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The Aim 100 2021: 10 to 1

The Aim 100 2021: 10 to 1
The Aim 100 2021: 10 to 1

10. Ceres Power

Ceres Power (CWR)  is a clean fuel-cell technology company whose potential can be underlined by the fact that it raised £181m in growth capital from shareholders in March – more than 10 times its half-year revenue. 

The equity raise was backed by prominent shareholders Bosch and China’s Weichai Power, with whom it remains in talks about a joint venture or wider strategic partnership.

The company licenses its technology as opposed to manufacturing fuel cells and chief executive Phil Caldwell told investors during an interim results presentation in September that the additional cash would allow it “to potentially double the market applications” for its use. It is developing uses in electrolysers to produce green hydrogen and has received government funding to develop methods for cells to power ships.

The company is not expected to generate a cash profit for the next five years, according to FactSet consensus estimates. It is currently valued at £2.2bn, which broker Panmure Gordon argues is way too cheap. A joint venture with Weichai, an upgrade of its shares to the London Stock Exchange’s main market and potential partnerships for green hydrogen could all spark reratings, it argued. On the other hand, HSBC analysts believe the company is overvalued, warning that technologies other than Ceres’s solid-oxide cells are more advanced in the development of hydrogen electrolysers. Given that Ceres Power expects to invest about 55 per cent of fundraising proceeds in electrolysers, it may be best to wait for evidence of revenue generation from this. Hold. MF


9. ITM Power

The word ‘giga’ gets thrown around a lot these days. Another 2021 financial market trend for which we can thank Elon Musk. ITM Power’s (ITM) latest factory plan, which it calls a gigafactory, does fit the description: the University of Sheffield site, bought for £13m, will have a capacity of 1.5 gigawatts (GW) of hydrogen electrolysers a year. This capacity refers to the combined output of all the units built at the factory. ITM’s largest unit is a 2 megawatt – or 0.002GW – container that puts out 36kg of hydrogen per hour. 

So if investors were thinking of this as equivalent to a Tesla factory such as the 100-football-field plant in Nevada, they would be mistaken. 

But that’s not to say the company lacks a growth trajectory – its sales are forecast to increase from just over £4m in the year to April 2021 to £23m next year and £68m in FY2023. While it is certainly valued on sales a few more years into the future given the £3bn market capitalisation, we think hydrogen exposure is worth having. Buy. AH


8. Keywords Studios

Keywords Studios (KWS) is a video games service provider so its shares generally move in line with the fortunes of game developers. Like them, it saw a lockdown boost in value before plateauing over the past few months as investors reappraised the sector’s growth trajectory. The slight difference, though, is that Keywords is more interested in the volume of game production rather than the direct success of the games franchises themselves.

The first half of the year was a success, with cash profits up 64.6 per cent to €50.7m (£43.3m), which pushed the underlying margin up 3.4 percentage points to 21.2 per cent. Cash conversion was strong, with the adjusted rate over 90 per cent.

New boss Bertrand Bodson, formerly chief digital officer at Novartis, will be happy with developers’ healthy pipelines. Some are playing catch-up due to the development disruption caused by the pandemic and lots have cash to invest in new games. This means next year there should be a continued high demand for Keywords services.

Management believes the outlook for 2021 is reflected in current market consensus, which has earnings at 69¢ per share for FY21 and 76¢ in FY22. The shares carry decent prospects, at a high price. Hold. AS


7. RWS 

RWS (RWS) provides translation and intellectual property services to companies with operations in multiple markets, particularly where regulation demands that information be consistent and compliant with international standards, such as in the pharmaceutical industry, for example. The pandemic dealt a big blow to several of RWS’ customers as clinical trials were delayed or cancelled, but the industry, as a whole, seems to have come through the worst of it as restrictions have been lifted. The company also announced a merger with its main rival SDL late last year with the combined group declaring an improvement in both margin and operational efficiencies in a recent trading update.  

