Christopher Spink’s pick of AIM

Increasing numbers of large businesses are raising significant sums on

AIM, giving investors a greater choice of corporate leviathans to

choose from on the ‘junior’ market

AIM’s new issue activity was dominated in March by small shells floating ahead of new AIM Rules excluding investment companies raising less than £3 million, but among the month’s record 69 new entrants were five companies raising more than £20 million. Together they pulled in £215 million of new money, accounting for 60 per cent of the £360 million raised by all the new issues that month.

This trend continued during April, with a further five floats attracting more than £20 million and four more wanting to raise similar sums at the moment. That means 16 new issues this year will have raised £620 million between them.

Several major investment vehicles dominate the list, including Black Sea Property Fund, which raised £50 million; former Mirror chief executive David Montgomery’s media entity Mecom, pulling in £45 million; and Trading Emissions, which obtained a whopping £135 million.

The latter company, beneficiary of the largest fundraising on AIM this year, is taking advantage of new environmental laws that force companies to restrict carbon dioxide emissions. Those that exceed them can trade ‘carbon credits’ and Trading Emissions represents the largest fund of such products in the world.

Other companies to secure significant sums include Shed Productions, which makes TV programmes such as Footballer’s Wives; Hispanic-style restaurant chain La Tasca, for whom Altium pulled in £37.5 million; and local authority software provider IBS OpenSystems, which raised £56 million via an ‘accelerated’ IPO structured by Numis.

Lining up to list on AIM are other intriguing businesses. For example investors are currently being asked to stump up £40 million for Global Oceanic Carriers, a Greek-based shipping company which wants to buy three dry-bulk vessels with the float proceeds.

These businesses will join the increasing spread of larger trading companies on AIM.

Existing opportunities

More than 60 AIM companies boast turnovers greater than £50 million and 59 made pre-tax profits of more than £5 million last year. Investors can select a number of these blue chip AIM businesses to form the solid core of a small cap portfolio.

Vinyl floor covering maker James Halstead, which has managed to increase its dividend for 30 years on the trot, recently reported interim figures that indicate it will lift its total payout again. The half time dividend was increased by 16.7 per cent to 7p a share, after pre-tax profits rose 6.5 per cent to £6.95 million.

Brokers are currently forecasting a full year dividend of 21.25p, twice covered by earnings of 41.5p. That puts the shares, at 512.5p, on a forward p/e of 12.3 and offers a tempting dividend yield of 4.1 per cent. This is all the more remarkable considering the company sold off non-core assets last year, returning £15 million to shareholders.

Another growth business worth considering is Telford Homes. Despite doubling earnings per share over the past two years, the East London housebuilder remains overlooked as pundits predict a collapse in property prices. The group’s results for the year to the end of March should put these Cassandras in their place.

Chief executive Andrew Wiseman said in a recent trading update that final results, due at the end of May, should be in line with expectations. Earnings are predicted by Shore Capital to rise 27 per cent to 23.5p a share. This gives a low p/e of 6.1 on the current share price of 143p. Investors also stand to receive dividends of 6.15p in total this year, producing a yield of 4.3 per cent.
The higher echelons of AIM offer plenty of other generous opportunities.