I have been a strong supporter of HRL and have been steadily buying a lot of the stock thrown out from 6.5c upwards. Clients also took up the 10c rights issue, and I am very pleased that we now have an opportunity to buy in the mid 8's. I love it when I am able to see what is coming well before the masses and be rewarded with some handy upside before the small funds pile in.
Why HRL is my favourite small industrial company
* Management. Steven Dabelstein can be straight from the MD textbook but occasionally will find one my jokes funny. He is all about building a business and isn't worried about impatient holders looking for an exit. Darren Anderson in my meetings with him seems pretty relaxed.
* Growth. Now have a look at the recent 4c's and some of the commentary. HRL have just acquired two businesses and the revenue appears to be heading in the right direction. HAZMAT management and Geotechnical businesses are the types you could almost consider recession proof (Yes Australia will eventually have one).
* Room for expansion. Once HRL bed down Morrison, Octfolio and build on Precise/Octeiff, I would expect not only organic growth but the potential to acquire complementary businesses that will allow them to tender for much larger projects.
* Upside. Once the earnings momentum builds the small cap funds won't be able to help themselves. I have seen this in the likes of NEA and PPS before they entered into their growth phases.
HRL is building a serious business and isn't getting the market recognition it deserves. Management are not promoters (nor do they have to be), however the one the thing the market won't discount is revenues, margins and low multiples. Whilst HRL is a more conservative play for me outside junior explorers and biotech's I believe it still offers multiple upside potential with the bulk of the re-rating to come once the story grabs the attention of some larger institutional investors. In the meantime I am happy to sit around and soak up as much stock as possible sub 10c.
HRL Price at posting:
8.5¢ Sentiment: Buy Disclosure: Held
