Equity fund manager DNR Capital has highlighted the performance of the testing services provider ALS Ltd in its portfolio over the past year and pointed to further strong performance from the company.
ALS’s share price went up 55 per cent in the year to June, driven by a pick-up in mining exploration activity. ALS is a provider of laboratory testing and analytical services, working in the mining, food, pharmaceutical, environmental and other industries.
The market re-rated the stock after the company announced that it would sell its loss-making oil and gas business, which it completed earlier this month, and move further into the life sciences market (food, pharmaceutical and environmental testing).
DNR says: “Exploration budgets have troughed and it is estimated that capital raised by juniors alone could underpin a 50 per cent increase in exploration activity over the next two or three years.”
In the year to the end of March, ALS produced revenue of $1.3 billion and net profit of $112 million – an increase of three per cent over the previous corresponding period.
It paid dividends of 13.5 cents a share 40 per cent franked, representing a 60 per cent payout ratio.
The company has provided earnings guidance for the current year, saying it expects underlying profit to be in the range of $70 million to $75 million in the first half, compared with $60 million in the pervious corresponding period.
ALS is an ASX 100 company, with a market capitalisation of more than $3.8 billion. It has 13,000 employees and operations in 65 countries (up from 21 countries a decade ago).
The stock has been on a run over the past 18 months, rising from a bottom of $3.50 a share in February last year to the current price of $7.46.
Macquarie Securities has put a price target of $7.80 in the stock, with an ‘outperform’ recommendation.