DWS - Get on it

[Rainesy]

DWS is an IT Consulting Company. I've held this stock for 12 months now and have enjoyed over 130% gain. There is still plenty more in this one in the next 2-3 years as acquisitions become the flavour of the years ahead.

They have great management and a great working model. Plenty more going for this company with offices in Melbourne, Sydney and Brisbane. Strong growth has been shown over the past 12 months and will continue in the years to come. The FY reports released in August will show this and I urge you to consider this exciting stock.

Rainesy

[Rainesy]

Hi All,

Any reason why no one seems interested in this stock? Do you want some more information?

At the current rate of increase we will see $3.00 in two weeks time.

Rainesy

[Lizard]

I do like this stock. Tossed up between DWS and BLU a few months back and plumped for BLU - which means DWS should do really well. [8D]

Will stay on my watchlist.

[stephen]

I had a quick look Rainesy when it came up in the "internet stocks" thread.

I only see one year's worth of results, and a PE that's already pretty rich. If I were a techie/momentum person I'd be interested, but I don't see enough of a track record or value to be in at the current price. Call me conservative.

As far as more information goes - what do you know about their history before 2006?

[David Hardman]

quote:Originally posted by stephen
As far as more information goes - what do you know about their history before 2006?


Check out the IPO document for details on their earlier history. Consistent year on year growth, highly diversified quality client base, broad product offerings

http://sa.iguana2.com/cache/d55f17ca6f3c4e0704e0ae6b31bf4776/ASX-DWS-255730.pdf

[Rainesy]

quote:Originally posted by stephen

I had a quick look Rainesy when it came up in the "internet stocks" thread.

I only see one year's worth of results, and a PE that's already pretty rich. If I were a techie/momentum person I'd be interested, but I don't see enough of a track record or value to be in at the current price. Call me conservative.

As far as more information goes - what do you know about their history before 2006?


Hi Stephen,

Basically this company has had 15 years of strong and constant growth and now they are acquiring more companies in new cities (Sydney and Brisbane). This shows they have the money to grow and expand in the future.

Rainesy

[Lizard]

Tidy result from DWS today - ahead of my expectations. P/E of 20, but still a growth share, so I'd say it's an easy "hold" at current price of $2.50.

And, yes, it has done better than my BLU... :cool:

[David Hardman]

Tidy result from DWS today - ahead of my expectations. P/E of 20, but still a growth share, so I'd say it's an easy "hold" at current price of $2.50.

And, yes, it has done better than my BLU... :cool:

Going from good to great.

Check out the report from the 13th of November

http://stocknessmonster.com/news-item?S=DWS&E=ASX&N=287433

Trading in 1st quarter of the year up 40-50% on previous.

Growth in NSW described as spectacular

Currently trading at PE 22... With the expected growth in 2008 its more like 16-17

Nice divi as well :)

[Lizard]

I agree David. The recent results have been excellent and still looks worth buying for a solid hold.

[David Hardman]

DWS in a similar situation as KLM.

Very solid business with a great track record been indiscriminately sold off over the last few months.

'07 EPS was 12

Reports out since indicate 50% growth in Q1/08.

Currently trading at $2.. Traded as high as $3.30 just 2 months ago.

Now trading on a fwd PE of around 12. Not as cheap as KLM but it is a significantly larger business.

Could get a pop with a solid 1/2 year report.

[Footsie]

Its been sold off like all IT stocks because of OKN and the concern that margins are being squeezed as IT firms go under the pump with wage bills soaring.

Still DWS has amongst the highest margins in the industry.
I liked it at $2.40 so like it even more at $2.00

[tommy]

Sentiment in IT sector is pathetic at the moment, ASZ announced NPAT 46% increase and was totally ignored by the market... in fact, the share price FELL today!

That said, DWS operating margin is double that of ASZ, which makes PE of DWS look much more attractive...

But I don't have much faith in way Mr Market treats IT sector at the moment, considering how UXC has been treated (PE:10) as well!

[David Hardman]

Continues its downwards trend but founder and CEO Danny Wallis continues to buy.

He's picked up $2m over the last week

I thought the report was good. Sounds like one of their acquisitions has gone pear shaped but overall they are still growing strongly.

[Footsie]

The whole IT sector is getting butchered which is just ridiculous.
Most of the firms are cash rich and have no debt. 70-80% of revenue is contract.... and its somewhat recession proof as they effectively save money for firms

DWS, OKN, SMX, CSV, ASZ
If prices keep falling i'd expect some consolidation M&A for sure... why not.

i mean p/e's of 10 with yields of 6-7%...... its just silly.

When the market bottoms.... these will be the companies to buy
who knows in a few months yuo might get em on a pe of 5 with 10% yield

I did say DWS might go to $1.00
CEO's might not be able to pick market bottoms but they dont buy millions of stock for no reason.
PS lets hope he didnt buy on margin !!! :)

[David Hardman]

Looks like DWS management has had enough of the market undervaluing their shares.

Been HEAVILY sold down over the last few months.. Director buying last month has not halted the slide.

Buy Back announced today. They are looking at buying back 10m of their 133m shares.

Should support the price at these levels.

Extreemly cheap at these levels.. Good divis as well.

[Corporate]

Looks like DWS management has had enough of the market undervaluing their shares.

Been HEAVILY sold down over the last few months.. Director buying last month has not halted the slide.

Buy Back announced today. They are looking at buying back 10m of their 133m shares.

Should support the price at these levels.

Extreemly cheap at these levels.. Good divis as well.


I've just had a look at DWS and like what I see. Any idea's why they have been so hammered over the last few months? Is it unreasonable....no debt...increasing revenue and profit.

How are they going to finance this buy back? They had $11million in the bank as at 31/12/07. 10million shares at $1.40 is $14million. I'd assume they have accumulated more cash lets say $2million. DWS is still short $1m plus enough operating cash

thoughts?

[David Hardman]

I've just had a look at DWS and like what I see. Any idea's why they have been so hammered over the last few months? Is it unreasonable....no debt...increasing revenue and profit.

How are they going to finance this buy back? They had $11million in the bank as at 31/12/07. 10million shares at $1.40 is $14million. I'd assume they have accumulated more cash lets say $2million. DWS is still short $1m plus enough operating cash

thoughts?

The buyback will run for the next year (starting April 10)

They will pay for it out of cashflow. They are generating stacks of cash.

It may put a halt/slow their acquisition strategy. Probably a good thing given the circumstances.. Why buy other companies with all their unknowns.. when you can pick up a bargain and buy your own stock.

[Corporate]

Thanks - as i said I just had a quick look.

Company makes a wise decision, one which should instill confidence. And the share price drops. Amazing

[David Hardman]

Thanks - as i said I just had a quick look.

Company makes a wise decision, one which should instill confidence. And the share price drops. Amazing

Yeah.. I really can't fathom the recent slide in share price.

Maybe an insto has to bail... Maybe they have lost a big client....That said they are not reliant on a single large client.. they have a very diverse client base over multiple industries.

No idea.... i'd like to buy more but don't have the balls.

I may give the company a call tomorrow and see what I can dig up.

[Corporate]

Yeah.. I really can't fathom the recent slide in share price.

Maybe an insto has to bail... Maybe they have lost a big client....That said they are not reliant on a single large client.. they have a very diverse client base over multiple industries.

No idea.... i'd like to buy more but don't have the balls.

I may give the company a call tomorrow and see what I can dig up.

I have only spent about 40 mins looking over the companies announcements and FS but I can not see why the price is falling either.

Maybe the new acquisition of SDM is not all it cracked up to be?

Danny Wallis (CEO) has an absolute bucket load of shares so the fact that he has recently purchased more doesn't really mean to much as his purchase only increased his holding by 1.1%. He holds something like 54million shares. A very wealthy man.

I'll do some more research and be back

[Corporate]

Yeah.. I really can't fathom the recent slide in share price.

