Our tip Acal cools in global downturn… but prospects of growth remain strong
THE summer festival season is under way, luring the young and not so young to fields and campsites around the country in search of music, fun and escapism. Increasingly, festival-goers expect decent food as well, from basic burgers to sophisticated gourmet offerings. Whatever the case, the food needs to be kept chilled, creating a logistical challenge for caterers, especially on long, bank holiday weekends.
That problem will be much easier to overcome, following the introduction of a temperature monitor that can be installed in the chilled cabinets of food transport lorries, enabling their owners to check how cold the fridges are from a central location – and adjust the temperature if need be.
The technology behind these monitors was designed by Acal, which specialises in niche, custom-built electronic components for customers worldwide.
Midas recommended Acal in September 2014 at 232p and by June 2015, they were 325p. Since then, persistent pessimism about global economic prospects has dragged the stock down and today they are 257½p. The falling price is disappointing, but it is also overdone.
Acal used to be a distributor of other firms’ electronic bits and pieces. Then it began customising those products for its customers. Now, increasingly, it designs and makes components from scratch, securing higher profit margins and developing closer relationships with customers in the process.
Chief executive Nick Jefferies has also chosen to focus on four sectors: transport, medical devices, renewable energy and the so-called internet of things, which connects machines with one another wirelessly. Each sector is expected to deliver steady, long-term growth, so Acal should too.
Results for the year to March will be announced this week and brokers expect profits to increase by 21 per cent to £14.3million with the dividend up 5 per cent to 8p. Profits of at least £17million are expected for the current year, alongside a dividend of about 9p.
Midas verdict: Acal suffers from being perceived by some in the City as a general industrial company. This may have been true in the past. However, the company today is more of a specialist electronics business, with good growth prospects and rising profit margins. At 257½p, the shares are cheap. Existing shareholders should keep their stock. New investors could also benefit from picking up a few shares.