MARKET CAP: £1BN & ABOVE 

IQE +318%

To call IQE’s (IQE:AIM) share price run this year remarkable still understates the performance. At one stage last month the stock closed at 178.75p. The share price began the year trading at 37.75p.

So why has it had an amazing run? Unconfirmed rumours that IQE’s vertical-cavity surface-emitting laser (VCSEL) technology is being used in Apple’s latest iPhone are largely behind the share price excitement. There are also other enticing IQE product lines with the potential for significant growth down the line.

‘We believe that IQE remains at the start of a multi-year re-rate cycle and think that the full extent of the future growth opportunities has yet to wholly emerge to the market, despite the stock more than doubling year-to-date,’ says Stifel analyst Lee Simpson. It’s a point Shares made back in September 2016 at 30.25p.

IQE last month used its new found share price strength to raise £95m of growth funding at 140p. The stock has subsequently traded above this level, suggesting that investors think this company is a big future winner. (SF)

PLUS500 +160%

Plus500 (PLUS:AIM) runs a contracts for difference (CFD) trading platform for retail traders. Its strong run this year has been aided by positive trading statements which have prompted analysts to upgrade their earnings forecasts on several occasions.

This is impressive given pressures on the industry to change the way its services are marketed. The European Securities and Markets Association (ESMA) is clamping down on derivative transactions aimed at the retail investor due to their complexity.

Driving the multiple earnings upgrades was higher quality new and active customers than analysts had expected. In the three months to 30 September, it said revenue was up 50%, average revenue per user was up 11% and the average cost of attracting new customers had fallen by 47%.

‘The ESMA will be granted powers of intervention in January, and we expect it will enact changes fairly quickly after that,’ says investment bank Berenberg. ‘While leverage limits remain the primary risk as it may reduce profitability per trade, we continue to believe that Plus500’s technology platform will enable it to adapt quickly to any changes and may allow the company to take share from smaller players that may exit if the regulation becomes too onerous.’ (DS)

HUTCHISON CHINA MEDITECH +119%

It has been a breakout year for Hutchison China MediTech (HCM:AIM) after revealing positive Phase III data in March for its drug Fruquintinib to treat advanced colorectal cancer.

The biopharmaceutical company is waiting for approval from the China Food and Drug Administration, which is expected in the first half of 2018.

Investors are excited by sales position for Fruquintinib and by its potential to treat gastric cancer.

This will be a key focus next year as the Phase III trial in gastric cancer started in October. (LMJ)

RENISHAW +103%

Precision engineer Renishaw (RSW) has doubled in price this year, fuelled by a storming set of full year results in July which revealed 25% increase in adjusted pre-tax profit, a strong balance sheet and an 8.3% rise in the dividend.

It has benefited from improved general industrial demand, auto production growth and strong orders for consumer electronics.

‘The share is now pricing in c25 years of 9% per annum growth and while history could support this, we see it as more challenging as the business scale grows and factoring in no execution risk in the business,’ said UBS last month as it downgraded the stock to ‘sell’. (DC)

KAZ MINERALS +100%

An 18% year-to-date surge in the price of copper combined with a doubling in production levels has served to push up shares in KAZ
Minerals (KAZ).

It has delivered two major growth projects and maintained its position among the lowest cost copper producers globally.

A surge in earnings is helping to generate cash to reduce its debt, leaving the miner looking extremely attractive to investors bullish on copper.

KAZ’s shares are likely to remain highly leveraged to the metal price. Analysts have mixed views over copper in 2018. We note investment bank Macquarie believes there will be a balanced market in terms of supply and demand which implies there won’t be a repeat of this year’s copper price rally. (DC)

MARKET CAP: £500M TO £1BN

BLUE PRISM +193%

One of the UK stock market’s best performing shares last year, Blue Prism (PRSM:AIM) has
only gone and repeated the trick in 2017. It’s been an amazing ride for investors, particularly those who got in at its 78p initial public offering (IPO) price on 18 March 2016, a fraction of the current £13.05 price.

Blue Prism is a virtual workforce disruptor which uses robotic automation process (RPA) technology to automate manual back-office administration. This cuts costs, improves customer service and speed and reduces the need to invest in new IT systems.

The secret behind Blue Prism’s success has been its ability to repeatedly beat market expectations. For example, at the start of 2017 Investec anticipated £17.3m of revenue for the year to
31 October 2018. By April the forecast had been raised to £25m; and to £26.3m in June. It now stands at £39.5m.