Maybe an insto has to bail... Maybe they have lost a big client....That said they are not reliant on a single large client.. they have a very diverse client base over multiple industries.

No idea.... i'd like to buy more but don't have the balls.

I may give the company a call tomorrow and see what I can dig up.

They could have lost a big client. But I don't believe that the client would be so big that it would impact them this badly. It would be very interesting to know the details of there client base.

I'm not buying until we see the end of this drop. But finger is on the trigger.

If you call them , i'd be interested to hear what you can dig up. I may also do the same. If I was in Australia I'd go for a visit, or even apply for a job :D

[Corporate]

The CEO also gets $5.4 Million in dividends a year. How high is his motivation to turn his holding of 54million shares from a value of $75.6million to $150 million, or even $300million?

The audit fee seems EXTREMELY low

Just putting it out there

[winner69]

.... and didn't Danny get the bulk of the $50M odd raised at the IPO

Amazing though it took 18 months to go from $1.00 to $3.38 and only 3 months to get back to $1.33

[Corporate]

Rather than anything wrong with the company business

I think it was overvalued earlier and now its fairly valued.

Even with the kind of growth DWS is showing?

[Footsie]

I heard their TLS contract is nearly finished....

IMHO buy-backs are a waste of time.... it's what companies do when they have no growth left..... normally the space of large corporates

they should keep the cash and use it as a war chest for when things get ugly.


next thing yuo know in 12 months they will do a cap raising to fund a acquisition....

Market doesnt like it.... hence the price.

At 3.30 it was on an FY08 EV/EBITDA of 15x now its a respectable 6x

TRY CSV, its earnings are more defensive. Lots of govt contracts and its cheaper on a EV/EBITDA basis.

[David Hardman]

I heard their TLS contract is nearly finished....

IMHO buy-backs are a waste of time.... it's what companies do when they have no growth left..... normally the space of large corporates

they should keep the cash and use it as a war chest for when things get ugly.


next thing yuo know in 12 months they will do a cap raising to fund a acquisition....

Market doesnt like it.... hence the price.

At 3.30 it was on an FY08 EV/EBITDA of 15x now its a respectable 6x

TRY CSV, its earnings are more defensive. Lots of govt contracts and its cheaper on a EV/EBITDA basis.

Not much luck talking to the company this morning. Danny is overseas and the CFO is away for a week. They don't have a Investor relations manager.

Can't remember the exact details but I recall the prospectus made it clear that they have a highly diverse customer base and are not exposed to a single contract.

I disagree about your comments about the buyback. If the company knows its shares are highly undervalued (for whatever reason) then it makes perfect sense to buy them back. I don't think it signals they have ran out of ideas. Its says.. Out of all the companies on the block ours is the best value.

DWS don't make large acquisitions as they go to great lengths to preserves their company culture. They would not be able to digest a large company. In any case given the cash they are generating it still gives them the chance to pick up the odd bargain if it arises. Previous acquisitions have been paid for by a mix of stock and cash.

Wage pressures maybe hurting them....

I thought it was a good buy at $3+.. Looks like a bargain at $1.30's

[Footsie]

I reiterate my EV/EBITDA analysis

[David Hardman]

I reiterate my EV/EBITDA analysis

For what it is worth - Just had a brief talk to DWS's CFO.

She says there is no fundamental reason for the slide in the share price.

They have not lost clients, clients are renewing, things are a-okay.

Telstra is their largest client and everything is fine on that front.

She can't explain the share price fall. She has inspected the share registry reports and there has been no major movements in holdings.

Danny's ~40% holding has no loans over it.

Although she can't be sure she does not think they are caught up in Opes debacle.

The buyback announcement is just that.. Its not a commitment to actually buy back the stock.

They are still acquisitive but believe private companies have to adjust there expectations and be realistic about the multiples they want.

[Corporate]

For what it is worth - Just had a brief talk to DWS's CFO.

She says there is no fundamental reason for the slide in the share price.

They have not lost clients, clients are renewing, things are a-okay.

Telstra is their largest client and everything is fine on that front.

She can't explain the share price fall. She has inspected the share registry reports and there has been no major movements in holdings.

Danny's ~40% holding has no loans over it.

Although she can't be sure she does not think they are caught up in Opes debacle.

The buyback announcement is just that.. Its not a commitment to actually buy back the stock.

They are still acquisitive but believe private companies have to adjust there expectations and be realistic about the multiples they want.

Thats interesting. Thanks! And the stock went down another couple of percent today.

[wns]

There's quite a bit that I like about this company.

One question - Grant Fielding left the company back on 1st Feb. He had been the MD and was with the DWS for seven years. The announcement didn't really say why he left or what he was going on to. Wonder why he left?

Haven't bought any but keeping an eye on this one.

In terms of the fall in share price... I think the share price was getting ahead of itself previously, and has now fallen to where it represents pretty good value.

[David Hardman]

There's quite a bit that I like about this company.
One question - Grant Fielding left the company back on 1st Feb. He had been the MD and was with the DWS for seven years. The announcement didn't really say why he left or what he was going on to. Wonder why he left?


Could be something in that.. He had 4.3m shares before he resigned.. Maybe his line of stock is pushing down the share price. Cos he's no longer a director or a substantial shareholder he does not have to declare any changes.



In terms of the fall in share price... I think the share price was getting ahead of itself previously, and has now fallen to where it represents pretty good value.


Really? I don't think it got above a 20x. For a growth based company it was hardly excessive. Now around 6x!

DWS has had great growth and is forecasting more. Sure it has only been listed for a few years but it has a great lengthy track record as an unlisted company.

DWS does not has a lumpy revenue stream like many project based IT companies. A lot of their contracts are maintenance and just roll over every year.

Anyway.. I'm freeing up some funds and will look to average down at these levels.

[Corporate]

Another down day :)

[wns]

Really? I don't think it got above a 20x. For a growth based company it was hardly excessive. Now around 6x!


20x is more than I'd be prepared to pay even for the best of companies... I just can't bring myself to do it. :) If something happens and the projected growth doesn't happen, the share price gets hammered and I'd rather not risk that.




- I heard their TLS contract is nearly finished....

What's your source? Can you elaborate?

[Footsie]

source: someone in the industry

[David Hardman]

Solid bounce in the last two days.

[wns]

Anyone who has TLS contracts will soon find their IT business gone. The IT Transformation that TLS is currently undertaking involves exiting over 1200 different systems, and consolidating down to 80.


Which is good news for some... the question is: who?

[David Hardman]

There will probably be another big tender similar to what they did for the field force - one or two winners for everything. It is a year or two off though.

Err.. I've worked with Telstra on several IT projects.. If its a year or two off in Telstra estimations then its at least 3-4 years away.

127 to 165 in two days! Solid buying. Downtrend broken

;-)

[Corporate]

good rise over the last week or so...Has it broken the trend?

[David Hardman]

good rise over the last week or so...Has it broken the trend?

Noticed that as well.. Small gaps on open and finishing near or at it highs. Volume up as well.

Solid company!

[Corporate]

Noticed that as well.. Small gaps on open and finishing near or at it highs. Volume up as well.

Solid company!


What do you think of the latest announcement? They got thumped by the market. I didn't think it was that bad. Seems like it may have had something to do with the GM by the tone of the announcement.

Maybe a good time to buy in.

An increase in Revenue (38%) and EBITDA (15%) from year to year, isn't bad.


http://www.asx.com.au/asxpdf/20080618/pdf/319pn9tkgdzm3z.pdf

[h2so4]

What do you think of the latest announcement? They got thumped by the market. I didn't think it was that bad. Seems like it may have had something to do with the GM by the tone of the announcement.

Maybe a good time to buy in.

An increase in Revenue (38%) and EBITDA (15%) from year to year, isn't bad.


http://www.asx.com.au/asxpdf/20080618/pdf/319pn9tkgdzm3z.pdf

Well I saw it as an opportunity to buy! I think its trading just above its float price???

