A COUPLE of years ago some analysts were suggesting that shares in social housing maintenance contractors were being over-sold.
Spring Grove's listing on the Alternative Investment Market and subsequent exit three years later suggests there is no space for new entrants.
Mears has been on AIM since 1996 and capitalised on investment in public housing at just the right time. City coverage is improving thanks to ebullient chairman Bob Holt.
Five out of seven covering brokers were positive on the stock.A recent statement on trading, which included details of an £800 million-plus order book, was followed by Dresdner Kleinwort Wasserstein starting coverage with a 239p target price.At the current level, the stock looks to have topped out, yet Mr Holt's plan to raise margins to 7 per cent - an unheard of level for new-build contractors - could produce progress.
With Mears established in the top rank of social housing contractors and clients tending towards long-term partnering contracts, this sort of margin could be attainable.
Like Erinaceous, which followed its float on AIM with a move to the main market, Mears is looking to boost profits by branching out into areas more akin to social work.
This sort of hybrid business has few comparitors but, if this model can produce the sort of margins that Mr Holt wants, the shares will be upgraded.