Posted about this one before here and it certainly looks worthy of buying or placing on the watch list. Looks a genuine recovery stock after the results today.

Shrewd Tip: top investors back dynamic Aero
Published: 10:07 Fri 27 Aug 2004

By Algernon Craig Hall, Secret Buying Correspondent
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Shrewd investors are beginning to warm to former AIM wonder stock Aero Inventory, which ran into problems last year.

Aero (AI.) provides online procurement of aerospace parts to repair and maintenance firms. Its growth has been rapid and it has signed up a number of the industry's big players as clients since it came to market in 2000. However, the final six months of last year presented its shareholders with a raft of disappointments.


Aero's interim results for the six months to the end of 2003 were hit by rising overheads, contract delays, US dollar weakness and the impact of SARs (severe acute respiratory syndrome) on demand from an important Asian customer.


The catalogue of woes has taken the shares from a 2003 470p high to a today's year low of 290p down 2.5p on the day.


The share price performance paints the picture of a thoroughly unloved stock but a number shrewd investors have actually shown renewed interest in Aero recently.


AAA-rated contrarian investor Patrick Evershed picked up 70,000 shares in July for the New Star Select Opportunities fund New Star Select Opportunities, which took its holding to 250,000 or 1.6% of the 46 million company.


Gartmore's star smaller companies stock picker Gervais Williams has also been buying recently. He has bought 10,000 shares so far this month to take the Gartmore UK & Irish unit trust's Gartmore UK & Irish Small Companies holding to 470,000.


Framlington star Brian Watson has a 450,000 share holding in the Framlington Innovative Growth investment trust (FIT).


The underlying state of the business does not seem as bad as recent trading suggests
External factors have been at the root of a number of the company's problems especially the SARs epidemic, US dollar's weakness and delays to a big contract caused by an external union dispute.


Unfortunately there is the chance tough conditions could persist.


SARs may no longer be in the headlines but a lagged effect on aircraft maintenance could continue to subdue Aero's business with HAECO - linked to Cathay Pacific - in Asia. Another negative is the high oil price, which could cause delays to repair and maintenance spending and could possibly mean fewer flights.


Although there are reasons to be wary, much of Aero's recent plight was down to its reliance on the contract with HAECO.


Aero now has three very significant contracts - with HAECO, SR Technics and FLS Aerospace - which should strengthen the group's resilience once they get up and running. The company also continues to win new business.


When Aero's large contracts kick in next year they should have a marked effect on revenue and profit.


Brokers' consensus forecasts suggest turnover has fallen by 6.6 million to 22.5 million in the year to the end of June 2004 but should jump to 47 million in the current year. Profit before tax in the year just gone is predicted to fall by about 600,000 to 2.25 million before leaping in the current year to 8.25 million as delayed big contracts kick in.


The shares are valued at 28 times forecasts for the year just gone and 7.8 times next year's earnings if the group, despite the difficulties, Aero can meet expectations.

Aero has to build up large levels of stock to support new contracts, which makes growth very cash intensive and to date it has relied on share issues to support its expansion. However, the group has recently extended its borrowing facilities from 10 million to 25 million, which should ensure it can take on new business without issuing shares at the current depressed price.


Full year results are expected on 13 September and should meet expectations despite continued weak trading over the final three months of the year. The weakness has been mitigated by profits from the active trading of inventory held by the group.


Aero appears to still have some difficulties but the longer-term picture is encouraging.


The forthcoming results should give shareholders a better view of how the company is faring but there are unlikely to be many positive surprises. Still shrewd investors appear happy to pay the current price for a company that has made such impressive inroads into its market and should benefit once current troubles are over.


It looks like a good time to tuck some shares away for investors not afraid to take a long term view and possibly suffer a knock following the results. For others Aero looks like a good candidate for the watch list.

Please DYOR

cheers GF.

Looking relatively strong this one. p/E less than 12.

Greetings. I thought it was a bargain at 370, til it went to 330! What an almighty tree shake. Managed to stay firm as I've cottoned on to this shameless MM behaviour through many years of bitter experience.

As I understand it, they raised a shedload of cash in the hope of a huge order from Boeing or Mcdonnell douglas or something like that. Any rumours/gossip on this?

I was cursing when I missed the post rights issue price so glad to have got in at last.

P.S. JSP interims tomoz.....

JSP yes. Fingers crossed.

Not heard anything on future contracts but Im still holding and this market correction wont have me panic stricken like a lot.

Cheers GF.

From Shares Mag..........

Updates:
*Buy FDM (FDMG.L) and Aero Inventory (AI.).

Director sells big time, no Airbus deal although with Qantas deal things pointing in the right direction

So cheap valuation, strong growth, strong balance sheet.....director sells ??

Confidant, I think we should start worrying if he sells these........


Following the sale, Mr. Dodge is the beneficial owner of 354,794 shares which
represent 0.75% of the current issued share capital of the Company.

About to move up ?

Tightly held, low value and results in early March

sho9uld be good if they break 4...

is this what we have been waiting for....... . Still think strong likelihood of run before results

......obviously wishful thinking

no, I think your right but 4 is strong resistence, any break from there could reach 5 very quickly.
imho, dyor!!!

no, I think your right but 4 is strong resistence, any break from there could reach 5 very quickly.
imho, dyor!!!

....is its this time.... 405p offered no takers yet

and up......

good right up in money week this week, states as good value

Now or never for this one ---results Monday --- hold on to your hats --- that's me hoping by the way

I have these on my radar, was just waiting however for them to close above 4

quiet following results Nothing here for the moment it would seem

For what it's worth EK has gone long.

MS

what would be the offer price.if the bid was successful.