One bad QY. BIG DEAL! Its part of the business cycle. A good business will survive the bad times and prosper in the good times.

I put the value of this company at $2.90 per share.

But just because the SP is cheap doesnt mean it cant go down.

But hey! I know nothing DYOR

[Corporate]

Well I saw it as an opportunity to buy! I think its trading just above its float price???

One bad QY. BIG DEAL! Its part of the business cycle. A good business will survive the bad times and prosper in the good times.

I put the value of this company at $2.90 per share.

But just because the SP is cheap doesnt mean it cant go down.

But hey! I know nothing DYOR

I just noticed it this evening. I'm a day behind. Looks like I'll be placing an order tonight. The 5 year graph is SHOCKING!

[h2so4]

I just noticed it this evening. I'm a day behind. Looks like I'll be placing an order tonight. The 5 year graph is SHOCKING!

Whats a graph?:rolleyes:

[Corporate]

Whats a graph?:rolleyes:

? :confused:

[STRAT]

? :confused:Chart Stephejame, chart :p

[Corporate]

Chart Stephejame, chart :p

Hahahah whats wrong with graph?

[h2so4]

? :confused:

Sorry shephejame I was being sarcastic.

I dont let graphs influence my actions. I just see it as a good commpany at a heavily discounted price. Im buying.

cheers

[Footsie]

who is to say there wont be another profit warning?

take the pain and get out...

[h2so4]

who is to say there wont be another profit warning?

take the pain and get out...
orx3 but Im not sweating on it.

[h2so4]

The DWS problem wasnt so much slow revenue in Q3 but very low EBIT and margin. Which suggests there were significant costs in that quarter. I wonder what they were, and if they will be recurring?

If it were a revenue slowdown you could have blamed the debt & equity market meltdown for businesses not spending. But that was not the problem.

The Apr-Jun period is usually a good time for IT companies as a lot of company IT budgets get spent in the last financial quarter. You can see this Q4 upswing in the DWS numbers.

Thats just too hard to know.

[Corporate]

Thats just too hard to know.

Down again today..wonder how far it will go

[h2so4]

Down again today..wonder how far it will go

Yep down again. I revalued it at $2. Thats my estimate not the markets.

DWS is a stock that will tend to follow the market down or up.

[jonathan76]

the rate that the down trend goes, I think it may hit 70 cents comes middle of july.

[Deelicious]

Not sure what the panic is all about. It’s a great co. very strong financials with no debt.
The profit down grade from 30m to 27m was barely material. Which was boarder line whether the announcement was required to be made or not.
The poor perf in Q3 was directly to do with the previous GM which has been moved on since.

IMO this is a great buying opportunity

[Corporate]

Not sure what the panic is all about. It’s a great co. very strong financials with no debt.
The profit down grade from 30m to 27m was barely material. Which was boarder line whether the announcement was required to be made or not.
The poor perf in Q3 was directly to do with the previous GM which has been moved on since.

IMO this is a great buying opportunity


Agreed. But how do you know it was directly related to the GM? Do you know why expenditure for that third quater was so high?

[macduffy]

It's partly a bear market thing and partly a tech industry thing. Other stocks such as SMX and TNE are being treated similarly. The market seems to believe that a business downturn will result in lower spending in this regard.

[STRAT]

Hahahah whats wrong with graph?
Heres a graph for ya Stephejame but its a bit grim. Dont know this company but I would say there is a lot more goin on than just bear market sentiment happening here.

https://www.directbroking.co.nz/cgi-bin/sparkle.dll/Superchart?session=00493AFD-DAE9-4945-A4DE-5B8839BDC293&instrument=DWS&exchange=ASX&period=6M&ps=&vs=LINE&ct=LINE&comps=&compi=&ma1=30&ma2=90&bb=&ind=MACD&template=dblsuperchart&adj=yes&ra=2

[h2so4]

Do we have a reason to smell something in the announcement? They said they had a bad 3Q. If they are telling porky's it will reflect badly on them. EBIT and EBITDA are extremely manipulative figures which cant be relied on. Ill give them the benifit of the doubt. However if they dont deliver on their plan to be the largest in their industry in 5 years Ill find another boat.

[Corporate]

And DWS continue to buy-back shares. I'm so torn!

[h2so4]

And DWS continue to buy-back shares. I'm so torn!

Do you think the share buy back is a good thing?

[Corporate]

Do you think the share buy back is a good thing?


Well i guess it shows confidence that they value the company higher than the current share price, and they see that repurchasing share is better than pumping money into other lower yeilding investments.

What do you think?

[h2so4]

Well i guess it shows confidence that they value the company higher than the current share price, and they see that repurchasing share is better than pumping money into other lower yeilding investments.

What do you think?

Yes thats how its supposed to work. I think its all good. They seem to be buying in dribs and drabs at the days lowest prices. At least they havent rushed in and purchased at any price.
cheers

[Corporate]

Is anyone still following DWS....great annual report in June. Strong company making good coin.

Anyone reason for the big drop on friday? (Apart from the general market). Massively undervalued. The SP is nearly at it's all time low of 88c

Disc. Don't own, but will one day.

[Corporate]

Still no one following DWS

Current market cap of $93.7 Million

Net profit after tax for the year ending June of $17.9 Million

Current PE of 5.23

Annual total dividends of 11c (yield of 15.6%) - if maintained would give nearl a 100% return on investment over 6 years!

No debt

To me it seems like a no brainer (however, I don't hold).

I don't really know the IT industry. Does the market think that earnings are going to drop significantly?

[winner69]

Massively undervalued. The SP is nearly at it's all time low of 88c

Disc. Don't own, but will one day.

I take it the 70 cents on Friday would be the all time low then steph --- long way off the 338 under a year ago

Seems to be a share that suffers from big drops every now and again as sentiment changes but as you say looks cheaps as

How tough economic times affect outfits like DWS I don;t reallt know but there was a report in one of the aussie papers the other day saying IT and financial service related companies weren't the place to be

[Corporate]

I take it the 70 cents on Friday would be the all time low then steph --- long way off the 338 under a year ago

Seems to be a share that suffers from big drops every now and again as sentiment changes but as you say looks cheaps as

How tough economic times affect outfits like DWS I don;t reallt know but there was a report in one of the aussie papers the other day saying IT and financial service related companies weren't the place to be

Winner - They dipped as low as 67c the week before. I think they were over-valued at $3.38 with a PE of at least 20. But I am sure that even in this market fair value is at minimum $1.

My only reservation is like you say, how they will cope with the "credit crisis" and the economic slow down. Although they have had 15 years of continous growth (according to their IPO).

[winner69]

Still going down but rate of decline slowed a bit

Note a few analysts downgrade of Oakton based on comments made at AGM might be an indication of future prospects of DWS

Still watching

[Corporate]

Still going down but rate of decline slowed a bit

Note a few analysts downgrade of Oakton based on comments made at AGM might be an indication of future prospects of DWS

Still watching


Yeah seems very cheap. I may get in touch with the company and find out if there is any fundamental reason for the smashing they have taken.

338c --> 65c an 81% decrease within 10 months!


MCap $85m
PE 4.5
Yield 17.19%

[Corporate]

http://finance.yahoo.com/echarts?s=DWS.AX#chart2:symbol=dws.ax;range=1y;com pare=^dji;indicator=volume;charttype=line;crosshai r=on;ohlcvalues=0;logscale=on;source=undefined

Interesting

[winner69]

Hope you haven't been tempted yet stephjame .... even at 60 cents looks like getting cheaper.

See Oakton tokk a big dive today ... maybe tarred with the same brush that sees many thinking that the services that these types of outfits offer are going to be down

[Corporate]

Hope you haven't been tempted yet stephjame .... even at 60 cents looks like getting cheaper.

