thoughts on a cheap stock

I believe the CIA management accepted the deal 1) because as 50% owner, other potential acquirers were limited given the other 50% owner was publicly listed (AZG) and 2) because they believe the AZG scrip received for their half of the company was significantly undervalued and has huge upside.

I think the days of this stock being so cheap are limited and have been faithfully buying right down to 11c.

As per previous 2012 FY forecast (which the company says they beat in Q1), post CIA acquisition, rev should now top over $200m with NPAT somewhere around $24M. My calculations around fro around 320M shares post CIA so an earnings per share of around 7.5c. Multiples based on peer evaluation and you are looking at such a big upside from here it doesn't even warrant calculating.

As for a capital raising, I'll be asking this and bunch more questions at the AGM later this month. I don't believe they will need one and the fact that they have acquired another very profitable company with large order book in an all scrip transaction confirms the insiders believe in the long term growth story. Surely these owners know far more of the inside story than us investors and are happy to put all their eggs in 1 basket.. Otherwise why would Rob Wilde etc have accepted all scrip offers for their companies. The DD that Arccon performed on AZG prior to the deal being closed was said to have been as thorough as that of AZG on Arccon. The string of acquisitions this year goes to prove CEO Scott Walkem is stuffing this company with value. When the company reports and delivers actual numbers the market will wake and take notice. And with a stronger share price he should be able to pick up future acquisitions for even less scrip. Let's not forget the CEO comes from a M&A and corporate finance background so this is what he knows best.