Disaster And Commander

This story features CODRUS MINERALS LIMITED. For more info SHARE ANALYSIS: CDR

By Greg Peel

Around about May last year, analysts were still relatively positive about the prospects of Commander Communications ((CDR)), a specialist in voice, data and internet business systems. But then the earnings downgrades started to roll in.

Those old enough will remember when Commander telephone systems were the must-have office accessory of the roaring 80s, and boy were they high-tech! Multiple lines, intercom…a clock for goodness sake. George Jetson had nothing on this one-time division of Telecom (now known as Telstra). To springboard off such success, Commander moved with the times into even newer technology, eventually listing as a separate entity in late 2001. Unfortunately, the times also moved with Commander.

After a rocky start post tech-wreck, Commander shares eventually rose from their $1.00 listing price to reach $2.50 in 2005. Voice data and internet business systems were the stuff of the mew millennium, and brokers had high hopes. But Commander soon found itself being elbowed aside from the very likes of its one-time parent. It could not compete. Then the company hit a big IT glitch and the wheels began to fall off.

Not that anyone really knew, for if there was one big problem analysts had with the company it was its lack of disclosure. That’s why frustrated analysts had to keep chasing the share price down with lowered targets as surprise downgrade after surprise downgrade was forthcoming. At the time of writing, Commander’s shares are trading at 41c – down over 30% on the day. The stock has been in a forced trading halt for two weeks having failed to get its accounts in on time. That can never be good news.

Around August analysts began slashing their $2.00 targets down to $1.00 targets. Apart from anything else, Commander was deeply in debt in the middle of a credit crisis. This morning, before coming out of the trading halt, analysts had halved those targets again. Most brokers had kept Hold ratings given the stock looked like it might represent value, even at $1.00. Today Citi gave up, and downgraded to Sell. Macquarie had already downgraded, and today suggested that even at its new target of 55c, the company was not much of a bargain. Commander had once been the stuff of takeover speculation.

JP Morgan is hanging on to Neutral (53c) in the belief an equity injection from one of the larger telco players is not beyond the bounds. Only GSJB Were sounded relatively positive, considering the upcoming strategic review the company has announced may just be what the doctor ordered. Weres’ target remains at $1.04 – 154% above where we are now.

Macquarie notes that even if the business is recapitalised or sold, its extreme leverage still represents a risk for shareholders.

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