90. FW Thorpe
Family-owned lighting equipment specialist FW Thorpe (TFW) is a 10-bagger. True, it's taken a decade to turn a 100p stock into one worth over £10, but profits have been growing steadily and long-term prospects remain sound. That success has been overseen by most of the current management team. All but two of the eight-man board have been there for 25 years or more, including chairman and joint chief executive Andrew Thorpe and non-executive director Ian Thorpe, both grandsons of founder Frederick William.
In fact, the Thorpes still own more than half the company. That, however, does affect liquidity and can be responsible for sharp movements in the share price in either direction. Andrew Thorpe warned at the annual meeting in November that sales growth was likely to slow - reduced government spending and order delays as customers weigh up new light emitting diode (LED) technology are the most likely explanation - yet the shares jumped almost a third in just three months. Recent half-year results have removed some of the froth amid evidence that Thorpe's core LED business Thorlux, which supplies lighting systems for schools, warehouses and office blocks, is suffering. It generates most of Thorpe's profit and the company relies heavily on it. Nevertheless, a cash-adjusted PE ratio of less than 10 makes the share one to hang on to. Hold. LW
89. Mood Media
Ever wondered who supplies the music you hear while browsing in Marks & Spencer or drinking your mocha in Costa Coffee? Blame Mood Media (MM.). It's designed to both directly and subliminally convince customers to spend more. Life, however, has been tough. Less than a year ago, the company was worth almost £500m and was knocking on the door of Aim's top 10 largest companies. Since then, it's lost two-thirds of its value and is still haemorrhaging cash. Revenue grew 62 per cent to $444m in 2012, but costs ballooned, too, and Mood lost over $25m, even after receiving a $14m tax credit.
Management has kicked off an efficiency drive which should help the company get a grip on costs. It also looks as though the entertainment business will be sold at last. The idea was first mooted a year ago and it can't come soon enough. Making music compilations and selling computer games generated an operating loss of $20m in 2012 on top of a $33m write-down. Sell. LW
88. M&C Saatchi
Media agency M&C Saatchi (SAA) has seen its share price rise 219 per cent since 2009, a reflection of the prudent way in which the group is run. When problems arise, management is quick to tackle them head-on, unafraid to shake up divisions that aren't profitable enough or relaunch into areas where it sees significant opportunities, such as New York.
The agency made several new business wins in the year to 31 December, including Peroni, InterContinental Hotels and Virgin Holidays, thanks to its tried-and-tested ability to quickly roll out its successful approaches across the network. Mobile business is booming in the Middle East and Africa, too, where revenue has nearly doubled. Even profits in Europe grew 14 per cent last year and by nearly 50 per cent in Australia and Asia. That resulted in group underlying pre-tax profits rising 10 per cent to £17.2m, while the operating margin was held steady despite competitive pressures.
Rising numbers of multi-channel campaign wins are also proving lucrative. For example, M&C Saatchi was commissioned to do advertising, social media, digital and PR for the Olympics. The group has a net cash pile of £17.9m, which means it can continue to invest in existing infrastructure - it opened three offices in Abu Dhabi, Singapore and Stockholm in 2012 - make acquisitions and boost the dividend. After adjusting for cash, the shares trade on 11 times forecast earnings - which is modest for a company growing as quickly as M&C Saatchi. Buy. JB
87. Zambeef
Africa is a risky place to invest, despite the general consensus that its economies are underdeveloped and likely to keep growing quickly. High poverty rates, political corruption and sectarian violence continue to depress a continent whose natural resources mean it should be one of the most prosperous regions in the world.
But if you're willing to take those risks, a well-run company such as Zambeef (ZAM) could be just the ticket. The Zambian-based agricultural business produces, processes and distributes beef, chicken, pork, milk, dairy products, edible oils, stock feed, flour and bread. It operates 87 stores under the 'Zambeef' banner, as well as 20 in-house butcheries in Shoprite supermarkets across Zambia. The retail side is expanding into Nigeria and Ghana, and Zambeef even owns seven fast-food outlets, called Zamchick Inn. That leaves it well-placed to serve Africa’s growing prosperity, particularly as food production needs to double by 2050 just to avoid widespread starvation.
Zambeef's key divisions consistently deliver strong revenue growth, driven by high levels of demand - Zambia's GDP growth has averaged 6 per cent a year since 2005 and is expected to continue at this level, although poverty rates remain still stubbornly high in the country. Meanwhile, Zambeef's profits have been volatile as operating expenses have fluctuated. Trading on 11.4 times forecast earnings, the shares are cheap considering the earnings potential and have already risen 25 per cent year-to-date. However, for those who bought on our buy tip (45p, 28 October 2011), it might be worth taking some profits, given that the share price is prone to volatility. Hold. JB
Unitech Corporate Parks (UCP) raised £360m in late 2006 to build six office complexes in India. The idea was to provide a home for the then fast-growing IT outsourcing sector, which operates out of vast campuses in so-called Special Economic Zones on the fringes of major cities. This was the brainchild of a major Indian developer, Unitech, which has a market capitalisation in Bombay of 61.6m rupees (£750m). London-listed UCP provided 60 per cent of the equity, with Unitech supplying the other 40 per cent and managing the joint venture.
The financial crisis blew the plans off course. As the IT services boom faded, office rents plummeted - reducing the estimated value of the developments – and the venture struggled to get the leasing commitments it needed. Some markets have since stabilised, allowing the company to proceed cautiously after a period of suspended animation. One scheme in Gurgaon is due to be finished by the end of the year; 53 per cent of the space is already let and income-producing. For the others, the projected completion dates range from 2016 to 2023 - a decade later than initially anticipated.
