PAS Group Ltd: One screamingly cheap stock?

Flying under the radar, PAS Group looks cheap at current prices

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published August 28, 2014 11:56 am AEST

PAS Group Ltd (ASX: PGR) could be one of the cheapest stocks on the ASX, and shareholders could be rewarded with a decent dividend early next year.

Even better, shares are now trading at around $1.10, less than the $1.15 issue price when PAS Group listed on the ASX in June this year.

The apparel and accessories wholesaler and retailer reported a pro-forma underlying net profit of $16.8 million for the 2014 financial year, ahead of prospectus forecasts of $16.6 million.

Like-for-like sales were up 3.1% – not a bad result given the recent negative growth faced by other fashion retailers like Specialty Fashion Group (ASX: SFH) and Myer Holdings Limited (ASX: MYR).

Alongside its existing brands such as Metalicus, Review, Yarra Trail and BlackPepper, PAS Group has also gained new brand licences Slazenger, Everlast, Fred Bare and DKNY Menswear, which will be launched in the 2015 financial year.

36 new stores were opened, taking the number of retail sites to 235, helping retail sales rise 13% over the previous year. A further 41 new stores are expected to be added by the end of June 2015, with one store slated for closing. PAS is aiming for 340 retail sites by the end of the 2017 financial year.

Online sales are growing strongly, with some brands yet to go live, and now account for 5% of Metalicus and Review brand sales, suggesting more gains are likely to come.

PAS says it remains on track to deliver a net profit of $17.7 million in the 2015 financial year as forecast in its prospectus. The company says it is aiming to pay out 70-80% of net profit in dividends, with the first dividend expected to be announced when the company reports in February 2015. Other attractive attributes include no debt and $0.5 million cash in the bank.

Currently trading on a prospective P/E ratio of 8.5x 2015 financial year forecast earnings, PAS could just be one of the cheapest retailers listed on the ASX, and worthy of adding to your watchlist.

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