2 ultra-cheap shares hiding in plain sight?

Photo: James F Clay Flickr

Printing might not be a sexy business anymore, but the fact remains that businesses and companies still require printing for various reasons, and the demise of most of the industry means those that are left have all the business to themselves.

Additionally, investors may not realise that the share of ebooks as a percentage of revenue in the market has stabilised or are in slight decline. According to one printing company, the death of printed books has been greatly exaggerated.

That means opportunities for these two companies.

IVE Group Ltd (ASX: IGL)

IVE is a marketing and print communications provider, providing direct marketing mail, printing, retail display, promotional merchandising with a total addressable market of around $4.1 billion. The upside for IVE is that the company is the largest operator and has just 8% market share. Last week the company executed a long-term contract with Westpac Banking Corporation (ASX: WBC) to provide graphic design, print and supply-chain management services.

IVE recently reported 145% growth in half-year net profit and is expected to report earnings per share of 24.9 cents this financial year – equating to a P/E ratio of 8.8x – and expected to pay an 8.4 cent dividend this year – but 16.7 cents next financial year – a fully franked dividend yield of 7.7%.

Opus Group Ltd (ASX: OPG)

Opus is also a printing company, specialising in printing for outdoor media, professional, educational, government and read for pleasure markets and counts many of the world’s largest publishers as customers. The company’s Outdoor media division is Australia’s largest provider of grand and large format printing, including things like billboards, bus advertising, retail displays and vehicle wraps.

Opus recently sold its Singapore printing business for $11.3 million with an additional $8 million potentially payable within 3 years. The company has decided to reward shareholders and is paying a fully franked special dividend of 9 cents per share on 10 June 2016 (Ex-dividend date is May 27, 2016).

Results from the 2015 financial year also indicate that Opus may have turned around its business, with a net profit of $12 million, for earnings per share of 12.5 cents. At the current share price of 62.5 cents, that equates to a P/E ratio of 5x. Opus also paid a fully franked dividend of 3 cents per share, a yield of 4.8%.

Foolish takeaway

Both printing companies are being overlooked by the market which is concerned that their businesses are in a structurally declining sector. That may no longer be the case, and both IVE and Opus are worthy of further research.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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