I don't have a view on AJL, or any other particular company, as a takeover suitor. IMO, the best case scenario would be (1) or a combination of (1) and (2) - that is, a PALA private equity takeover or PALA using its stake strategically to act as something of an industry consolidator - eg offering its stake in a script-swap and taking a board position in a merged entity comprising WDS and one of its peers. From a cursory glance at the share register, there also seems to be a relatively large "free float" in the stock (ie no major family/founder shareholdings that won't budge!).
PALA certainly strike me as smart money with an international perspective.
We shouldn't forget that any takeover option is totally speculative, however. Unfortunately, however hard we collectively wish for it won't make it more likely to happen.
What I really hope is that management have done a good job "recalibrating" the business by stepping down their fixed costs and overhead while they wait for CSG work flow to start and therefore restore short to mid term earning, but in doing so they have not "overcompensated", leaving them in a position where they have affected their ability to successfully tender for, and more importantly, execute this work.
Of course getting the work of itself won't be enough - it will be delivering on contracted work and making a profit on it. This may prove difficult if wage costs and other inputs blow out - hopefully their contracts allow them enough "wiggle room" in this regard. If they get it right, however, I think the future for this business is very bright.
WDS Price at posting:
60.0¢ Sentiment: LT Buy Disclosure: Held
