If you read some of the coverage on the AIM market, you might conclude that it is a deadzone, where smaller companies go to die.
Headlines like: “Sharp rise in AIM delistings casts doubt over City of London’s future”, or “AIM is a zombie market not fit for purpose”, or “AIM-listed biotech explores US float over ‘lack of UK interest’”, from the mainstream media do not inspire great confidence in the London Stock Exchange’s junior market.
However, The Armchair Trader takes a different view, seeing AIM and Aquis as exchanges where the future national champions will emerge from. Yes. it is undeniable that AIM has been laggy compared to its bigger cousins. However, within the index are some real champions and this week we’re going to look at some of AIM’s biggest recent winners, starting with Yü Group LON:YU..
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Yü, although its name does sound like a macrobiotic yoghurt brand, is a Nottingham-based energy company, focused on supplying water, gas and electricity to small-to-medium sized business premises. Established in 2014, and listing on AIM in March 2016, the company is a direct, licensed utility supplier, as well as installing smart meters, EV charging stations and offering consultancy on energy efficiency solutions.
Triple-digit share price rises
The company opened the week at 1,640p. Since the start of the year Yü has seen its share price increase 35%. Over one-year Yü shares have gone up 137.7%. Two years ago Yü was trading at 192.5p, more than 750% behind where it is today. Yü has a market cap of GBP276m and its shares have ranged between 590p and 1,970p over a 52-week period.
Yü seems to be tapping into a seam that is very productive – namely smaller businesses looking for specialist utility suppliers, considering the dramatic rise in cost of utilities since the start of the War in Ukraine.
In its last results to end of December 2023, published in March, Yü saw its revenue up 65% year-on-year to GBP460m. Earnings were up nearly 440% y-o-y, profit increased from GBP5.8m to GBP39.7m and adjusted earnings per share were GBP1.82, compared to 2022 where EPS was GBP0.30.
Still cheap by comparison
The company also built up its cash pile, increasing net cash from GBP19m to GBP81.9m, equating to GBP4.89/share. For early adopters, the company offered a dividend of GBP0.37/share, and although Yü is starting to gain some column inches, the stock is still reasonably cheap with a price-to-earnings ratio of 9.7 (p/e ratios of less than about 20 are seen to be good) investing in Yü still looks attractive.
Yü is operating in a market – SME Business Utilities – that has great potential, valued at GBP50bn, and the energy firm has the opportunity to grow its market share. Also its forward focus on technology installation – EV chargers and smart meters – is again thematically a growth area.
AIM has its problems, but there are many gems at a good price with great prospects to be uncovered, of which Yü is but one.
