Aga Rangemaster (LON:AGA) , owner of a truly iconic kitchen brand, could well turn out to be an incredible bargain. In fact, investors can buy the company today for little more than the cash it holds in the bank.
It may be that – for the moment at least – a price of around 75p is justified as the dividend last year was only 1.7p and is unlikely to be much better this year. Earnings have also fallen during the recession and could stay well below 10p for the foreseeable future.
None of this is exactly surprising. Given that AGA’s products are a big discretionary purchase for consumers, it’s entirely sensible that many of them put their dream AGA purchase into the someday / maybe folder.
A quick look at the company’s 10 year price chart shows why past investors may be less than happy.
As was the case with the review of Marks and Spencer, looking at the past share price can be very misleading. If instead we look at the company in terms of its assets rather than its price chart or even its earnings, then things start to look a little different. It turns out that AGA fits the 21st Century Net-Net criteria.
Sign #1 – Plenty of cash
At the last annual report AGA had around £35m net cash, which just means that if they turned all their liquid assets into cash they could pay off all their borrowings and have £35m left over.
Any company with net cash is likely to have a relatively small amount of interest bearing debt, which means that surviving tough economic periods becomes that bit easier.
Partly as a consequence of the £50m cash pile in the bank, the quick ratio is over 1 and the current ratio is over 1.5, both of which are relatively healthy numbers.
I don’t expect excessive debt or cash flow problems to be the downfall of AGA anytime soon, so I think it has a fair chance…
