Peoplebank Australia (PBA)

[tommy]

Here is a low PE company listed last year that is growing exponentially.

Peoplebank Australia Limited (PBA) is engaged in the provision of information technology and telecommunications (IT&T) contracting and recruitment services.

- Market cap: 40 million

- PE: 9

- Posted a record net profit attributable to members of $4.1m, up
160% on the previous year.

- Revenues of $122.2m grew by 15% on the previous year. This included revenues from recruitment services increasing by 84% to $3.3m.

- The growth in revenue and EBIT, all being organic, is largely due to the prevailing market conditions and strong demand for recruitment services, combined with improved efficiencies as a result of the increased scale.

- Contributing to the significant improvement at the net profit line was the reduction in borrowing costs being enjoyed as a result of restructuring all loan facilities during the IPO process in June 2005.

- Debt reduction has also been a major highlight for the year. The bank loan with Westpac was reduced by $2.4m of which $2.0m is available for redraw at a later date if needs arise. At 30 June 2006, the $6.6m
overdraft facility was unused.

- Strong net cash flows from operating activities of $5.9m (2005: $1.2m) were recorded reflecting the strong net profit result and a management focus on debtor collection.

- Declared a final dividend for the 2006 financial year of 3.0 cents per share fully franked with a record date of 15 September 2006 and expected payment date of 2 October 2006. This represents
a payout ratio of 55% of 2006 net profit attributable to members.


Contracting Services
Contracting services represents 97% (2005: 98%) of Peoplebank Australia Limited�fs revenue. These services entail the provision of IT&T contractors to our clients under labour hire contracts for an average
length of 3 to 6 months. Typically these contracts are renewed depending on the length of the IT Project, with many contractors remaining with the same client for 18 to 36 months. This business is underpinned by the company�fs list of over 45 Preferred Supplier Agreements and its ability to source suitable candidates.
The contracting revenue improved by 14% on the previous year and the number of full-time equivalent billable contractors reached 971 by the end of the year.

Recruitment Services
Recruitment services, being the traditional placing of permanent staff with clients for a placement fee, has represented less than 2% of revenue in recent years, but due to strong market conditions has grown to represent 3% of 2006 revenue and represents approximately 18% of our gross profit. Peoplebank Australia Limited considers that the permanent recruitment market will continue to provide the company with significant growth opportunities over the next year or so.

Looks like a bargain to me! (I hold)

Please do your own research[:I]

Preliminary Final Report & Full Year Accounts
http://sa.iguana2.com/cache/7eb0ce67065533bb74a0057430044c91/ASX-PBA-423019.pdf

Presentation:
http://sa.iguana2.com/cache/74c83d2077fd38d1ec0e8a483694fcc2/ASX-PBA-405755.pdf

Annual Report 2006
http://sa.iguana2.com/cache/a6a83c5ac48d32cf07c4117c102dcd54/ASX-PBA-428139.pdf

[James K]

I agree Tommy, I hold too (from 50 and 60 cents). Indeed I bought some more within the last week. Still feels like a good story, and while they are not well diversified, at least all the concentration is too a strong and growing part of the market. Seems ineitable they will make another acquisition this year, probably in the mid-market segment.

[tommy]

Hi JamesK,

You must be sitting on a tidy profit if you purchased at 60c! Well done mate:D

PE is currently around 9, which is way below the sector average of 16, so I see the current price level as more than reasonable. Being in a high-growth sector, there should be plenty of upside. Shame I only found this company recently!

[James K]

Hi Tommy - I bought more again today. Paid $1. Bit more than I wanted, but I have confidence. And yes the P/E comparisons with CND are interesting. Another acquisition at a good price will give them their next leg up, I expect.

PS. I bought my first lot a bit over a year ago.

[tommy]

Hi JamesK,

I think $1 will seem cheap in six months time, considering that there are not many sellers out there.

Definitely not a traders' stock due to illiquidity so we can't expect massive gains in a short period of time but we may see a steady price rise at the going rate;)

CND currently trades at PE of 14, so PBA has some work to do[:I]

[tommy]

Looking at the healthy buy side and the thin sell side, PBA seems to be on a continuous uptrend from here onwards... up another 6% today, well done James K:)

[tommy]

PBA's sell side is now virtually nonexistent... no one letting go of their holdings!

