AIM stocks to watch: I think the PAF and APH share prices look promising

With a high gold price, the PAF share price is thriving, and APH’s strong product lines could stand it in good stead too. I see them as AIM stocks to watch.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With the price of gold on a tear, there has never been a better time to be in gold production, I feel. Pan African Resources (LSE:PAF) is a South African gold producer and an AIM stock to watch, in my view. The PAF share price has skyrocketed 99% in the past six months and it now has a market cap of £545m. The company kept things ticking over in a reduced capacity throughout lockdown. But it continues to make strides with revised production guidance for FY21 of 190,000 ounces.

And it recently undertook a feasibility study on its Egoli Project, which shows a life of mine of between nine and 15 years, with gold production of 72,000 ounces annually and mining rights in place until 2038. In the meantime, the company already has several other mines producing substantial quantities of the precious metal.

Paying down debt

The rand/gold price is approaching an all-time high and this could mean Pan African achieving debt-free status before the end of FY21. 

With a forward EPS of around 16p, and current share price over 24p, the company has a price-to-earnings ratio of 1.5, which makes it a cheap UK stock. Its dividend yield is only 0.5%, but management would like to return to being a sector-leading dividend-payer later this year. Also appealing (and a key issue for future-proofing any business) is the fact that the company is big on safety and strongly committed to Environmental, Social and Governance (ESG) awareness.

But operating a mining company in South Africa comes with considerable risk. Covid-19 continues to pose a danger in developing countries, and political strife can wreak havoc. The South African economy is struggling, and the treasury has said it needs to raise an additional R40bn in taxes over the next four years. This could mean Pan African Resources is in for a steep hike in tax payments.

For these reasons, the PAF share price is likely to experience volatility. This makes it a share for those with a high risk-tolerance only. But I think it’s an AIM stock to watch nonetheless.

Is the APH share price stuck in a rut?

Alliance Pharma (LSE:APH) is a leading international healthcare business. It recovered from its March market crash low, but the APH share price has been coasting, with little excitement ever since. 

Alliance Pharma owns an array of products including Kelo-Cote,  MacuShield and Nizoral, each of which has a unique selling point. They’re proving popular in Asia-Pacific, where Alliance is rapidly growing its market share. Sales of Kelo-Cote for the first half were up £1.1m.

It cancelled its final dividend payment for 2019. This could be one reason for the APH share price dwindling in recent months. It may be stuck in a rut, but sales are picking up in China and the CEO is confident growth will resume later this year.

Altogether, Alliance Pharma has over 90 products selling in over 100 countries. It’s no stranger to acquisitions, and I wonder if it may take advantage of the economic downturn to acquire more unique brands. With a market cap of £392m and a P/E of 15, it’s not dirt-cheap but I think high demand for its products could give it appeal as a potential takeover target. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Alliance Pharma. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »