EPD - Empired Ltd

[silu]

Couldn't find a thread so here the basics:

Empired Limited (Empired) is an information technology (IT) services company. Empired focuses on providing companies with tailored IT service solutions that address their needs. Empired offers a range of services complemented by hardware and software products that enable it to provide information and communications technologies (ICT) solutions. Empired operates through two business streams: Managed Services and Enterprise Services.

BRIEF: For the fiscal year ended 30 June 2013, Empired Ltd revenues increased 4% to A$46.5M. Net income increased 22% to A$1.5M. Revenues reflect an increase in demand for the Company's products and services due to favorable market conditions. Net income benefited from Administration decrease of 38% to A$518K (expense), Occupancy Expenses decrease of 7% to A$1.1M (expense), Insurance decrease of 12% to A$138K (expense).

They are still kind of flying under the radar. They have a solid revenue growth but most importantly improved margins due to a growth in services revenue. IT is a fickle business but once you have the contracts the margins and revenue are usually secure. This is the area where I place confidence in the management and judging by its record it seems to be well run.

Mkt. Cap $70.7M
P/E 31.57
Maiden dividend this year
2012/2013
Revenue 48m +8%
EBITDA Margin 9% +56%
NPAT 2.1m +68%
EPS 3.04c +38%

Securing the contracts which are in the pipeline is both the up- and downside. They expect to get 35% of tenders submitted. However, watch the share price move if it is able to secure a potential 50m contract with a major resources company. But as always do your own research.


discl. Bought a small initial stake at 72 cents today.

[stoploss]

Pie Funds have a good stake in this.....started buying mid 30's fyg. If you check out their past monthly updates you will probably find a good deal out about the company as they obviously researched it well...

Disc: Holding

[Dej]

Pie Funds have a good stake in this.....started buying mid 30's fyg. If you check out their past monthly updates you will probably find a good deal out about the company as they obviously researched it well...

Disc: Holding

Thanks for the heads up silu, will look at this over the weekend in Queenstown.

[steve fleming]

http://www.afrsmartinvestor.com.au/p/shares/empired_set_for_long_term_growth_M9uXst9IhMmaYHJAH sVbaJ

Empired set for long-term growth

Analysts at Bell Potter have praised Empired, claiming the stock offers substantial share price upside, driven by earnings per share growth of 30 per cent per annum over the next three years.The broker has a buy recommendation on the Western Australian-based IT services provider with a 12 month price target of 92 cents, representing a 22.7 per cent premium to Friday’s closing price of 75 cents.
Empired operates throughout Australia, providing full service IT solutions for the energy and natural resources industries as well as government instrumentalities. Bell Potter said the company distinguishes itself from other players in a competitive sector by providing business solutions rather than just technical labour and the on-selling of hardware and software.
Empired’s contracts are typically of a multi-year term and a substantial proportion of revenue is generated from high margin project services work. At the end of October the company was awarded a $46 million contract by Main Roads Western Australia to provide IT managed services and infrastructure project services for the next five years. This brought the total contract secured in the last two months to $96 million.
Although in dollar terms this level of contracts may not appear to be significant, strong margins result in healthy profit translation. In 2014-15, Bell Potter estimates that Empired will achieve revenues of $96.6 million, generating earnings before interest, tax, depreciation and amortisation of $11.2 million.
Examining the numbers for that year highlights the company’s strong value proposition. Earnings per share are expected to grow by 49 per cent to 6.5 cents implying a price-earnings multiple of 11.5 based on the company’s current share price. On a price-earnings to growth (PEG) basis the implied discount suggests the company could quickly re-rate to Bell Potter’s price target.
In 2013-14 there will be a substantial skew in earnings towards the second half with the recent acquisition of OBS only contributing about $7 million in revenue in the first half as opposed to $25 million in the six months to June 30, 2014.
The company shares have been well supported in the last 12 months, more than doubling from a low of 35 cents in November 2012. However, with the acquisition of IT services company OBS and the award of important contracts in recent months the company’s shares have increased by about 50 per cent and better reflect its enhanced earnings profile.

[steve fleming]

http://www.afrsmartinvestor.com.au/p/shares/empired_set_for_long_term_growth_M9uXst9IhMmaYHJAH sVbaJ

Empired set for long-term growth

Analysts at Bell Potter have praised Empired, claiming the stock offers substantial share price upside, driven by earnings per share growth of 30 per cent per annum over the next three years.