Expecting a re-rating soon;)

[tommy]

PBA creeping up despite low volumes, sell side thinnish and still undervalued at 45 million market cap and PE of 10 against sector average of 16.

Chairman expresses his target to make PBA into a 100 million market cap company and is considering acquisitions. Looks like a no brainer to me!

Chairman's Welcome
http://sa.iguana2.com/cache/45326f818767f7c0106fcd25b8a3e285/ASX-PBA-432734.pdf

Presentation:
http://sa.iguana2.com/cache/435b643c0fd9718ffab7f0492aba1a0a/ASX-PBA-432595.pdf

[tommy]

PBA up a healthy 6% today, steady increase continues:D

Hope I'm not the only one enjoying the ride[:I]

[tommy]

PBA continues to rise, at the going rate we might see 1.40 before the end of the year[:I] Still underrated at PE of 12 with market cap of 52 million against sector average of 17.

Tightly held, sell side still thin... easy money [:p]

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Apba&draw.x=0&draw.y=0

[tommy]

PBA seems to be running out of steam after a good solid run over the past several months, obviously profit collectors selling out before the end of the year. PE is still only 12 against sector average of 17, market cap is only $51 million.

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Apba&draw.x=0&draw.y=0

May have to wait until half-year results are out for another boost (yawn) but it might be a good opportunity for those who want to enter on the cheap[:I]

[absolut-advance]

hey tommy PBA seems a good bargin at the moment ive held for quite some time due to its incredible earnings and the fact its tightly held due to not many shares on issue, although it is in a sector i wouldn't normally invest in so im watching very carefully therefore wont hesitate to take a good profit.

cheers for your appreciated contribution on S/T

Merry Xmas


AA

[tommy]

PBA uptrend continues despite small volumes, market cap a mere 54 million and PE of 13, still a bargain at the current price level.

http://bigcharts.marketwatch.com/interchart/interchart.asp?symb=AU%3Apba&draw.x=0&draw.y=0

Expecting a re-rating when half-year results are announced;)

[Zephyrus]

Peoplebank (PBA) currently advertising 170 fulltime positions with the oldest being from 28 December & 152 contract positions with the oldest being from 27 December.

Their billable contractor growth went from 912 to 971 in 2006 & was stated as over 1000 as of the AGM presentation on 01/11/06.

Looks like PBA will be showing some fine growth again for 2007.

[tommy]

quote:Originally posted by Zephyrus

Peoplebank (PBA) currently advertising 170 fulltime positions with the oldest being from 28 December & 152 contract positions with the oldest being from 27 December.

Their billable contractor growth went from 912 to 971 in 2006 & was stated as over 1000 as of the AGM presentation on 01/11/06.

Looks like PBA will be showing some fine growth again for 2007.


Hi Zephyrus,

Thanks for the info on the job vacancies at PBA mate, well spotted. I agree with ya on that PBA looks good, driven by strong demand in the sector.

But this is a very boring stock that only seems to go up consistently:D Tightly held and hard to buy decent volumes, so I'm glad I took the plunge last year... sitting on very handsome paper profits so far[:I]

http://asx.netquote.com.au/charts.asp?code=pba&x=0&y=0

[ohmyme]

Bit of a sly profit warning with that latest announcement. Followed by a warranted sell-off.

Good luck holders. Still believe that Seek is the company to hold in this sector.

cheers.

[ruethewhirl]

Bought some of these YESTERDAY...!!!

I sh*t you not. Yesterday.

[B)]

[tommy]

Re: Peoplebank Australia Half Year Results


Peoplebank Australia (ASX: PBA) expects to release its reviewed half-year financial results in mid February.

Directors confirm that total revenue for the half year has continued to grow.

Half-year earnings are expected to be modestly behind the same period last year due to product mix changes.

As part of our policy of continued strategic review and market evaluation, we have recently completed an externally facilitated update of our overall business plan and direction.

Appropriate merger and acquisitions that are earnings accretive are being actively explored and reviewed by your board.

Yours sincerely
PEOPLEBANK AUSTRALIA LIMITED
LEON S. LAU
MANAGING DIRECTOR

__________

WTF... real shocker[xx(]

Stop-loss kicked in and got ejected today at a modest profit... damn.

Nevertheless this must be grossly oversold?!

What da hell is "product mix changes"[?] Management needs to explain and clarify what this exactly means...

Kicking myself for not collecting profits in the recent weeks[xx(]

I feel your pain ruethewhirl, this was totally unexpected... I think I need a beer to calm myself down.

[OneUp]

Product mix:

Say Dick Smith sells:

In Year 1:

$50m of computers at 10% margin
$40m of games at 50% margin

Profit = $25m

In Year 2: Dick Smith reduces the floor space alocated for selling games, and instead offers a wider range of lower margin computers.

$70m of computers at 10% profit margin
$30m of games at 50% margin

Profit = $22m

In this case Dick Smith has increased sales from $90m to $100m but decreased profits due to a change in product mix from higher margin games to lower margin computers.

[tommy]

Hi oneup,

Thanx for your simple explanation of the "product mix" definition based on first-year economics classes mate[8D]

Yeah, I know what "product mix" actually means but what I meant was that I wasn't sure what kind of change in "mix" had occured at the contracting and recruitment margin side of things at PBA... wondering whether the change in the mix was delibrate based on poor management policy or due to unanticipated shift in the nature of demand in the sector?

I haven't experienced a flop like this in a long time, so I am completely gutted...oh well, goes to show that it's important to collect profits now and then when it comes to illiquid stocks [|)]

[ruethewhirl]

Minus 23% in one day, that's got to be a personal record.

Why did I do it? A small cap, illiquid stock. Why god, why?

Why is it every time I try to be clever, stray outside the
ASX 200, this happens?

Well, OK, not every time ;)

[tommy]

quote:Originally posted by ruethewhirl

Minus 23% in one day, that's got to be a personal record.

Why did I do it? A small cap, illiquid stock. Why god, why?

Why is it every time I try to be clever, stray outside the
ASX 200, this happens?

Well, OK, not every time ;)


Hi ruethewhirl,

Your timing was indeed... unbelievable.

That said, PBA might be oversold so it might bounce back a bit (however, I don't like catching falling knives... too scared!) I may re-enter when the picture becomes clearer (management must explain what on earth is going on), but at this point the profit warning was completely unanticipated news for many shareholders.



[|)]

[ruethewhirl]

Tommy,

Agreed, there must be a dead cat bounce after such a
massive decline.

Question is, do I get out then with maybe a 10% loss,
or hold like the boob I am for the full announcement?

Maybe the announcement will not be quite so bad,
then we would see a retracement.

[:I]

[tommy]

quote:Originally posted by ruethewhirl

Tommy,

Agreed, there must be a dead cat bounce after such a
massive decline.

Question is, do I get out then with maybe a 10% loss,
or hold like the boob I am for the full announcement?

Maybe the announcement will not be quite so bad,
then we would see a retracement.

[:I]



Hi ruethewhirl,

That all depends on your risk profile and opportunity cost mate... I personally do not "hold" if I am uncertain about the prospects and am sure that I can do better by investing the same money in another stock.

Say, you made a 23% loss in one day, but you are almost certain that you can reduce that loss to 10% in one month time. But if you are equally almost certain that you can invest the same money to make 20 or 30% gain in the same one month period, then you should reconsider the benefits of holding on to a dog that might not bounce back (remember, trend is your friend!)

I personally never hold a stock for the sake of holding when new information has changed my analysis of the company... I would only hold a stock if I am willing pay the current market price based on that information. Unfortunately, the information released today was not sufficient for me to warrant a "hold" position.

If PBA was a good liquid trading stock, then it might be worth holding on but with such illiquidity, it might be hard to get out when you want to in the future. That's the problem with small cap illiquid stocks, you can make a killing when the going is good but can get burnt when everyone tries to jump ship! Oh well, no pain no gain[:o)]

Good luck mate[:I]

[ruethewhirl]

Tommy,

Being "certain" of a 20%-30% one month gain on ANY stock in the All Ords is a very bold assertion. I'd saying sticking with PBA short term (say one month), I would have a much better chance of paring my losses than trying to play roulette with another small cap.

