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3 Soaring Small-Cap Bargains: Jubilee Platinum PLC, Alliance Pharma plc And AdEPT Telecom plc

While the FTSE 100 has produced a net movement of pretty much zero in the past 12 months, it’s been a great year for some small cap stocks. I’ve been looking at three (all listed on AIM) whose prices have climbed, and asking if there are further gains to come:

Precious

Shares in Jubilee Platinum (LSE: JLP) have more than trebled in price in the past 12 months, to 4.4p, with the bulk of the gain coming since the middle of July — and that’s all happened while the price of platinum has been falling! So what’s the story?

The company has been working on a new platinum surface processing project, which CEO Leon Coetzer has described as “transformational”, with plans for processing an estimated 4.4 million tons of platinum-containing surface material. The big boost came on 16 July when Jubilee announced the sale of its non-platinum Middelburg assets for £5.8m which would help fund the surface processing project.

Then on 4 August we heard that the debt portion of the funding is pretty much secured with “a major financial institution”. The times ahead could be exciting.

Mature drugs

Alliance Pharma (LSE: APH) shares have been climbing ahead of interim results due on 9 September, gaining 73% to 59p since this time last year — with most of the rise coming since mid-June. A pre-close update in July, from the company that specialises in acquiring “mature” pharmaceutical products and then manufacturing and marketing them, indicated first-half sales of around £22.8m and told us that Alliance “continues to explore a number of acquisition opportunities“.

Whether that acquisition plan justifies the current share valuation is uncertain, though, as we’re now looking at a forecast P/E for 2015 of more than 17, with only single-digit EPS growth expected this year and next and dividend yields only around 2%. On that kind of valuation, I can’t help feeling the shares are high enough at the moment.

Telecoms success

For a really stunning rise, we only need to look at AdEPT Telecom (LSE: ADT). Its shares have doubled over the course of a year to 249p, which is good enough on its own — but they’ve 12-bagged in five years!

AdEPT provides business telecommunications services, and it’s a strategy that has paid off in the form of double-digit earnings growth every year for five years in a row and with the same forecast this year. At the same time, the dividend yield has gone from nothing in 2010 to 3.4% last year. The big question is when that growth is going to slow, especially as this is a small company in a very big market — and EPS growth for 2017 is currently forecast at only 2%.

At market-average P/E ratings the shares don’t look overpriced, but for me the rapid price growth is in the past now.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.