Organically-growing tech: ASG Group (ASZ)

[tommy]

Here is one for the tech fundamentalist like me who doesn't mind illiquid tech stocks with massive organic growth potential.

ASG Group (ASZ) is involved in the provision of computer infrastructure, application development, systems integration, specialist technical services and Internet and e-commerce security. The companys products and services comprises Infrastructure Services, Application Services, Systems Integration, Consulting Services, Security Products/Services, Oracle eBusiness Suite, eHost Data Centre and Service Desk Systems Management Centre.

PE of 17 isn't too bad for a rapidly growing company that managed to increase NPAT massively in 2006, not to mention the fact that existing contracts alone will ensure a healthy revenue stream for 2007 (see presentation at link below), plus the Qantas contract announced today (again see below).

Preliminary Final Report
http://sa.iguana2.com/cache/735858c6...ASZ-332779.pdf

Financial Results Presentation
http://sa.iguana2.com/cache/4176b76f...ASZ-334132.pdf

Annual Report
http://sa.iguana2.com/cache/17a40f88...ASZ-336284.pdf

ASG Secures IT Services Contract with Qantas
http://sa.iguana2.com/cache/7635fb70...ASZ-336841.pdf

Anyone else holding ASZ? I have been constantly accumulating[:I]

Here is an excerpt from the preliminary final report:

Highlights:
- Revenue up 45% and NPAT up 99%
- EBITDA up 66%
- Record earnings per share
- Record Dividend
- Healthy Operating Cash flow
- Strengthening Balance Sheet
- Increased Contracted Backlog
- Strong Business Outlook for FY2007

IT Services provider ASG Group Limited (ASX: ASZ) today announced a net profit after tax of $5.2 million for the year to 30 June 2006, an increase of 99% over the previous financial year.

The strong earnings growth flowed from revenue of $59.3 million, an increase of $18.5 million or 45% on the previous year.

Basic earnings per share rose to 4.7 cents, up 68% from last year. The Board has declared a fully franked final dividend of 2.2 cents per share bringing this year�fs total to 3.2 cents, a 46% rise.

EBITDA for the year was $7.2 million, 66% above the FY05 level and ahead of the $6.7 million guidance released to the market in May 2006.
Second half EBITDA stood at $4.3 million, representing almost 60% of the FY06 total.

ASG Managing Director Geoff Lewis said that the result demonstrated the growing presence and strength of ASG across the Australian outsourcing and computer services markets.

�gWe are pleased revenue, net profit, earnings per share and dividends have all reached record levels and our business measures and performance criteria are on the increase across the board,�h said Mr Lewis.

�gWe have also grown EBITDA at a rate greater than revenue growth, demonstrating our strong increase in business activity is also reflected in improving profits.

�gParticularly important is that our improvements in revenue and profit performance have been achieved from organic growth.

�gThese gains have flowed directly from the investment made to optimise costs, improve productivity and to leverage our Australia wide infrastructure.�h

Mr Lewis said the performance was also noteworthy given how the high demand for IT Services and technical staff has created cost pressures for the sector.

�gASG�fs business model has enabled us to control unit costs through productivity and deliver ongoing savings to our clients whilst still delivering increased value to shareholders,�h said Mr Lewis.

�gOur access to skilled and experienced staff is very important to maintaining our growth. Significant attention is being addressed to this area and staff numbers have increased to more than 450 during the year, up around 25% over the year.�h

During FY06, ASG continued to perform strongly in securing new long-term contracts across all geographic markets in which it operates.

�gThe reference sites now established by ASG have increased our profile acro

[tommy]

http://australianit.news.com.au/arti...-15316,00.html

Qantas awards deal to ASG
Ben Woodhead
OCTOBER 06, 2006

QANTAS has awarded Perth firm ASG Group a three-year services contract for its controversial eQ business software project.

Under the deal ASG will provide Oracle technical development and environment management services for the eQ project, which is aimed at stripping complexity out of the carrier ' s ageing computer systems.

The contract comes as Qantas prepares to send some of its information technology jobs offshore. It has short-listed Indian software firms Satyam Computer Services and Tata Consultancy Services for a pending software maintenance deal.

It has said it may award a single contract or split its services requirements to sign both of the short-listed firms.

The potential value of the offshore outsourcing deal has not been disclosed and Qantas also did not reveal the value of its new contract with ASG Group.

