Summary

  • During the course of last four years (FY15-19), the IQE’s revenue grew at a CAGR of 5.27 per cent.
  • People looking for safety of their capital look forward to stocks such as Greatland Gold. On a YTD basis, the company has delivered a share price return of 640.44 per cent.
  • During the course of last four years (FY15-19), Frontier Developments Group’s revenue grew at a CAGR of 40.87 per cent.
  • On a YTD basis, Highland Gold Mining has delivered a share price return of 49.09 per cent.
  • During the course of last four years (FY15-19), Asos’ revenue grew at a CAGR of 24.15 per cent.

Companies hailing from a variety of sectors including early stage, venture capital backed companies strive to get listed on the alternative investment market for an easy access to funds along with more relaxed regulatory framework in comparison to the main market of the London Stock Exchange (LSE).

Alternative Investment Market (AIM) can be considered as a sub-market controlled by the London Stock Exchange. The AIM is a great starting point for young investors seeking growth stocks. More than 3,000 companies are traded on the AIM segment of the LSE. Many institutional investors make systematic investments in AIM stocks. Investors seeking regular income or dividends should not get bogged down as some of the AIM listed businesses also pay-out dividends. However, most of the AIM listed stocks refrain from making dividend pay-outs as they look to reinvest profits back into the business.

Unlike the premium listings on a stock exchange, an AIM stock could provide an investor with huge earnings potential over decades, while factoring the prevalent inflation in the economy. A cyclical slowdown might lead to temporary dip in stock price, however, the growth has a direct correlation with time, provided the stock is fundamentally strong.

Do read: Performance Review of Two AIM Listed Stocks – Mears Group & Essensys

Investors can look out for businesses that have shown consistent growth in revenue, margin, and market share- if not growth, then at least sustained market share and show growth in other parameters. These stocks seem to be in a good momentum at present. Let us have a quick glance at some of these stocks.

  1. IQE Plc (LON: IQE)

IQE is a technology company which forms a critical part of the global supply chain and has delivered a resilient performance in the context of prevalent uncertainties in the UK market. FTSE AIM listed company provides wafer services and advanced wafer products to the semiconductor industry. The company’s primary activities include developing and manufacturing of epiwafers or compound semiconductor wafers, by using a process called epitaxy. The Group is catering to upcoming 5G infrastructure deployments with its technologies and platforms.

After Huawei’s exit from the UK, there is a huge void in the realm of 5G products & services. For 5G handsets, IQE has immense opportunities in both Wireless Power Amplifiers and 3D Sensors. The deployment of 5G communication infrastructure is a huge opportunity for company to capitalise and grow. The demand for the Group’s products is likely to increase across all geographies.

In the first quarter of 2020, the revenues were in line with the expectations, while trading in the second quarter of 2020 to date has been robust in both the Photonics and Wireless Business Units.

IQE’s production has not been affected to date, despite the substantial risk of disruption posed by the COVID-19 pandemic. For the first half of 2020, the semiconductor company expects total revenues to be at least GBP 85 million, representing an increase of more than 27 per cent as compared with the corresponding period of the last year (H1 2019). With a low single-digit adjusted operating profit for the first half of 2020, the Group expects to be profitable in the near term.

In H1 2020, the firm expects to be cash generative due to existing trading performance. The Group also expects a decrease in capital expenditure. Therefore, the net debt has reduced since year-end FY19, headroom on IQE’s credit facilities has increased, and liquidity stays robust. During the course of last four years (FY15-19), the group’s revenue grew at a CAGR of 5.27 per cent. On a YTD basis, the group has delivered a share price return of 12.68 per cent.

  1. Greatland Gold Plc (LON: GGP)

London-headquartered, Greatland Gold Plc is a gold exploration and mining company, primarily focused on gold. The company achieved high-grade results from Newcrest drilling majorly conducted last year. The company confirmed its strong financial position and continued its Paterson exploration programmes in 2020. The company would continue to focus on moving its portfolio of assets up the value curve, with regards to its recent discovery of gold-copper deposits in Australia. Gold as a commodity has rallied and breached the price level of US$ 2,000 per ounce recently. This unprecedented surge in gold prices has had a huge influence on most of the gold stocks.

The prices of commodities in which the company markets and explores can be subject to significant fluctuations, and as the prices are affected by global supply and demand, the company does not have any influence on the market prices, which can lead to a significant impact on the financials and affect the business assumptions. However, Gold has always been a safe heaven during tough times. People looking for safety of their capital look forward to these stocks. On a YTD basis, the group has delivered a share price return of 640.44 per cent.

  1. Frontier Developments PLC (LON: FDEV)

Frontier Developments Plc is a software technology company, which is incorporated in the UK and engaged in developing video games and non-game applications for the entertainment sector.

The group reported decent finish to the financial year 2020 with a reported revenue of around GBP 76 million and expected operating profit (as per IFRS) of approximately GBP 16 million with an operating profit margin of around 21 per cent. The company started its financial year 2021 with strong momentum based on its exciting development, attractive portfolio of titles, published roadmaps and passionate, growing, and skilled team. The company unveiled Elite Dangerous: Odyssey on 3rd June 2020, which is set to release in the Q1 of the calendar year 2021, which is a major paid update for Elite Dangerous. The company will also release Planet Coaster on Xbox and PlayStation platforms in the financial year 2021. The gaming industry has evolved and there is huge demand for it across the globe. In the present scenario, where people are looking for home entertainment options, these products could witness huge demand. During the course of last four years (FY15-19), the group’s revenue grew at a CAGR of 40.87 per cent. On a YTD basis, the group has delivered a share price return of 68.43 per cent.

Do read: Operational Review of Two AIM Listed Resource Stocks – Hurricane Energy & Cadence Minerals

  1. Highland Gold Mining Limited (LON: HGM)

Highland Gold mining Limited has mines located in the region of Mnogovershinnoye and Belaya Gora in Russia. The company had given lower production guidance for the first half of the year 2020 due to a fall in the ore grades; however, the rising prices of gold has more than made up for the losses. The company has given a guidance of 290,000 to 300,000 ounces of gold production for the full year 2020, which is almost close to what it produced in 2019. The strengthening of gold prices though will continue to provide strength to the company’s bottom line. During the course of last four years (FY15-19), the group’s revenue grew at a CAGR of 9.39 per cent. On a YTD basis, the group has delivered a share price return of 49.09 per cent.

  1. Asos Plc (LON: ASC)

The UK listed fashion retailer has shown resilience, and flexibility, during the unprecedented crisis. It has delivered strong performance despite the tough economic and social backdrop. The recent trading dynamics shall deliver FY20 sales and profitability ahead of market expectations, and further strong underlying cash generation is expected this year. Revenue growth is projected between 17-19 per cent along with profit before tax of £130-£150 million, according to the pre-closing trading update for 2020. During the course of last four years (FY15-19), the group’s revenue grew at a CAGR of 24.15 per cent. On a YTD basis, the group has delivered a share price return of 51.58 per cent.

Overall, the AIM listed businesses offer a much higher potential of growth in comparison to the mainstream premium listings. A prudent stock selection approach in the AIM segment could increase the chances of unlocking the full potential of the investment. These stocks are the most sought after category for young investors. However, due to relaxed norms, there are chances of price manipulations and liquidity risks. Moreover, high-risk takers such as institutional investors can substantially impact the share price movement of an AIM listed stock.

 

 


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