The Investment Column: Hardman and NETeller are the stars in our look at AIM's big five

Civica keys in a neat programme for growth

The top five largest companies on AIM would all be contenders for mid-cap status were their shares to trade on the main list, but they prefer to be big fish in a different pond. In their various ways, they reflect the good and bad of AIM.

We have two connected with the hot investment area of the moment, online gambling; two foreign oil explorers of contrasting reputations; and one retailer run as a personal fiefdom and dragged kicking and screaming off the main list by its chairman in 2003.

Hardman Resources has earned investors' respect since it arrived on AIM in 2002. It is an Australian company of long standing, a speculator which has hunted for gold and for diamonds in the past but which has now focused on oil and gas and where its pioneering work in Mauritania is paying off. It has stakes in several exploration blocks off the coast of the West African country, where its bigger partner is close to commencing production from the first block. Its shares have risen in line with this progress, but there could be upside from further work in the area, and from its other interests across the globe, including in Uganda and the Falkland Islands.

An ex-BP executive is a recent arrival as chief executive, and it appointed JP Morgan Cazenove yesterday to support its long-standing broker Oriel Securities. Both appointments suggest ambition to become a serious player in exploration and production, and the next fundraising may see it graduate to the full list. 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. The shares have collapsed as a result (the loss of value, in absolute terms, is worse than on Regal Petroleum, another over-hyped stock). Even joint venture talks with Repsol may not come to fruition, the company admitted last week.

Sportingbet has confounded all its sceptics. It was one of the first online bookies and has grown with public demand for ways to gamble over the Net. It has taken advantage of the cloudy legal situation in the US, where online gambling is outlawed, meaning punters go to offshore operators. Some two-thirds of Sportingbet's custom comes from the US.

It also recently bought an online poker site, Paradise Poker, 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. The multiple of earnings at which Party Gaming is being floated is a 20 per cent discount to Sportingbet. That seems too much, given that Sportingbet takes on the bookies' risk of losing, while Party Gaming simply takes a cut of the money wagered. It seems more likely that Party Gaming will rise than that Sportingbet will fall, so hold on to Sportingbet shares.

NETeller is a related business, 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. Its shares on flotation last year had to be heavily discounted because of investor scepticism over the US legal situation, but its earnings look resilient and its shares are still a buy.

Then there is Monsoon, which moved to AIM as part of an attempt by Peter Simon, the chairman, to wrest more control from institutional shareholders. He already controls more than 60 per cent and AIM's lax rules on company disclosure suit him fine. The City is in a bit of a huff about this and few retail analysts cover the stock, but the shares still look fair value. Balanced against the corporate governance risks and the potential for a consumer slowdown is Mr Simon's ambitious expansion plans and a chief executive who has been able to fill up the stores with much more appealing merchandise of late. Hold.

Civica keys in a neat programme for growth

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.

A year ago we tipped the shares at 193p following the company's interim results. After this year's six-month figures, published yesterday, the shares settled at 224p, so netting a 16 per cent gain. In the intervening 12 months, the shares have been up to 253p, more than repaying our confidence.

At the moment, the state's coffers are being raided for investment, so Civica is in a good place. But it also should be protected from the worst should the spending cycle turn down. When the Treasury's largesse is squeezed, the productivity gains that Civica's software delivers become even more important.

Apart from selling its own software, Civica also has a consulting business that helps public bodies make sense of new technology. The company's third leg is managed services, which involves taking charge of local authorities' more boring tasks, carrying out paperwork and administration at a price that offers attractive savings. It also has an old low-margin business selling Microsoft software, but that is being deliberately run down.

All this translated into sales of its core consulting, software and managed services of £22.4m, up 36 per cent. Operating profit was up 25.7 per cent to £5.5m.

To bolster its business, Civica also announced the £7m acquisition of Flare Software Systems, which handles pub licensing, trading standards and environmental health systems. The deal is being paid for in cash and shares involving a £10m placing with the excess being used for working capital for the enlarged group.

Civica trades on a price earnings multiple of 14 times for this year, falling to 12.4 times in 2006. The rating has not run away, so Civica is still a buy.