The broker has a buy recommendation on the Western Australian-based IT services provider with a 12 month price target of 92 cents, representing a 22.7 per cent premium to Friday’s closing price of 75 cents.
Empired operates throughout Australia, providing full service IT solutions for the energy and natural resources industries as well as government instrumentalities. Bell Potter said the company distinguishes itself from other players in a competitive sector by providing business solutions rather than just technical labour and the on-selling of hardware and software.
Empired’s contracts are typically of a multi-year term and a substantial proportion of revenue is generated from high margin project services work. At the end of October the company was awarded a $46 million contract by Main Roads Western Australia to provide IT managed services and infrastructure project services for the next five years. This brought the total contract secured in the last two months to $96 million.
Although in dollar terms this level of contracts may not appear to be significant, strong margins result in healthy profit translation. In 2014-15, Bell Potter estimates that Empired will achieve revenues of $96.6 million, generating earnings before interest, tax, depreciation and amortisation of $11.2 million.
Examining the numbers for that year highlights the company’s strong value proposition. Earnings per share are expected to grow by 49 per cent to 6.5 cents implying a price-earnings multiple of 11.5 based on the company’s current share price. On a price-earnings to growth (PEG) basis the implied discount suggests the company could quickly re-rate to Bell Potter’s price target.
In 2013-14 there will be a substantial skew in earnings towards the second half with the recent acquisition of OBS only contributing about $7 million in revenue in the first half as opposed to $25 million in the six months to June 30, 2014.
The company shares have been well supported in the last 12 months, more than doubling from a low of 35 cents in November 2012. However, with the acquisition of IT services company OBS and the award of important contracts in recent months the company’s shares have increased by about 50 per cent and better reflect its enhanced earnings profile.

EPD have been trying hard over the last year to get some broker interest / coverage....starting to get some good some good traction with this now

Argonaut also cover:
Empired (EPD) - Logging in with the IT CrowdCreated on Tuesday, 29 October 2013 14:41We initiate coverage on Empired (EPD), a provider of IT services ranging from business consulting to infrastructure and applications systems development and support. The Company recently announced its largest contract win and acquisition to date which underpin our expectation for strong growth in FY14 and FY15. We set our price target at $1.00 and initiate with a Buy recommendation.

[percy]

Thanks Steve.
All very positive.

[silu]

Thanks Steve for sharing. Waiting for a tax return so I can top up.

discl. hold

[steve fleming]

"Run rate sales results and pipeline have strengthened against the prior quarter with the OBS line of business delivering record sales in Q3 and all business units expecting to deliver strong sales results in Q4.

Strong run rate sales provide confidence in the trading performance of the overall business for both Q4 FY14 and into the start of the FY15 year. "


Some green shoots maybe?

[Toulouse - Luzern]

For me this all depends on the contract/projects.

For example is it to provide resources at $ per hour or day = certainty and low risk.

Or is it to provide an end result deliverable within the time and price agreed in which case the difference is the profit or (loss) and higher risk.

[steve fleming]

For me this all depends on the contract/projects.

For example is it to provide resources at $ per hour or day = certainty and low risk.

Or is it to provide an end result deliverable within the time and price agreed in which case the difference is the profit or (loss) and higher risk.

From Eureka report

Earnings forecastsWe have based our earnings forecasts on the following key drivers: billable staff, utilisation rates, charge-out rates, gross margins and fixed costs. As the company’s grows revenue there will be continued margin growth for two reasons. One will be the benefits of increased scale and earnings per employee, and the other the larger growth rate within the higher margin Applications division. The target gross margin for Applications is 35-50%, whereas Infrastructure is 30-35%.
There are currently approximately 430 staff, with 220 billable staff in Applications, and 140 billable staff in Infrastructure. For FY14 I have assumed 80% utilisation and a charge out rate of $135 per hour and $115 per hour for Applications and Infrastructure divisions respectively.
The balance sheet is strong with only $5 million net debt, and operating cash flow conversion is also high at around 85%.
We have a BUY recommendation and $0.85 discounted cash flow valuation (assuming a weighted average cost of capital of 12.4%).

[silu]

Empired acquires eSavvy Pty Ltd

http://www.asx.com.au/asxpdf/20140519/pdf/42ppnww0q8q1w6.pdf

discl. hold

[steve fleming]

Empired acquires eSavvy Pty Ltd

http://www.asx.com.au/asxpdf/20140519/pdf/42ppnww0q8q1w6.pdf

discl. hold

Bell Potter have upgraded EPD to 92c following the acquisition

Now trading on 5x Fy15 EBITDA (although not sure if EV picks up all deferred consideration payments)

Out of interest..

ASZ is also trading on 5x FY15 EBITDA
RXP is trading on 5.5x FY15 EBITDA
PSZ is trading on 3.7x FY15 EBITDA

But CGO would appear to be the cheapest in this group based on current numbers, trading on 5.5x LTM EBITDA (no forecasts available)

[mark100]

They all look cheap. My issue with EPD is the huge amount of growth required next year to achieve Bell Potter's forecast. Will they fall short?

