apsec buy recommendation

Apsec just put a buy recommendation on AAX wwith a target price of 4.25

1. Project Acquisition stronger than expected - Unlike many of the Australian Mining services companies that are exposed to the
Iron Ore and LNG boom in Australia, AAX has significant diversification geographically to support earnings over the coming years.
Given their large exposure (75%) to the larger Global Miners as well as new industries (Chemicals, Ports, etc), provides greater
confidence that they will be able to sustain their order book. AAX needs to be considered in the context of global GDP growth
rather than peaking Australian mining investment
2. Growth in Operations and Maintenance - This has been a hole in their diversified strategy up until the past month whereby they
acquired the Rylston group at 3x EBIT. This is likely to contribute approximately 25% of EBIT, a strong change to the underlying
recurring earnings of the group.
3. Excess cash - It is expected that the company will have significant financial flexibility going forward with a net cash position as
well as strong free cash flow. They are yielding around 6.3% as well as recently implementing a 5% buy back of shares. Both of
these should protect from downside risk as well as the company having revised up earnings twice over the past 3 months.