##{"id":58695,"date":"2011-08-18T13:03:39","date_gmt":"2011-08-18T03:03:39","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/08\/18\/all-buys-on-sai-global\/"},"modified":"2011-08-18T13:03:39","modified_gmt":"2011-08-18T03:03:39","slug":"all-buys-on-sai-global","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/08\/18\/all-buys-on-sai-global\/","title":{"rendered":"All Buys On SAI Global"},"content":{"rendered":"

\n\t– SAI<\/span> Global delivers better than expected profit result
\n\t– Guidance for FY12<\/span> positive, acquisitions also expected to deliver growth
\n\t– Earnings estimates lifted, Citi<\/span> upgrades to a Buy rating<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tStandards and compliance group SAI<\/span> Global ((SAI<\/span>)) yesterday delivered a 42% increase in net profit to $48 million, a result above most expectations in the market. Earnings growth was helped by the acquisition of Integrity Interactive during the period and organic growth from the Assurance and Information Services division.<\/p>\n

\n\tIn terms of divisional performance, Citi<\/span> notes the Compliance division performed better than expected following the Integrity Interactive acquisition, while the Assurance division performed very well and lifted margins by 250-basis points relative to the previous year. On the flip side, Citi<\/span> notes Information Services struggled amid a weak property market and the stronger Australian dollar.<\/p>\n

\n\tAlong with the result management at SAI<\/span> Global delivered what UBS viewed as positive outlook commentary, with expectations for further organic sales growth and margin expansion in FY12<\/span>. In UBS's view this positive commentary highlights the resilience of SAI<\/span> Global's business.<\/p>\n

\n\tOn the back of the full year result and the comments provided by management, UBS and others in the market have lifted earnings forecasts in coming years. In earnings per share (EPS) terms UBS has lifted its forecasts by 4-5% through FY14<\/span>, while Citi's<\/span> forecasts have increased by 5% this year and by 2% in FY13<\/span>. Consensus EPS forecasts according to the FNArena<\/span> database now stand at 30.6c<\/span> for FY12<\/span> and 35.7c<\/span> for FY13<\/span>. <\/p>\n

\n\tAs Macquarie notes, the fact most of SAI<\/span> Global's revenue streams are annuity and non-discretionary in nature means FY12<\/span> should deliver another year of double-digit earnings growth. This growth should be complemented by further acquisitions, given the offshore operations of SAI<\/span> Global are presently somewhat immature. <\/p>\n

\n\tAcquisitions should be helped by a strong balance sheet, Citi<\/span> noting as at the end of FY11<\/span> cash on hand had increased by 56% to $52.3 million. Along with acquisitions RBS<\/span> Australia sees scope for growth via new products, while also expecting SAI<\/span> Global will take advantage of opportunities to lift market share in areas such as the food safety division.<\/p>\n

\n\tThe other advantage in terms of earnings growth highlighted by UBS is SAI<\/span> Global enjoys leading positions in global markets and its operations are scalable. This leaves the group well placed to benefit from a continuation of the trend towards outsourcing within financial services, as well as from the ongoing burden of increased Governance, Risk and Compliance obligations faced by many companies.<\/p>\n

\n\tFollowing SAI<\/span> Global's profit result there has been only one change in rating, Citi<\/span> upgrading to a Buy recommendation from Hold previously. This upgrade is a valuation call, as on Citi's<\/span> numbers SAI<\/span> Global is trading on a FY12<\/span> earnings multiple of 14.5 times, which is a discount to the five year average multiple of 15.7 times.<\/p>\n

\n\tThe upgrades brings Citi<\/span> into line with the recommendations of the other brokers in the FNArena<\/span> database covering SAI<\/span> global, as the database now shows a perfect seven-for-seven Buy ratings. The consensus price target for the stock is $5.48, up from $5.43 prior to the result.<\/p>\n

\n\tShares in SAI<\/span> Global today are slightly weaker and as at 12.15pm<\/span> the stock was down 2c<\/span> at $4.58. This compares to a trading range over the past year of $3.84 to $5.15. The current share price implies upside of around 19% relative to the consensus price target in the FNArena<\/span> database.<\/p>\n

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\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"