In part 3 of this 2012 Performance mini-series, we examine the best 5 and worst 5 performers in the  UK AIM Index during 2012.

In my previous articles, I covered the UK FTSE 100 and UK FTSE 250 best 5 and worst 5 performers.

Later in this mini-series, I’ll be covering the US Dow Jones and NASDAQ 100 so be sure to return to this blog to read about those too.

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So let’s first look at the best performers…

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All of the top 5 AIM shares in 2012 could be described as penny shares.

The biggest riser in 2012 was Energy Technique, a manufacturer of heating, cooling and ventilation products for industrial use.

Its shares rose 987.5% during 2012 having started the year at only 4p and rocketing to 65p in mid-August before falling back and settling at 43.5p by the year-end.

So, had you sold in August, it looks as if you could have multiplied your money 16.25 times on this one share alone!  Amazing!

HOWEVER, all is not as it seems with this share.

Searching for the reason for this sudden jump reveals that the company reorganized its capital base during August to remove 40% of its shareholders from its register (all of whom were holding less than 200 shares, worth about £10 or less at the time) and to raise the nominal price of each of its shares by 10 times their previous nominal share price.

In effect then, shareholders at the start of the year would be no better off by the year end, despite what the share price chart might say!

The second best performer is Scancell Holdings, a developer of vaccines for cancer and infectious diseases.

Its shares rose 672% during 2012 on positive news of its clinical trials for its first potential product – a vaccine and new delivery mechanism to fight malignant melanoma (skin cancer).

The shares have retreated from their peak of 60p to 50p by year-end and have started 2013 by falling further to 43p at the time of writing.

These shares are very high risk but could be one to watch or a speculative buy as they are currently loss making, not selling any products of any kind and have several more clinical trial hoops to jump through before any product comes to market.

West African Minerals is an iron ore miner operating in Cameroon and Sierra Leone.

It is also loss-making with zero income and its shares followed a similar pattern to Scancell as its shares rose on positive news flow.

This could be another speculative share to watch?

Magnolia Petroleum is a classic penny share starting 2012 at only 0.61p per share, it rose to the dizzy heights of 5p in early November before falling back to 3.55p by year-end for a gain of 472.6%.

Now trading at just above 3p, these shares are still difficult to value.

The gains in 2012 were due to positive news flow about its shale oil exploration and use of horizontal drilling techniques to unlock on-shore U.S. oil reserves that had been previously closed down.

Magnolia is therefore a play on the use of new drilling technology to unlock value from proven assets and is therefore lower risk than deep-sea drilling or operations in politically unstable African regions, for example.

However, Magnolia is a minnow, currently relies on its partners operating oil wells with which it has a very small interest for its income.

It obtained an operating licence in 2012 so that it can take more control and earn a bigger interest, but even then, its interest is of the order of 10%.

So, this is a tiny company (stock market value of circa £24m) with a lot to prove.

That said, if things go well and it does not need to raise more share capital, the current share price could prove to be a good entry point.

Last on this list is Essenden, an operator of 33 ten pin bowling centres in the UK with a market share of 20%.

It is a recovery play and is in the middle of a turnaround plan, which has had a positive effect on its share price so far, rising 454.5% in 2012.

Whether this can keep going remains to be seen, especially as it only operates in the UK and it is competing for its customer’s leisure spend during challenging times.

It has reduced its debt burden substantially in the last year but is still carrying heavy debts on its balance sheet – geared at 162% – which could put it in difficulty if interest rates were to rise in the near future as its profits only just cover its interest payments (interest cover = 0.2).

By my reckoning, most of the short-term gains have already been had for this share during 2012 and is therefore a hold at best.

Now for the worst performers…

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The worst performer Global Brands suffered share price falls when it announced and completed the de-merger of its Domino’s pizza business in Switzerland during early 2012.

It is now an investment vehicle looking to invest in commodities opportunities.

Its investment proposition therefore depends entirely on its next move, which has yet to happen.

ATH Resources is a UK coal miner that got into extreme financial difficulties during 2012.

It entered administration in December after its major lender demanded repayment of its loans so its shares are no longer being traded.

Kennedy Ventures is the new name for Managed Support Services, which sold off its last remaining building services interests in early 2012.

Under its new name, it is now an investment company, similar to Global Brands, except it is looking for opportunities in the Support Services sector.

Pursuit Dynamics is a developer and manufacturer of industrial machinery and got into financial difficulties during 2012.

Its shares are currently trading at just over 3p having traded at 711p two years earlier!

In recovery mode and working on a new strategy, it recently appointed a new CEO and raised additional finance via a new shares issue.

Its future is uncertain but if the new CEO can turn the company around, its shares could recover well during 2013.

Shidu Capital is the new name for what was Digital Learning Marketplace plc.

The company appears to be in a state of flux at the moment with changes to its strategy and its leadership in recent months following difficulties raising the capital required to fuel its “buy and build” strategy.

It is therefore best avoided until its future is more certain.

As usual, I welcome your own views and opinions which you can post in the comments area below.

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