A curated selection of six smaller companies trading on the London Stock Exchange are identified as potentially offering significant returns for investors. These selections aim to help investors navigate the vast array of available options by focusing on firms with demonstrated or anticipated growth potential.
The London Stock Exchange, known for its international reach with businesses from over 100 countries, provides a platform for UK investors to access global opportunities. However, identifying the most promising investments, particularly among smaller, less-known companies, can be a challenge.
Airtel Africa
Airtel Africa operates in 14 African countries, providing mobile phone and mobile money services. The company is positioned to capitalize on the significant digital divide in Africa, where smartphone penetration and access to banking services are considerably lower than in developed markets. Airtel's smartphone division is experiencing growth of approximately 20% annually, with expectations of continued double-digit expansion. The Airtel Money service, which allows users to transfer money and make payments via basic mobile phones, processed nearly £150 billion in transactions last year. The company intends to float Airtel Money on the London Stock Exchange later this year, a move that could benefit shareholders whether the parent company retains its full stake or reduces it.
Airtel Africa shares were initially floated in 2019 at 80p. After a dip during the COVID-19 pandemic, Midas recommended them in 2020 at 57p, and they have since risen to £3.32. Dividends are paid, and the significant ownership by the Bharti Mittal family, who hold nearly 80% of the shares, suggests an incentive to increase these payments.
Amaroq
Amaroq, a mining firm operating in Greenland, is focused on extracting valuable minerals. The company holds licenses across Greenland, with its Nalunaq gold project currently in production and expected to increase output to over 45,000 troy ounces by 2027. The Nalunaq site yields nearly 20 grams of gold per tonne of ore. Amaroq is also exploring the potential of the nearby Nanoq deposit, which could boost gold production by at least 20%. In addition to gold, Amaroq's Black Angel mine, historically a producer of zinc, lead, and silver, has revealed deposits of germanium and gallium, minerals critical for defense, telecommunications, aerospace, and computer chip manufacturing.
Amaroq recently transitioned to the main market of the London Stock Exchange and reported strong interim results. Brokers project profits of £31 million this year, with expectations to more than double that figure by 2027. Shares have risen from 44p to £1.04 since being tipped in 2022.
Prospex Energy
Prospex Energy, traded on AIM, holds oil and gas projects in Italy, Spain, and Poland, with a focus on energy security. The company aims to acquire assets, improve them, and return value to shareholders. Under new chief executive Tom Reynolds, the business is undergoing a strategic shift focused on development and share price enhancement without requiring additional shareholder capital. Italy hosts Prospex's most profitable asset, a gas project in the Po Valley with plans to expand from one operational well to five. The company also has interests in two Spanish sites and has acquired licenses in Poland. Despite a current market valuation of just over £16 million, the company's assets are estimated to be worth more than £200 million if Reynolds' plans are successful.
Empire Metals
Empire Metals is involved in the mining of titanium, a critical mineral used in various industries, including aerospace, defense, and medical implants. The global market for titanium is valued at approximately £15 billion annually and is projected to grow by 20% in the next five years. The company, operating in Western Australia, has announced a significant resource of eight billion tons of ore containing high-grade titanium dioxide. This high-grade raw material is expected to lead to lower processing costs and cleaner production compared to existing market sources, which are largely controlled by China. Empire's shares have increased from 9.5p to 42p since January 2024. The company is also planning a listing in Australia.
Nippon Active Value Fund
Nippon Active Value Fund (NAVF), listed on the main market, invests in small and medium-sized companies on the Japanese Nikkei Exchange. The fund targets underperforming companies with the aim of improving their management and generating returns for investors. The portfolio currently includes 29 companies. NAVF has seen substantial growth since its launch in 2020, with its valuation increasing from £103 million to nearly £450 million. The fund benefits from collaboration with fellow investment funds Dalton and NAVF Select, enabling them to build larger stakes and exert greater influence on target companies. Despite a recent lag in smaller Japanese companies compared to larger peers, NAVF is considered an intriguing buy at £2.28.
MP Evans
MP Evans, an Indonesia-based company focused on palm oil production, emphasizes sustainable practices. The company ensures its plantations are in carefully selected areas, includes wildlife corridors, and collaborates with local communities. Palm oil is a versatile ingredient used in 50% of packaged foods, cosmetics, and increasingly as biofuel. Demand for palm oil is rising, with prices increasing by over 25% this year alone. Profits of $134 million (£98 million) are expected this year, with further increases anticipated. Dividends are also on the rise, with 62.5p projected for this year, increasing to 65p next year. MP Evans is valued at nearly £1 billion, and its long-standing family involvement suggests a focus on sustainable, generational growth.