I have recently invested into AZG, I think it's worth a closer...

I have recently invested into AZG, I think it's worth a closer look for those who like the mining-service sector.

AZG are recently listed on the ASX, and they have recently announced the acquisition of Arccon, which I see as a defining moment for Allmine.

Allmine have achieved an incredible purchase price for Arccon, 6x FY2011 NPAT and 1.9x FY2012 Projected NPAT.
They have made other acquisitions recently, for extremely low multiples - 2x FY2011 EBITDA for Carey Gardner Engineering.

With the acquisition of Arccon, All-mine has a far improved outlook for profitability, balance sheet and growth trajectory.

Some interesting figures for valuation

- Forecast FY2012 NPAT of $16.5 million
- Forecast 2012 Equity of approx $60 million
- Implied ROE of 25%
- Current Implied market cap (post-share issue for Arccon purchase) - $77 million

That is a PE of 4.66!!

It's also a multiple of equity of just 1.28, when they are earning 25%+ p.a. on that equity.


Using Roger Montgomery formula, using ROE of 25%, 50% dividend payout, 14% RR, I come to a value somewhere north of 50cents.

Take a look at the most recent investor presentation (25th May 2011), I think this is extremely undervalued.

Cheers