per cent above their February issue and could go further still.

At the other end of the list, some companies whose shares have lurched below their issue price provide an opportunity for more optimistic investors to take advantage of the new discount. For instance, online video search engine Blinkx was spun out from fully listed Autonomy in May and had fallen 28 per cent by the end of June. But, although loss making, the business looks a good speculative buy and will reward if its strategy goes to plan or if the encircling swarm of larger internet players decides to snap it up for its patented ability to search its 12 million hours of audio and video content.

Another profitable play that is worth a look, though its shares have neither impressed or disappointed prominently, is Public Service Properties, which made operating profits of £25.4 million in 2006 from its niche strategy of investing in property that relies on rental cash flows generated or supported by state agencies, primarily in the UK, Germany and Switzerland. Acquisitions of care homes in Germany are targeted this year to bulk up its existing £155 million property portfolio.