Next Investors logo grey

Computer games

Published 11-AUG-2016 12:11 P.M.


2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.

Click Here to View Latest Articles

While shares in Computershare (ASX: CPU) fired up in response to the release of its fiscal 2016 result yesterday, analysts have responded in a mixed fashion with Bell Potter maintaining a sell recommendation on the stock while Morgans CIMB upgraded its recommendation from hold to add.

There is a stark disparity between the broker’s share price targets. Lafitani Sotiriou from Bell Potter maintained his price target at $7.50, while Morgans’ Richard Coles increased his price target from $10.41 to $10.82. Under high-volume trading, shares in Computershare surged yesterday, increasing from the previous day’s close of $8.95 to hit an intraday high of $10.17 before closing at $9.74.

Coles noted that fiscal 2016 earnings per share (US54.7 cents) were slightly above his estimate of US53.8 cents per share. However, Sotiriou focused on the lack of growth within the business and the likelihood that this will continue despite the group having made numerous acquisitions in recent years.

While acknowledging the net profit was 2.2% ahead of his estimates, Sotiriou also noted that the year-on-year earnings per share decline of 7.9% was slightly higher than management’s guidance of a 7.5% downturn.

Bell Potter is forecasting an adjusted net profit of US$290 million in fiscal 2017, representing earnings per share of AUD71.9 cents. This implies a fiscal 2017 PE multiple of 13.5, well below the heady multiples of circa 20 that the company consistently traded on some years back.

However, it would appear those days are over with Bell Potter forecasting earnings per share to decline 5% in fiscal 2017, but of more concern, not recapture 2016 levels before fiscal 2020.

On this basis, Bell Potter’s sell recommendation and a price target that implies a PE multiple of approximately 10 appears in keeping with the stock’s prospects.

Investors should note that broker forecasts, as well as share price targets and fluctuations are fluid and investors should take a cautious approach to any investment decision, and in particular not base that decision solely on the financial metrics of the company and its peers.

General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.