I hear what you're saying regarding the trend being my friend, but at the risk of stating the obvious, the trend wasn't really my friend on this occassion...? But true, true, that axiom has always been on my side in the past.

Given the speccy nature of this small cap, and the fact that I did put money in that I was prepared to expose to the risk of just this set of events, I am going to hold.

Watch this space...!

[absolut-advance]

Ruethewhirl.... my thoughts..... is to remember.... for example..

if a company loses 50% and you take the loss and sell and invest the money into something supposedly better.....

That company must go up 100% "JUST TO BREAK EVEN"

I havent been following the last few weeks as im not holding now and havent read the announcement yet.... but my thoughts are most of the sudden loses have already occured today by the sounds of things.... one can watch carefully and make a intelligent decision.... rather than a herd panic sell....

Most important is your take on the fundamentals ... not the share price volatility now..... what share price would remain value to you?.... to get your desired returns...

Is this a over reaction based on fundamentals?

or is it a under reaction based on fundamentals...

maybe average down (buying more) is a option?

you have time so be cool... to access the situation... maybe giving you a investment edge... over the pack....

to sell at a loss is that.... a Guaranteed loss you will lose money

is it more RISK to SELL.....or more risk not to SELL


AA

[OneUp]

quote:Originally posted by absolut-advance

Ruethewhirl.... my thoughts..... is to remember.... for example..

if a company loses 50% and you take the loss and sell and invest the money into something supposedly better.....

That company must go up 100% "JUST TO BREAK EVEN"



Yes but so does the stock you already hold.

If a stock goes from $1.00 to $0.50, to get back to breakeven (i.e. from $0.50 to $1.00) is a gain of 100%.

At any rate, what we paid for a stock is irrelevant (except for tax considerations). The assessment we have to make is how the company will perform in future. Too many punters hold on to lemons, or companies whose operating performance is deteriorating, hoping they'll go back up to what they paid for it (not suggesting PBA is a lemon, don't follow it).


quote:Originally posted by tommy

Hi oneup,

Thanx for your simple explanation of the "product mix" definition based on first-year economics classes mate[8D]


No worries mate. I have a library full of useless examples like that from my fifth form accounting textbook that I'm just waiting for the chance to share ;).

[absolut-advance]

yes very true oneup... but if you think about it for a bit... its a rather interesting concept...

AA

quote:Originally posted by OneUp


quote:Originally posted by absolut-advance

Ruethewhirl.... my thoughts..... is to remember.... for example..

if a company loses 50% and you take the loss and sell and invest the money into something supposedly better.....

That company must go up 100% "JUST TO BREAK EVEN"



Yes but so does the stock you already hold.

If a stock goes from $1.00 to $0.50, to get back to breakeven (i.e. from $0.50 to $1.00) is a gain of 100%.

At any rate, what we paid for a stock is irrelevant (except for tax considerations). The assessment we have to make is how the company will perform in future. Too many punters hold on to lemons, or companies whose operating performance is deteriorating, hoping they'll go back up to what they paid for it (not suggesting PBA is a lemon, don't follow it).


quote:Originally posted by tommy

Hi oneup,

Thanx for your simple explanation of the "product mix" definition based on first-year economics classes mate[8D]


No worries mate. I have a library full of useless examples like that from my fifth form accounting textbook that I'm just waiting for the chance to share ;).

[tommy]

Hi ruethewhirl, AA and oneup,

Interesting opinions here posted by highly respected contributors here, excellent points made by all of you.

I think at the end of the day it all boils down to the individual's investment/trading risk tolerance and timeframe[}:)]

The stock market is a popularity contest after all, so who knows it might shoot back up tomorrow!

If you believe the price will increase again based on fundamentals, hold on to it...

