Australia | Jun 28 2007
By Chris Shaw
Accounting software group MYOB (MYO) yesterday updated the market on its performance for the half year, providing enough information for Aspect Huntley to lift its rating on the company to Buy from Accumulate.
The group is not the only one positive on the company’s outlook as Macquarie also rates the stock as an Outperform at current levels, seeing upside potential on a 12-month timeframe.
The trading update indicated revenue for the half year to the end of June would show a 13% increase compared to the same period in 2006, while EBIT (earnings before interest and tax) for the period of around $13m would be slightly better than the company’s internal targets.
With this likely to be broadly in line with its own estimates Macquarie’s outlook is centred more on 2008, for which management is quite optimistic. While factoring in some cut in its margin growth expectations the broker sees value emerging in the stock on a 12-month view, as it expects earnings per share to increase from 4.54c this year to 6.5c in 2008 and 8.14c in 2009, which would put the stock on a P/E in FY09 of less than 15x based on yesterday’s closing price.
Aspect Huntley’s estimates are similarly positive and are based on expectations of 25% growth in earnings annually in coming years, the group forecasting earnings of 4.4c this year and 5.7c in 2008.
It argues such earnings growth justifies a forward P/E of 18-20x, so it sees the stock as cheap at current levels, fitting in with Macquarie’s positive view. Adding weight to Aspect Huntley’s positive outlook is its expectation margins should expand in the second half of this year to levels above what were achieved in 2006.
The FNArena database shows the stock is rated as Buy/Outperform twice, Hold once and Sell once, though the latter rating from Citi dates back to February. The average target price according to the database is $1.18 but again this is influenced by Citi’s dated $1.05 target. While not offering a price target Aspect Huntley values the stock at $1.50, while Thomson One Analytics shows a median price target of $1.31.
Shares in MYOB are stronger today and at 12.35pm were trading 6c higher at $1.25.
