The Matthew Kidman view on ASZ - nothing new here... a little to negative in my perspective. Any other thoughts from holders?
Trick to picking winners as market starts to surge DateFebruary 21, 2013 15 reading now(0)
NOW that we are officially in the bull market, it is still possible to pick the wrong stocks and miss out on making money.
ASG Group
THE series of events at the West Australian-based IT services company should be a red flag for all investors. The group's share price has fallen 20 per cent since October, when it made the dual announcement of receiving an unsolicited cash takeover offer of $1.03 a share and a $15 million rights issue at 52¢. The rights issue was used to lower debt and was underwritten by UBS.
The group held its annual meeting in November and gave no indication of any operational or accounting issues. Then last week the company said it was writing off $14.9 million (co-incidentally almost the same value of the underwritten rights issue in October) of capitalised contract establishment costs.
Advertisement It also announced it was undertaking a formal review of its accounting policies relating to cost deferrals, capitalisation and amortisation of major contract wins. The announcement was topped off by the resignation of chief financial officer Stuart Whipp, who was replaced by chief operating officer and former CFO Dean Langenbach.
All of this is disconcerting enough for shareholders, but if we look back at the past two years of accounts it becomes doubly so. ASG has booked a total of $30.3 million net profit after tax (NPAT) and $57.1 million of earnings before interest, tax, depreciation and amortisation (EBITDA). It has also told the market it will book another $13 million of EBITDA for the six months to December 2012.
The cash flow statements for 2011 and 2012 tell a completely different story, revealing a total loss of $15 million.
It is difficult to believe that once the group stops capitalising costs it will be worth anything close to its $116 million market capitalisation.
