There is no doubt that the covid handouts from the gov helped them to restore the balance sheet, from over 30 million to only a couple of million was a great result, where as a couple of years ago it was touch and go, now they have options to grow and prosper and hopefully start paying dividends.
Throughout the last few years they have resisted taking the easy option of raising capital at depressed prices, so we now have the situation that they
could raise if a strategic asset could be added at the right price.
The board and management have been overhauled and i believe we now have the right team in place to grow.I do not see Stuart Grimshaw and his handpicked team coming here to preside over a 26 million dollar market cap company, they are here to grow it and in the end most likely sell it in a trade sale.
We have a very tight capital structure, the free float is smaller than it first appears as i believe a significant portion of stock are held by clients of a particular broker up north in the sunshine state.If you add these holdings to the founders then there is not much stock around at all.
Margins are everything in this business and the company has been improving them at every result, this is testament to the fact that they are only now taking on profitable work.
Management incentives are tied to getting the share price up as are the cannacord options, sometime in the future cannacord will put out a note to their clients and all the cheap stock will be gone very quickly.
Right now you can buy shares about the same price as they were two years ago, whats changed between now and then?, well we have paid off 30 million in debt and are profitable again,
we are effectively a way cheaper company now than at any time in the last 4 years, and our balance sheet is way way better.
There is no doubt that it is an competitive industry but covid has shone the light on making sure that cleaning and security is done right, and that it is not just a line item that needs to be cut to the bone,
major companies want to deal with a company that is asx listed as they know that the right procedures are being followed, staff are being paid correctly and the job is being done in a professional manner.
This is the ultimate defensive business , its earnings should be largely unaffected by market shakiness , they just need to keep on improving the margin, while at the same time looking for bolt on additions to add scale.
Rass group have an excellent note out on their website, its free to view, well worth a look, from memory they have a target price of 1.25 or thereabouts.
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