Accesso Technology (LSE: ACSO), formerly Lo-Q, has delivered a stunning return for investors over the past 10 years. It’s turned a £10,000 investment into £600,000.
For the moment, I’ll put aside the question of whether Accesso remains good value for investors today, because first I want to show you how the history of this company offers valuable insights for anyone looking to invest in early-stage businesses with high growth potential.
Accesso was floated on the small OFEX market (now NEX Exchange) in 2000. It raised £2.3m at 106p a share and a further £3.6m at 100p when it moved to AIM in 2002.
The company had developed a system for virtual queuing at theme parks, prototyped at Thorpe Park in the UK and Six Flags Over Georgia in the US. It looked a decent idea and the OFEX prospectus contained management projections for rapid revenue and profit growth.
Unfortunately, as the table below shows, the projections proved to be over-optimistic.
|Projected revenue (£m)||2.4||7.7||17.2|
|Projected profit (£m)||0.1||1.9||6.7|
|Actual revenue (£m)||0.3||0.9||2.3|
|Actual profit (£m)||(0.8)||(1.6)||(1.3)|
Accesso’s fortunes weren’t helped by a downturn in US theme park visitors following the 9/11 attacks of 2001 and delays in rolling out its systems at Six Flags’ parks. A profit warning in 2002 sent the shares tumbling and by early 2003 they were trading below 10p.
Business remained tough — indeed, it was touch and go whether the company would even survive — and the share price languished in single digits to beyond the end of 2005.
However, things gradually improved. Accesso reported a maiden full-year statutory profit for 2007 and hasn’t looked back since.
Risk and reward
Accesso’s shares have been trading around 1,500p of late. The table below shows the current value of a £10,000 investment made on a number of key dates in its history.
|Share price||Return on £10,000 investment|
|OFEX admission (30/10/2000)||106p||£141,509|
|AIM admission (24/4/2002)||100p||£150,000|
|Share price all-time low (21/6/2005)||2.88p||£5,208,333|
|Announcement of maiden profit (10/4/2008)||25p||£600,000|
Things rarely go smoothly for a company that comes to market with a product or service but no trading history. Even if the story is good, setbacks can be devastating — indeed, terminal for many fledgling businesses.
Accesso’s early investors in the OFEX and AIM placings were sorely tested, seeing the value of their £10,000 investment falling to just a few hundred pounds for the best part of three years, before ending up with a 14/15-fold increase of their original stake.
In the darkest days, Accesso could hardly be classed as an investment. It was an out-and-out gamble. A lucky punter who put 10 grand on the nose at the all-time low would be a millionaire five times over today. However, you could go a lifetime of making similar bets without ever hitting such a jackpot — and losing many 10 grands along the way.
In my opinion, as a general rule, waiting for an early-stage business to prove it can turn a profit offers the best risk-reward proposition. In Accesso’s case, this transformed £10,000 into £600,000 — a return most investors would be more than happy with.
Finally, is Accesso still worth buying today? The forward P/E is a premium 38 and forecast earnings growth of 24% isn’t high enough relative to the P/E to persuade me that the shares are outstanding value. But nor is the valuation grotesquely high. As such, I would rate the shares a ‘hold’.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.