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Five AIM new boys this A-rated team has poured money into

Amati Global Investors' top small cap investors Paul Jourdan and Douglas Lawson have backed five floats on the Alternative Investment Market this year.

Paul Jourdan

Paul Jourdan (pictured), the Citywire A-rated co-founder of Amati Global Investors, and his team have participated in five AIM initial public offerings so far this year.

Jourdan is one of the most successful small cap stockpickers of his generation. His Amati UK Smaller Companies fund has returned 64.7% over the last three years versus a 54.5% rise in its benchmark, while over 10 years it has returned 208.3% versus the benchmark's 157%.

Here his colleague Douglas Lawson, also A rated, reveales what had attracted them to these five AIM debutants.

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Quixant

Float date: May

Quixant develops and manufactures the computers that go into gambling devices, like casino slot machines.

These computers determine how often the machines pay out, so are subject to strict regulation. This means that the industry has high barriers to entry since buyers overwhelmingly prefer to work with operators with whom they have longstanding client relationships, such as Quixant.

‘Once you’re designed into the system,’ says Lawson, ‘you’re in for the long term.’ He also salutes its impressive track record of profitable cash generation.

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AB Dynamics

Float date: May

For similar reasons Amati has backed AB Dynamics, a specialist supplier of testing equipment to the automotive industry. ‘It has been around for a long time and its customer list is hugely impressive,’ says Lawson.

From its Wiltshire base, AB Dynamics sells to the likes of Honda, BMW and Volkswagen and has been profitable for years. ‘It’s an antidote to the misconceptions about AIM,’ Lawson believes.

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Outsourcery

Float date: May

But that isn’t to suggest that Amati won’t invest in younger firms in more fashionable sectors.

The third AIM debutant it has bought into this year is Outsourcery, which helps companies migrate their IT systems to the cloud. Particularly appealing to Lawson was that Outsourcery had already spent to build its infrastructure before it floated. ‘A lot of capital had already gone in,’ he comments.

Despite this, Outsourcery is still debt-free although it is currently loss-making. ‘But they have the infrastructure now to earn much higher revenues,’ reckons Lawson. He views its model as ‘massively scalable’ and commends its recurring-revenue contracts.

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Keywords Studios

Float date: July

Keywords Studios provides what is known as localisation to developers of video games, translating speech and text and basically ensuring every element is appropriate for foreign audiences.

‘There is a structural trend in the games market – which is booming – to outsource this work,’ relays Lawson.

As with Quixant and AB Dynamics, Lawson also highlights its ‘embedded’ relationships with clients. It is loss-making at the moment, having invested heavily in expansion, but is growing revenues and has cash on the balance sheet. It is also already paying a dividend.

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Frontier Developments

Float date: July

The final new entrant to AIM to be owned by Amati is Frontier Developments, a producer of video games.

Amati initially put money into Frontier Developments through a convertible loan note, which turned to equity upon the company’s stockmarket bow – conferring an instant 15% uplift in the investment’s value.

‘If you know how to structure convertible loans, you build in the upside,’ explains Lawson. ‘They’re an ideal pre-IPO investment.’

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Paul Jourdan
Paul Jourdan
40/42 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 49.28%
Douglas Lawson
Douglas Lawson
39/42 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 49.28%
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