2 September 2010

Brokers' Views: Gall & Eke

09/02/2010

Gall & Eke sees upside potential at Property Recycling, the vehicle of seasoned property entrepreneur Paul Rackham, who built up and sold Waste Recycling to Guy Hands for £315 million. AIM-quoted Property Recycling buys brownfield sites in the UK and through its planning and asset management expertise looks to enhance valuation by re-zoning the use.

‘A good example of this,’ the broker writes, ‘is the Stanton site, where the company obtained planning permission for a 1.1 million sq ft industrial park for Ikea. The property was purchased for £1.07 million and is now on the market for many multiples of that’.

‘Property Recycling shares reached a 62.5p high in 2007, before collapsing to 11p earlier this year, and on reviewing its assets we feel a fair value is approximately 35p,’ says Gall. ‘Applying a 20 per cent discount, we get a 28p price target,’ the broker insists, which is still significantly north of the 16.5p share price.

The Real McCoy

Another AIM counter worth buying is anti-counterfeiting group Opsec Security, which expects to benefit from Eastern European government orders for bank notes and high-security documents this year. Gall points out Opsec’s ‘Brand Protection business has been winning new customers in the conventional and online sectors, its ID Solutions division has benefited from strong US and Canadian government orders and has a significant sales pipeline, and its 3DCD joint venture has signed a new multi-year contract with a major customer’.

In summary, ‘this all points to a stronger second half, and with the shares trading on a forward p/e of 10.7 and EV/EBITDA of 6.2, now could be a good time to buy’.

Tags: Buy/Hold , Undervalued

Companies: Property Recycling , OpSec Security

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