New Issues Examined by Oliver Haill

One that recently lit up the City was China-based LED International, a profitable maker and distributor of LED (light-emitting diode) products. Dealings were frenzied in its first few days on AIM, even though only five million shares were placed in the fundraising, whipping the shares up from the 10p issue price to a peak of 17.5p before they settled slightly lower.

Interest in LEDs has burgeoned in recent years due to their more efficient consumption of power, greater durability and lower maintenance costs than normal lighting. Furthermore, LED screens can be made much larger than the biggest plasma or conventional televisions, and are thus in demand in the advertising industry (just take a look at Piccadilly Circus) and at countless football and sports grounds.

The worldwide market is potentially huge and LED International is already growing organically in China and aims to add to that with domestic and international acquisitions.

A tireless champion at the helm
The group is led by Peter Chau, the former boss of Publicis China, a tireless champion of new ideas and new markets. ‘I’m like a Doberman,’ he barks, highlighting his vigorous chasing of new business and his ability to sniff out money-making ideas. The man holding his leash is English finance director Mervyn Cragg, an experienced accountant who tempers Chau’s dogmatic inventiveness with a straightforward clarification of what the business needs to be about. But Cragg admits ‘if just one per cent of Peter’s ideas come off it could change the world.’

Chau and Cragg explain that at its low-cost manufacturing base in the Shenzhen economic zone, the company’s 12-strong R&D team have plenty of their own ideas and have already developed 14 patents – with a pipeline of many more. Of last year’s £7 million sales, a quarter came from ‘beautification lighting’ – the sort that will soon light up the façade of Buckingham Palace and which is already very popular at China’s government and commercial buildings. Most of the remaining revenues were derived from ‘modular video panels’ for billboard-type advertising sites and for sports events such as the Chinese Grand Prix (see picture). Overseas sales are embryonic, but the distributor in Miami recently bought a 40 square metre screen, and the largest foreign contract to date has been secured to distribute screens in Japan.

Insurance policy
SSP, guided by broker and advisor KBC Peel Hunt, is an IT systems provider to insurance brokers. It too got off to a quick start after attracting £31 million at 98p, with its shares trading up almost 20 per cent in its first month on the market. It helps that, like LED, SSP is profitable. Its USP is that it is a market leader in the provision of software to UK insurers.

Half the funds raised went to existing shareholders but the rest is earmarked for expansion, says chairman David Rasche: ‘The listing will enable the group to pursue our strategy of consolidating our market leading position and to continue our expansion into continental Europe.’ The group is cash generative, growing fast, has a highly visible revenue stream and is led by an extremely experienced executive team. With the insurance industry switching over to more modern systems SSP could fly further if it can corner the market.

Don’t forget Datatec
Despite having not recorded such large gains as the pair above, major South African IT and services player Datatec – up nine per cent to 209.5p so far – is worth inspecting. It joined AIM with a market cap of £300 million-plus and a record of having delivered a 20 per cent profit improvement over the last three years. As its markets have undergone a downturn, Datatec has turned the situation to its advantage by snapping up rivals. One to follow.