I think I would disagree with you. My opinion is that even at 0.125, AMA is still an excellent investment with very good risk/reward. This little company has a lot of debt, and therefore the leverage. The point is, the leverage is in our favor.
If my reading is correct, the AU auto market has strengthened dramatically. According to an article in WSJ a few days ago, the sales of auto has risen more than 10 percent last year. When it comes to high end models, the sales is actually greater than average. It is fact that quite a lot of AMA's business is towards auto enthusiasts, so it will benefit from the trend a little more than average auto aftermarket businesses.
In 3 years, if AMA pay down the debt and generate 10m in EBIT, this is going to be a huge winner. If I remember correctly, all the businesses in AMA was all established a few decades ago locally. It deploys very moderate amount of working capital and the ROIC is very respectful. By any chance, a debt-free, cash-generating company should not be trading at a little over 3x EBIT in 3 years.
I bought the share @0.044 and did not sell a single share along the way. My biggest regret is that I did not buy more when the 2m settlement has changed the sentiment of public dramatically. I also underestimated how quick the price gap can be filled. Hopefully I learned a little something this time and do not make the same mistake in the future.
AMA Price at posting:
12.5¢ Sentiment: Buy Disclosure: Held
