Aim Report

During the early stages of a bull market companies that are squeezed higher tend to be smaller speculative concerns with illiquid stock. This has certainly happened on Aim recently.

Take carbon fibre braking specialist Surface Transforms, whose shares have surged 200 per cent to 67.5p on the back of a tiny £50,000 development deal with the US Air Force's research unit. Or international trading concern 3DM Worldwide, owner of a textile mill in Kyrgyzstan, which surged 196 per cent to 71p after announcing a deal, US patent approval and funding for its 3D plastic moulding technology. The company also produced delayed results for the year to last December in August.

So signs of optimism are returning to the market, helped by some decent results in September and renewed interest in mergers, acquisitions and other deals. All this has helped the Aim Index rise 13 per cent over the past two months to a fresh year-high of 756.5.

Sterling focuses on Fusion

Deals have flowed thick and fast in the oil and gas sector, with Northern Petroleum jumping 31 per cent to 4.25p after successful drilling results from the Avington well in Hampshire, in which it has a five per cent stake. And Pan Andean Resources, chaired by intrepid Irishman John Teeling, gained 26 per cent to 12.25p, helped by an acquisition in Texas.

Trumping this though was Harry Wilson's Sterling Energy bid to gain control of West African explorer Fusion Oil & Gas. This looked to have failed when the Fusion board brushed off a proposed deal but Sterling then announced it was buying fellow Aim company Westmount Energy's 20 per cent stake in Fusion. This deal will, in return, raise Westmount's stake in Sterling from 2.5 per cent to more than 18 per cent. Fusion's shares gained 21 per cent to 38.5p amidst this activity, with Westmount rising 23 per cent to 51.5p and Sterling remaining at 11.5p.

Meanwhile at Chepstow Racecourse, punters were grabbed by news that Northern Racing, the joint venture owned by chairman Sir Stanley Clarke and fully-listed property developer St Modwen, will reverse into Chepstow via a £24 million deal. This will transform the group into a £44 million concern owning nine courses. The shares rose 33 per cent to 179p.

Mears and ASK satisfy

September's busy results season saw some of Aim's more established names continue to please investors.

Social housing maintenance group Mears put on 4p to reach a new year-high of 125.5p after another record set of interims, showing a 40 per cent rise in pre-tax profits to £2.3 million.

Restaurant group ASK Central edged up three per cent to 150p on the back of a 12 per cent rise in profits to £8.5 million, accompanied by a 220 per cent hike in the dividend payout. Broker Arbuthnot expects pre-tax profits of £19.1 million for the year to December.

Meanwhile, former main market player Mayborn leaped 33 per cent to 158.5p, after unveiling pre-tax profits raised 132 per cent to £2.9 million in the first half, driven by growth from its Sangenic nappy wrapper and Tommee Tippee baby feeder. Charles Stanley expects at least 14.5p of earnings per share for the year, rising to 16.3p in 2004.

Some lesser lights delivered the largest gains, however. Publisher Charterhouse Communications and semiconductor etching machine maker Surface Technology Systems both rose prior to their results but fell on their actual release. Charterhouse, which returned to profit, is nevertheless still 91 per cent ahead at 5.25p, but still has negative working capital. STS is up 162 per cent at 18p. Interim figures showed losses reduced 49 per cent to a still hefty £4.3 million.

Coming up

October will see fewer results released. However, investors should watch out for interims from workspace provider Bizspace. These may see the shares surge, since the group's final figures provoked a 60 per cent rise in the share price back in May. Now at 24.75p, the shares trade on a forward p/e of only 7.5 based on house broker Seymour Pierce's expectation of £1.8 million in pre-tax profits and 3.3p of earnings per share for the year to February 2004.