By the Shares team

Investors are spoiled for choice when it comes to small cap stocks with exciting events. As a taster for what’s to come in 2018, we’ve scoured the markets to look for some of the most interesting activities.

Read on to discover 19 stocks either expecting big news in the very near future or ones which are in the middle of developments which could have a big impact on their longer term prospects.

CASHED UP AND READY TO GO

Technology business Crossrider (CROS:AIM) is sitting on net cash of $68.7m and a big focus is how it might invest this money to accelerate growth.

Under chief executive Ido Erlichman, who took over in 2016, the company has successfully shifted focus from add-on applications and related advertising for internet browsers to wider distribution of third-party apps through its platform.

Shore Capital analyst Ben McSkelly says Crossrider’s strong balance sheet can allow management to pursue more deals to build out the B2C (business-to-consumer) proposition. ‘Upon any further deals, we expect the benefits of cross and upselling to increase with leverage to the underlying platform,’ he comments.

SERICA’S MAJOR BREAKTHROUGH

Assuming it completes as planned in the middle of 2018, Serica Energy’s (SQZ:AIM) £300m deal with oil major BP (BP.) for its Bruce, Keith and Rhum fields will make the company among the largest independent North Sea oil firms by output.

Serica’s production is projected to increase seven-fold to 21,000 barrels of oil equivalent per day, 85% of which will be natural gas. The deal is structured so most of the cost is being met by future cash flow.

Also in the energy space is Oregon-based coal bed methane play Curzon Energy (CZN) which joined the UK stock market in October 2017. The company is under the radar of most investors yet this situation may change once it produces first gas from its Coos Bay project, expected by the second quarter of 2018.

The phase one work programme consists of the low-cost workover of five existing wells and the drilling of two new wells, as well connecting them to the Coos Bay Gas Pipeline located close to Curzon’s wholly owned existing intra field pipeline.

POTENTIAL TO BENEFIT FROM RIVAL’S WEAKNESS

The unsecured lending market has been rocked this year by the implosion of Provident Financial (PFG). The old adage ‘one man’s loss is another man’s gain’ rings true as Non-Standard Finance (NSL) has been handed a ‘once in a lifetime growth opportunity by the failed transformation programme of its largest competitor, Provident Financial’ says investment bank Liberum.

Non-Standard Finance poached a number of Provident’s staff when the company changed its home lending model. Non-Standard’s CEO John van Kuffeler used to be chairman of Provident so has a great deal of experience in the industry.

Liberum is a fan of the smaller company, expecting it to deliver a 44% earnings per share CAGR (compound annual growth rate) between 2017 and 2019.

In the support services sector, deep fat fryers cleaning business Filta (FLTA:AIM) is expected to unveil plans for a concerted expansion effort in continental Europe very soon.

It is talking to two master franchise owners in Germany and Benelux about a different way of addressing the European market. Filta recently set up shop in Canada and already has well established operations in the UK and US.

A TRIO OF MINERS BRACED FOR BIG EVENTS

The mining sector is full of companies hoping to hit milestones in their career during 2018. Among them is gold miner Avesoro Resources (ASO:AIM) which is rejigging an existing project in Liberia and buying two mines in Burkina Faso.

Merchant bank Hannam & Partners believes several consecutive quarters of profitable production from the New Liberty mine in Liberia and the Burkina Faso operations could lead to a re-rating of Avesoro’s share price.

Vast Resources (VAST:AIM) is to reopen the Baita Plai polymetallic underground mine in Romania. It is currently waiting on a mining licence and should be able to start production approximately six months after that event has happened.

In Spain, Atalaya Mining (ATYM:AIM) is to start work on an €80m expansion project, upgrading the processing facility at its Proyecto Riotinto copper mine. Construction will start in 2018 and the whole project should be up and running in early 2020.

MOVING INTO NEW MARKETS

Lipstick-to-eyeshadow specialist Warpaint London (W7L:AIM) is moving into the men’s market with the £18.2m acquisition of Retra. The deal, which only completed three weeks ago, is expected to enhance earnings and dividends alike. It will allow Warpaint to target male consumers and increase exposure to the attractive international gifting market.

Distributing its wares to Boots, Superdrug and Asda – new customers for Warpaint – profitable, Yorkshire-based Retra’s major brands are Technic, Body Collection and Man’s Stuff, the latter a new male grooming range spanning shower gels-to-beard oils.

