Small Talk: Commodity plays dominate list of this year's Aim winners
Monday 20 December 2010
With just a few days to go until the new year, it is time to take stock of how things have played out on the Alternative Investment Market (Aim) in the past 12 months.
The market backdrop has certainly been busy. In the UK, we have had a general election, the formation of the Coalition Government and the implementation of a fiscal squeeze; and in Europe, Greece and Ireland have had to be bailed out to stop the spread of the sovereign-debt crisis. In the wider world, commodities rallied strongly as emerging markets strengthened and investors regained their confidence.
These and other events have, unsurprisingly, influenced the mood the markets. A glance at list of the best performers on the Aim All-Share Index swiftly yields companies geared to these trends.
The leader, with a gain of more than 1,500 per cent in the year so far, is Condor Resources, which explores for gold and silver, two highly prized commodities, in Central America. The second-best performer so far, Arian Silver Corporation, is also exposed to precious metals. As the name suggests, it is a silver producer, focused on Mexico's well-known silver belt.
Both silver and gold have done extremely well in the past year as investors, faced with continuing economic uncertainty and the threat of inflation, sought to hedge their bets.
At the end of last week, gold was trading at around $1,371 per ounce, leaving it well within strikingdistance of the $1,400-per-ounce mark seen earlier this year, and comfortably about the $1,000 mark seen at the beginning of 2010.
Silver also remains firm, and on Friday was trading at above $28 an ounce. Earlier in December, silver prices touched a record, climbing above the $30-an-ounce mark for the first time since 1980.
Numbers six and nine on the best-performer list – Red Rock Resources and Beowulf Mining – are also commodity plays. The former, which has projects in Australia and Africa and, via affiliates, in South America, is focused on the discovery of gold, uranium and other minerals, while the latter is active in Sweden. Beowulf also offers exposure to a variety of commodities, including iron ore, which has been doing well in tandem with the pick-up in steel-making. The third strongest, Niche Group, and Parkmead Group, in fourth place, are both investment companies. Niche has interests in gas exploration and development in Turkey and attracted quite a bit of interest. It rallied by 125 per cent when the Irish entrepreneur John McKeon, known to investors from his involvement in the North Africa-focused oil explorer Circle Oil, came on board as a consultant earlier in the year. Mr McKeon is also one of the largest shareholders in the company.
Parkmead, which specialises in oil and gas exploration and production, received a boost in October, when it named Tom Cross as its executive chairman. Mr Cross is another name that should be well known to investors in the oil space. He used be the chief executive at FTSE-250 listed Dana Petroleum, which was bought out by the Korea National Oil Corporation in a flurry of publicity.
The other big winners – Encore Oil, Chariot Oil & Gas and Nautical Petroleum – are also exposed to similar sectors. Oil is the common theme here. And as with industrial and precious metals, prices have rebounded strongly and were hovering around the $90-per-barrel mark at the end of last week. Happily for investors, analysts are hopeful of further gains in the year ahead.
Avesco, at tenth place, is the outlier. Unlike the other top performers on the Index, it has nothing to do with digging or extracting things out of the ground. Far from it, in fact, for it offers services such as the provision of audio-visual equipment to the corporate entertainment and broadcast markets.
It received a push in July when investors bought on news of a multi-million dollar windfall following a favourable resolution of a court case involving Celador International, in which Avesco has a stake, and the US entertainment giant Disney.
Fuse 8 eyes growth amid online-marketing surge
last week, Fuse 8 released its maiden half-yearly results. The digital-marketing agency, which is based in Leeds and London, listed on the Aim in July and offers a variety of services, including building websites and media planning, for big and small companies.
The client roster boasts big names such as Asda, British Airways and Persimmon Homes, and also includes smaller customers spread across the UK, Europe and the US.
The results, which followed the acquisition of Delete Digital Marketing, a full-service digital agency, evidenced a good performance, with Fuse 8 posting headline operating profits of around £230,000 on a turnover of £2.4m. The profits figure was lower than last year, but the turnover came in higher than the £2.1m booked in 2009.
Though new to the Aim, Fuse 8 was founded 10 years ago and now employs around 90 people. Most are based in London and Leeds, with the remainder located in Russia, where the company does its back-end work. The websites, for instance, are designed here, while the programming and other technical aspects are done in Russia.
The company prides itself on working out how to draw traffic – that is, how to get customers clicking on to their clients' websites – before building the design around it. The idea, management says, is to make sure that the end result is not merely attractive, but that it also works for clients.
That focus should come in handy as the digital-marketing business grows in coming years. The forecasts are certainly promising. A recent report from the researchers at WPP's GroupM division predicted that internet advertising was likely to contribute to 37 per cent of global advertising growth next year and, in terms of value, is likely to swell to more than $80bn (£51.5bn). That bodes well for Fuse 8.
The analysts at FinnCap also highlighted the potential of this market when they initiated coverage on Fuse 8's shares last week. "In the past four years," they pointed out, "the share of online advertising as a proportion of total advertising has grown from 5 per cent to above 20 per cent, and this shift in emphasis is expected to continue."
This company is clearly one to watch as the market grows.
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