Trustnet Magazine Issue 44 October 2018 | Page 50

In the back Although smaller companies have consistently outperformed over recent years, there are still hidden gems to be found Richard Power, manager of the FP Octopus UK Micro Cap Growth fund, names three “hidden gems” that are under £50m in size Under 50s T he AIM index has matured a lot over the past five years, with the average market cap now just over £100m. Today AIM remains a stockpicker’s market, and although smaller companies have consistently outperformed over recent years, there are still hidden gems to be found. The team MyCelx Technologies US-based MyCelx has developed technology that removes oil and hydrocar- bons from water. Having navigated the downturn in the oil & gas sector, it is now seeing an increase in demand for its products. Sales last year were up 74 per cent to $13.8m, and first half figures to June FE TRUSTNET [ STOCKPICKER ] 48 / 49 2018 were up 107 per cent, well ahead of expecta- tions. The order book has expanded significantly and given the current mo- mentum, further earnings upgrades are likely. A part- nership with Schlumberg- er should provide another avenue of growth, from which MyCelx recently an- nounced its first order. It is valued at £34.8m. at Octopus scours the breadth of the market in search of earlier stage companies that have the potential to become substantially more valuable in time. Below are three under-the- radar investment opportunities that all have market caps of less than £50m, but which each offer exciting upside potential. Angling Direct Angling Direct is the UK’s largest specialist in-store and online retailer of fish- ing tackle. The company already has 21 stores across the UK, however opportuni- ties lie in the fragmented domestic market and online growth potential, where it has established a leading position: website revenues increased by 58 per cent last year and the company now exports to 40 countries. Angling Direct is expected to report a profit of £1.1m on revenues of £41.3m, an increase of over 35 per cent year-on-year, while margins should also expand as the company achieves further scale. Angling Direct is val- ued at £44.9m. Mi-Pay Group Mi-Pay is a real minnow and a great example of inefficient pricing among the smallest public com- panies. It provides mobile payment and fraud man- agement services to Tier 1 mobile network operators and digital content provid- ers, which typically sign up to long-term contracts. The company has also identified growth opportunities sell- ing its fraud management solutions into other sectors. Revenues of just £3.4m are expected this year, however their recurring nature and the company’s growth plat- form mean there is substan- tial upside from the current market cap of £4.5m. trustnet.com