RXP put me off back at 80c with yet more share issues. I'd like to see some decent EPS growth before getting excited about them again.

PSZ looks a bargain but is unproven so far with its short history.

CGO is my pick at present. At least they are already cheap on a FY14 basis with a decent H1 result to build on. Not much needs to go right for them to see some growth in FY15

[mark100]

I think IT is still not a good sector pick - with the budget cuts in fed govt spending, and the $80b shortfall for the state govts to cover, a lot of the IT industry spend will be vanishing. Remains to be seen if private business can replace the lost revenue, but its a hard ask.

That's why my pick of the 4 stevefleming mentioned is CGO. 52% of FY14 revenue is forecast to be international with higher margins than their Australian business

[silu]

I'm at work so can't really delve too deep into the FY result but I'm happy.

FINANCIAL HIGHLIGHTS
 Record Revenue of $67M up 44%
 Record EBITDA of $7.1M up 98%
 Record Net Profit Before Tax of $4.3M up 119%
 Underlying(1) EBITDA of $5.7M
 Positive Operating Cash Flow of $5.3M
 Cash at June 30, 2014 of $8M
 Net Interest Bearing Debt of $5.2M
 Will declare final fully franked dividend on release of audited accounts
 Enter FY15 with approximately 45% of Revenue contracted.

[Joshuatree]

Cheers silu.Yep v good. share price up 5% plus atp. Mkt cap re $68.5 mill.

[silu]

Empired growing and growing and with the acquisition of Intergen nearly doubling in size. Need to check out the finer details but it seems all positive.

discl. holding.

[steve fleming]

Empired growing and growing and with the acquisition of Intergen nearly doubling in size. Need to check out the finer details but it seems all positive.

discl. holding.

Intergen seems to be a real NZ success story.

Done very well for what was a small Wellington based company that secured a lot of NZ Govt department contracts, then successfully expanded into Aus.

Looks like a nice fit with EPD, but EPD is taking a big bet on the fortunes of Microsoft

[silu]

All time high today at 87c. Was mighty good buying more in low 60s. I had a target price of $1 so I might exit this at some stage soon to seek other opportunities.

[silu]

20m contract with Rio Tinto announced. Should see the all time high tested again today. Looks positive with future contracts in the pipeline.

[Regi]

20m contract with Rio Tinto announced. Should see the all time high tested again today. Looks positive with future contracts in the pipeline.
Opening market hype saw it at 87cps, back down to 84cps now... will be interesting to see how the day and near future goes! Happy holder, finally some solid news.

[silu]

In the short to medium term the share price will catch up. MC is under 100m so lots of room to move upwards. Others in the sector had a good run lately too i.e. ASZ, PSZ

[silu]

Great announcement in securing 65 out of 100m in service contracts achieved. Upgraded revenue figures. I guess its all about the margins about this one but if management can increase this by a couple of percentage points then share price would fly. Until then this drags an anchor around its ankles but at least the immediate future is bright.

A MC of 93m on 120-130m on FY15 expected revenue is ridiculous.

discl. hold

[silu]

You know how it's good for the soul to stay in places without Wifi or Network connectivity. However, it is very bad for your portfolio.

Ouch :(

[bung5]

You know how it's good for the soul to stay in places without Wifi or Network connectivity. However, it is very bad for your portfolio.

Ouch :(


Really amazing watching this fall. my eyes lighting up with each fall. Can't believe its so cheap, the news didn't seem that bad to me.
Will be buying once this stops falling!

[muss1]

Really amazing watching this fall. my eyes lighting up with each fall. Can't believe its so cheap, the news didn't seem that bad to me.
Will be buying once this stops falling!

The announcement wasn't bad - one bad period can easily be worn by the company. The question I have is whether it is a sign of an underlying issue. Integration of acquisition and poor contract execution potentially?

It could go either way in my view. A great buying opportunity, or the first of a bunch of issues the company will need to resolve to turn the corner

[DarkHorse]

Just starting watching EPD a couple of weeks ago. They certainly look cheap. Being in a competitive sector I'd be interested in any thoughts of those who've being following them longer-term. Particularly on the competence and integrity of management - not least their track record in terms of what they've said compared to what's come to pass.

[bung5]

Just starting watching EPD a couple of weeks ago. They certainly look cheap. Being in a competitive sector I'd be interested in any thoughts of those who've being following them longer-term. Particularly on the competence and integrity of management - not least their track record in terms of what they've said compared to what's come to pass.

I havn't been following long but the the director selling 950k at 88c a few weeks ago looks a bit dodgy