AMA Group: An overlooked ASX opportunity?

AMA Group Limited (ASX: AMA) may present an opportunity for patient investors who can see opportunity in this under-appreciated business

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

AMA Group Limited (ASX: AMA) released its half yearly result on 21 February, 2012. The results from this car parts and panel beating business were mostly steady and solid as expected, following our coverage of the company back in September 2011.  (Since that time, AMA has paid a fully franked dividend of 1 cent per share, and its share price has appreciated roughly 35%.)

Investors would have had some indication of the result from the earlier results of ARB Corporation Limited (ASX: ARP), and the ABS data on motor vehicles and SUV sales.

The positives from the latest results are:

  1. Operating cashflow remains healthy at $3.2m for the half;
  2. Debt reduced by $2.2m;
  3. Finance costs reduced to $441k for the half, overall costs contained.
  4. Yearly dividend flagged by management;
  5. Good trading months for January and February 2012.

The negatives for the latest results are:

  1. Sales growth is relatively soft, and large drop in revenue for Panel Repair division;
  2. Operating margins slipped slightly to 14.6%.

Management has previously stated its intent to focus on current businesses, to ensure each business is profitable on its own, to reduce debt quickly, and to utilise its franking credits.

The latest report confirms that they are doing exactly what they have promised.  The company does not promise booming growth and AMA is not a business that will set hearts aflutter.

In fact, we're not market timers, but it's entirely possible that the lack of growth, no exciting news and the absence of a half yearly dividend may cause impatient investors to sell, pushing the share price down in the coming weeks.

AMA's market capitalisation is around $40m. Business operations generate cash of about $7m per year, and accrued losses will ensure that no tax is actually payable for at least 3 to 4 years.  It is rare to find opportunities such as these.

If you are looking for ASX investing ideas, look no further than "The Motley Fool's Top Stock for 2012." In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

Motley Fool contributor Peter Phan owns shares in AMA Group. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »