Each week, I’ll be picking a random small-to-mid-cap ASX stock that I have rarely seen discussed online (personally, yes I’m aware it may have been discussed at some point in history) – and that I did NOT hold at time of writing – to cover at a glance.
We’ll have a look at what it does, some of their financials, and conduct some polling on general sentiment. The main purpose being to add some more variety in coverage to the standard blue chips or meme stocks we see pumped day in and day out, and hopefully discover some hidden gems or innovative companies on the Aussie market.
Here’s this week’s Random Stock of the Week.
Company name: Ashley Services Group
Ticker: ASH
Industry: Recruitment & Training
Headquarters: Sydney
Market cap: $87m
Current share price: $0.605
P/E ratio: 9.4
1-year Performance: 55.13%
What they do, smoothbrain version: give you shitty job offers in a British accent at below-market salaries, then take a cut when you commit to your new life of cubicle-based mediocrity
What they say they do, wanky version: “Ashley Services Group is an integrated Labour Hire, Recruitment and Training organisation delivering quality workforce management and business improvement solutions across Australia since 1968.” 🍆👋
What they do, actual version: Ashley Services Group is a Sydney-based recruitment and training business with 23 offices around Australia.
They divide the sources of their revenue between the recruitment side and the training side, however the recruitment portion of the business makes up the fast majority of their revenue – although the training portion of the business $ are growing decently in terms of profitability.
Their careers training arm offers a wide variety of job classes and licenses, and 16 official qualifications they’re able to certify.
They listed on the ASX in August 2014.
What looks good:
-
If you believe the government and media spiel that the Aussie job market is recovering quickly, these guys are a way to play on that momentum. They already saw decently chunky growth in profits for the 2020-to-2021 financial year; revenue jumped from $336m to $383m, while profits increased from $5.07m to $9.61m (all without JobKeeper).
-
Their Share Price started off in the ~$1.50 range after listing in 2014, then fell off a cliff soon after (this is why you don’t FOMO into IPOs, my friends – give that stuff some time to play out so a baseline value for the company can be established). Since then, there’s been a pattern of consistent, pretty solid share price growth since 2015 without any real drop (not counting March 2020 Covid cliff) throughout the whole period.
- While this is a fairly low-volume share with ‘jagged’ chart movements, the pattern over the past ~5 years has been a sexy, consistent, upwards graph without any massively negative news to drag it down.
-
They’ve expanded, rather than contracted, since Covid-19 hit, adding 2 extra regional offices to their chain – a good sign of confidence. They also didn’t have to lose/fire any staff.
-
No Jobkeeper payments were received to skew their recent financials. This also means they aren’t/weren’t struggling in general relative to the economy, and all of their growth was ‘real’ rather than propped up by government stimulus.
-
They pay a fat dividend, if that’s your thing; largely a result of the founder (more on this below) holding such a massive portfion of the company. A 7% yield is pretty chunky for a small-cap stock, if you want some extra pocket change to fund other speccies.
-
Combine the dividend yield with the consistent share price growth, and it’s been around a 200% return over 5 years; not a 🚀, more of a 🚤, but still not at all shabby for a ‘boring’ company.
-
ASH’s training division doesn’t bring in a massive amount of revenue yet, but it is very profitable percentage-wise. As face-to-face contact continues to open up again after Covid fears have lessened, this looks to be where more of their additional profits will come from moving forward.
-
Their P/B (Price to Book ratio, aka share price vs. the value of their assets) is very solid @ 2.4 for this kind of company, which coincides with manageable and ‘not worrying’ levels of debt.
-
They have a solid amount of loyalty from their main B2B customers, which only seems to be getting longer (5.4 years average length), which makes revenue more stable and predictable.
-
They’ve been cited by a few ‘journalists’ online as one of the key ASX companies poised to benefit from the “JobKeeper finished/return to work/Great Resignation” tailwinds in 2021-2022, depending on how much value you put in the words of e-journos.
-
This is a heavily insider-owned company, with founder Ross Shrimpton owning nearly 60% of the Shares on Issue. His kiddies also own a percent-ish each. It’s often hard to tell how strongly some of these entrenched oldie CEOs are involved in the day to day, however heavily-invested owners never want to see their share price plummet, and their net worth balances drop as a result.
What doesn’t look good:
-
The founder is getting old; how long until he looks to cash out, and the share price tumbles as a result? There may be the upside of him looking for/pushing for a buyout when this happens for an added payday, however.
-
What is their “competitive moat”? These types of businesses usually come down to a mix of relationships & contracts, and if one major one turns sour it can have drastic effects on a small-ish recruitment company like ASH’s bottom line.
- They’re not frequent “market-communicators”; as in, they’re not the type of business that pumps out newsflow that will give their share price a jolt, outside of their bi-yearly required ASX reporting calendar updates.
-
What’s their path to innovation? They’re slowly expanding their training division to more sectors and opened a couple of extra offices and… that’s about it. Nothing revolutionary or moat-generating here. Which leads to…
-
Extremely low 🚀 potential. Outside of a buyout, I honestly don’t see any scenario in which these ASH’s share price could massively take off, regardless of how much the re-employment boom theoretically takes off. Still, nothing wrong with 20-30% gains if they are sustainable.
-
Their company website is literally a minimum effort WordPress skin called Divi I’ve seen used thousands of times (yeah I’m a stickler for ‘meh’ websites) that costs like 40 bucks. Personal pet peeve.
-
I mean, it’s a recruitment business – it’s not exactly ‘sexy’. The argument could be made that there are better upside sectors in which to invest your capital during the same period you’d have it sitting with these guys, e.g: punting on the ‘ESG’ boom.
Summary:There’s much to like about ASH after assessing its fundamentals. Sure, this isn’t glamorous tech or a miner harvesting raw uncut lithiraniumoxidiumate you can inject directly into your veins – but hear me out.
As anyone who reads this site knows, I am a fan of under-the-radar profitable smallcaps, and this certainly ticks that box. Their revenues and profits continue to trend in the right direction, particularly over the past ~3 years.
It will be interesting to see if their growth in profits does end up lining up with the growth in jobs the government keeps pumping in the media post-peak-Covid – if so, they could receive another nice share price bump.
My reasoning is: if you can get some decent share price growth that’s better than anything many larger ASX200 companies would realistically get and ride the highly-invested-owner dividend wave get some solid yield, well that’s more than fine by me.
The numbers bear it out, too – if you’ve held these dudes over the past 2+ years, you’d be looking at ~180%% gain with dividends factored in; that’s almost a “double-bagger” for an otherwise ‘boring’ company.
Lots of people previously being out of jobs (or burnt out on their current job), equals lots of people looking for jobs. Plus – anecdotally – I’m personally getting bombarded with a ton of recruiter messages on places like Linkedin offering me surprisingly-not-shitty jobs over the past couple of months as well.
With construction and IT especially in demand, I don’t see any reason why their business would decline in the foreseeable future; the main ‘cloud’ hanging over the business seems to be how long Ross Shrimpton is willing/able to stick around to continue to headline as ASH’s top dog.
Company website: https://www.ashleyservicesgroup.com.au/
MarketIndex page: https://www.marketindex.com.au/asx/ash
Feel free to add your own opinions on ASH in the comments below.
Would you buy this stock? Why or why not? Feel free to vote in the poll.
