Sydney, Aug 21, 2008 AEST (ABN Newswire) - MicroEQUITIES has initiated coverage on DWS Ltd (ASX:DWS) with a BUY RECOMMENDATION. DWS shares underwent a sharp correction in June 2008 when the company released a revised profit guidance that revealed 3rd-quarter revenue and EBITDA earnings had fallen sharply.
Microequities sees the share price correction as offering investors an opportunistic price entry point according to Microequities Analyst Fond Lim "From our discussions with management, internal management issues played a significant role in the underperformance during the period in question. More importantly, DWS has not lost any clientele and the resultant impact produced only minimal staff turnover. As such, we believe the market may have overplayed the revised guidance on the downside"
Strength of IT services demand FY09
Whilst there remains elements of spending uncertainty in the IT services market, Microequities sees demand levels holding and expects modest Year on Year growth "On aggregate, it is our view that broad based IT services demand is likely to hold up reasonably well into FY09, albeit moderating to a slower growth rate than that observed during 2007/08".
Strong Operating Cash Flows underpins valuation
MicroEQUITIES has placed a $1.50 price objective on DWS, based on a prospective FY09 EV/EBITDA of 5.7x. DWS DCF valuation is backed by a business model that generates strong operating cash flows whilst relatively minimal CAPEX providing the company with high Free Cash Flows.
MicroEQUITIES has initiated coverage of DWS with a BUY RECOMMENDATION and a target price of A$1.50, reflecting a 32% premium of the current price (based on a $1.13 share price). Fond Lim comments "The crux of the investment case on DWS is our valuation of the DWS business. We view DWS transparent and singular pricing model to be a sustainable competitive advantage".
About MicroEQUITIES
MicroEQUITIES is an Australian company established with a singular vision: to actively investigate and research investment opportunities in Micro Cap companies listed in the Australian Stock Exchange. The company provides value adding professionally elaborated extensive research within an area of huge investment potential but poorly covered by Australia's investment banking community, the Micro Cap investment universe. Therefore, MicroEQUITIES's aim is to rebalance that information inequality, inform investors, and at the same time provide its clients with superior returns. MICROEQUITIES PTY LTD is an Australian Financial Services licensee, which authorises the company to provide general investment advice on securities to retail and wholesale clients.
Companies currently covered by MicroEQUITIES
Hostworks (ASX:HWG)
Integrated Research (ASX:IRI)
KLM Group (ASX:KLM)
M2 TELECOMMUNICATIONS (ASX:MTU)
Becker Entertainment (ASX:BKR)
CPT Global (ASX:CGO)
Kresta Holdings (ASX:KRS)
Colorpak (ASX:CKL)
Peoplebank (ASX:PBA)
Clover Corporation (ASX:CLV)
Comtel Corporation (ASX:CMO)
Sirius Corporation (ASX:SIU)
DWS Ltd (ASX:DWS)
Disclaimer: This news release is provided for informational purposes and should not be construed as a solicitation or offer to buy or sell any securities or related financial instruments. Microequities has not independently verified the information contained in the document, which is derived from publicly available sources. Microequities assumes no responsibility for updating any advice or recommendation contained in this document or for correcting any error or admission, which may become apparent after the document has been issued..
Microequities does not give any warranty as to the accuracy, reliability or completeness of advice or information contained in this document. Additional disclosure: Microequities employees may hold securities in the above-mentioned company/ies.
Contact
Media enquiries: Eva Lopez-Casero
ebeltran@microequities.com.au
+61 2 9232 7494
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