An ASX share that only listed a few weeks ago is being ignored by investors, even though next month's reporting season could light a fire under it.
That's according to Wilson Asset Management portfolio managers Matthew Haupt, Catriona Burns and Oscar Oberg, who reckon the pathology services provider has bright long-term prospects.
"Australian Clinical Labs Ltd (ASX: ACL) continues to benefit from record levels of testing due to the coronavirus, which have extended further given the spread of the more infectious Delta variant," they wrote in a memo to clients.
"The company has 86 accredited laboratories and services in approximately 90 public and private hospitals."
Both the WAM Capital Limited (ASX: WAM) and WAM Research Limited (ASX: WAX) listed investment companies hold shares in Australian Clinical Labs.
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IPO-weary market underestimating ACL's potential
The company floated on the ASX in May with an initial public offer price of $4 a share. It has since disappointed IPO-weary investors.
The stock is trading at $3.64 around midday on Friday.
"Australian Clinical Labs has underperformed as the market rotated away from companies perceived as coronavirus beneficiaries," read the Wilson memo.
"However, we think the market is underestimating the underlying earnings power of the business given the substantial work undertaken to drive automation of systems and processes prior to listing, which is not readily visible to investors."
The portfolio managers thought that the short-term success would allow the company to scale and expand its market share in the longer term.
The improving balance sheet would provide it with a chance to acquire earnings-accretive assets in Australia and in overseas markets like the US.
"White-labelling of lab services also presents further growth opportunities," said the memo.
"And over time, we expect superior organic growth rates and successful inorganic expansion to drive a re-rating in Australian Clinical Labs' valuation towards peers, versus its current discount of greater than 30%."
The trio said the company was a classic example of an ASX share that's "overlooked and under-researched" by investors.
"We view the upcoming reporting season as a catalyst for investors to revisit these companies."
The Melbourne-headquartered company currently has a market capitalisation of $727 million, according to the ASX. Australian Clinical Labs employs more than 3,800 staff.
