My nomination is AT Communications (ATCG) - current offer price 40p
Described as a '...a leading independent UK business to business communications systems integrator, service provider and distributor'
and from the website ...
Holding the highest accreditations from the world's leading manufacturers and carriers, ATC provides comprehensive, best of breed voice, data, mobile and video solutions, specialising in IP technology. Catering for any size and type of organisation, from 2 users to 20,000, ATC looks at your business' exact needs in order to design the optimum communications platform to provide a direct return on investment and maximum business efficiency.
That's the blurb, the reason for proposing them is that they are so bloody cheap!
The recent trading statement on 6th December stated that pre-tax profits to Dec 06 would be of the order of £4.5m, equating to EPS of 5.7p, so the company stands at a soon to be historic PE of 7.
Following the trading statement Daniel Stewart revised their 2007 forecast to EPS of 8.3p, representing growth of over 40%. A prospective PE of under 5 for that growth rate just looks far too low. Considering growth is likely to continue into 2008, a prospective PE of 10 for a doubled price of 80p looks justified right now. The interims showed that cash generation was adequate and the company also intends to pay a dividend for 2006, estimated by DS at 1p - 2.5% yield, which is a further sign of confidence.
The shares have made no headway since the trading statement and accompanying contract win with Siemans + the subsequent announcement of an extension of the existing BT agreement because there is a substantial overhang from what appears to be a forced seller but to take the contrarian view this could be seen as an opportunity. I'd expect the shares to be sharply re-rated once the overhang disappears.
There is a possible risk that the 2007 forecast is too optimistic but the miserly rating means the shares could still double even if it were to be missed.
The company also has some debt following acquisitions but this looks manageable given the cashflow and profitability.
Finally thanks to the other contributors for some very interesting looking prospects.
