Member Info for Uh-oh

Hi Rivaldo. I've been in these shares for some time, having doubled my money already. At the moment, I still feel the shares are a 'buy' based upon the rate of growth, affordable (for Aim stocks!) p/e, the good visibility to future earnings and potential for more earnings enhancing acquisitions. In my view, a takeover cannot be ruled out either because it is the sort of business that private equity look at.

Mickey, yesterday's figures, whilst in line with forecasts, were tremendous. On a p/e of little more than 10x, yielding almost 4%, generating very strong cashflows and sitting on little debt, the shares look a decent 'Buy' all the way to £3+, if not 350p+. Quite why the shares have been bashed several times in recent weeks is beyond me, but a lack of liquidity in AIM stocks can see this happen and fear can take over, in a fast moving price, when news flow is thin on the ground. Not that ALU's management have been shy to announce better than expected trading updates! Fill 'yes boots. There's a lot more upside to come.

Hi there. There are plenty of acquisition focused groups on the market where, owing to factors like the people running them, they are prepared to give them the benefit of the doubt (for a while!) and so afford the shares a premium rating. This is then used to issue shares, to fund acquisitions that are accretive to earnings. If you are right in saying that there are many well-funded operators in this market, it sounds like Tony Brewer is the sort of man who could take advantage of the fragmented industry conditions.
Do you have any idea of the sort of profits, earnings or growth being forecast by Likewise's brokers?

Hi Trek. I think you need to put your hesitancy to one side and buy ALU, even after the strong rise this year.

The reason for my optimism is based upon the strength and recovery in trading and trying to estimate what the full-year results in the autumn might produce. For this, if you take the 6 month earnings of 13.4p and, crudely, doubled them (i.e. 26.8p), and put the shares on a 10x price earnings multiple, which would be fair for a construction related company, it gives you 268p. However, this is a company growing very fast, partly from depressed levels linked to Covid, and so a rating of well over 10x would seem fair. Cash flows are also very strong, with debts almost paid off and a dividend payout restored, and margins have risen appreciably.

In short, at c.220p, the prospective rating could be as little as 8x. That looks to be very cheap in my view.

One of the problems in feeling completely confident is that this remains a small company, with a market cap. of only c.£80m, and research articles are few and far between (i.e. I've not seen one!). Therefore, it is important not to assume too much because its operations may suffer disproportionately if economic conditions slow down again into 2022.