ASX:ALQ
ALS Ltd
Investment Summary
The fund managers believe Maronan Metals Ltd (MRM) presented a compelling investment opportunity due to the significant undervaluation of offshore service companies, especially in the oil and gas sector. In their opinion, MRM was trading well below the replacement cost of its machinery, creating a clear disconnect between its market price and potential earnings power. The fund managers initially invested at an average price of 33c per share, and by late 2023, the share price had appreciated to what they considered fair value at $1.55. Following this rise, MRM was subsequently taken over at even higher prices, making the investment highly successful and contributing positively to the fund's returns in 2022 and 2023.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Manager
Greencape Capital
Date
31 Mar 2024
Price
$12.98
Medium
Quarterly Report
Commentary
Greencape High Conviction Fund continues to hold ALS Ltd. (ALQ) due to the company's strong position in the Testing, Inspection, and Certification (TIC) industry, particularly in laboratory testing and commodities. Despite the stock being range-bound over the past three years, ALQ has delivered solid earnings growth, and the Fund believes the market has overly focused on short-term headwinds, such as declining sample volumes from junior miners and the underperformance of the Nuvisan acquisition. The Fund sees significant potential in ALQ’s Geochemistry division, where the company’s global software platform and hub-and-spoke model give it a competitive advantage, driving higher margins and an increasing market share. Additionally, the recent rise in gold and copper prices is expected to boost demand for ALQ’s services, particularly in the commodities sector. In the Life Sciences division, the Fund notes the steady growth and margin improvement, supported by global megatrends like increased regulation and the rising need to test for emerging contaminants. The resolution of issues related to the Nuvisan acquisition has also removed a key source of uncertainty, further improving ALQ's outlook. Greencape believes ALQ remains well-positioned for long-term growth as the temporary challenges facing the company begin to reverse.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.