Could the ASX blue-chip stock ALS Ltd (ASX: ALQ) be an opportunity hiding in plain sight?
The under-the-radar company has a market capitalisation of more than $7 billion, which certainly puts it among some of the larger businesses on the ASX. It's about the size of AMP Ltd (ASX: AMP) and Super Retail Group Ltd (ASX: SUL) combined.
What does this fairly unknown company do?
Fund manager Wilson Asset Management (WAM) describes ALS as a provider of laboratory testing, inspection, and certification services across a wide range of industries, including mining, energy, environmental, and food.
The company has a presence on every continent (except Antarctica), so it's truly tapped into the global economy.
ALS is a holding inside one of WAM's funds, the listed investment company (LIC) WAM Active Limited (ASX: WAA). The fund manager highlighted ALS as an opportunity in its latest monthly update.
Strong performance
WAM noted that in its FY25 half-year result announced in November, ALS's underlying revenue increased 14% thanks to "strong organic and scope growth within life sciences, which beat market expectations."
ALS integration of recent acquisitions was "ahead of budget", with those businesses expected to show continuing improvements as integration and transformation initiatives were implemented, according to the fund manager. The company said Nuvisan was "slightly ahead in its transformation plan and showing good sales pipeline momentum."
ALS also declared an interim dividend of 18.9 cents per share, representing a payment of $91.6 million to shareholders.
WAM concluded its positive thoughts on the ASX blue-chip stock with the following:
We remain positive on ALS' medium-to-long term outlook as it remains on track to meet its long-term targets set out in FY2027.
FY25 commentary
ALS said the medium-to-long-term outlook for both its life sciences and commodities was positive. It remained leveraged to attractive end markets supported by industry tailwinds and was "well-positioned to execute on near-term financial objectives."
The company said it was targeting a number of things over the remainder of FY25.
It's aiming for mid-single-digit organic revenue growth for the company.
Excluding acquisitions, ALS expects a "solid" improvement in operating margins for life sciences and continued margin resilience in its minerals segment.
ALS is also giving "risk-weighted growth prioritisation to environmental and minerals businesses, in-line with value creation framework".
It will remain focused on the integration of recent acquisitions and the Nuvisan transformation program.
Finally, the company's leverage will remain "at the top end of [the] targeted range with [the] intention to mid-point in the next 12-18 months".
According to the forecast on Commsec, the ALS share price is trading at 25x FY25's estimated earnings.
