The Week In Review: Take AIM for profits in the online betting game

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The Independent Online

Let us be the first to congratulate AIM, the lightly regulated stock market for small and growth companies, on its 10th birthday tomorrow.

Let us be the first to congratulate AIM, the lightly regulated stock market for small and growth companies, on its 10th birthday tomorrow.

Oh all right, then, not exactly the first. The market has been fêted as a soaraway success story for most of the past two years, and it is attracting record numbers of companies, which are raising record amounts of cash.

The top five largest companies on AIM would all be contenders for mid-cap status were their shares to trade on the main list. In their various ways, they reflect both the good and the bad of AIM.

Two are connected with the hot investment area of the moment, online gambling. Sportingbet - set up by Mark Blandford and valued at more than £900m, AIM's biggest company - has taken advantage of the cloudy legal position in the United States, where internet gambling is outlawed, meaning that punters go to offshore operators. It also recently bought an online poker site, Paradise Poker, as advertised by the model Caprice, and it is one of the nearest stock-market comparators to Party Gaming, which is floating on the main list with a value of about £5bn. Hold on to Sportingbet shares.

NETeller is a related business, a provider of an "e-wallet" which moves money from online gamblers across to the poker and other sites. It takes a cut along the way, and its shares are a buy.

Hardman Resources is a fine example of the foreign natural resources companies that have found AIM a useful source of fundraising. It is an Australian company of long standing, and its pioneering work in Mauritania in North Africa is paying off. There could be upside from further work in the area. The shares look a decent long-term buy.

It is not possible to say that about First Calgary Petroleums, whose focus is more narrowly on Algeria, and whose high-profile attempt to sell itself last year ended with no major oil company willing to pay up.

Then there is Monsoon, which moved to AIM as part of an attempt by Peter Simon, the chairman, to wrest more control from minority shareholders.

AIM's relaxed rules on company disclosure suit him fine. Balanced against the corporate governance risks and the potential for a consumer slowdown is Simon's ambitious expansion plan and a chief executive who has been able to fill up the stores with much more appealing merchandise of late. These shares are worth holding.

TEN ALPS COMMUNICATIONS

Ten Alps Communications is famously the television production company where Sir Bob Geldof is a director. TV production is a sexy area at the moment, but Ten Alps has less exciting advertising and events management arms and its shares look toppy. Avoid.

MAJESTIC WINE

While other retailers flounder like a man blind drunk, the wine warehouse group's annual profits just fizzed higher for the 12th consecutive year. Majestic's customer numbers were up, the amount they spent per visit was up and so was the average price of a bottle of wine. Buy.

CIVICA

Civica is a technology company mining the rich vein of demand for software from the public sector. Its systems drive a plethora of complex day-to-day functions, from local authority procurement to collecting parking fines. Buy.

NEWMEDIA SPARK

About a dozen of NewMedia Spark's investments from the dot.com era are still active, and in the year just gone it sold one business for real money. The shares are worth a punt before winter, when the company plans to begin investing again.

GRIFFIN MINING

With Griffin Mining, unlike some of AIM's more famous explorers, you don't have the worry of a management prone to hype or worse. Over seven years, Griffin has proved up its reserves of zinc at a single site in China and invested in a new mine which opened this week. Speculative buy.

FORMSCAN

Formscan has been to hell and halfway back over the decade since being a founding member of AIM.

Now its document sorting business - whose kit ensures confidential documents, usually credit card bills, do not get mixed up - has got some government work up its sleeve. Speculative recovery play.

ATHELNEY TRUST

Athelney is an investment company seeking long-term value among small caps. Historical surveys suggest small caps outperform over the long run, and stockpickers can prosper. Athelney shares' 20 per cent discount to net asset value is unfair given the track record. Buy.

DART GROUP

Dart is not on AIM yet but it is moving across in August. It runs cargo planes and Jet2, a low-cost airline. Fuel costs have risen sharply and it is not clear how much of that can be passed on to Dart's customers. The stock will struggle to gain altitude.

The above is a selection of small company shares on the Alternative Investment Market discussed in the daily Investment Column

Ambition drives Torex Retail towards the stratosphere

The AIM market is an ideal home for companies pursuing a "buy and build" strategy, aiming to create a mighty group through a string of acquisitions.

Torex Retail is one of the most ambitious currently on AIM, having carried out three takeovers in the past month, including two in a week.

It is a software company, whose products links store tills with head office to give retailers vital information on customers' shopping habits. It plans to consolidate the still-fragmented UK market, expand its operations in Continental Europe and has now built a bridgehead into the US, with the aim of creating a global software giant selling a wide range of technology to retailers. Chris Moore, chief executive, wants this to be a £1bn company, no less, in five years.

It may be a moot point whether the value of the whole will be greater than its parts would have been separately. But for the Torex Retail shareholder, as long as acquisitions are quickly earnings enhancing, as all the recent deals have been, the gains ought to be real. Buy.

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