The Alternative Investment Market, or AIM, has more flexible regulations than the main London stock market and can provide advantages to startups and other smaller companies in their early days. Here are two that have just reported, and I like the look of them.
A cracking 10 years
Accesso Technology (LSE: ACSO), formerly known as Lo-Q, does ticketing and virtual queueing systems for amusement parks, water parks and other attractions.
And it’s been very profitable for Accesso shareholders, who have seen their shares soar from around 30p a decade ago to 1,570p today. But is there any more growth to come? Reading Tuesday’s full-year results, I’d say there is.
For 2016 we saw pre-tax profit rise by 40.3% to £10.1m, with operational cash generation up 26.5% to £18.6m (and a healthy 97.4% cash conversion ratio). Adjusted EPS put on 25.7% to 51.48p, and net debt was slashed from £9.4m to £3.4m.
Executive chairman Tom Burnet told us that “2016 has been the year in which I believe Accesso has achieved meaningful scale.” He also spoke of “a significant global opportunity in the medium term,” and that’s what I see as key to Accesso’s future growth now as it turns from a ‘blue sky’ pipsqueak into a more mature global business — but we could be entering something of a two-sided phase now.
What concerns me a little is that when a growth darling starts getting towards maturity and its initial rate of earnings appreciation starts to slow, we can suddenly be facing a forward P/E ratio that’s a little high without the EPS growth to support it in the short term, and that can lead some early investors to jump ship. At today’s share price levels, forecast P/E multiples stand at 35 and 30 for the next two years, which is perhaps discouraging.
I reckon we could be in for a volatile year for Accesso investors with slowing overall share price growth, but I see the company as still being near the start of serious profitability and a good long-term buy.
Pharma prospects
There’s no ambiguity about the growth status of Sinclair Pharma (LSE: SPH), as it’s still in a net-investment and loss-making ‘jam tomorrow’ phase — but that should be coming to an end pretty soon.
Results for 2016 showed a 51% rise in sales to £37.8m, with gross profit up 56% to £26.7m and with a gross margin improving from 68.3% to 70.7%. And the firm’s adjusted EBITDA loss is coming down, from £8m in 2015 to £61.m last year.
Sinclair sold off its non-aesthetics business in 2015 for £132m to become, in its own words, “a fast growth high margin pure-play aesthetics business,” and that looks to be paying off. Chief executive Chris Spooner told us that the board “expects Sinclair to be adjusted EBITDA positive in 2017.”
Analysts seem to be in agreement and are forecasting positive earnings per share by 2018, which would put the 35p shares on a P/E of around 27 — that’s pretty meaningless for a year in which a loss turns into profit, and it wouldn’t take much growth beyond that to drop the P/E to something irresistibly low.
The share price has been erratic over the past year, and I expect more of the same as we’re going through a stage in which it’s hard to assign any meaningful short-term valuation. But I’m optimistic for the longer term.
