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IPH Best Performing ASX 200 Stock at Midday as Recovery Gains Traction

Published 12-JAN-2017 15:22 P.M.


2 minute read

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At Midday on Thursday, IPH (ASX: IPH) was the best performing S&P/ASX 200 stock with its shares up just over 5%. However, this gain is off a low base, one which most brokers had previously stated earmarked the company as oversold.

IPH is the holding enterprise for a number of companies that provide services that assist in managing and securing intellectual property. The company’s operations extend beyond Australia with substantial growth opportunities emerging in the Asia-Pacific region.

Analysts at Bell Potter and Morgans CIMB highlighted the fact that the company’s share price had come under pressure in the second half of calendar year 2016 as investors became wary of escrowed stock that was due to be released on November 21.

This stock overhang did have an impact on the company’s trading before and immediately after that date. However, selling appears to have washed through, and since mid-December the company’s shares have gradually regained some of their lost ground.

That said, the IPH’s share price of $5.43 (Midday Thursday) is $4.00 shy of the 12 month high of $9.43. Furthermore, it represents a steep discount to the price targets of Bell Potter and Morgans CIMB which are $7.96 and $7.51 respectively.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data and share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

Brokers see potential for acquisition led growth

Both brokers see the potential for substantial growth through acquisition opportunities in markets such as Asia, potentially complementing the October purchase of Ella Cheong which is represented in Hong Kong and Beijing.

IPH’s high profile suggests it has the scope for expansion, being the market leader in patent management in Australia with a share of 22%. In fiscal 2016 the company managed approximately 16,000 patent applications and 4,000 trademark applications.

At its October AGM management highlighted that the group was debt free with $58.5 million cash and drawn banking facilities of $95 million, leaving it well-placed to pursue acquisition opportunities. The company is also generating strong free cash flow of circa $40 million.

Management has demonstrated its ability to identify and integrate quality businesses with numerous earnings per share accretive acquisitions being made in the last two years, as indicated below:

Adjacent markets Australia Asia

Improve operational efficiencies

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.

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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.

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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.

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