Renewable energy company Green & Smart (GSH:AIM) is enjoying a successful flotation on the AIM market as it gains 11% to 10p.
The Malaysian outfit raised £4 million before costs and expenses through the placing of more than 45 million shares at an issue price of 9p a share, resulting in a market cap of £24.9 million.
It designs and builds biogas power generation plants. The biogas is captured from treated wastewater from palm oil mills and the aspiration is to expand on its existing roster of 26 contracts. Green & Smart wants to use the IPO proceeds for two plants, each of which will cost around £2.5 million and will take approximately nine months to build.
The company has been around for 30 years and is profitable. In the 12 months to September 2015, Green & Smart’s profit after tax was around £770,000 at current exchange rates. Investors need to be cautious as Green & Smart is currently transitioning into an independent power producer. Its first fully owned biogas power plants are currently under construction so it may take some time for the company to reap the rewards from producing its own power.
Future success is also dependent on a consistent pipeline of biogas power projects and agreements with palm oil mill owners. The firm may require additional working capital, which can negatively affect shareholders or result in securities with rights that rank higher than ordinary shareholders.
Other risks are common for most emerging companies such as competition and the use of research and development to meet milestone deadlines.