The Alternative Investment Market (AIM) was set up 18 years ago to aid young inexperienced British buccaneers. Bold investors willing to take that extra risk could pluck out companies destined to make monumental returns. Firms from all over the world quickly cottoned on. And sure enough, since 1995, 3,000 companies from around the globe have chosen to join AIM.
But the AIM has been in decline recently, and needs to turn the tide. The harsh economic climate has meant investors are keen to avert risk. The number of companies listed on AIM has slid from a peak of 1,694 in 2007 to just 1,094 today.
Given that over 400 new shares have been admitted to AIM in that period, the rate at which companies have been falling by the wayside is alarming. While all companies that come onto AIM do so with high hopes and ambitious plans, all too many fail to deliver. A dose of healthy cynicism must be applied to all newbies arriving on AIM.
Today, I want to assess two of the latest companies to join AIM – with my sceptic’s hat firmly on… let’s have a look.
A cloud full of our health data
The vision of CloudTag (AIM: CTAG) involves us all running around plastered with sensors, transmitting the state of our health to remote monitors. Its share price of 20p places a £30m valuation on this nascent business. CloudTag is leaping into the crowded space of tele-health. As I mentioned here in Penny Sleuth on 19 March, this is a hot theme right now.
Healthcare visionaries see a future in which we take care of our wellbeing, monitor the state of our health from home and wait for a call from a remote nurse to tell us if warning lights are flashing. Many companies are devising diagnostic devices that can be used by you or me, but that of course requires some participation.
Much better is the notion of fitting us with sensors that monitor our vital signs in much the same way as the diagnostic sensors under the bonnet of a car. We need hardly know that we are wearing them. They can monitor our health as we go about our daily lives and transmit data to a remote computer.
The CloudTag Patch monitors 17 different parameters including heart rate, respiration rate and the rate at which we burn off calories. It can also include a GPS positioning system able to identify whether we are running uphill through sand or cruising around a running track, and make the necessary allowances for our performance.
CloudTag claims the system will generate data accuracy standards “equivalent to those of a much larger bench-top, medical diagnostic instrument”. The data is then sent off into the cloud from where it can be retrieved by the user on his smartphone, for example, or by his fitness coach.
The medical world is rapidly advancing
I am yet to be convinced that there is a big market for this kind of thing. For sure it might appeal to geeky physical fitness nuts, but is the average Joe really going to monitor his health in this way, at least without some financial incentive? CloudTag reckons it can both sell the patch and subscriptions to its software applications, but it has not made any sales yet and operates in an increasingly crowded space. The £30m valuation looks generous.
That is not to say there aren’t some incredible things happening in the world of technology, health and medicine. Monumental advances are happening on a daily basis. Helping us live longer, building new hearts, beating cancer… the medical world is moving rapidly. And the good news for us is that most private investors are completely missing the real story. I’ll be sending you a report on how you can profit from this thrilling field in the coming week. You won’t want to miss this one. I must say, I haven’t been this excited about a story in a long time.
This palm oil play is a less risky bet
Also making its debut on the stock market, and falling squarely into the penny share category, was DekelOil (AIM: DKL). Its 1p share price values this aspiring palm oil producer at £13m.
DekelOil is a play on the migration of palm oil production from the traditional strongholds of Malaysia and Indonesia to West Africa, which not only has an amenable climate but is also close to the markets of Europe and the eastern USA. DekelOil owns 51% of a business that is developing a large-scale palm oil operation in Ivory Coast. The other 49% is held by the Siva Group from India, which also has a joint venture in Liberia with Equatorial Palm Oil (AIM: PAL).
DekelOil has a computerised oil palm nursery, extensive agreements with local suppliers of palm oil, 1,886 hectares of its own plantations and it is building a 60-tonne per hour mill. The plan is to feed the plant initially with palm fruit supplied by local farmers while it seeds its own plantations.
Demand for palm oil, which is used for cooking oil, margarine and ice cream as well as soaps, detergents and animal feed, is rising steadily. It can only be cultivated in tropical climates and there is every reason to expect West Africa to become a major producer. The main risk here is the volatile politics of Ivory Coast, which only ceased civil war in 2011. And, given that the growth of new palm trees cannot be accelerated, investors need to take the long view. But with a stock market value half that of CloudTag, I’d say it is a likelier and less risky bet.