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The Share Centre: our top five AIM-listed stock picks

Your Money
Written By:
Your Money
Posted:
Updated:
04/07/2013

The Treasury’s decision to allow AIM-listed stocks in ISAs by autumn will offer investors access to over 1,000 small firms.

Here, Helal Miah, investment research analyst at The Share Centre, suggests five AIM-listed stocks for investors to consider.

1. Incadea

Incadea is a software company whose products aim to improve the performance and efficiency for car dealerships and since coming to the market in May 2012, the share price has made steady headway.

The company has a presence in around 80 countries and 2000 dealerships, with established relationships with BMW, Nissan, Mercedes and VW. It is currently concentrating on developing into emerging markets, especially the BRIC markets (Brazil, Russia, India, China), where opportunities are far greater than parts of Europe.

The April results showed Incadea is making excellent progress with increased demand from clients and this is expected to be reflected in an improving revenue stream. As expected, a first dividend for shareholders was announced.

This is a higher risk smaller company idea for the medium to longer term, which is establishing itself across the globe in a niche market. According to forecasts the group is trading on a P/E of around 15 times this year’s earnings.

2. Amerisur Resources (high risk)

As this is a small oil and gas exploration firm operating in a potentially unstable region, it represents a very high risk investment.

In terms of exploration, the company has made significant progress in recent years, turning exploration projects into productive assets. The current total production level is 7,100 barrels of oil per day (bopd) and capacity is 8,500 bopd. The target is to double the 2012 production rate by the end of 2013.

With production increasing at a rapid rate, the company is expecting to build on last year’s performance with net margins expected in the region of 45% higher, helped by the fact that the company has no debt on its books.

3. Mulberry (high risk)

The luxury goods sector as a whole has come under some pressure recently, partly as a result of concerns over Chinese and global growth. However, Mulberry’s weakness has been more to do with its heavy focus on the UK and European markets where the economic conditions have been much weaker.

However, we believe that for the high risk investor this represents an entry point for a long term investment into a stock that has the potential to see significant demand growth. Also the potential will be increased if it manages to shift its sales focus to emerging countries such as China where the evolving demographics favour luxury goods. Other luxury brands are doing extremely well from Asian demand and we believe that Mulberry can prosper too.

 

4. Monitise

There has been renewed interest in Monitise from investors due to news that it had completed a new deal with Telefonica, following recent deals with Lloyds, Visa Card Europe. Plus, hedge fund manager Leon Cooperman, saying he believes the stock is a ‘five bagger’.

The US market is huge for Monitise and over 200 institutions have signed agreements. However the jewel in the crown is the deal that was arranged with Visa Inc, this gives Monitise access to Visa’s 1.7 billion cardholders.

Monitise reported interim results that show the company continues to confidently head in the right direction. Also, the company’s global ambitions have been helped by the acquisition of their peer, Clairmail, in the US for $173 million in shares and once amalgamated the group should be set to break even by late 2014.

We continue to recommend investors ‘buy’ Monitise for a high risk, early stage investment opportunity. The company continues to attract high calibre partners and customers, helping to firmly integrate its proposition as the preferred interface between financial institutions and their customers globally.

5. Hutchison China Meditech

There are three divisions to Hutchinson China Meditech – the Healthcare division, Drug R&D and the Consumer Products Division. One of Chi-Med’s products has made it to the Chinese essential list of medicines, of which there are only around 370.

The business is focused primarily on China. The benefit of this is that as the Chinese population becomes more affluent there is a significant upturn in those signing up for medical insurance and also by the government on national healthcare. To give an indication of the potential market, the average spent on healthcare in the US is just above $7,000 per person per year while the average in China is about $150.

The stock has performed well lately as there has been positive news flow about joint ventures and drug trials. However, this is a high risk ‘buy’ idea for investors seeking exposure to China.