New Issues Examined by Oliver Haill

Broker SVS Securities’ £2.1 million funding for Jersey-incorporated Medilink-Global might seem a pretty impressive feat given the current investment climate – however, all the funds were raised from deep-pocketed individuals in Singapore, Hong Kong and Malaysia, so the float should not be regarded as a return to fundraising form for an out-of-sorts AIM. Instead it means that with only December to go, a mere £99.3 million of IPO cash has been raised on AIM in the second half of the year, compared with more than £800 million in the first six months.

Nevertheless, Kuala Lumpur-based MediLink, which is led by founder Shia Kok Fat, plans to use its new finances to pursue growth in China. Providing an electronic swipe-card system for hospitals and other healthcare providers to verify whether potential patients are eligible for insurance cover, the company already has 90 per cent of Malaysian hospitals covered. In China, 52 per cent of people pay for their own healthcare but only six per cent have healthcare insurance, so a deal with the second-largest life insurer in the People’s Republic is a good start. Broker SVS predicts that the company, which still looks rather speculative at this stage (see page 18), will break even next year.

Tomorrow’s world

November’s other tech float, Birmingham-based JSJS Designs, caught the eye for its mysteriously futuristic business description of providing ‘home automation systems’. The group’s technology allows homeowners to remotely operate everyday household appliances, such as lighting, heating, air conditioning, door entry, audio, video and security.

JSJS Designs believes that the ‘retro-fitting’ of these devices into homes represents a ‘potentially significant mass market’ and in the longer-term thinks the products will drive demand for schemes to enable independent living for the elderly and physically immobile. For the year to July, the company achieved a modest £94,000 pre-tax profit, from sales of £857,000, made mostly from business with B&Q.

While all very exciting, I must point out that this technology fared less well under a previous incarnation. As SRS Technology, floated on AIM in 2001 by JSJS chief executive John Shermer, the shares lost almost all of their value on persistent losses, before management eventually disposed of the entire operation. Today’s management captures the mood in the admission document, where they advise that ‘the group’s future growth and expected profitability is primarily dependent on consumer confidence and consumers’ willingness to spend on discretionary items’. With such spending now under severe pressure, the shares should be avoided, at least in the short term.

Hedge group sheared

Last month’s other newcomer, Greek hedge fund group Argo, also has a previous association with AIM as it was bought last year by AIM-listed Absolute Capital. However, soon after this deal closed the sudden resignation of Absolute Capital’s founder, Florian Homm, saw a rush by investors to redeem investments and the company’s shares collapsed. After a review of the business, Absolute decided the ‘previous strategy of combining the two operations [was] no longer in shareholders’ interests’.

Hence Argo’s demerger in June and AIM homecoming now. The manager of five funds, all specialising in global emerging markets, the group has grown assets under management from $421 million to $741 million since December 2004. However, recent trading has been difficult, long positions have generated NAV losses for four months in a row and the performance of two funds has ‘turned substantially negative’. Increased levels of government intervention, such as prohibiting short selling, may affect business but management maintains that its strategy ‘is unlikely to be affected by this’. Argo shares, which were introduced at 16.5p and have already halved to 8.25p, are a tad too risky for my taste.