stock pick of the week., page-12

I think this may get oversold. If you did not know that labour costs and key inputs like tyres had gone up in price then you should not own any company related to mining. Margins were not too bad, but earnings were too much weighted to Africa for my liking, although the contracts are reasonably long term and with blue chips. There was significant investment in equipment for new projects which will only deliver full value this year. Also one-off factors like a bad cyclone season impacted results.

ASL does not go after too much exploration drilling - this means its margins are lower as it is dealing with bluechips, but stability is greater. A bit of a drag in boom times like now, but management is very experienced.

Balance sheet is very strong - I expect some acquisitions pretty soon and I doubt they will be drilling companies -more likely a service or product provider like an Imdex. Cash is on balance sheet for a reason. I would rather ASL takes their time with an acquisition rather than rush and overpay or miss something in due diligence.

As I said a bit disappointing but not a shocker. I got out mostly around $1.60 and expect it will trade around $1.40-$1.50 until they make an acquisition. Anything less than $1.40 is good buying in my view, with a trade towards $1.60 and upside for the right acquisition.

Management is pretty conservative and they have said they expect increased sales (a given) and at least steady margins (time will tell).

Cheers
Monty