Indoor Skydive and Osprey Medical worth watching.

Optimists had to dig deep to find positives in last year’s float market. Capital raised was the lowest in more than a decade and listing volumes tumbled. But beneath the float train-wreck has been some surprisingly strong performances that eagled-eyed speculators should follow.

Not that you would know it by coverage of the Initial Public Offerings (IPO) market. Micro-cap floats usually get little media and broking coverage before their listing and even less after. The days of using a full-service broking firm for access to floats and research on new companies are a distant memory.

The good news is this lack of coverage creates opportunities in micro-cap stocks for speculators who understand the risks of trading illiquid stocks. Floats have added complications as vendor shares are released from escrow, and able to be sold, within a year or two of listing.

Caveats aside, some IPOs have impressed since listing in the past year. Below are two largely unknown small-caps that have captured the market’s attention this year, but are yet to attract much interest from the mainstream media or sharebroking community.

1. Indoor Skydive Australia Group (ISA)

The tourism operator’s float stood out last year. In an IPO market dominated by explorers, ISA sought $12 million to build Australia’s first simulated skydiving attraction in western Sydney.

ISA looked like a challenging float: it was about to start construction on its attraction and probably a year away from opening it. In a news-hungry market, a dearth of announcements can be a death-knell for small-caps that have to work overtime to maintain the market’s interest.

But ISA shares raced from a 20-cent issue price to as high as 50 cents after their January listing, before easing to 35 cents, on low volume. ISA has plenty of supporters in the skydiving community and its founders’ military connections – both are ex-SAS Regiment soldiers – are a big asset.

The company’s biggest selling point is the success of similar attractions overseas. iFly Singapore was hugely popular upon launch in May 2011, with skydiving enthusiasts and novices eager to experience the thrill of skydiving in wind tunnels. ISA, through its iFly Down Under brand, could have similar success.

ISA needs to leverage its first-mover advantage by expanding rapidly to other states. Smaller attractions are planned for the Gold Coast and Melbourne, and ISA wants the military to use up to 20 per cent of the facility’s capacity, instead of going to the US or UK. Its Sydney facility will be built next to Penrith Panthers Rugby League Club’s main entrance and within 50 kilometres of Holsworthy Army Base.

ISA is obviously speculative. But unlike many micro-caps, it at least has a product that has had strong success overseas, has a well-regarded board, and is potentially within 12 to 18 months of first revenue.

2. Osprey Medical

Backing biotech floats in recent years has been a portfolio health hazard. For all their promise, REVA Medical and GI Dynamics, two of the largest floats since late 2010, have disappointed investors since listing, with both companies trading sharply below their issue price.

Osprey Medical could be the exception. Like Reva and GI Dynamics, Osprey was another pre-revenue US-based life science company that chose to list on ASX when the Nasdaq was all but shut for capital-seeking, early-stage biotechs after the GFC. Its core technology was stgeloped at the Baker IDI Heart and Diabetes Institute in Melbourne.

Unlike REVA and GI Dynamics, Osprey was priced conservatively. At least $20 million had been invested in Osprey before its float, which capitalised the company at $40.4 million upon listing, and Osprey’s core backers invested more money through the float, which is always a good sign.

Osprey’s flagship stgice treats contrast-induced nephropathy (CIN), a form of kidney injury caused by X-ray visible dye that cardiologists inject during heart procedures such as angioplasty and stenting. Osprey’s Cincor System captures a large amount of dye before it circulates to the kidneys. The dye is toxic in some kidneys and can cause severe damage.

Osprey’s 40-cent shares hovered around the issue price for months after listing in May 2012 – a good effort in a falling sharemarket at the time. Osprey hit 69 cents last month, before easing to 60 cents, after Therapeutic Goods Administration approval for its CINAVERT dye reduction technology and completing a 50-patient initial clinical experience with it.

Osprey hopes to launch is flagship CINCOR product in the US by 2014 and is clearly targeting a large market, with 6.2 million stent and angiogram procedures each year in the US and Western Europe alone. This should be a pivotal year for Osprey as it gets closer to commercialisation – a point at which small biotech stocks are often sharply re-rated.

But like all emerging life science companies, Osprey suits experienced investors and speculators.

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Tony Featherstone is a former managing editor of BRW and Shares magazines. All prices and analysis at February 7, 2013. The author implies no stock recommendations from the above commentary. Readers should do further research or talk to their financial adviser before acting on themes in this article.