It's a little while since I last produced a blog post so I thought I'd write a short article about Aeorema Communications (AEO). I've mentioned them several times in the past. It's basically a great value micro-cap that's returned to encouraging growth. The market is currently overlooking this little gem, although it does appear that micro-caps are, in general, currently out of fashion with Mr. Market. It'll all change in time. It always does.
From 2014-2018 revenues at AEO fluctuated in the £4m-£5m range, although pre-tax profits were declining. It's worth noting that the company did remain profitable during this period and continued paying dividends.
However, AEO's current management appear to have now got the company back on a growth trajectory. After reporting a half-year loss, chiefly due to the lag between making two senior appointments to their team and the inherent recruitment costs and time to make an impact, and the usual second half weighting they've now rapidly turned the half year loss into a full year profit which has beaten market expectations at over £350,000. Revenue took a big leap forward to £6.7m which is a quantum leap from the 2014-2018 figures. It appears that the new appointments are already beginning to prove their worth.
Their cash position is strong and it's their intention to continue with dividend payments. In 2018 the dividend was 0.75p so I'd expect a further increase this year. The current p/e ratio is around 7, and I'd guess the cash on the balance sheet is at least half the current market cap. of £2.4m.
Bizarrely, after the ahead statement yesterday and an initial 20% rise in the share price, the shares have now fallen back to where they started on Thursday.
From a personal perspective whilst it can be frustrating waiting for the market to recognise AEO's true worth, and in my view the company is stupidly cheap, I've received around 25% of my money back in dividends already with more to come following the release of their full year results.
Finally, a Mr Jonathan Hicking appears a regular and keen buyer and has today upped his stake further to 13%.
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