Joint bosses Sam Bazini and Eoin Macleod insist Retra, which also produces white label cosmetics for Asda and Matalan, will ‘help to accelerate Warpaint’s growth both domestically and internationally’.

Eve Sleep (EVE:AIM), the online sleep products retailer behind Eve-branded mattresses as well as bed frames, pillows and pyjamas, reckons its UK business will become profitable in the last quarter of 2018. Analysts believe Eve will be profitable on a group basis in 2019.

Investment bank Berenberg says some of its best small and mid-cap investment ideas have involved companies operating in ‘apparently benign, slow growth markets (e.g. holidays, soft drinks and gyms)’. It adds: ‘Their management teams have exploited the slow-paced characteristics of the underlying market to scale up, disrupt and grow.

‘We think that Eve Sleep is another such company: while its underlying market is mature and slow-growing, its price advantage and use of marketing techniques derived from larger online businesses have enabled it to grow a significant presence in the UK mattress market.’

TECHNICAL EXPERTS PRIMED FOR 2018

Taking over power industry engineering peer Hayward Tyler for £29.4m has transformed the scale of Avingtrans (AVG:AIM). Revenue of £80m is expected in financial year to 31 May 2018, versus the £22.7m posted by Avingtrans in its last solo 12 month period.

The big challenge for the new owner is to not only integrate Hayward Tyler in the broader group but also improve operational execution given the latter’s recent financial losses. Avingtrans’ share price has been weak over the past few months, so proof that it can revive Hayward Tyler could be a catalyst to win back the market’s favour.

Designing radio frequency semiconductors for communications and industry positions, CML Microsystems (CML:AIM) fits neatly in any super-connected, renewable future. The company has struggled for meaningful scale despite a consistent track record for profits. Investment in an expanded product range and new markets (advanced medical devices and smart transport, for example), could change that situation.

Analysts anticipate record revenues of £31.5m in the year to 31 March 2018, partly on solid state data storage demand. Half year results on 21 November saw CML report continued momentum in its business, adding that all of its key indicators had improved and that growth was ‘broad based’.

RECENT IPOS FORECAST TO DELIVER LARGE EARNINGS GROWTH

Israel’s Ethernity Networks (ENET:AIM) joined the stock market in June 2017 and has a very limited track record. However, designing virtual and software-based communication networks technology that boosts data speed and efficiency sounds like the right kind of place to be.

Existing infrastructure will eventually start to creak if you believe there will be an explosion in volume and complexity of data. Ethernity’s technology may be one solution, if not necessarily the only one. Analysts are hopeful and anticipate this year’s implied $1.4m of pre-tax profit will more than double in 2018 and do so again the year after.

Spun out of its Australian parent earlier in 2017, GetBusy (GETB:AIM) has built document management software designed to free its customers from paper clutter.

With a lot of product cost already sunk and fresh IPO (initial public offering) funding to fuel sales and marketing initiatives, it is hoped that the company can begin to scale up.

Implied operating leverage means an increasingly significant percentage of these new sales will fall straight to the bottom line, hence the near-three-fold jump in pre-tax profit forecast in 2018.

DRUG STOCKS AWAITING MAKE-OR-BREAK NEWS

The pharmaceuticals space in 2018 is jam-packed with potentially game-changing clinical trial results.

Drug developer ImmuPharma (IMM:AIM) is expecting Phase III results in the first quarter of 2018 for lupus treatment Lupuzor. Analysts speculate the drug could hit multi-billion dollar annual sales if the tests are successful and the drug gets approved by the regulators.

MotifBio (MTFB:AIM) believes its drug Iclaprim for serious skin infections could be approved by the US Food and Drug Administration and a product licence confirmed by the end of 2018, having recently completed the two necessary Phase III trials.

Skin health life science company SkinBioTherapeutics (SBTX:AIM) should complete human trials next year, being
part of the process to develop its cosmetic skin care product and ultimately commercialise it.

N4 Pharma (N4P:AIM) expects results in April 2018 from human pilot clinical trials on its reformulated version of Sildenafil, most commonly known as Viagra. If this goes well, the data would be used to determine steps forward for a clinical trial, which could help to commercialise the drug in the US and EU.

Drug discovery firm Verseon (VSN:AIM) expects to put two drug programmes into clinical trial in 2018. One is trying to tackle anticoagulation, which helps to prevent blood clots, and the other focuses on a condition that could impair vision known as diabetic macular edema.

‹ Previous2017-12-21Next ›