We recently invested in ABM Industries, a leader in the fragmented janitorial services industry with related services such as parking, security, engineering and lighting. ABM suffered earnings declines due to fewer high margin lighting projects, some cost escalation on fixed price contracts and the underperformance of its SSA security acquisition. The lighting division is now rebounding with new business tied to energy tax credits and efforts to fix the security division are yielding results.With the majority of revenues tied to the office market, ABM should benefit from higher occupancy rates as white collar employment continues to strengthen.We believe that earnings should grow to more than $1.50 per share in 2 to 3 years, up from $0.94 in 2006. ABM is reasonably valued at less than 16.5 times normalized earnings, has a strong balance sheet with $2.70 per share in net cash and pays an attractive 2% dividend yield.
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