Hot stock: ALS Ltd (ASX: ALQ)
Closing share price 14-6-16: – 5.210
52-week high: 5.859
52-week low: – 2.930
Most recent dividend: 6c
Annual dividend yield: 2.57%
Invast’s stock pick for the week is ALS Ltd, an analytical testing service provider. Takeover offers aren’t being initiated in the market these days but as the cycle starts to turn positive for equities, the smart money is chasing undervalued assets. Bain Capital’s recent approach to take over ALS shares caught our attention, not because of the asset itself but more so the timing. Clearly Bain sees things picking up in the key markets in which ALS operates in – laboratory testing and certification. It has big exposure to mining, energy, minerals, food and environmental testing.
Debt is cheap and valuations of many companies such as ALS that have been exposed to the mining industry have come down. If Bain sees an opportunity, there will be others that think the same. While ALS isn’t exactly a small cap these days, it is still under the radar and presents a reasonable trading opportunity. The board rejected the approach (so it should) but we think there might be more to this story, with interest returning.
The suggested takeover price was apparently $5.30. We’re happy taking a long position at current levels with a tight stop-loss just below $4.90. The stock should find support at these levels.