This pace of growth, coupled with equally soaring pre-tax losses, makes valuing the shares tricky to say the least. You need to think about a potential increase in competition and the fact that there is still no forecast in the market for when the company will become profitable.

In a research note on 15 November, Investec issued a £15 target price saying: ‘Valuation is not in the “widows and orphans” category, but total addressable market analysis remains exciting, the group’s indirect channel has now demonstrated the capability to scale, and competitive position has if anything improved in the last six months.’ (SF)

GAMES WORKSHOP +191%

Fantasy miniatures maker Games Workshop (GAW) has delivered a staggering 191% year-to-date share price surge, driven by a series of upbeat trading statements and forecast earnings upgrades.

We said to buy at £12 on 29 June, flagging the Nottingham-headquartered company’s strong cash generation and earnings resilience, built on a loyal base of global hobbyists, nigh-on obsessional about its high quality miniatures and games. It now trades at £19.69.

A tailwind for the operationally-geared group has been the weak pound, as the bulk of Games Workshop’s sales are generated overseas.

Following a trading update on 1 December, Peel Hunt analyst Charles Hall, a buyer with a £24 price target, wrote: ‘Games Workshop has delivered a very impressive first half with earnings before interest and tax of £38m matching last year’s full year. The company is well on track to deliver on our full year forecast of £65m ahead of the important Christmas period.’ (JC)

KEYWORDS STUDIOS +173%

Keywords Studios (KWS:AIM) has been a favourite among investors for some time and with good reason. The company supplies the video games industry with specialist services such as language translation and has been operating a successful buy and build strategy.

The exponential rise in this company’s share price has been phenomenal, almost tripling in a year. October saw its biggest acquisition to date, being the $66m purchase of VMC which fast-tracks Keywords from number five to first place for functional testing. (DS)

XP POWER +100%

There’s no single catalyst behind the stunning rise of XP Power (XPP) in 2017, unless you include Shares’ in-depth feature on the stock (1 Sep 2016) when it was trading at a mere £16.51, less than half the current £34.16 price.

We believe investors have simply woken up to the superb total returns nature of this complex engineering expert.

For example, in the 10 years to 2016 the power switching technology designer paid out 444p per share in dividends, including last year’s 71p payout, up from 66p in 2015. A payout of about 77p per share is on the cards for 2017, according to analyst forecasts.

It provides complex, science-based kit designed for times when off-the-shelf solutions can’t do the job, allowing XP Power to claw its way up the value chain. This includes more in-house developed, patent protected components.

Expanding its end markets has also helped draw investors to the story, partly through its first acquisition (Comdel) in two years.

A run of superb results ‘prove the quality of the business and the appropriateness of the strategy,’ says Peel Hunt. ‘XP Power more than deserves its premium rating and is a must-have (stock)’. We share this bullish view. (SF)

WATKINS JONES +80%

Student accommodation specialist Watkin Jones (WJG:AIM) enjoyed a superb
start to 2017 as it unveiled a stellar set of maiden full year results (17 Jan) less than a year after joining AIM in March 2016.

This momentum has carried through the year. The ninth-generation family-run company reported in October that results for the 12 months to 31 September would hit expectations as it continued to secure new student housing sites and expand into the build-to-rent sector.

Equity Development analyst Mark Hughes recently commented: ‘The shares trade at just over a 40% premium to the house building sector. We think this is deserved’. (TS)

MARKET CAP: £100M TO £500M

VERSARIEN +553%

Graphene play Versarien (VRS:AIM) generated considerable excitement as it held talks with several potential customers and made some progress towards profitability.

Collaborations with Israel Aerospace Industries and a leading global consumer goods firm to use its ‘few layer graphene non-platelets’, also known as nanene, in its packaging has been followed by an agreement with an unnamed Fortune 100 company in the US (4 Dec).

Further progress might be expected across the pond following the establishment of a sales office in Palo Alto, California (the home of Tesla Motors). The group remains loss-making, posting a narrowed pre-tax loss of £0.77m in the six months to 30 September. (TS)

FARON PHARMACEUTICALS +214%

Investors are excited about the potential approval of Faron Pharmaceuticals’ (FARN:AIM) drug Traumakine for the treatment of acute respiratory distress syndrome (ARDS).

ARDS is a severe orphan disease that can cause inflammation in the lungs as a result of pneumonia, sepsis or significant trauma.

