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
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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.
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