Thursday, February 01, 2007


I bought PeopleBank Australia Limited (ASX:PBA) today after some research last night. I spotted it due to its dramatic fall in the last few days and its subsequent rebound. There was also a good review on Grow your Egg which follows:

Peoplebank (ASX: PBA) is a technology contracting and placement company which
has been listed for around a year. Its share price was near an all time high and
there was no warning of bad news to come. It announced yesterday that because of
changes in product mix, its performance for 1H 2007 would be impacted. The
announcement was a little light on detail and the stock got hammered. They were
forced to put out a second announcement which tried to reassure the market that
they were still on track as a solid growth company.

The company is is engaged in the provision of information technology and telecommunications (IT&T) contracting and recruitment services. Contracting services represented 97% of the Company's revenue during the fiscal year ended June 30, 2006 (fiscal 2006). These services entail the provision of IT&T contractors to the Company's clients under labor hire contracts for an average length of 3 to 6 months. Typically these contracts are renewed depending on the length of the IT Project, with many contractors remaining with the same client for 18 to 36 months. Recruitment services, being the traditional placing of permanent staff with clients for a placement fee, represented 3% of the Company's revenue in fiscal 2006.

There were some interesting statements in the second announcement which included :
  • The primary contracting business grew approximately 15% in the 6 months to 31 December 2006 with a very high quality customer profile.

  • The combined NPAT as a result is expected to be about $1.85 million, 5% less than comparative 31 December 2005. (Yet the share price fell 30%. Overreaction ... you decide!!!!)

  • Projections are for a stronger second half of the fiscal year.

  • Director forecasts and market conditions indicate full year profit results will be ahead of last year.

  • Peoplebank has a strong balance sheet, and anticipates no changes to its dividend policies. (Dividend yeild is 4.9% fully franked)

  • Peoplebank considers itself very well positioned within its industry and is actively pursuing opportunities.

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

Along with the low P/E of 11.5 at this level. Its earning growth last year was 20% and while I expect it to be a lower increase this year I still expect it to continue to grow for future years.

My initial stock price target for this stock is around $1.50. When it hits this level I will reevalue my holdings.

Good Luck Investing.

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