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A number of months in the past, I owned a penny inventory by the title of Logistics Growth Group (LSE: LDG). The corporate had what is named a young provide, shopping for shares from shareholders at the next worth than they’d been promoting for in the marketplace. Between that and a market sale, I removed my entire funding in Logistics Growth Group and banked a tidy revenue.
Nonetheless, I’ve been trying on the inventory once more not too long ago. I feel it’s one buyers ought to contemplate, because it nonetheless seems to be like a possible discount from a long-term perspective. That’s even after a 49% surge within the share worth over the previous yr.
Promoting at a deep low cost
The corporate flies beneath many buyers’ radar, as its share worth is in pennies and even after the previous yr’s rise, its market capitalisation remains to be a reasonably modest £66m.
It has began to situation extra frequent updates on its internet asset worth than it used to, probably making it simpler for buyers to worth the enterprise. The newest valuation, as of 31 March, was 24.6p per share.
Presently, the inventory sells for round 16p. That implies that it sells for over 50% much less than its internet asset worth.
At face worth, that looks like an apparent discount. In observe, issues will not be so easy. That internet asset worth just isn’t money sitting within the financial institution. It largely consists of a small variety of shareholdings, equivalent to Finsbury Meals Group, IT firm SQLI, and Alliance Pharma. These three key investments are all non-public corporations, which means that it’s laborious to evaluate their worth with a excessive diploma of accuracy.
Lengthy-term potential
Nevertheless, simply because it may be laborious to worth non-public corporations precisely doesn’t essentially imply that such valuations are improper.
Logistics Growth Group has a monitor document of shopping for into robust companies at enticing valuations. Over time, that may assist it realise income. The efficiency of the inventory over the previous yr demonstrates the windfall this could probably imply for buyers when issues go effectively.
Final week, the enterprise introduced its newest funding: £15m into APC, the UK’s largest unbiased parcel supply community. The deal construction is pretty convoluted and Logistics Growth Group has arrange a brand new senior debt facility of £30m to assist assist the deal.
Given its measurement, managing the stability sheet neatly stays a danger for Logistics Growth Group. It ended final yr with money and money equivalents of £30m, however the tender provide and different company exercise since then implies that the stability sheet might look very completely different the following time the corporate publishes it.
Nevertheless, I see this penny inventory as having important long-term potential. It’s promoting for a sizeable low cost to internet asset worth because it stands. If corporations through which it has stakes carry out effectively, that worth may rise over time. I due to this fact see the share as one for buyers to think about.