For me, the press release didn't provide me with sufficient information to make an updated fundamental analysis, so that's why I allowed the stop-loss trigger to fire, especially when it started dropping like a lead balloon... I wanted to put my money elsewhere to get some good sleep tonight.

But in any case, I think it is always best to get out before making a loss if you think the stock is looking bad fundamentally.

Remember what Warren Buffett said:

"Rule No.1: Never lose money.
Rule No.2: Never forget rule No.1"

Whenever I think I'm about to lose money, I drop the stock like a hot potato... but having said that, I'm no where near rich as the oracle of omaha, so obviously I'm not doing well enough[|)]

[absolut-advance]

Those are very good points Tommy...the individual's investment/trading risk tolerance and timeframe.

From our above discussions Loss prevention is the KEY... or better put.. minimize loss skillfully is very important.. as you did well Tommy with your "trailing stop" .... and can be successfully be used to lock in profits most times...

Setting a successful Trailing Stop is something which takes practice.. and knowledge of a companys volatility... there is not set rules which work all the time...



loss minimization incase of those unexpected suprises.. which protect your valuable capital... to prevent situations like oneup and myself just mentioned.. about what is needed just to break back even... a loss is not a ideal situation....a situation which a sucessful investor manages to avoid more times than not...

Tommy as for you saying your not doing well enough... I dont believe that for a minute...im sure you are very very successful and i always look forward to your posts..

S/T is so lucky to have such a vast field of knowledgeable investors... which we can continue to learn from...

AA

[tommy]

quote:Originally posted by absolut-advance


Tommy as for you saying your not doing well enough... I dont believe that for a minute...im sure you are very very successful and i always look forward to your posts..

S/T is so lucky to have such a vast field of knowledgeable investors... which we can continue to learn from...

AA


Hi AA,

I'm no professional investor/trader mate, don't over-rate me! I also learn a lot from your posts and other highly skilled posters here, and agree with you that this forum is a great place to access a wealth of knowledge and expertise! Keep up da good work;)

PBA bounced back 6% on additional announcement today. Obviously management realized that they could face a free fall without disclosing more info.

Seems like a good buy at the current price level,,,

_____________

Re: Peoplebank Australia Limited�fs announcement 30 January 2007

The Continuous Disclosure announcement of 30 January 2007 generated considerable investor interest, but apparent uncertainty in the market about Peoplebank�fs continuing growth prospects. Your Directors wish to be sure there is no misunderstanding as a consequence.

As advised, the reviewed interim financial statements should be ready for release in mid February. The primary contracting business grew approximately 15% in the 6 months to 31 December 2006 with a very high quality customer profile. Sales in the higher margin permanent placement business were behind expectations. The combined NPAT as a result is expected to be about $1.85 million, 5% less than comparative 31 December 2005. It should be noted that the comparative period included �grecord�h permanent placements.

- Projections are for a stronger second half of the fiscal year. Director forecasts and market conditions indicate full year profit results will be ahead of last year.

- Peoplebank has a strong balance sheet, and anticipates no changes to its dividend policies.

- Its expansion strategy through earnings accretive M & A has been thoroughly reviewed and reaffirmed. Substantial funding is readily available. Peoplebank considers itself very well positioned within its industry and is actively pursuing opportunities. The market will be kept informed as and when potential transactions are appropriately advanced.

- The Directors confidently consider Peoplebank to be a growth stock and are committed to delivering quality earnings to shareholders.

Yours sincerely

PEOPLEBANK AUSTRALIA LIMITED

[ruethewhirl]

Now sitting on a massive paper loss.

rtw

[Flying Goat]

Hmmmm, thanks for pointing this one out in the ITD thread Tommy.

Seems like MMCotrarian also think this is looking oversold.

Looks healthy enough to me. Nice return on equity and low debt.

Low pe relative to historical pe, and dividend also quite good.

Mike

[tommy]

Hi FG,

Seemingly PE is low but just bear in mind that management has to regain investor confidence due to the surprise downgrade that had not been thoroughly explained. I do think it is undervalued but not quite convinced enough to buy into it again. Nevertheless, worth a keeping an eye;)

That said, chart looks good and sell side is thin so might make a mint although it is difficult to accumulate big volumes!