Many years ago, a friend was looking at my portfolio and remarked: “You do like to buy shares that have already gone up, don’t you?” Well, very often those early rises are just the start of something even better in the long term.
I think that when I look at Accesso Technology Group (LSE: ACSO), the company that revolutionised the way people queue to get on rides at amusement parks and similar attractions. Physically standing in queues is wasted time, which is wasted money, and Accesso’s technology cuts through that. By carrying around a little doo-dah that virtually waits in the queues for you so you can turn up at the perfect time, you can be enjoying one ride while queuing for the next.
Accesso’s shares have soared more than 2,000% to today’s 2,310p, since its AIM flotation back in 2002, and Thursday’s full-year trading update suggests there could be a lot more to come.
Beating expectations
The company says that revenue should come in slightly ahead of expectations, and that EBITDA should be substantially ahead. Analysts currently have a 7% drop in earnings per share pencilled in for the year ended December 2017, and I can see that turning into an EPS rise now.
It was only ever expected to be a brief pause anyway, after annual EPS hikes of more than 30% for the past three years. And there’s a 57% boost predicted for 2018 as acquisitions start adding to the bottom line, followed by a further 30% in 2019.
And unlike many growth companies, Accesso doesn’t have to worry about net debt, which should be less than $6m.
P/E multiples might look high, at 31 as far out as December 2019, but I don’t think that’s too stretching. Accesso is increasingly becoming the supplier of first choice in a business where first-mover advantage is significant, and it has what I see as a nice safety moat.
Lower-tech growth
High-tech firms are often seen as having the best growth prospects, but that ignores cracking growth stories like that of Victoria (LSE: VCP).
The company designs, manufactures and distributes floor coverings — that’s carpets, underlay, tiles and the like. And its business in the UK and Australia has been booming. With earnings per share growing rapidly since turning upward in 2014, the shares have risen by 1,800% in the past five years.
The announcement on Thursday of a capital markets day at its new Spanish acquisition, Keraben Grupo, didn’t say much about the company’s performance. But we did hear of “very good levels of trading in the important December quarter, which has continued into the New Year,” and that suggests April’s scheduled trading update should be good.
Impressive interims
Interim results released in November showed a 22% rise in EBITDA, with adjusted EPS up 26%. Debt rose too, by 46% to £98.6m, which is a characteristic of many companies growing by acquisition, and that’s something to watch for at full-year results time.
But at least the firm’s adjusted net debt/EBITDA ratio was falling, to 1.77 times from 1.93 times a year previously, so I expect a careful eye is being kept on it.
On fundamentals, we’re looking at relatively high P/E ratios. But I see a multiple of 16.5 by March 2020 as sustainable, and I think Victoria shares are still good value.