ASG Group managing director Geoff Lewis welcomed the deal and claimed it signalled to the market that the company could deliver large projects.

"Along with our recent $88 million contract for the Western Australian government's Office of Shared Services, this contract with Qantas confirms ASG's ability to deliver large scale projects and managed services in the emerging shared services market through our strong Oracle implementation and application managed services capability," said Mr Lewis.

"ASG will continue to exploit this capability and referencability as we move rapidly towards a market leading position in this area."

eQ has been underway since 2002 and attracted controversy early this year when Qantas axed an eQ technology services contract with IBM six years before it was due to expire.

Former Qantas chief information officer Fiona Balfour also openly admitted last year that the carrier would struggle to meet the cost of replacing some of its legacy software systems.


___________

ASG secures IT services contract with Qantas
6-October-06 by Edited announcement
Latest News


Perth-based IT services provider ASG Group Ltd has been contracted to provide IT systems integration and management services for Qantas Airways Ltd.

The three year contract will be managed and delivered out of ASG's Northern Region operation based in Sydney. ASG was named preferred tenderer for the contract following a rigorous selection process.

Under the terms of the agreement, ASG will provide Qantas with Oracle Technical Development and Environment Management Services to support the airlines' eQ project - an e-business initiative aimed at reducing the complexity of older systems and infrastructure to drive savings within Qantas.

ASG Chief Executive Officer Geoff Lewis said the company was delighted to have been selected to serve such a prestigious icon organisation.

"Along with our recent $88 million contract for the WA Government's Office of Shared Services, this contract with Qantas confirms ASG's ability to deliver large scale projects and managed services in the emerging Shared Services market, through our strong Oracle implementation and application managed services capability," said Mr Lewis.

"ASG will continue to exploit this capability and referencability as we move rapidly towards a market leading position in this area."

Mr Lewis said ASG was especially delighted to have been selected by Qantas to play such an important role in implementation of its change program.

"We look forward to providing real value to Qantas through implementing its eQ initiative and assisting to deliver the productivity and efficiency gains sought by our customer," he said.

"This contract reflects an ongoing strategic relationship that ASG has with Qantas and is an important milestone for ASG."

"We are thrilled to have been awarded the project, despite strong competition and look forward to working with the Qantas team."

The eQ initiative, launched in 2002, is focused on upgrading systems in Qantas' p

[tommy]

Hehehe, up 9% today[] Sell side non-existent!

[tommy]

mmm, cannot find how much the Qantas contract is worth, extremely annoying[xx(] But found an old article:

http://australianit.news.com.au/arti...-15320,00.html

ASG doubles profit
Ben Woodhead
AUGUST 30, 2006

PERTH outsourcer ASG Group has backed forecasts that corporate and government buyers will continue to spend up on computer and communications services after it nearly doubled its net profit to $5.2 million in the 2006 financial year.

ASG reported a 99 per cent rise in net income from $2.6 million a year ago and said revenue for the 12 months to June 30 jumped from $40.8 million to $59.3 million.

The result outstripped full-year earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of $6.7 million that the company issued in May after strong second half sales boosted EBITDA to $7.2 million.

The company declared a 2.2c per share fully franked finally dividend and its shares were up 2c to 74c in early afternoon trading.

ASG Group managing director Geoff Lewis said that the result was aided by efforts at the company to optimise costs and lift productivity. He also said the company increased headcount by 25 per cent to 450 during the year.

"The reference sites now established by ASG have increased our profile across Australia and enable us to compete for larger and more complex systems management roles and projects in both government and corporate markets.

"(The 2006 financial year) has been our best ever year for building up our backlog of contracted services to be delivered over the next five years," Mr Lewis said in a statement to the Australian Stock Exchange.

Mr Lewis also the current strong demand for computer services was likely to continue.

Technology services companies have been major beneficiaries of renewed corporate and government investment in new computer systems following a lengthy lull in spending after Y2K.

Candle, Oakton and SMS Management & Technology have been some of the biggest winners and all three companies have recently said that reinvestment in computer systems would remain strong during the current financial year.

All three have also said that the demand has put pressure on the availability of skilled workers and Mr Lewis said that the high level of competition in the market was putting pressure on costs and access to technical resources.

He also said that ASG was ready to make acquisitions should any suitable opportunities arise.