UCP's shares trade at a 31 per cent discount to the company's last-reported book value of 53p a share, which could theoretically be realised if the board decides to wind the whole project up early. But that book value is based on valuations that are too speculative to interest all but the bravest investors. Developers are opaque at the best of time; buying into an Indian developer looks a punt too far. Sell. SW
85. Patagonia Gold
Emerging gold miner Patagonia Gold (PGD) is getting closer and closer to full-scale gold production at its Lomada heap-leach project in southern Argentina. The company has been successfully producing gold from a trial leach pad these past few months but construction of the main heap leach site is well advanced and on target to achieve full production of 21,000 ounces of gold a year.
Despite these positive developments, Patagonia's share price continues to drift steadily downhill - the shares are now worth a mere fifth of what they were when the gold price peaked around $1,900 in mid-2011.
And while back-of-the-envelope calculations suggest the Lomada operation could spin off nearly $21m (£14m) a year in free cash flow, a good chunk of that will be eaten up by administrative expenses and exploration costs at Patagonia's other projects. Rather than pay dividends, Patagonia hopes to self-fund exploration at its flagship Cap-Oeste property and other earlier-stage projects nearby.
So, although the promise of solid cash flow is firmly on the horizon, this looks fairly priced in given Patagonia’s current market capitalisation of £122m. Investors must wait for further direction from the gold price before the market assigns value once again to undeveloped exploration projects. Hold. MA
Emerging gold miner Patagonia Gold is getting closer and closer to full-scale gold production at its Lomada project in southern Argentina.
84. Waterlogic
Waterlogic (WTL) floated on Aim in 2011 and did very well selling drinking water purification and dispensing systems to offices, schools and hotels. Domestic appliance manufacturers like its Firewall purification technology, too, and Indesit recently signed a four-year deal for devices which fit in the kitchen.
Sales grew by almost a fifth in 2012, including a sharp increase in rental revenue, but a big jump in acquisition and administration costs halved profits at both the operating and pre-tax level. Still, the company had net cash of almost $30m at the end of December despite snapping up three businesses during the period. Bosses have bought another four since, but say there's plenty more headroom to bankroll further deals.
It looked like the wheels had come off in November when the company warned of a substantial full-year profits miss, largely due to macroeconomic problems, but also some project delays. That eventually wiped over a third off the share price and, while there has been a partial recovery since then, Europe's economy continues to struggle. Hold. LW
You don't hear much these days about 'rare earth elements' (REEs) - a collection of 17 related metals that are used in many important technologies such as smartphones and electric cars. Nor, for that matter, do you hear much about thinly traded Rare Earths Global (REG), the Chinese refiner and trader of such specialty minerals that listed on Aim in early 2012.
That's because the price bubble for REEs finally burst last year, with prices for many of the metals tumbling by as much as 60 per cent. China, which accounts for about 95 per cent of REE production, had severely curtailed international exports of the raw materials which had temporarily inflated prices. But lately the Chinese government has announced it is changing its stance on REEs, and Rare Earths Global blames an uncertain regulatory environment for the fact that it expects to report a normalised loss for the financial year ended 31 December 2012.
In fact, Rare Earths Global has experienced significant delays in receiving its production quota and did not even receive an export quota at all in 2012 as the government reviewed its policies. The uncertainty has caused Credit Suisse to back out of talks regarding a proposed new $50m (£33m) debt facility. We side with the Swiss bankers here. Sell. MA
82. Globo
Globo's (GBO) Greek origins have proved something of a millstone around the neck of the fast-growing mobile software company - when it came to Aim in 2007, the bulk of its sales came from its economically challenged home market, and the Greek government in particular.
However, the group has successfully diversified away from Greece and the sale of its struggling domestic software business in December has eliminated any dependency on the ailing country.
As it happens, Globo won't be abandoning Greece altogether - it's more a case that international growth rates have been so fast, as more and more businesses sign up to its suite of products that allow employees to work remotely. Mobile applications now make up more than three-quarters of sales. Overall sales are expected to have hit €58m (£49m) in 2012, up 28 per cent on the previous year and a fivefold increase in five years, while new distribution agreements such as the one recently signed with Ingram Micro in North America should keep growth rates ticking upwards.
It's a profitable business, too - pre-tax profits in 2012 should easily beat broker RBC's $18.1m target, a 50 per cent year-on-year increase. Yet, even after a decent run, the shares still trade on a conservative forecast PE ratio of 11. That doesn't reflect Globo's rapid growth. Buy. JSH
Eco Animal Health (EAH) has nestled quietly under the radar for some time but it is one of the largest health-related companies on Aim, with a market capitalisation of £140m.
The company was founded in 1972 and specialised in trading minerals, chemicals and specialist machinery. After changing little for several decades, the business was subsequently reorganised to focus on animal health, while at the same time reducing the original family holding in the company from 75 per cent to below 30 per cent of the issued shares.
Eco Animal Health's main product is called Aivlosin, which is an antibiotic-based treatment for respiratory diseases in all types of farmed animals. The last set of results showed sales of £28m, with pre-tax profits of over £2.3m. The company has been expanding into new markets with the recent approval of Aivlosin in Russia. Eco’s profile is low but it makes steady progress and its overall profitability compares well with competitors. Hold. JH
