Fears about the budget are sucking the life out of the AIM market.
The private individuals London’s junior bourse is reliant on for day-to-day liquidity are paralysed with fear about what Keir Starmer’s Labour government might to do taxes and the implications for AIM.
After the a strong start to the year for AIM, it’s been pretty much one way traffic for the index since July. Fears about whether Labour will scrap IHT and other tax relief for investing in AIM shares are largely to blame.
Should the measures implemented in the upcoming budget be anything better than the worse case scenario, one would hope we see a relief rally in AIM shares.
Over time, markets always recognise value in companies, no matter the tax incentives for investing. The market is littered with exciting companies that deserve a higher valuation.
Here are just eight of them.
hVIVO
hVIVO have set an ambitious £100m revenue target for 2028 and everything coming from the company suggests this target will be hit. The company is a specialist in viral challenge studies working with the world’s largest drug companies. Revenue for the first half of 2024 rose 30% to £35.6m as the company launched a new state-of-the-art facility in Canary Wharf, recruited a record number of volunteers for its challenge trials, and implemented automation at FluCamp, it’s flagship virus testing brand.
Avacta
Like any early stage biotech stock, Avacta comes with a high level of risk. However, for those investors willing to accept those risks, the potential returns for shareholders are enormous. The company is focused on developing a drug delivery platform designed to reduce damage to normal tissue during chemotherapy. Should Avacta succeed, the returns for investors will be sizeable, but the outcomes for patients and their families will be immeasurable.
GenIP
The Generative AI analytics specialist listed in October and has already announced orders for one month that totalled 40% of the prior year’s revenue. The company is targeting the technology transfer market with Generative AI tools that help commercial new technologies. Around 70% of potentially groundbreaking innovations produced by Universities and research institutions never reach their full potential in commercial enterprises. GenIP is helping ensure more innovations maximise their commercial potential with the power of Generative AI. Given the size of the addressable market, GenIP shares present very good value.
Yu Group
Yu Group is simply screaming out for a higher valuation and it wouldn’t be a surprise if the power supplier and smart meter installer is snapped up by private equity in a takeover. Trading at just 8.8x historical earnings, the market isn’t efficiently recognising the 60% increase in revenue in the first half of the year. Nor is it appreciating the rapidly growing dividend and capacity for it to ramp the dividend up further in the years to come.
Optima Health
A recent AIM IPO, Optima Health is the UK’s leading provider of technology-enabled corporate health and wellbeing solutions in the occupational health sector, with a revenue 1.8 times larger than its closest competitor. Optima health generated revenue of £110.9m in the year to year to end of March 2024. The company has set out clear ambitions to capture 25% of the £1.4bn occupational health market representing a significant opportunity for growth. Optima is new entrant to AIM, and like all recent IPOs, should have had a better reception.
Cadence Minerals
Long term investors with a propensity for the risky early stage mining sector should spend time looking at Cadence Minerals. The company’s flagship Amapa Iron Ore mine has the potential to produce annual EBITDA many multiples of Cadence’s current market cap. Cadence doesn’t own the entire asset, but its majority stake should eventually yield the company significant cashflows. In addition to Amapa, Cadence has investments in European Metals Holdings, Evergreen Lithium, and Hastings Technology Metals. At £5m market cap, Cadence offers plenty of potential upside.
Yellow Cake
There’s not two ways about it, nuclear power will be a vital part of the world achieving its net zero targets. Yellow Cake is London’s foremost uranium pure play and any investor seeking exposure to the energy transition should pay particular attention to the company. With a market cap in excess of £1.2bn, Yellow Cake is one of AIM’s heavy weights. The company acquires and holds physical U3O8 and engages in uranium-related commercial activities providing investors with direct exposure to uranium prices, which are forecast to increase further, even after more than doubling over the past three years.
Cornish Metals
Cornish Metals working towards restarting production at the South Crofty Tin mine in Cornwall. Once an operating mine at the heart of Cornwall’s mining industry, operations were ceased in 1998 as low tin prices made continuing extraction uneconomical. Fast forward to 2016 and higher prices supported by demand from electronics and industry, Cornish Metals acquired 100% of the South Crofty mine. Cornish Metals is undergoing dewatering of existing South Crofty mine infrastructure with a view to begin production soon after.