Shares in Faron have soared by 214% to 832.5p so far this year with Phase III results expected in the first half of 2018. If successful, they could lead to approval in the US and Europe.

Panmure Gordon expects rapid take-up of Traumakine if pricing is reasonable. (LMJ)

BLUEJAY MINING +241%

It’s been a good year for many junior miners and BlueJay Mining (JAY:AIM) has certainly caught the market’s attention with its mineral sands project in Greenland. The shares are up by 241% so far this year to 23.125p and there could be much more to go, according to broker SP Angel which values the business at 37p per share.

BlueJay is one of Shares’ running Great Ideas; we said to buy the stock at 13.75p in April 2017. We were drawn to the stock because of its project’s very high grade material and potential large scale.

The company has made significant progress throughout 2017 and is now talking to potential offtake partners who may be able to provide some upfront cash to help build its mine, in exchange for the rights to future production.

You may think that Greenland isn’t amenable to supporting a mining operation given its harsh weather conditions. BlueJay is confident it can run a simple dredging operation and one that won’t cause any environmental concerns. While it may only be able to export material direct from site via shipping five months a year, there is potential to stockpile some material in Canada to facilitate all-year-round shipping.

Next year will be very important for the business as investors will want answers on permits, financing and operations, ahead
of maiden production in 2019.

Mining stocks are always high risk yet we think this is one of the more interesting stories to back. (DC)

MARKET CAP: LESS THAN £100M

GREATLAND GOLD +941%

The tiny miner caught the market’s attention in May when Newmont, one of the world’s largest gold producers, struck a deal to look at Greatland Gold’s (GGP:AIM) Ernest Giles project tenements and exploration database.

The shares went ballistic in October when Greatland said it had identified multiple gold targets at Ernest Giles. Chief executive Gervaise Heddle reckoned the results gave the potential for the Australia-based project to be ‘one of the most significant gold districts to be identified globally within the last decade’. (DC)

ECHO ENERGY +803%

Shares in Latin American focused oil and gas business Echo Energy (ECHO:AIM) are currently suspended pending the completion of a big farm-in deal in Argentina which would constitute a reverse takeover under AIM rules.

Before it was suspended, excitement around the story built as investors hoped Echo could follow the blueprint of Sound Energy (SOU:AIM) which is run by Echo’s chairman James Parsons.

Sound Energy has endured a mixed 2017 thanks to setbacks in Italy but 2016 saw it go from a micro-cap with a messy portfolio of assets and legacy of failure in South East Asia into a major force in the Mediterranean. (TS)

WEY EDUCATION +803%

Wey Education (WEY:AIM) is a disruptive force in the education sector. The users of its various divisions can access online lessons in a variety of topics from all over the world.

The company’s InterHigh business, a non-selective international online independent school, ‘is proving to be successful’ according to WH Ireland analyst Nick Spoliar. The company has invested heavily in InterHigh and has a student roll in excess of 1,000 pupils.

The increased income from InterHigh helped Wey to report a 60% increase in group revenue to £2.4m on a year-on-year basis for 2017.

For 2018, Spoliar expects 42% growth from InterHigh and a strong revenue contribution from Wey ecademy. The latter is a business-to-business school platform launched in 2017.

The company also has Quoralexis, an online language school.

The analyst believes that education businesses can ‘derive high returns for shareholders’ as has been the case with Wey in 2017.

He says: ‘With a strong platform set to deliver further rapid growth in 2018/19 ratings compress dramatically, offering a compelling investment opportunity’. He sees near-term fair value closer to 70p, implying that investors could still double their money even after this year’s stellar share price rise. (DS)

TRINITY EXPLORATION AND PRODUCTION +747%

Shares in Trinidad oil producer Trinity Exploration & Production (TRIN:AIM) enjoyed a big rally in early 2017 with the shares recovering from a low base after resolving financial problems.

Although they have since stalled we think there are reasons to believe the momentum can be revived in 2018 as the market recognises improving profit and cash flow from a rising production base.

Cantor Fitzgerald has a price target of 37p (versus current trading price of 15.88p) and the company is getting closer to its targeted output of 3,000 barrels of oil per day.

The management team has some pedigree. Executive chairman Bruce Dingwall was the man behind North Sea oil firm Venture Production which he floated at 170p in 2002 and sold to Centrica (CNA) for 845p in 2009. (TS)

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