With private equity companies floating many of their holdings on the ASX in recent times, they are now flush with cash, and could have their eyes on several struggling listed companies.
Clime Asset Management has identified seven candidates that could be prime private equity targets – and we can add another to the list. They could also be candidates for a strong turnaround in their fortunes, with many facing short-term issues, rather than structural problems with their core business.
Without further ado, here are the first four and a brief summary of why they may be targets…
SMS Management & Technology Limited (ASX: SMX) has seen its share price fall more than 38% from its 52-week high, hit by a 55% fall in net profit for the last six-month period. Many IT services companies have been hit by a lack of major technology projects, as companies hold back their capital spending, but a revival could be just around the corner.
Reject Shop Ltd (ASX: TRS) – has struggled with an intense new store rollout program and CEO Chris Bryve recently quit. The share price dropped more than 50%, and while it has recovered somewhat, still looks cheap. Earnings should grow strongly as new stores mature.
McMillan Shakespeare (ASX: MMS) – has been hit hard by Labor's plan last year to reform fringe benefits tax (FBT), and the CEO recently announced his retirement. But the current Federal government has pointedly said that it would not follow through with the FBT reforms. Like Reject Shop, McMillan also looks cheap, as earnings should recover fairly quickly.
Ausdrill Limited (ASX: ASL), provides mining services including drilling and blasting and associated services to resources companies, but has been hard hit by falling resource development and exploration investment. Having said that, the company is trading at less than half its net tangible assets of $2.41, with the share price currently sitting at 96 cents. Investors may also be concerned about its mountain of debt – and it's unlikely to be a takeover target in my books.
You can find Part II here.
A better bet than these four…
