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.

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.

Thanks for the memories and goodnight!

Don't own but amazed this has gone bust. Was a real darling for a number of years and once again shows how a company can go from boom to bust very quickly which surely reaffirms why people shouldn't buy shares and sit on them for a few years especially during a recession.

Many tipster/scribblers have a lot of egg on their faces with this one, but will they apologise for their sttupidity?

A very good example of profit and cash being very different animals. Profits can be massaged so easily (not least by stock valuations) but cash flow statements imo tend to give a truer picture of financial health.

Investors Champion research supports the view that senior management of Aero Inventory were well aware of major problems several months prior to September 09 - when they 'encouraged' investors with main market hopes!

Comment at www.investorschampion.com/research/company/aero-inventory

Grief another failure, due in part to lack of support from Banks. Yet the business supported aircraft (didn't it?), an area that is somewhat dodgy, with passenger numbers down . . . . and the servicing is likley to be the first casualty.

What is a real shame is the involvement of retail shareholders being stripped of their savings by this business outcome.

Clearly the Company was not making the Market aware of their precarious position......I suspect the Company must have been aware of the Bank's concerns some months ago - why was this withheld?
-it is this that should be investigated, to make sure heads roll - and this doesn't happen again. (assuming it did indeed occur, that is).

This was never one of mine, as the sp was always too high.
All IMHO - DYOR.

It will happen again - human nature often makes otherwise decent people do strange things when backed into a corner. Not a great fan of the banks (not least as holder of LLOY and BARC nursing substantial paper losses) but unfair to put much blame for this on them. Management looks to have lost all credibility and in those circumstances no real option but to say no more. Regular cash outflows were the big warning signal that perhaps all was not well.

Killicks strick again.