Research complied by our Investment team ASHLEY SERVICES Group...

Research complied by our Investment team
ASHLEY SERVICES Group (ASH)
There are not too many companies listed in the ASX which can boast of price earnings ratio of 5.38 and an annual fully franked dividend payment of 6.4 cents per share (annual yield of 12.30%) based on share price of 52 cents and a final year fully franked dividend payment of 4.1 cents (7.88%). One such company is Ashley Services Group (ASH) which is in the business of providing training, recruitment and labour hire services.
The company issued shares in August 2015 at an issue price of $1.66 which was fully subscribed with some major institutions taking up their share allocation. Ross Shrimpton bought the company in 1999 and thirteen acquisitions have followed in the past 15 years.
The float raised $41 million in cash and shares. Shrimpton insists ASH has a point of difference to some of the companies it has been compared to, including the recently listed Vocation Limited and the long-established Skilled Group.
“What we say is that we train the unemployed, then get them a job, upskill them after that [with more training] in order to keep adding more value."
The managing director, Ross Shrimpton and family members owns about 60% of the issued shares (skin in the teeth) and is very active in managing the business. He even list his name as a Contact person for any ASX announcements (hands on person).
However, after 2 profit downgrades from EBITDA of $31 million (prospectus forecast) to $20.7 million due to falling enrolment numbers impacted by termination of federal government incentive payment, it is now the subject of possible legal class action by
perennial litigation funder, IMF Bentham Limited. The company has denied all liability and will defend any claims.
ASH has just announced that it has received a significant increase in the financial cap allocated to its NSW training division meaning that ASH now has access to over $35 million in subsidies to support delivery of training and assessment services in NSW.
Inspite of the increased funding, the company has conservatively maintained its market guidance for financial year end 2016 to be in line with financial year end 2015.
Based on current and prospective annual dividend payment of 6.4 cents per share, the company can provide a juicy dividend yield of 12.30%. Verdict: BUY