See Oakton tokk a big dive today ... maybe tarred with the same brush that sees many thinking that the services that these types of outfits offer are going to be down

Winner no no - i haven't. I emailed Danny this afternoon though, so it will be interesting to see his reply.

What is Oakton?

Mcap $79.7 Million
PE 4.29
Yield 18.33%

[Corporate]

Another bad day on the Dow could see it dipping well into the 50's

[winner69]

Winner no no - i haven't. I emailed Danny this afternoon though, so it will be interesting to see his reply.

What is Oakton?

Mcap $79.7 Million
PE 4.29
Yield 18.33%

Oakton OKN is IT services/consultancy company

Shareprice down from high of 648 to 176 (down 20% today)

[Corporate]

Winner

What did you think of the most recent annoucement?

Looks pretty positive to me. I.e we know we are facing tough times a head but will weather the storm!

[Lizard]

IT Braces for the Crunch (http://www.smartcompany.com.au/Premium-Articles/Industry-growth-focus/20081104-IT-braces-for-the-crunch.html)

[Corporate]

Quite high volume yesterday on DWS compared to the last 3-6months

[AMR]

Is anyone still following this? DWS has fired off a few technical buy signals lately.

[Corporate]

Is anyone still following this? DWS has fired off a few technical buy signals lately.

I'm still following AMR. Don't really no to much about TA. Could you elaborate?

I get the feeling that they haven't been hit as hard as people think. But hey lets wait to the next set of results.

[AMR]

I think the handle is still forming, longer term it's broken out of a falling wedge. OBV not terribly useful in this case.

[AMR]

IBM announced today an optimistic profit prediction for 2009. It seems companies believe spending on IT will save money in the long term and are continuing to fund projects. Good for DWS.

Now just waiting for this European banking crisis to cause major panic before I buy in.

[David Hardman]

Spoke to soon AA

Getting smashed today allbeit on light volume

Oaktons "market update" will have a few DWS punters worried.

DWS however appear to be bucking the trend and winning work according to their last announcement.

[winner69]

Spoke to soon AA

Getting smashed today allbeit on light volume

Oaktons "market update" will have a few DWS punters worried.

DWS however appear to be bucking the trend and winning work according to their last announcement.

Jeez that Oakton has got smashed a few times now .... when we mentioned it in October it had just been smashed 20% to fall to 170 ... today smashed 20% and closes at 77

When good times come back both OKN and DWS will be good investments .... even now in spite of the difficult times both are still making money and compared to 'normal' valuations cheap as.

OKN have some residual impact on DWS ... looks like it has been tarred with the same brush

[Corporate]

OKN down to 63c! Market cap of $57m:confused::eek:

[AMR]

OKN down to 63c! Market cap of $57m:confused::eek:

You spoke too early, now down to 55c.

[contrarianinvestor]

DWS Recent Performance

Looking at the income statement for the year ending June 2008, DWS generated $88.2 million in revenues and $18 million after tax profits. The net profit margin remains above 20% which is very good for an IT services firm. Other comparable companies such as Hansen Technologies or CPT Global have net profit margins below 10%.

The balance sheet shows current assets of $30 million, which mostly consist of receivables. There is $2.5 million past due 60 days. Current liabilities is $10 million with zero bank debt. This looks like a very healthy current position.

Non-current assets mostly consists of goodwill which won’t require maintenance and don’t need to be replaced with capital expenditures in the future. DWS made small acquisitions during the 2008 financial year buying EQuest Consulting Pty Ltd, SDM Sales Pty Ltd and Strategic Data Management Pty Ltd. These acquisitions where funded with approximately $11 cash and by issuing 2.7 million shares.

There is zero long term debt. DWS earns $18 million on a tangible net asset base of $20 million. That is a very high return on net capital employed (close to 100% p.a.) without using any debt.

Valuation

With 134 million shares outstanding DWS has a market cap of $75 million at a share price of 56c. That gives a Price/Sales ratio of 0.85 and Price/Earnings of 4. Such a low valuation is usually present in situations where the business is expected to perform materially worse in the future. I don’t see any evidence of this business slowing or reversing its 16-year track record of good profitability and rapid growth. Also, this growth was achieved using zero debt which is very impressive.

Philip Fisher mentioned in his book Common Stocks and Uncommon Profits that “no company grows for a long period of years just because it is lucky. It must have and continue to keep a high order of business skill”.

Business Outlook

DWS continue to look to expand their service offerings and their client portfolio. They expect the telecommunications industry and energy sector to continue investing in IT systems beyond 2010. According to CEO Danny Wallis, many businesses will look to IT to provide productivity improvements and cutting costs during an economic downturn. Business probably won’t come to a complete stop.

He did however say that DWS expects the next few years to be “challenging” and there will be a contraction in the IT services sector. We are cautiously optimistic that 2009 and beyond won’t be as bad as what many other industry analysts are believing. Pessimism is abundant in the current market environment as it produces very low share prices.

DWS expects that the financial crisis may provide opportunities to increase market share by acquisitions and by buying “favourably priced competitors”. They also expect some weaker competitors not to survive which may further increase DWS’s market share.

Conclusion

DWS is a well-established business with a strong balance sheet and an excellent track record. There is a high probability that this strong track record will continue, even though they may face a slowdown during the next couple of years.

The share valuation on 56c appears to be far too low for a growing and expanding business. As with any other business there are risks involved in owning its shares. Anything can happen. I do however believe that the probability for achieving high returns by buying shares at 56 cents far outweigh the probability for losses. This is a rare buying opportunity in my view.

[Corporate]

DWS Recent Performance

Looking at the income statement for the year ending June 2008, DWS generated $88.2 million in revenues and $18 million after tax profits. The net profit margin remains above 20% which is very good for an IT services firm. Other comparable companies such as Hansen Technologies or CPT Global have net profit margins below 10%.

The balance sheet shows current assets of $30 million, which mostly consist of receivables. There is $2.5 million past due 60 days. Current liabilities is $10 million with zero bank debt. This looks like a very healthy current position.

Non-current assets mostly consists of goodwill which won’t require maintenance and don’t need to be replaced with capital expenditures in the future. DWS made small acquisitions during the 2008 financial year buying EQuest Consulting Pty Ltd, SDM Sales Pty Ltd and Strategic Data Management Pty Ltd. These acquisitions where funded with approximately $11 cash and by issuing 2.7 million shares.

There is zero long term debt. DWS earns $18 million on a tangible net asset base of $20 million. That is a very high return on net capital employed (close to 100% p.a.) without using any debt.

Valuation

With 134 million shares outstanding DWS has a market cap of $75 million at a share price of 56c. That gives a Price/Sales ratio of 0.85 and Price/Earnings of 4. Such a low valuation is usually present in situations where the business is expected to perform materially worse in the future. I don’t see any evidence of this business slowing or reversing its 16-year track record of good profitability and rapid growth. Also, this growth was achieved using zero debt which is very impressive.

Philip Fisher mentioned in his book Common Stocks and Uncommon Profits that “no company grows for a long period of years just because it is lucky. It must have and continue to keep a high order of business skill”.

Business Outlook

DWS continue to look to expand their service offerings and their client portfolio. They expect the telecommunications industry and energy sector to continue investing in IT systems beyond 2010. According to CEO Danny Wallis, many businesses will look to IT to provide productivity improvements and cutting costs during an economic downturn. Business probably won’t come to a complete stop.

He did however say that DWS expects the next few years to be “challenging” and there will be a contraction in the IT services sector. We are cautiously optimistic that 2009 and beyond won’t be as bad as what many other industry analysts are believing. Pessimism is abundant in the current market environment as it produces very low share prices.

DWS expects that the financial crisis may provide opportunities to increase market share by acquisitions and by buying “favourably priced competitors”. They also expect some weaker competitors not to survive which may further increase DWS’s market share.

Conclusion

DWS is a well-established business with a strong balance sheet and an excellent track record. There is a high probability that this strong track record will continue, even though they may face a slowdown during the next couple of years.

