11 AIM companies that doubled in the third quarter

So much for a post-election recovery for AIM. It has certainly not happened yet, and the uncertainty about the continuation of inheritance tax (IHT) relief and other tax incentives for AIM shares means that it is likely to continue to be tough at least until the Budget on 30 October – and possibly for the rest of the year.

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In the third quarter, all three AIM measures declined, whereas the Main Market has made gains, particularly the medium-sized companies.

The FTSE AIM All-Share index is 3.13% down in the quarter, although the measures of the larger AIM companies have done slightly better. The FTSE AIM 100 index is 2.24% lower and the FTSE AIM UK 50 index fell 2.75%.

This is a continuation of the trend since the beginning of 2024. The AIM All Share has declined by 3.3%, while the AIM 100 is 3% lower. The main difference is that the AIM 50 is only down 0.4%.

In contrast, the FTSE All-Share index has risen 7.2% so far this year and the FTSE SmallCap index is 8.3% higher.

The better performance of the AIM 50 than for the junior market as a whole is partly down to bids and approaches for larger companies, such as self-storage provider Lok’nStore (LOK), video games services supplier Keywords Studios (LSE:KWS) and Learning Technologies Group (LSE:LTG).

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This is offset by weak trading by some of the larger companies, including mixer drinks supplier Fevertree Drinks (LSE:FEVR) and marketing services provider Next 15 Group (LSE:NFG).

Next 15 Group lost 43% after it revealed that a major client of subsidiary Mach49 would not be renewing its contract. This was expected to contribute more than £80 million to 2025-26 revenues. That was one-eighth of the previously forecast revenues for that year, which have been cut to less than £530 million with a much greater decline in profit. There will also be a hit the second half of the year to January 2025. Prior to the warning Next 15 Group was the 11th biggest company on AIM and it has subsequently slipped out of the top 30.

In the third quarter, the best-performing sectors are telecoms and insurance, which do not have many companies in them. Travel and leisure is a major sector and rose 4.5%, partly thanks to a 7% rise in the share price of AIM’s largest company airline and tour operator Jet2 Ordinary Shares (LSE:JET2). There was also a small recovery in the construction sector.

Multiple gains

There are 11 AIM companies where share prices at least doubled in the third quarter. They are predominantly resources or pharmaceuticals companies.

The main outlier is Mobile Streams (LSE:MOS), which has experienced an eightfold increase and is the best performer. The milestone achieved by 22.7%-owned Mexican casino and sports book business when it started onboarding VIP clients following the beta phase of its platform sparked a recovery in the share price, which is still lower than three years ago and 98% down over 10 years.  

The largest company in the top movers is Faron Pharmaceuticals Oy (LSE:FARN), which is one of the smaller constituents of the AIM 100. The US Food and Drug Administration (FDA) granted fast-track designation for Bexmarilimab for treatment of relapsed or refractory myelodysplastic syndrome (r/r MDS) in combination with azacitidine. There have been positive phase 1 and phase 2 results. The overall response rate was 79%.

Faron Pharmaceuticals had cash of €30 million (£25.2 million) at the end of June 2024 and this should last until the end of the first quarter of 2025. A fundraising will probably knock the share price when it happens.

Shield Therapeutics (LSE:STX) also had positive news concerning regulatory approvals. Phase 3 paediatric study results for ACCRUFeR, its iron deficiency anaemia treatment, showed highly clinically relevant effectiveness. This will support filings with the FDA and the European authorities for children older than one month. The FDA filing should be in the first quarter of 2025.

Oil and gas company Tower Resources (LSE:TRP) believes that the completion of the financing for the NJOM-3 well in Cameroon is near and that would be a positive boost for the company. The well could be spudded in early 2025. There is also outside interest in the PEL96 licence in Namibia. An increase in receivables helped to generate $270,000 (£207,000) in cash from operating activities in the first half of 2024.

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A switch from oil and gas to a focus on the more fashionable helium exploration helped Global Petroleum Ltd (LSE:GBP) shares rebound. Interest in potential Dorset and Yorkshire hydrogen storage projects boosted the UK Oil & Gas (LSE:UKOG) share price.

Kazera Global (LSE:KZG) has completed the acquisition of an additional 10% stake in diamond miner Deep Blue Minerals (now 74%) and heavy mineral sands project owner Whale Head Minerals (now 70%). There is consent for mining and processing at the Whale Head project.

URU Metals Ltd (LSE:URU) has a 74% stake in the owner of the Zebediela nickel project in South Africa, which has received environmental authorisation. Kore Potash (LSE:KP2) raised $1.28 million at 1.1p/share at the beginning of the period to finance progress at the Kola Potash project.

Two of the 11 companies, Sancus Lending Group Ltd (LSE:LEND), where director buying led to a share price jump, and Tan Delta Systems (LSE:TAND), are not constituents of the AIM All Share index. Tan Delta Systems entered into a product agreement with an engine manufacturer to develop a sensor to monitor coolants and water-based hydraulic solutions. The share price is still below the 26p flotation price in August 2023.

Source: Sharepad. Past performance is not a guide to future performance.

Trading activity

Trading levels continue to decline on AIM. The value of trades in each of the first three quarters of the year was around £12 billion – just under in the third quarter. However, there has been a steady decline in the number of trades has been declining steadily. By September, normally an active month, there were 35,881 trades per day on average. The only months of the year where the average was lower were July and August.

The total number of trades in the first nine months of 2024 is just short of seven million. That compares with 9.89 million in the whole of 2023 and 20.3 million in 2021. The total for 2024 could still surpass the 2023 level, but it appears unlikely. If it does not, then it will be the lowest number since 2016.

Mining has become one of the most active sectors and the percentage of AIM trades in the sector has doubled to more than one-fifth of the total since 2019.

There needs to be clarification about what will happen with North Sea oil and gas taxation, where investment by companies has stalled.

Some of the changes have been announced. The Energy Profits Levy will be raised from 35% to 38% from November, which will make the total UK tax rate 78%. The government says it “will also reduce the extent to which capital allowance claims (including first-year allowances) can be taken into account in calculating levy profits”.

There has been a larger decline in trading in the energy sector than the market as a whole and it is one of the worst performers in the third quarter with a 12.5% slide.

A general recovery in investor interest is important for any upturn in the performance of AIM.

Prospects for AIM

The London Stock Exchange, the Quoted Companies Alliance (QCA) and advisers are lobbying the government about the importance of retaining the tax incentives for AIM, particularly inheritance tax (IHT) relief. Guidance that the chancellor will not be swooping on pensions to raise cash means that changes to IHT relief and capital gains tax could be more likely.

London Stock Exchange chief executive Dame Julia Hoggett has sent a letter to the City minister Tulip Siddiq to outline her concerns that tax changes could hurt AIM. She says denying IHT relief “would remove a core source of capital undermining the market’s capital base and bringing its viability into question over the short-to-medium term”.

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In 2020, Grant Thornton estimated that AIM companies and related suppliers and employees made an economic contribution of £70 billion to the economy. That GDP contribution would be held back by the loss of IHT relief. 

There could be a further month of underperformance until the uncertainties are cleared up. Some investors appear to be fearing the worst and, if the tax changes do not have a significant negative effect on AIM, there is room for a recovery given the depressed levels of many share prices.

Andrew Hore is a freelance contributor and not a direct employee of interactive investor.