Accsys chips away at big market opportunity

Specialist wood-hardening player is managing expectations well

Last week’s (2 May) better-than-expected year-end trading update from Accsys Technologies (AXS:AIM) will give credibility to forecasts the company is only two years away from profits. As confidence builds in the £57 million cap story there is potential for a sharp recovery in the shares.

Only house broker Numis has put its neck on the line with a prediction of a €1.1 million pre-tax profit in 2015, based on sales of €44 million. This represents a big step up on the €18.8 million generated in the 12 months to March 2013 sales outturn but last year’s 25% topline advance should help foster confidence in the forecasts.

Small Caps_Pie_Accsys

Accsys offers considerable recovery potential, as a share price of €0.16 compares with the all-time high of €4.58 struck in July 2007, before the failure of a Chinese joint venture prompted large losses in 2010. A new management team, led by chief executive officer Paul Clegg, brother of deputy prime minister Nick, now looks poised to deliver on the potential.

The opportunity for Accsys’ two key products, Tricoya and Accoya, is enormous (see Griller, Shares, 28 Apr ‘11). Tricoya is made from the same wood chips used to produce medium-density fibreboard (MDF) but is hardened via Accsys’ proprietary ‘acetylation’ process, so it costs much less. Accoya involves the use of acetylation to convert softwood into hardwood, again creating a much cheaper alternative.

The company is carrying debt, but cash reserves of €20.5 million at the March year end could carry it through to 2015 without the requirement for a further dilutive share fundraising.

Shares says The considerable growth potential explains the bullish consensus stance, with which we agree.

Broker consensus
  • Issue Date: 09 May 2013
  • Page: 26
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