Small-caps under the microscope
Article Date: May 27 2009
Scrutinize small caps at the GCI Show
Given the current economic uncertainties, it has never been more essential to rigorously quiz the management of companies in which you are considering investing. At our forthcoming Growth Company Investor Show, you will have the chance to examine them close up, writes James Crux.
While the backdrop for investing in smaller companies has been anything but hospitable over the past 18 months, influential voices, among them Fidelity’s Anthony Bolton, are calling the bottom of what he described as ‘this pretty awful bear market’.
Given that there are signs of a lifting of the recessionary doom and gloom and hopes that we are at the start of a bull market, there has never been a better time to start buying shares. Companies, notably in the small-cap ranks, are cheaper than ever, and with the markets on the cusp of a potential recovery, it could be time to pile in.
But remember, stockpicking acumen remains vitally important, and it is essential that investors meet, question and challenge the management teams of the companies in which they plan to invest. By ‘kicking the tyres’ of prospective investments, you can make much more informed stock selections and avoid painful mistakes.
Taking place at the Barbican Exhibition Halls in London on Wednesday 10 June, the Growth Company Investor Show is your perfect opportunity to meet, face-to-face, with up to 100 growth companies that you are either invested in or have your eye on. The event provides you with opportunities to meet with smaller company management teams and attend presentations given by an array of growth company stars (quoted on AIM and the Full List, as well as those listed on PLUS and Sharemark).
In addition, for the second successive year, our Growth Europe Event will allow you to quiz and listen to the investment cases of ambitious growth companies from the Continent.
Star turns on show
A number of strong performers and recent Growth Company Investor recommendations are set to outline the merits of their investment case at the show, including ‘buy and build’ business Northbridge Industrial Services.
Guided by seasoned CEO Eric Hook, Northbridge, a Company Watch recommendation at 128.5p in 2006, hires and sells specialist industrial equipment to clients in resilient sectors such as oil and gas and power generation.
Crestchic, its main subsidiary, is the world’s largest manufacturer of ‘load banks’, used to test power supplies and hired out worldwide. Northbridge is seeing buoyant demand for the hire and sale of load bank equipment, driven by the need to continually test and maintain power systems, as well as the increasing reliance on power-critical technology within sectors including medical, banking and defence.
Results for calendar year 2008 showed a 40 per cent sales surge to £15.7 million, with pre-tax profits powering ahead by more than 80 per cent to £2.97 million, boosted by currency swings. Following another strong cash performance, the final dividend was increased by 30 per cent, raising the annual total payout to 3.9p (2007: 3p).
Annual highlights included record trading at Crestchic, as it reaped the benefits of market buoyancy in the Middle East, as well as strong demand for product sales from the US and South-East Asia.
Having strengthened its international presence and expanded its hire fleet with the help of recent acquisitions, Northbridge now looks set fair for strong long-term growth.
For 2009, investors might expect robust profits of £2.6 million from a top line
£15.35 million, giving earnings of 22.47p and a 4.25p dividend.
Based on those numbers, the shares, now higher at 157p, are trading on an undemanding prospective multiple of seven times, offer a solidly underpinned yield and represent a buy/hold.
Another AIM-traded counter with resilient qualities keen to outline its plans at the Barbican is Alliance Pharma, the speciality pharmaceuticals concern tipped here at 4.38p earlier this year.
Now valued at £16 million, with its shares having skipped higher to 9.88p, the company is in rude health, having restructured and honed its strategic focus in 2007.
Results for 2008 revealed record levels of sales, profits and cash, reflecting the resilience of its prescription-driven, and therefore recession proof, product portfolio. Sales growth of 20 per cent to £21.8 million helped drive pre-tax profits higher to £2.4 million, a six-fold increase for the year, while analysts see dividends commencing within the next year.
Knowledge is power
A further invaluable component of the show is its seminar programme, where you’ll be able to learn the secrets of successful investing from a slew of expert speakers, all under one roof.
Among the luminaries set to speak are technical analysis guru Sandy Jadeja and Terry Bond, who helped to establish the investment club movement in Britain. In addition, some of the UK’s leading smaller company fund managers will be in attendance, including Neil Hermon, who manages the Henderson Smaller Companies Investment
Trust, Gervais Williams, who heads the small-cap team at Gartmore Investment Management and respected Schroders fund manager Rosemary Banyard.
Small-caps on show:
Advanced Medical Solutions
Alliance Pharma
Braemore Resources
C-ads
Chromex Mining
Education Development International
ERHC
Falklands Oil and Gas
Gasol
Goldplat
ILX
Keycom
LPA
Minerva Resources
Montague Pitman
Nighthawk Energy
Norseman Gold
Northbridge Industrial
Omega Diagnostics
Rockhopper
Running River
Scancell Holdings
Tristel
Zeta Compliance Group
By pre-registering today, you can ensure that you will have a place at this celebrated exhibition. You can register free of charge by visiting the website www.growthcompanyinvestorshow.co.uk. Pre-register soon and save the £25 entrance fee on the day.
This story is from Growth Company Investor, the independent voice on fast-growing companies. Subscribe today for the latest AIM recommendations.