While some of the uncertainty around its end-markets seems to have lifted, RWS’ shares have traded in a very wide range this year as investors went through multiple bouts of pessimism and optimism. The reliance RWS has on the US market, and the relatively low barriers to entry in the core business, keeps us cautious. Hold. JH


6. Fevertree Drinks

Investors in Fevertree Drinks (FEVR) have had a bumpy ride. There were years of blistering performance after the group’s 2014 listing, then the shares were down 75 per cent from their 2018 peak as the pandemic hit. The maker of premium tonics and mixers is now on the road to recovery, helped by its high-end offering.

The premiumisation trend has long been key for Fevertree. IWSR, a body which analyses the alcohol market, expects the market share of premium drinks to rise to 13 per cent by 2024: good news as punters tend to prefer a high-end mixer with their high-end spirit.

With 65 per cent of sales now outwith the UK, Fevertree’s international presence is firmly established. Impressive growth in China, appealing to its budding middle class, can be capitalised on and driven further. The South Korean market has been penetrated for the first time, while robust growth in Australia, Canada, and the US looks set to continue. But with the shares trading on 56 times forecast earnings, this picture looks priced in. Hold. CA


5. Jet2

Predicting the fortunes of travel companies is no stroll along the beach. There is even a major divergence between carriers: EasyJet (EZY) has cut its fleet and flight numbers, while Ryanair (RYA) has expanded, putting billions into buying the Boeing 737 Max 2.0 (which it says no passenger has yet refused to travel on) and pushing for greater market share, with the belief passengers will quickly come back once Covid-19 restrictions are further lifted.

There was also a significant consolidation play in the industry in September, when Wizz Air (WIZZ) pitched a combination with easyJet in an all-share deal, which did not fly with the orange airline. 

Jet2 (J2), which is a package holiday business that sells standalone flights on the side, has gone somewhere in the middle of expansion and contraction. It has ordered 51 new planes since the end of August, compared to an existing fleet size of 90. These are long-term deals that will see planes delivered up to 2029. This comes after the former Dart Group sold off its logistics business last year to help the balance sheet, although this space only got stronger through the pandemic. 

Its 2021 financial year, which ended in March, was obviously a disaster (despite plenty of government support), but consensus forecasts compiled by FactSet see cash profits roaring back in the 2023 financial year to over £500m. This is compared with just under £336m in the 2019 financial year, and so would be an extreme turnaround, marking a mass return to package holidays. 

This side of the holiday industry broadly faced some difficulty even before the pandemic (see: Thomas Cook) but Jet2 sees positive momentum in this area for next year. “Bookings [for summer 2022] to date are encouraging, with average load factors at the same point ahead of summer 2019 and package holiday customer numbers as a proportion of total departing customers showing a material increase,” the company said in September. 

The near-term is less certain, with winter holiday pricing needing to remain “enticing” to encourage bookings. This current financial year looks to be an improvement on 2021 but investors should still expect plenty of losses, as we have seen across the sector despite airports slowly reopening. We're optimistic but will remain on the sidelines until package holiday demand and profitability is clearer. Hold. AH



The early stage of the pandemic offered the perfect stage for e-commerce fashion retailer ASOS (ASC) to thrive. Consumers who were stuck at home during the lockdowns were forced to shop online. At the beginning of the year, the company’s share price was around the pre-pandemic price. At this point things were going as planned.

However, the supply chain issues emerging in the twilight of the pandemic have now largely wiped out its huge valuation gain during 2020. In its recent full-year results, sales were up 43 per cent on a two-year basis to £3.91bn. The issue is that sales are forecast to fall by around a third to between £110m and £140m because of increasing cost pressures. People are also now ordering more formal clothes, which are returned at a higher rate.

Chief executive Nick Beighton stepped down in October and is yet to be replaced. The silver lining for the unchosen successor is underlying sales growth of around a third in the US. A partnership with luxury US department store Nordstrom should help boost its brand in America. If it can emerge from the supply chain storm with a larger US business then its valuation could bounce back. Hold. AS


3. Boohoo 

Boohoo (BOO) continues to be dogged by the supply chain allegations which blew up in the summer of 2020. These included claims of illegally low wage payments in UK factories. Shares have collapsed over the last year, despite revenues soaring by a fifth in the latest interim results.