The share valuation on 56c appears to be far too low for a growing and expanding business. As with any other business there are risks involved in owning its shares. Anything can happen. I do however believe that the probability for achieving high returns by buying shares at 56 cents far outweigh the probability for losses. This is a rare buying opportunity in my view.

Nice post. The half year report is going to be very interesting! Should be out soon based on last years timing?

[David Hardman]

Nice post. The half year report is going to be very interesting! Should be out soon based on last years timing?

Yup, my finger is on the trigger to buy some more... and average down.

If the market does not start to appreciate this little company then I can see Danny W buying the thing back and de listing it.

Interesting they are not buying back any shares atm.. keeping their powder dry......

[Corporate]

Yup, my finger is on the trigger to buy some more... and average down.

If the market does not start to appreciate this little company then I can see Danny W buying the thing back and de listing it.

Interesting they are not buying back any shares atm.. keeping their powder dry......


Luckily I don't own any because they would have been bought at around $1. STill on the radar....i am also wondering why more shares have not been bought back...it doesn't give me the greatest feeling regarding DWS's cash position.

I wonder what will happen with the dividend?

I hope the result isn't as bad as OKN!

[contrarianinvestor]

..i am also wondering why more shares have not been bought back...it doesn't give me the greatest feeling regarding DWS's cash position. I wonder what will happen with the dividend? I hope the result isn't as bad as OKN!

Looking at the half year results DWS's cash position is excellent at almost $7 million. With a return on equity of 30% this company should pay zero dividends and re-invest all profits. They reduced the dividend from 5.5c to 3.5c. I think that is good since "there will be a significant opportunity to increase market share through both organic growth and the acquisition of distressed assets". There is a good chance that they will use the cash to buy a struggling competitor cheaply.

Revenue is slightly up to $43.8 million, net profit is slightly down to $7.2 million and free cash flow is up to $8.2 million. That gives:

Net profit margin after tax of 16%
Return on Equity of 30%
And we can buy this at a P/E of 5

There is obviously enormous pessimism in the market with such a low valuation - It basically says that this business will soon operate at half of the current profits, with no future growth ever again. A more likely scenario is that profits will remain depressed for a short while and then the business will continue on its growth path like it did for the last 16 years.

I just read Warren Buffett's Berkshire annual report which was released yesterday. In it he says: "When investing, pessimism is your friend, euphoria the enemy". I couldn't agree more.

[Stranger_Danger]

Except with Irish banks ey....

[Corporate]

Looking at the half year results DWS's cash position is excellent at almost $7 million. With a return on equity of 30% this company should pay zero dividends and re-invest all profits. They reduced the dividend from 5.5c to 3.5c. I think that is good since "there will be a significant opportunity to increase market share through both organic growth and the acquisition of distressed assets". There is a good chance that they will use the cash to buy a struggling competitor cheaply.

Revenue is slightly up to $43.8 million, net profit is slightly down to $7.2 million and free cash flow is up to $8.2 million. That gives:

Net profit margin after tax of 16%
Return on Equity of 30%
And we can buy this at a P/E of 5

There is obviously enormous pessimism in the market with such a low valuation - It basically says that this business will soon operate at half of the current profits, with no future growth ever again. A more likely scenario is that profits will remain depressed for a short while and then the business will continue on its growth path like it did for the last 16 years.

I just read Warren Buffett's Berkshire annual report which was released yesterday. In it he says: "When investing, pessimism is your friend, euphoria the enemy". I couldn't agree more.

contrarianinvestor - what is your view regarding Sydney. The brokers presentation states that revenue was down $6million compared to the prior comparative period. If Sydney had performed as it did last year this would have been a stella 6 month report.

[contrarianinvestor]

what is your view regarding Sydney. The brokers presentation states that revenue was down $6million compared to the prior comparative period. If Sydney had performed as it did last year this would have been a stella 6 month report.
You probably already know that the weakness in Sydney is the result of a significant cost overrun for a particular project.

My view is that any business strikes bad projects and DWS will almost certainly suffer more project setbacks in the future. What is important is how the business as a whole copes and where the business will be in 3, 5 or 10 years from now.

DWS was able to double revenue and earnings over the last three years without issuing more shares or taking on any debt. It was booming times although it is not unreasonable to expect that DWS can double revenue and profits again within 5 years. (The business model hasn't changed and in 5 year's time everyone would have probably forgot about any economic crisis). An addition, financially strong businesses such as DWS are in an excellent position to increase its market share in the current economic climate as many weaker competitors go out of business.

DWS may well be priced at P/E of 25 again which is reasonable for a fast-growing business. We may then be looking at a market cap of $900 million (earnings of 36 Million and P/E of 25) which may give a share price of over $6.

[macduffy]

DWS may well be priced at P/E of 25 again which is reasonable for a fast-growing business. We may then be looking at a market cap of $900 million (earnings of 36 Million and P/E of 25) which may give a share price of over $6.

QUOTE.

I would see the prospect of a P/E of 25 as being well out in the future.
Other IT firms such as SMS and Tech One are also beaten down and trading at similar low P/e's as DWS. Looks like it's going to be a much tougher market for these companies for some time to come.

[Corporate]

Well DWS is still making decent money, no debt and getting cheaper (nearly at an all time low).

[David Hardman]

Well DWS is still making decent money, no debt and getting cheaper (nearly at an all time low).

Yup, I'm at a loss as to why this stock is not $1+

Has been a larger seller in the market keeping it below .53 for the last few weeks

[Corporate]

Well i got a packet of DWS this morning. Should have gone with my gut at 49-55c but let it run hoping for a pull back.

[Corporate]

Phaedrus - can you work your magic on an updated chart of DWS. I got in at 68c just recently

[Phaedrus]

DWS appears to be at the start of a trading range. (Price action today hit the wall at the level of previous resistance). The On Balance Volume is pretty much flat-lining (there is no real volume flowing into this stock) so this gives us no idea as to future direction. Nothing very positive there, right? Look at the Momentum, though. See how it has been steadily rising while the price has gone nowhere much at all. See how the recent Momentum "Buy" signal coincided exactly with a break of the confirmed downward trendline giving two "Buy" signals at around 59 cents.

In the short term, DWS looks weak. Take a look at the craftily inserted candlestick chart. Today's candle was a Gravestone Doji. These often signal a turning point at the end of an uptrend. DWS opened at 77 cents and rose to as high as 83 cents before heavy selling pressure pushed it right back down to where it had started at 77 cents. There were some pretty determined sellers out there. Right now, it looks as though the previous resistance at 77 cents is still a significant factor.

So, in the short-term, the continuation of a trading range looks to be likely. Medium-term, though, the outlook appears better but it should be noted that volumes are low. Todays total turnover was a miniscule $70,000 for example. You can't get too euphoric in the face of a flat OBV!

http://h1.ripway.com/78963/DWS56.gif

[Corporate]

Thanks P.

I was watching the buying and selling throughout the day. It seemed as if it was reluctant buyers rather than determined sellers. A few small (could they get any smaller) trades made it drop off a few cents at the close of play.

[Corporate]

Oh and I'm picking that we may go a little higher today :-)

[Phaedrus]

From what you say, you could well be right.
Whenever it happens, a break above the previous resistance at 77 cents would be significant - and Bullish.

[Corporate]

From what you say, you could well be right.
Whenever it happens, a break above the previous resistance at 77 cents would be significant - and Bullish.


