AMO - Ambertech

[Lizard]

AGM presentation now out. Unlike last year, they actually provided some firm profit guidance, indicating first half will come in at $1.8-$2.2m NPAT - around twice the $996k booked in prior year. Looks well on track for the full year range I'd estimated of $2.5-$3.9m.

Has attracted a few buyers, but still pretty thin on depth. Last sale at 52.5cps, and wearing a tricksy 10% spread.

Result out last night and came in pretty much as forecast. No obvious fish hooks except that cashflow didn't match profit due to inventory creep. Looking back, it seems inventory has often been higher at the end of first half, so perhaps seasonal factors involved. (The fact they haven't activated the DRP for the $1m in dividends suggests cashflow probably better post-Christmas?)

Value metrics are now pretty much unbeatable - particular if second-half is assumed to match first half (and there's no obvious reason why it wouldn't at this point). First half dividend of 3.5cps puts the rolling 12-month yield at 11% plus franking - likely to be higher.

Makes it on my (very short) list of Graham-Newman "Working Capital Bargains" where Current Assets less Total Liabilities are greater than market cap. Only the third one I've ever come across (and the last two worked well).

And before someone says "the chart is going nowhere", I'd just suggest that it probably will after the next 1m shares have been traded - given HNG selling for non-AMO related reasons as covered here:

http://www.sharetrader.co.nz/showpos...4&postcount=11

For anyone thinking of buying, I'd suggest you don't bid above 50cps - HNG currently seems willing to sell down to any bids at that level. It is perhaps also desirable to wait until the next 500k shares have gone through the market before buying, so as not to have to wait in the trade too long for the overhang to clear - at current rates it could still take another 3-6 months for HNG to exit, although I suspect this result/dividend will hurry things along a bit.

[macduffy]

Thanks for the post, Liz. An interesting small company!

As you say, it's not often that you find a co. with net current assets exceeding market cap. In fact, Inventories are about equal to mc!

It's the growth of Inventories that gives me cause for pause - that and the illiquidity of the stock as evidenced by the time it's taking for the sell down by a large holder. I'm not sure how subject to obsolescence AMO's stocks are but I must admit to a certain bias against tech stocks o/a my own ignorance of things technical!

I'd also be looking for more surplus operating cash flow. Recent trading ( and the previous year's result) have been helped considerably by the strong AUD which may or may not continue.

Not dismissing AMO by any means but I need to dig a little deeper into the business when time allows.

[Lizard]

Well there we go - looks like someone just cleaned out pretty much all that remained of the HNG holding at 50cps. It's possible they have up to 100k left, but most likely not.

Should have removed the lead weights off the feet of this stock.

[percy]

lizard
keep it up.AMO and TEN both on the move!!!!

[macduffy]

Yes, well done, Liz!

The power to move markets!



Nice to have!

[Lizard]

The power to move markets!



Nice to have!

Haha ... if only!

[Lizard]

Looks like the shine wore off - guidance for FY out today suggests they won't even scrape together a second-half profit due to a fall-off in revenues.

Perhaps they distribute to Clive Peeters.

[percy]

Looks like the shine wore off - guidance for FY out today suggests they won't even scrape together a second-half profit due to a fall-off in revenues.

Perhaps they distribute to Clive Peeters.

What surprised me is just how quickly the maket changed.There will be a great deal of companies in the same leaky boat.

[thereslifeafter87]

Another low p/NTA play, potential earnings recovery story.

They were unprofitable in the second half, and are facing some ACCC issues - but it doesn't look to be serious. These issues caused the sell-down.

It now looks reasonably attractive based on low P/NTA and historical profitability.

[Lizard]

TLA87, you may be interested in the "Net-net bet" thread... though a few don't really fit the bill now.

AMO is not top of my list for now - they were pretty slow to report the negatives coming through in second half last year. However, they trade with a margin of safety as you have noted. My problem at this point would be that first half 11 seems unlikely to beat 1H10, although there are some comments regarding commercial project spend this half that are encouraging. I am well convinced that at some point in the next 2 years, they will be trading above 50cps and perhaps as high as $1. However, even at 36cps, I'm not certain it's worth the sit-in.