Australia | Sep 01 2008
By Chris Shaw
Mobile phone content creator Jumbuck ((JMB)) delivered a result broadly in line with market expectations, with the profit of $4.9 million coming in just below the Austock Securities forecast of a $5.0 million. What did disappoint the broker was the slowdown in revenue, which wasn’t helped by adverse currency movements.
To reflect this, the broker has downgraded its rating from Buy to Hold and now prefers to adopt something of a wait and see approach until growth returns, an eventuality that should be helped by a weaker Australian dollar, in its view.
Much of its current concern stems from the group’s European exposure, where sales slowed to $5.4 million in FY08 compared to $6.0 million in FY07. By contrast, the US performed solidly given the adverse currency movements and Australian revenues continue to trend up slowly.
The broker’s downgrade comes despite its view the stock is inexpensive at current levels. On its numbers, the shares are trading at only 5.3x earnings in FY09 and less than 5x on its FY10 estimates. Given these low multiples the broker suggests any evidence revenue growth is being restored is likely to see the stock jump quickly to around the $1.00 per share level.
To reflect its conservative approach, the broker has set its price target at $0.70, while its discounted cash flow valuation is $0.96 on assumptions of only modest growth in earnings going forward. It makes the point the stock’s tiny capitalisation – at current prices it is capitalised at less than $30 million – makes it too small to attract attention unless it is performing more strongly than is currently the case. The FNArena database backs this up, as none of the of the brokers or equity researchers analyse the stock.
Today, shares in Jumbuck are weaker and as at 11.30am the stock was down 5c or 9% at $0.50. This compares to a trading range over the past year of $0.48 to $1.32.