Well it's boken 77 on very low volume. Bids sitting at 81.5 - Thinking about bailing and taking a 20% gain

[winner69]

Well it's boken 77 on very low volume. Bids sitting at 81.5 - Thinking about bailing and taking a 20% gain

I think Phaedrus would be very disappointed in you if sold above 77 at the moment ..... he'll be irked you don't appear to have a exit strategy ... just one based on gut feel .... and underneath it all I feel you would love to have DWS in your portfolio for ever

P says current action bullish / Mr Hardman thinks it should be over $1

[Corporate]

I think Phaedrus would be very disappointed in you if sold above 77 at the moment ..... he'll be irked you don't appear to have a exit strategy ... just one based on gut feel .... and underneath it all I feel you would love to have DWS in your portfolio for ever

P says current action bullish / Mr Hardman thinks it should be over $1

I definitely think it's a great company. But also wanting to get back into some oil :-)

[Corporate]

Well i'm still in DWS and reasonable happy. It's a sleep at night stock. Closed at 82.5. Does this change things P?

[Corporate]

Sitting at 89c now :-)

[Phaedrus]

Closed at 82.5. Does this change things P? Sure does. This puts an end to any talk of trading ranges and the decisive break above the earlier resistance at 76.5 cents is obviously Bullish. The Gravestone Doji turned out to be a bum steer - I should have paid more attention to the fact that it was formed on a day when volume was less than half the average. Total turnover that day was only about $70,000! Quite apart from that, DWS is very lightly traded and any TA is less reliable with such stocks. As an example of this, there have been many instances of DWS forming "4 price Doji's" so far this year. These occur when the Open, High, Low and Close are all the same and are supposed to be quite rare. They represent total uncertainty among buyers and sellers as to market direction. A more likely explanation here is that there was only a single trade on those days!

http://h1.ripway.com/78963/DWS59.gif

[David Hardman]

It has been a great last week for DWS

Looks like the catalyst for this move was the 1m shares that were crossed @ 65.5 on the 30th April. This was the biggest volume day since late November 08.

DWS has been tracking a straight line up since then. Last three days its closed at or very near its highs.

Still more to go in the run IMHO

[contrarianinvestor]

This DWS share price chart (http://2invest.com.au/demo/stockdatademo.php?axcode=DWS&el=f1) shows where CEO Danny Wallis bought his shares. It looks like he was a bit too optimistic too soon when he bought quite a lot of shares at $1.80. It does however show that he has a lot of faith in the long term value of this company.

[Corporate]

This DWS share price chart (http://2invest.com.au/demo/stockdatademo.php?axcode=DWS&el=f1) shows where CEO Danny Wallis bought his shares. It looks like he was a bit too optimistic too soon when he bought quite a lot of shares at $1.80. It does however show that he has a lot of faith in the long term value of this company.

I suspect that Danny's purchases will be immaterial to him. Take his shareholding and multiply it by the dividend he gets each year!!!!

[winner69]

DWS gone nowhere over the last few months whereas the other stock in DWS peer group OKN has really gone gangbusters

Fickle world this share market eh

You still have these corporate?

[Corporate]

DWS gone nowhere over the last few months whereas the other stock in DWS peer group OKN has really gone gangbusters

Fickle world this share market eh

You still have these corporate?

Yeah the upward trending OKN is very interesting...I am yet to see a reason why. DWS if a better company.

I bought at .67 and sold at .91 (or was it .90) - over the space of 3-4 weeks. Looking for a re-entry once I see what the second half result are like.

Do you hold winner?

[David Hardman]

Good to see DWS consolidate at these levels. Waiting for the next leg up....

Just spoke to the company. FY09 results out Monday 24th (afternoon)

[contrarianinvestor]

Just spoke to the company.
I would like to learn more about your experience in directly contacting companies. Are they helpful? I assume they won't say much about the company performance other than pointing you to the official ASX announcements.

[Corporate]

Great result in my mind for DWS yesterday.

Sitting on a PE of 10 -- compared to OKN's outrageous 19!!

No debt

Mega strong balance sheet

10% gross dividend yield

[Footsie]

OKN is overpriced..... it amazed me that it fell to 50c and it amazed me that it ran back to 3.10

In my mind, fair value for OKN is about $2.00

[contrarianinvestor]

Great result in my mind for DWS yesterday.

It may be hindsight bias, but not being too optimistic in good times and too pessimistic in bad times seems to be a good investment strategy. In my post in February (http://www.sharetrader.co.nz/showpost.php?p=244556&postcount=97) I wrote:
"We are cautiously optimistic that 2009 and beyond won’t be as bad as what many other industry analysts are believing. Pessimism is abundant in the current market environment as it produces very low share prices."

[Lizard]

Can anyone tell me why DWS appears to trade relatively cheaply - P/E looks to be about 10 based on HY result. Yield 7.75% + franking. No debt or other bad habits I can see. Is there something else going on with regard to their business that I haven't seen yet? Large contracts about to expire or suchlike? I don't really understand their business very well - just one of those vague business services models that could mean anything. But on paper, the growth and returns look good and nice ROE, so no problems with cash for growth - only whether the market exists for their services and is a growing one. Any comments appreciated.

[h2so4]

No, but it's on my buy list at $1.20

[Lizard]

No, but it's on my buy list at $1.20
It may well get there soon! $1.27 and taking a slugging last few days. Haven't been able to find any goss on it - RBS had it as a Buy at $1.45 and Roger Montgomery picked it as one of the last of the value stocks on the ASX at about the same price... doesn't seem to have saved it.

Just realised - made it to $120.5 today before the buyers kicked in - perhaps you got them after all!

[h2so4]

It may well get there soon! $1.27 and taking a slugging last few days. Haven't been able to find any goss on it - RBS had it as a Buy at $1.45 and Roger Montgomery picked it as one of the last of the value stocks on the ASX at about the same price... doesn't seem to have saved it.

Just realised - made it to $120.5 today before the buyers kicked in - perhaps you got them after all!

No I didn't. Been buying FGE, at $2.40 I think its better value than DWS at $1.20.

[Lizard]

Investor presentation just out gives outlook for second half similar or slightly lower than first half earnings, with strong outlook for FY2011 and strong order book. I'm guessing about $18m NPAT for FY10?

This looks great value to me down here, and with uncertainty about second half wiped out, it is difficult to see it going any lower. I estimate forward P/E at 9.1 at current $1.24 - which is pretty spectacular for an ASX500 co, holding over 8cps in cash and no debt. ROE is very high, so can grow strongly while still paying high divs.

I nervously bought some at $1.21 on Tuesday, so am relieved to get some reassurance on outlook... still some strong selling there though.

Actually, just re-read presentation and am less sure they are confirming second-half earnings similar to first half - the wording is pretty vague and really doesn't (at least on paper) confirm or deny their half-year statement. Though any investors actually attending the presentation will no doubt get more clarity.

[percy]

I have read the presentation.Just love "in growth mode".Would appear to me you have it right.

[Corporate]

Investor presentation just out gives outlook for second half similar or slightly lower than first half earnings, with strong outlook for FY2011 and strong order book. I'm guessing about $18m NPAT for FY10?

This looks great value to me down here, and with uncertainty about second half wiped out, it is difficult to see it going any lower. I estimate forward P/E at 9.1 at current $1.24 - which is pretty spectacular for an ASX500 co, holding over 8cps in cash and no debt. ROE is very high, so can grow strongly while still paying high divs.

I nervously bought some at $1.21 on Tuesday, so am relieved to get some reassurance on outlook... still some strong selling there though.

Actually, just re-read presentation and am less sure they are confirming second-half earnings similar to first half - the wording is pretty vague and really doesn't (at least on paper) confirm or deny their half-year statement. Though any investors actually attending the presentation will no doubt get more clarity.

Hi Lizard, DWS is one of my favorites. Along with FGE, it sits on a very low P/E. I am leaning more towards DWS as they will be less effected by the resource tax.

Chart looks nasty though.

I am getting conflicting information on the volume of shares traded on Friday? Directbroking.co.nz is saying 287,000 shares while big charts and incredible-charts are telling me over 1million??

[percy]

[Chart looks nasty though.

