Australia | Aug 02 2007
By Chris Shaw
As the Australian market enters profit reporting season company earnings guidance can often be updated, so guidance of a record profit result and an extension of a current on-market buyback is something that should cheer investors.
IT Solutions group Data#3 (DTL) is one such provider of good news as management has informed the market it expects total revenue for the year of more than $280m, which would result in a 27% increase in (EBIT) earnings before interest and tax to a result of at least $9.9m.
As a result Intersuisse has retained its Buy rating, this despite the stock trading within sight of its record highs of $6.75. While the new guidance from management is only slightly above the broker’s forecasts it is positive both on the company’s earnings outlook and the outlook for the IT sector as a whole given the ability of companies to attract new customers and win new contracts.
Also supportive in the broker’s view is the decision to extend the current share buyback for another year from September, which was originally put in place a year ago to buy up to 10% of the issued capital.
This would suggest the re-purchase and cancellation of as many as 1.5 million shares but to date only around 44,000 shares have been repurchased. Given this potential buying support and the solid earnings outlook there appears limited share price downside.
Data#3 is not covered by any brokers in the FNArena database but Intersuisse’s forecasts call for earnings per share to increase from 36.5c last year to 43.5c this year and 47.9c in FY08, putting the company on a prospective P/E (price to earnings ratio) of less than 14x. At the same time it is forecast to pay 36c in dividends in FY08, meaning it should yield around 5.5% fully franked.
Shares in Data#3 today are slightly weaker and at 2.30pm were down 10c at $6.41, which compares to a trading range over the past 12 months of $3.70-$6.75.