ASG Group Limited (ASG) is a provider of information technology (IT) services to the users of mid range computers for enterprise systems delivery. The Company provides solutions to address clients business requirements in the areas of infrastructure and applications management outsourcing, Oracle e-Business suite implementation and support, applications development, business intelligence solutions, systems integration, IT service management and specialist technical services.
Pros
- Strong recurring revenue
- Decent competitive advantage
- Many government contracts
- Operating margins ~14%
Cons
- Facing economic headwinds
- Capitalises software development costs
- Poor operating cashflow
- Impossible to raise operating margins materially as ASG are a management consultancy company.
Valuation
- Share price as at 26th Aug 2008: 90 cents, market cap $116m
- Forward P/E: ~9
Bottom Line
- A GARP share, with no obvious share price catalyst
- Would like to see an improvement in cashflow
- Would like an even larger margin of safety with the share price
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