I am getting conflicting information on the volume of shares traded on Friday? Directbroking.co.nz is saying 287,000 shares while big charts and incredible-charts are telling me over 1million??[/QUOTE]

SP is below 30,60,90,120,180 day moving averages.Stocknessmonster.com gives Friday's turnover at 1,137,328 shares,value $1,369,373.
The presentation to me was very positive.I do not own but have it on my watch list to buy.

[Lizard]

Looks like there was a single trade of 850,000 shares at $1.20 that went through on or before the bell. For some reason (perhaps the type of trade), it is probably not included in DB data.

Fisher Funds recently declared a substantial holding, so they could still be on the buy. There is a lot of bot trading going on that is hard to read (since I don't really understand automated trading strategies). Last time DWS fell hard, there seemed to be little substance behind the fall, but that doesn't necessarily mean there won't be this time.

Both DWS and FGE are probably affected by levels of capex spend, but DWS maybe more broad-based customers?

[Lizard]

Fisher Funds increased their holding on recent weakness and, now that they've notified an increase, the share price has suddenly strengthens... so did Fisher Funds suddenly master the art of a patient entry or are they now experts in DMA-computerised trading?

[Snow Leopard]

Fisher Funds increased their holding on recent weakness and, now that they've notified an increase, the share price has suddenly strengthens... so did Fisher Funds suddenly master the art of a patient entry or are they now experts in DMA-computerised trading?

Sometimes prices go up, sometimes prices go down, and sometimes they stay the same.

[David Hardman]

Fisher Funds have been buying DWS stock for years.

They first took a position in March 2007. The largest parcel was bought in June 2007. Buying 1m shares at $2.38

Their average price is at $1.91

So any recent buying looks like more of a case of averaging down rather than waiting patiently ;-)

See - http://www.stocknessmonster.com/news-item?S=DWS&E=ASX&N=336745

To be honest I've traded DWS similarly. Looks cheap at these levels.

Stock is very tightly held.. More so with Fisher picking up more stock.



I'm happy holding

[Lizard]

Sometimes prices go up, sometimes prices go down, and sometimes they stay the same.

On the NZX, Fishers used to seem shockingly careless in pushing the price up when they bought - although realistically there probably wasn't much choice for getting the kind of volume they needed.

They've reported buying more DWS a couple of times lately, but the price hasn't moved much over the period - perhaps more down than up. No other SSH's filed to suggest a large seller. They look to have picked up almost half the volume traded in the period between the two notices. Stock being heavily DMA traded (as many are these days), so I was curious as to whether Fishers were just sitting below the offer and picking up DMA selling or whether they were the ones using DMA. Not really expecting an answer. (Though did expect to provoke some kind of striped response.)

[Snow Leopard]

Seems to be doing rather well for itself over the last few days

[Lizard]

Yes, turned out to be one of my better entries (at $1.20). Maybe Phaedrus won't heckle me on this one? Well, at least until I forget to get out at the right time... :eek2:

[h2so4]

Yes, turned out to be one of my better entries (at $1.20). Maybe Phaedrus won't heckle me on this one? Well, at least until I forget to get out at the right time... :eek2:

Close to a quick 30%? I'd be thinking about it.

[Lizard]

Was hoping this would get a second wind to push through resistance at $1.47. Still trying...

[Lizard]

Result out at $18.5m NPAT and slightly above my expectations. So little investment required to grow/maintain this business, that they can afford to pay out 11.25cps of the 14cps earnings for the year and still stash cash. The "investment" is pretty much all expensed, since it is mostly in people. For that reason, I think it deserves to trade on a higher EV/EBIT than the current 7.1 (at $1.53).

Happy to hold at up to $1.90 for now.

[Lizard]

Was hoping this would get a second wind to push through resistance at $1.47. Still trying...

Have had the second wind through to $1.62 today and perhaps will be some resistance here?

http://img.villagephotos.com/p/2006-8/1204598/Picture%202.png.jpg

[h2so4]

Nice work Lizard. I reckon $2 at least.:)

One that I sold out of yonks ago. :p

[Zarbu n Lilith]

Nice work Lizard. I reckon $2 at least.:)

One that I sold out of yonks ago. :p

Hello h2so4,

When do you feel DWS may hit $2 ?,

A good friend of mine holds this, lovely lady she is, its a good company .

Well I see a temporary pull-back , good n healthy , after all DWS has done well for its self this week

Zarbu

Latest recommendation report

Valuation: $1.76Last updated:18/08/10
Initiation of coverage: A well run IT services company with growth potential

Investment rating

DWS is a highly skilled IT services company providing a range of consulting services to a diversified portfolio of government and large private sector clients. The company operates in a growing industry and has experienced increasing revenues since its 2006 IPO. This has translated into steady profit growth, with the exception of 2009 which saw profits decline slightly due to the economic downturn. We expect the growth trend to continue and also expect further consolidation in what is still a fragmented industry. The company has a strong balance sheet with no debt and is therefore well placed to make acquisitions, though this does not appear a key focus. We consider DWS to be a well run business and see it as an attractive exposure to a growth industry while providing an attractive fully franked yield. However, this is a cyclical industry and staff retention is a key issue. Investors should understand and be comfortable with these risks.

Event

We initiate coverage of DWS, a company that provides IT consulting services to a broad range of industries.

DWS reported FY10 NPAT of $18.5m, up 16%. This was a good result which exceeded our expectations due to an increase in margins. Revenue grew 8%, a good outcome in a difficult environment while cost growth of 6% was below revenue growth.

One of the pleasing aspects of the result was a large increase in dividend, with the final dividend of 6.25 cents per share taking the full year dividend to 11.25 cents, up from 9.5 cents in FY09.

Impact

The outlook for DWS is quite positive given the stronger economic environment. DWS expects solid organic growth in FY11 driven by new clients and a steady flow of work from the banking & finance and utilities sectors.

In a new key initiative, DWS announced it is launching a Business Intelligence Centre of Excellence in September 2010. This business focuses on the area of data warehousing and is seen by DWS as a major new growth opportunity.

Our forecasts allow for solid earnings growth over the next two years on the back of a stronger economy and organic growth initiatives. The company has no debt and we expect the high dividend payout ratio to be maintained.

Recommendation impact (last updated: 18/08/2010)

We value DWS at $1.76 and initiate with an Accumulate recommendation up to $1.65.

Event analysis

Initiation of coverage: A well run IT services company with growth potential

We initiate coverage of DWS, a company that provides IT consulting services to a broad range of industries.

DWS reported FY10 NPAT of $18.5m, up 16%. This was a good result which exceeded our expectations due to an increase in margins. Revenue grew 8%, a good outcome in a difficult environment. Cost growth of 6% was below revenue growth, with selling, general and administrative costs down 13%. Staff costs grew 8% due to business growth, with staff numbers increasing from 533 to 550. The Graeme V Jones business acquired in 1H10 did not make money but is expected to contribute to earnings in FY11.

Earnings Summary - $m FY09 FY10 Change %
Services revenue 88.2 95.7 8%
Other revenue 0.3 0.1 -76%
Total revenue 88.5 95.7 8%
Operating expenses -64.9 -68.9 6%
EBITDA 23.6 26.8 14%
Depreciation & Amort. -0.4 -0.4 -9%
Interest 0.3 0.3 -4%
Profit before tax 23.4 26.8 14%
Tax expense -7.4 -8.2 11%
NPAT 16.0 18.5 16%
EBITDA Margin % 26.7% 28.1% 1.4%
Source: DWS

One of the pleasing aspects of the result was a large increase in dividend, with the final dividend of 6.25 cents per share taking the full year dividend to 11.25 cents, up from 9.5 cents in FY09. This represents a payout ratio of around 80%. DWS has a strong balance sheet with no debt and cash of $13.7m. Cash flow is also strong, but fell marginally in FY10. Given the healthy financial position we expect the company to maintain a high payout ratio in the absence of any major acquisitions.