"This still remains a key aspect of our growth program and the company is well positioned from a balance sheet viewpoint when an opportunity arises," Mr Lewis said.

"We are actively exploring a number of prospects and expect success (this financial year)."

ASG had $3.1 million in cash at June 30 this year, down from $3.5 million in the previous corresponding period.

[tommy]

ASZ has hit 100 million market cap mark, PE is now 19 which is above the sector average of 17. Now that it will be on the radar of instos, I expect a rerating in the coming months, although the illiquid nature of the stock might not allow much movement until the next half-year results are out.

ASZ may superficially seem overvalued but is not the case simply because ASZ is NOT a normal IT company that receives piecemeal sales revenue: it has a continuous income stream based on long term contracts. Not many companies can double their NPAT based on long term contracts.

Here is an excerpt from the annual report
http://imagesignal.comsec.com.au/asx...f/00652451.pdf

"Underpinning our successful execution of both our strategic and operational plans is the unique ASG Cumulative Revenue Model. This is the first factor that we highlight when identifying reasons for our success. The very heavy weighting of multi-year long term contracts remains the stable foundation upon which our revenue and profitability
growth rests. Unlike most IT services companies, ASG carries up to 70% of its annual revenue forward into each successive new year, forming a basis for growth and momentum that influences turnover and profit for many years ahead.

The logical corollary to this is that the business model will continue to be more robust than those of our competitors in less buoyant or even deteriorating economic conditions. The services that we provide to our long-term clients are fundamental and are deeply embedded in the day to day operation of their businesses. They are partnerships that must endure under all business conditions.

One of the compelling aspects of the ASG performance flowing from this model is the ability to increase profits at a rate greater than revenue growth. With EBITDA growing 45% faster than revenue, this augurs well for the Group�fs ability to capitalise on organic growth in the current strong market."

Most notably, look at the chart on page 13 of the investor presentation (http://sa.iguana2.com/cache/4176b76f...ASZ-334132.pdf)
under the heading "Major slice of FY07 revenue locked in at start of year/under long-term contracts"[:0]

They already have MORE "existing contracts" for FY2007 than "existing contracts + new contracts" combined in FY2006, and this chart was released BEFORE the latest Qantas contract!!!

I still cannot get hold of the figures of the Qantas contract but I presume it is similar in scale or bigger than the $88 million contract they won for the WA Government's Office of Shared Services... can anyone find any info on this?

In any case, this is a tech firm with very little downside IMHO. If you can withstand illiquidity, it might be worth taking a look. Please do your own research[:I]

[tommy]

WTF... trading halt[:0]

[tommy]

http://sa.iguana2.com/cache/c91d2257...ASZ-342686.pdf

Good news, ASZ to become even bigger through acquisition (gee, I initially thought they purchased an indian takeaway joint!)


Perth, 21 November 2006
ASG Boosts Oracle Capability with Acquisition of Vindaloo
Systems


IT Services provider ASG Group Limited (ASX: ASZ) today announced the acquisition of Sydney-based Vindaloo Systems, a leading Oracle solutions and managed services group.

The acquisition delivers to ASG a significant boost to its delivery capability and positions the Company for further growth in the Sydney market.

It is also part of ASG�fs strategy of building capability and national service reach through organic growth and earnings per share accretive acquisitions.

Vindaloo Systems is a top-end Oracle consulting firm that will bring to ASG a premium customer base with strong annuity revenue streams, outstanding technical and consulting capability and a sizeable and growing market share. Vindaloo currently employs approximately 45 staff including leading Oracle Consultants.

ASG�fs purchase consideration is based on a 4.75 times EBIT multiple and will be in the form of cash and ASG shares. The acquisition will be immediately earnings per share accretive.

ASG also announced today a $4 million capital raising. The raising was underwritten by Paradice Investment Management. Proceeds from the issue will be used to fund the acquisition and to provide working capital for the further growth of ASG�fs combined businesses.

ASG Chief Executive Officer Geoff Lewis said the Vindaloo acquisition represents an important step forward for the Company in its ambition to build a leadership position in the Sydney market.


�gWe have admired the Vindaloo business for a long time, particularly its technical and service capability,�h said Mr Lewis.

