PR prude Kay Larsen does not want me writing this but shares in Advanced Computer Software are a strong buy

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Kay Larsen is the PR bird at College Group PR who believes that she has a right to say how and where her client – AIM listed Advanced Computer Software Group (LSE:ASW) is covered. Furthermore she has accused me of hosting pornography on www.TomWinnifrith.com and claims ( falsely) that I accused a Welsh company of being sheep shaggers. Kay is a keen google user and does not like it that her clients (or presumably) her name now comes up next to images she finds innapropriate and now in the same google searches as pornography, sheep shagging etc. Kay does not want me writing about AIM listed Advanced Computer Software (LSE:ASW) at all as she would rather that only serious journalists who she approves of write about her clients in a way that she approves of. I describe the curious post lunch rantings of Kay and her vision of how she gets to dictate who writes about her clients and in what manner here.

But since Kay enjoys seeing on google what words come up when I mention College group PR, herself and Advanced Computer Software, I should make it clear that today I have not watched any live streaming teenage lesbian videos but that there is a lot of computer software that allows you to do that including many streaming feeds with college group scenes in them.

Happy Kay? I have tried to help google by getting all the key tag words from this piece in.

Now back to serious matters at hand. Advanced Computer Software is quite simply the best run tech stock on AIM. Its CEO Vin Murria is THE buy and build master strategist in the sector. I describe in full detail what her company does in a prescient share tip with serious analysis HERE

It has been a busy month or so for Vin. In late February she raised £44 million ion a placing at 80p. And she moved swiftly to use that cash by buying Computer Software Holdings (CSH) – a form that she was the founder of and sold on what seems like a decade ago – for £110 million. That leaves Advanced with net debt of c £78 million (well within a new enlarged facility of £105 million).

The company says that on a proforma basis the enlarged group would is expected to deliver pro forma revenue of £193.2m for the year to 28 February 2013, of which £160m is recurring (contracted and repeating), and adjusted EBITDA of £42.3m – that last number includes just over a million of cost savings although Advanced says that it has already identified total savings of £2.5 million.

Hmm. £2.5 million – you are having a laugh. Vin Murria does not go into a business and make piecemeal cost savings. That is not her way. And so what points do I take from this?

Firstly I would expect that the enlarged group will in the year just started report EBITDA of at least £57 million on the basis of organic growth at both companies, synergies between the two and Vin Murria’s proven ability to take out cost plus the smaller purchases that ASW made during 2012 now chipping in for a full year.

Secondly, ASW had very high cash conversion rates (greater than 100%) and so too will the enlarged group. As such Murria is well placed to pay down debt aggressively and within nine months I suspect that she will be looking at further acquisitions.

Thirdly the market cap at 87.5p is £372 million and so the Enterprise Value is £450 million and as such a current year EV/EBITDA multiple of just under eight might look a little on the full side but

a) debt will be repaid quickly
b) you pay a premium for growth
c) you pay a big premium for having the best management in the sector
d) I suspect that Feb 2015 EBITDA numbers will be materially higher and so that multiple will fall rapidly both on the basis of falling debt and rising EBITDA.

As such I would continue to rate the shares as a buy. This should be a core holding in any UK tech/AIM portfolio.

Tom Winnifrith writes for 10 US and UK websites. And he writes about what he wants about, where he wants to write and in whatever style he wishes to do so. You can get alerts on all of his writings by following him on twitter @tomwinnifrith or from his own free speech blog www.TomWinnifrith.com

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