Outlook

The outlook for DWS is quite positive given the stronger economic environment. DWS expects solid organic growth in FY11 driven by new clients and a steady flow of work from the banking & finance and utilities sectors. Government work is also expected to be strong regardless of Federal and State election outcomes with the company expected to target NBN work if Labor wins the Federal election. The turnaround of the Graham V Jones business will also drive earnings growth in FY11.

In a new key initiative, DWS announced it is launching a Business Intelligence Centre of Excellence in September 2010. This business focuses on the area of data warehousing and is seen by DWS as a major new growth opportunity. It has already built strong relationships with key business players within the IT industry such as IBM and has commenced hiring specialist Business Intelligence personnel. The company plans to hire around 100 new staff over the next year as it builds the Business Intelligence team. While DWS expects this new business to be a major earnings contributor over time, it could take up to 18 months to realise full profitability. DWS expects the new business to be profitable almost immediately, but the risk is that it takes longer than expected to generate revenue to cover the large costs base.

While DWS has a strong balance sheet, it does not appear to be actively seeking new acquisitions. Its focus appears to be more on organic growth and the establishment of its Business Intelligence operation. Nonetheless, we believe it is open to any opportunistic acquisitions that present themselves.

Our forecasts allow for solid earnings growth over the next two years on the back of a stronger economy and organic growth initiatives. We value the stock at $1.76 and initiate with an Accumulate recommendation up to $1.65.

[h2so4]

Hi Zarbu n Lilith

WELCOME:D

To answer your question I honestly don't know when it will reach $2 but I think it's worth evry bit of $2. My calculation is based on averaging DWS's cash return on invested capital over the last 5 years and then using discount cashflows.

I think it is a good company. Read back over the thread to see my thoughts when I had DWS in my portfolio.

[Lizard]

No I didn't. Been buying FGE, at $2.40 I think its better value than DWS at $1.20.

FGE up 44.5%
DWS up 39.5%

So not buying DWS could still be seen as a good choice in that context! Well done...

[Corporate]

bugger.....DWS and FGE both stokes I sold to early...

FGE from $2.7 - $3.00 and DWS from 60c-90c :-(

[Lizard]

...DWS from 60c-90c :-(

50% trade - well done!

Gee some people are hard on themselves... :eek2:

[h2so4]

Nice work Lizard. I reckon $2 at least.:)

One that I sold out of yonks ago. :p

Bought back in today.

Thought I should put my money where my mouth is, not that that counts for anything. :)

[h2so4]

Sold to buy DTL.

Even with recent price action I think DTL is better value.

[Lizard]

I am uncertain of the implications for DWS over TLS seemingly reducing consultants in some areas and perhaps employing more IT staff in house.

I may be jumping at shadows, but have decided to take the profit for now and put it back on watch.

[h2so4]

I am uncertain of the implications for DWS over TLS seemingly reducing consultants in some areas and perhaps employing more IT staff in house.

I may be jumping at shadows, but have decided to take the profit for now and put it back on watch.

One thing I looked at was revenue per consultant. In 2010 this equated to $178,000, compared to say XRO $42,000.

[Lizard]

Looks like it was a shadow worth jumping at...

... ann out today and the 6 week stop has a large enough impact, let alone any ongoing reduction in consultants (likely).

[soulman]

Sold to buy DTL.

Even with recent price action I think DTL is better value.

Nice one h2so4. Talk about great timing. I have bought into DTL as well since their profit upgrade. There could be a wave of money flowing into DTL from DWS from now onwards.

[h2so4]

Well soulman it looks like the money is flowing back into DWS from DTL.:) I'm staying out for now and only because SP at a 52week high.
I thought the 1HY was excellent. Revenue per consultant annualised now equates to well over $200,000.

Still waiting for Lizards pearls of wisdom re 1HY. :)

[Lizard]

A steady result for DWS and looks good value here at $1.52, as my valuation around $1.85. Plus, being highly cash generative, is producing a great div yield (8.2%).

I sold out of these earlier as was concerned re the declining margins on changes to Telstra contracts. However, they look to have managed the transition well and are good value. Looks like they are finding niche growth in Specialist Solutions, as well as considering geographic expansion. Definitely one to consider for a long term portfolio.

[soulman]

I'm avoiding IT sticks at the moment as there is little work in the sector due to all the govt cut backs. There will be more Oakton type announcements in the future.

OKN result very good. 2nd half improved by 27% PCP and they are increasing their dividend payout to 80%. Shares closed up 9.7% at $1.355. Div Yield currently at 8.1% FF.

[h2so4]

These guys know how to make money. Revenue per consultant now out to $217000. Value increases with every report and the gap between my valuation and price is now the biggest it's ever been. But then I'm an optimistic bastard.:)

[mamos]

Margins a different story though.


These guys know how to make money. Revenue per consultant now out to $217000. Value increases with every report and the gap between my valuation and price is now the biggest it's ever been. But then I'm an optimistic bastard.:)

[h2so4]

Margins a different story though.

Hi mamos
I was referring to DWS in my post, their margins look OK unless something in the future impacts on them. I haven't looked at OKN though.

[soulman]

KW, I think all 3 result highlighted that the market was pricing in a negative performance and all 3 coy comes out fruits.

Judging by their share price performance lately, the market are impressed by their result and a re-rate is under way. You got DWS and OKN sitting on one of the highest FF yield in the ASX and both have net cash position on their balance sheet.

[Corporate]

Followed by .....

"The Directors of DWS Limited advise that the company has not been selected for Telstra Limited’s new IT & Professional Services Panel."

A 7% revenue hit is quite tough for DWS. I wonder who will pick up the Telstra work?

[Joshuatree]

Suggested NPAT $12.8 mill or less for 2014 and D/y re 9.4%!!! and a company with zero debt and new income from defense industry etc. Oversold maybe.

[soulman]

Suggested NPAT $12.8 mill or less for 2014 and D/y re 9.4%!!! and a company with zero debt and new income from defense industry etc. Oversold maybe.

Yes....oversold JT. Forward dividend yield will be smaller JT but I would say maybe 9 cents for DWS for this FY. So still 6.8% FF on $1.32.

UXC, DTL, SMX the same. All have no debt and net cash position. All have solid dividends even with decreased earnings this year.

Only OKN have gone up this year.

It's frustrating to have losers in your portfolio in times like this. My IT portfolio has certainly been feeling it the last few weeks.

[ozzie]

RXP sounds like one of the most promising IT consulting companies, still flying under the radar - good discussion of it here yesterday:
https://www.facebook.com/australiancapitalnetwork

[soulman]

Everything looks cheap. Until it gets cheaper :-)

But bear in mind that a zero growth company should trade on a P/E of 8 - all these companies are on much higher P/Es even though their earnings are going backwards by up to 25% or more.

The bottom might not be set yet for DWS. Certainly none is a screaming buy at the moment with DTL, UXC, SMX and DWS all touching yearly lows.

Although good to see a director shells out over $400,000 for SMX in todays change of director notice.

[Joshuatree]

Thanks guys. I see RXP ( i hold) and OKN have tracked each other quite closely and have both been a bit aimless since their sharp rises in sep/ oct.

[soulman]

Looks like the best bunch out of the IT sector. Cash position improved while the rest of them (DTL, SMX, OKN) decreased.

DWS dividend yield still quite strong despite the decrease profits.

[soulman]

Am I not seeing anything? Or something is up with DWS?

I don't like the fact they haven't bought back any shares yet. Net cash position. Div yield at 8%. Certainly offering better value than SMX, DTL and UXC.

[Lizard]

I bought into these again at 76cps in May, only to see it plummet. However, it seems to have made a speedy recovery of late and have so far missed all my attempts to add. Closed at 98cps - with $1 in sight, it must surely be time for a breather.

[Lizard]

Result out today, and as expected, the result itself was weak. I got given my bid at 91cps before it bounced to close at 94cps.

However, with growth showing up in second half, acquisitions to add to earnings for the coming year and the total 7.5cps in fully franked divs, I am happy enough to hold this one.