Dart Group - 20p

AIM-listed Dart Group, which will be best-known to readers for its low-cost airline Jet2.com, has been mentioned before at a much higher price.

The company also owns food and produce distributor Fowler Welch Coolchain. Having traded at over 150p in early 2007, the shares have plunged in recent months and touched a low of 11.25p at the end of June.

Results for the year ended March 31 2008 were eagerly awaited and some observers had been fearing the worst as soaring oil prices and the credit crunch conspired to throw a blanket of gloom over the future for Dart Group.

Indeed, people with flights pre-booked with Jet2.com could have been excused for worrying whether the airline would still be around for much longer given comments from some quarters, including Ryanair.

However, on the day the results were released recently, the share price jumped by over 30 per cent. This made it the biggest winner among all London Stock Exchange traded shares and the rise also represented Dart Group's steepest one day rise since May 1989.

The figures were undoubtedly reassuring, with profit before tax coming in at £11.8 million on turnover, which rose by 23 per cent to £429 million. Net debt had edged up to £17.2 million at the period end versus £14.1 million a year earlier. This does not seem excessive and whilst all debt is being viewed cautiously at the moment the balance sheet looks in decent shape.

Hopefully some confidence will now return to investing in the shares and for investors willing to take a high degree of risk Dart Group is an interesting recovery play. If the shares were to move onto a multiple of ten times historic earnings then the share price would treble. It should be noted that the dividend has been shelved for the time being, so those seeking income should look elsewhere.

Obviously, there are risks involved and the aforementioned oil price is a worrying factor.

The company has hedged its fuel commitments for the current year, but may have problems on this front in the medium to long term, although it has to be said that competitors are also in the same boat.

A downturn in the economy could also derail things somewhat, but all in all, and given the price which Dart Group has traded at in the past, the shares must rank as a SPECULATIVE BUY.

  • WARNING: Opinions expressed are the writers' judgments at the time of writing. The information does not constitute a personal recommendation and readers should seek their own professional advice as to the suitability of the investments.