�gVindaloo�fs premium client base and its footprint in the Sydney market represent a great opportunity for ASG to build our presence in this important market.�h

Vindaloo was founded in 2000 and had built a strong market position in delivering a range of exclusive, cutting-edge solutions and services.
These include Oracle consulting, managed services, specialised methodologies and complementary solutions to enhance Oracle solutions, applications development and systems integration solutions.
The company has a reputation for being a specialist in supply chain management and has built a strong presence in the automotive and retail sectors.

Mr Lewis said the new business would operate under ASG�fs Northern region division, which recently announced major new contracts with Qantas and Ericsson.

�gASG has achieved consistent and strong revenue and earnings growth over recent financial years and the Vindaloo acquisition will accelerate that growth. Vindaloo also has a number of significant long term customer relationships which will complement ASG�fs cumulative
revenue business model�h he said.

�gImportantly, the acquisition is a great strategic fit for ASG, offering a blue-chip client base, opportunities to leverage other ASG services as well as increased earnings.�h

Contact:
Mr Geoff Lewis
Chief Executive Officer
ASG Group Limited
(08) 9420 5420

[tommy]

Great update from ASZ, I topped up again today[8D]

ASX ANNOUNCEMENT
Perth, 22 November 2006
Annual General Meeting

ASG Group Limited today conducted its Annual General Meeting in Perth. Addressing the meeting, the Chairman Mr Stan Lewis reviewed the recent progress against the Company�fs development plans and outlined key developments, plans and objectives for the current year.

Highlights included:
- Strong organic and acquisitive growth.
- Solid FY2006 earnings and increased dividend through high growth period.
- Good cash generation from operations and successful measures to conserve working capital.
- Acquisition of Sydney based, leading Oracle Solutions and managed services group, Vindaloo Systems.
- Balance sheet continues to strengthen.
- Record levels of new business, $30m contract revenue booked in 3 months.
- Positive economic and business outlook for sector and ASG.
- Record Improvement in business performance through organic expansion.

A full text of Mr Lewis�f address accompanies this release.

Chairman�fs Address to the FY2006 AGM on 22nd November 2006

ASG has again completed a very successful year during which we have expanded and matured in a competitive sense and also strongly consolidated our position in our chosen markets around Australia. Today I will recap the major features of our year, comment on matters currently in progress and outline our plans and objectives for the present financial period and beyond.

Looking back over the 2006 financial year, a striking feature is the record improvement in all areas of business performance based solely upon organic expansion. As predicted when I spoke to you at this time last year, the surge in revenue and profit growth was underpinned by the solid geographic positioning and market profile that had been achieved during the preceding years.

The Board�fs intention has always been to maximize business development. This is to be achieved consistent with the parallel objective of maintaining satisfactory earnings growth, an improving dividend stream and solid improvement in shareholder value generally. Having achieved many of our geographic and organizational objectives in prior years, our development during this period has been evolutionary rather than revolutionary. This has allowed ASG to show its true potential. In a year driven purely by organic growth, all of our financial measures are records. Revenue increased by 45%, EBITDA by 66% and NPAT was double that of last year.

Our balance sheet has again strengthened and the key working capital management parameters have also continued to improve. The buoyant economy has promoted growth but has also produced cost pressures for ASG and for our clients. It is pleasing that our businesses have supported the growing working capital needs of our expanding base. This was whilst growing profits more quickly than revenue and also producing an improved operating cash flow, even when measured on a cents per revenue dollar basis. This clearly demonstrates the advantages brought to ASG by the economies of scale across our business portfolio.

We continue to deliver value to our shareholders with a combination of improvingper share has jumped by 68%, one of the strongest performances by any company in our business sector. As a result there was a 45% increase in fully-franked dividends for the year, with a total distribution of 3.2 cents per share.
[b]
As on many previous occasions, I again highlight the ASG Cumulative Revenue Model as a major factor underpinning our business and financial success. Our deliberate targeting of multi-year selective outsourcing contracts has resulted in an accumulation of profitable business for the future. Although the sales cycles for acquiring this class of business are long, the establishment of a strong base of profitable contracts is invaluable in the maintenance of consistent profitability as well as stability through various economic cycles.

During the last 12 months, ASG has secured a very significant volume of additional bu

[tommy]

ASZ being re-rated now with sell side thinning out...

http://bigcharts.marketwatch.com/int...w.x=0&draw.y=0

[tommy]

ASZ breakout?! No depth, what has happened? Rumors?

http://bigcharts.marketwatch.com/int...x=34&draw.y=10

I am getting ready to wet my pants[]