While the supply chain drama is ongoing – the group is currently implementing improvement actions from an independent review – acquisitions made over the past year have brought expectations of better news. The purchase of intellectual property assets, including those from Debenhams and Dorothy Perkins, represents an opportunity for significant future growth. Management hopes expansion will result in a customer base of 500m people.

Shares were buoyed recently by the announcement of the preliminary settlement of a class action claim around pricing practices brought against the group in the US. The settlement will be “covered in full by the existing provisions disclosed in the group’s published accounts”, which set out £19.1m for claims. The future looks brighter for Boohoo, but it still needs to convince the market it has cleaned up its act. Hold. CA


2. Abcam

We have seen mixed outcomes across the wider healthcare sector since we started “flattening the curve”. But the fact that Abcam (ABC), a dual-listed supplier of protein research tools, boosted its headcount by around 10 per cent in the year to June speaks volumes about its recent commercial progress. The group’s founder Jonathan Milner has likened the business model to that of Amazon: effectively offering a reliable, one-stop, online destination for clinicians to access advanced research antibodies.

The Cambridge-based group delivered a 9 per cent increase in adjusted full-year cash profits to £71.9m, a possible reflection of an increased proportion of in-house developed products. This is an objective under a five-year strategy which kicked off two years ago. 

Over the most recent fiscal period, Abcam also reported an 18 per cent increase in constant currency sales, including double-digit improvements across all its locales, though the accelerated growth rate in China through the second half of the year was perhaps the most encouraging development.

Acquisitions added 2 per cent to reported revenue growth and in October the group completed a marquee deal to acquire BioVision for $340m (£248m), a move aimed at further enhancing in-house innovation while adding scale. BioVision generated revenues of $33.8m through 2020, approximately a quarter of which were linked to Abcam.

As with other companies in the biotech space, Abcam has sought to generate symbiotic relationships with biopharma, diagnostic and multiplex platform partners as a means of accelerating growth, while effectively pooling resources. In the year to June, the number of commercialised antibodies with partners had risen from 459 to more than 800.

Despite clear operational progress, the group didn’t get off scot-free from coronavirus. Sales volumes were constricted as the pandemic led to the widespread closure of laboratories and clinical facilities. But by mid-2021, operations had nearly recovered to pre-pandemic levels. Ironically, the group has developed a range of clinical tools used to help understand and accelerate infectious disease research, including SARS-CoV-2, the coronavirus that causes Covid-19.

Abcam completed a secondary US listing on Nasdaq in October 2020, and has continued to expand its digital and physical infrastructure to support further growth, including the opening of new and expanded sites in China, Massachusetts, and California.

Naturally, the commercial and clinical success of Milner’s brainchild hasn’t gone unnoticed, so expectations of growth upgrades are reflected in a forward rating of 142 times FactSet’s consensus earnings. Hold. MR


1. Hutchmed (China)

Hutchmed (China) (HCM), Aim’s largest company, recently partnered with the FTSE 100’s largest firm, AstraZeneca (AZN), on a global Phase III study of a small molecule inhibitor designed to halt or slow the progress of a potentially metastatic subtype of kidney cancer. The partnership provides Hutchmed with milestone and/or royalty payments, while moderating capital commitments and providing an enhanced route through to market.

The group, formerly known as Hutchison China Meditech, also has a handful of new oncology drugs under development in the US and Europe. Earlier this year, the European Medicines Agency validated and accepted its marketing authorisation application for Hutchmed’s Surufatinib treatment for pancreatic tumours, though it could be argued that China presents the key commercial opportunity due to the size of its addressable market. 

Management anticipates a significant increase in oncology and immunology sales over 2021, but the approvals process and R&D expenditure places a heavy burden on cashflows regardless of the strategic partnerships underway. Yet, the group exited its June half-year with negligible bank borrowings and net cash of $914m (£667m), enough to support further clinical progress this year and beyond. Speculative buy. MR