Opd Share Discussion Threads

[goldcooper] 18/5/2007 09:26

Investors Chronicle article:


17 May 2007

A new recruit

It was with more than a passing interest that I perused the bullish trading statement from recruitment group Robert Walters last week. I have been looking to get back into the sector, but have been put off by the valuations on offer. Walters, for example, trades on around 19 times analysts 2007 earnings estimates, while larger rival Michael Page is rated even higher, on 21 times earnings. So, with the best will in the world, I really can't get excited about shares in either of those companies - even though they are clearly trading well. In fact, as Walters reported net fee income (NFI) growth of 17 per cent in the first four months of this year - following a stellar 19 per cent growth rate in the second half of 2006 - then it is fair to say that business is buoyant. This has not been lost on investors, who, in the past six months, have pushed up Walters' shares by 20 per cent and driven those of Michael Page ahead by 45 per cent.

However, I have noticed that shares in an old favourite, OPD, have lagged behind those of its bigger rivals. To recap, I advised buying shares in the company at 323p ('A new recruit for your portfolio', 25 August 2006) and, following a 32 per cent advance in just 10 weeks, recommended banking profits at 427p ('Lessons learned', 2 November 2006). With hindsight, I was a bit premature in taking this quick-fire gain as OPD's shares then proceeded to advance to an all-time high of 495p at the start of this year. It was a rise that looked justified when the company announced in March that pre-tax profits had risen from £4.5m to £12.5m in 2006 – a full £1.5m higher than broker Bridgewell Securities had been forecasting last August – with earnings per share rocketing to 32.3p (13.9p in 2005).

Still, the good news is that we can now buy back into the OPD story at what I deem to be an even more attractive relative valuation than when I first recommended buying the shares. That's because, at the current share price (TIDM: OPD – 471p), the company is trading on just 12.5 times 2007 earnings estimates based on Investec Securities pre-tax profit forecast of £15m, which gives EPS of 37.5p. Admittedly, that means OPD will have to increase profits by 20 per cent this year to hit those broker estimates. But a read through Robert Walters latest trading update indicates that the recruitment cycle is firmly in its uptrend. So I feel comfortable that OPD will not only match those forecasts, but could actually exceed them - especially as we already know that the company was trading 20 per cent ahead of last year when it gave a trading update in mid-March.

In any case, we will not have to wait long to find out how OPD has been performing, as it is scheduled to have its annual meeting later this month and will then follow this up with a post-half year-end trading update in mid-July. It's worth noting, too, that even without forecast upgrades, OPD – which is capitalised at £125m – looks too lowly rated compared with its larger rivals, trading on a 30 per cent discount to the sector's average PE ratio for 2007. In addition, with £11.9m net cash on its balance sheet at the end of 2006, OPD has ample scope to make further value enhancing acquisitions. On that score, the company's purchase of Odgers, Ray and Berndtson (ORB) in December 2005 is looking a pretty smart move, with ORB's net fee income – the income derived from permanent placements, together with the contribution earned from temporary staff and advertising - rising from £18m in the first half of 2006 to £22.7m in the second half. As a result of this strong trading, OPD has actually increased the value of goodwill acquired in that business by £850,000. Needless to say, given this track record, any further corporate activity would be seen as positive for the shares.

There is also a technical reason for buying the shares now. fFollowing a period of share-price consolidation since the start of the year, the shares are now trading back above the 100-day moving average at 460p, with both the faster-moving 20-day and 50-day moving averages offering nearby support at the 440p level. And, looking back at share-price trends over the past 18 months, the 100-day moving average has provided support on any counter-trend pull-back.

So, on the basis that OPD has the highest exposure in the UK listed recruitment sector to permanent staffing (85 per cent of net fee income), is trading on a chunky valuation discount to its larger peers, and is shortly due to give the market a trading update, I rate the shares a short-term trading buy.

I have set a two-month price target of 550p a share – to take the rating up to to 14.5 times 2007 earnings estimates – which looks realistic as we will also have the benefit of the mid-July trading update in this eight-week period.


Simon Thompson is the Investors Chronicle's companies editor

[nickcduk] 11/5/2007 23:13

Ive lobbed out a short at 495p this morning as part of a pairs trade with IMP. OPD has bounced back sharply but is no longer the screaming buy it was at 400p. This rise feels like its too much too soon. IMP on the other hand has fallen sharply over last few weeks in a similar way to OPD did when it went to 400p. Its now trading on less than 10 times earnings. Should be a bounce worth 15-20% in IMP over the coming weeks to bring it back in line with the likes of OPD.

[sludgesurfer] 11/5/2007 22:10

Real quiet on here. Doing very nicely indeed. Up 11% and testing a fiver soon.

[jeffian] 01/5/2007 10:14

Strange Director's sharedealing aside, this stock has to be too cheap, doesn't it? Still under 12x current year's forecast earnings it is massively below its peer group and substantially below the market average. Got to be worth 525, surely? I've just doubled my holding.

Regards, Ian

[dansjhall] 11/4/2007 00:25

400 could be a good support point. Seems to me that my capital is wasted holding in OPD at the moment when it could be better served in a growing stock. However my stop losses are currently just under 400 and if there is no bounce from this low then i will be exiting OPD. However i am happy to hold unitl this point is reached. This is a good growing company however it is probably wise to exit and reenter when buy signals are given after this trend bottoms.

Just my opinion

[jeffian] 10/4/2007 22:59

I don't know about the gift by FR to PH, but the sale by Ian Moss isn't indicative of a lack of confidence IMHO ("It was his entire holding which isn't the greatest sign of confidence in the company.") It is fairly common for directors to treat their share options as part of their remuneration package and sell at the first opportunity. After all, they simply get granted more! In the case of Moss, he still has options over 55,000+ and I expect there'll be plenty more after he's sold those, too. Tempted to follow nickcduk in for more at these levels.

Regards, Ian

[crita1] 10/4/2007 19:56

Did any one see that Francesca Robinson gifted over 1/4m of shares to Peter Hearn. Some thing seems a bit odd to me, what with the Moss sale as well. I think there is a piece of news on the cards.

[nickcduk] 10/4/2007 19:39

Director sold 30k+ shares at an average of about 406p today and on thursday. That would explain the weakness over the 2 days. It was his entire holding which isn't the greatest sign of confidence in the company. It is on an extremely low multiple compared to its peers and the trading outlook was bullish enough only a few weeks ago. We will get another trading update in May which should help remind the market how cheap OPD has become. On 2007 forecasts OPD is trading on about 10.7 times earnings. I expect it to re-rate over the coming days and picked up more stock at around 401 today.

[jeffian] 10/4/2007 19:21

Not sure about Manpower. What's wrong with UK competitor as a comparitor? After good results from OPD, Michael Page International have just produced a bullish trading statment at the first Quarter and yet OPD's shares have suddenly started going the opposite way to MPI.


Seems odd. Either all is not well behind the scenes at OPD or they are looking cheap. Which is it? (Edit: MPI trading on 30x 2006 EPS compared to OPD 12x)

Regards, Ian

[nickcduk] 04/4/2007 14:42

Manpower put out a profits warning in the US today. Looking at the time the sell off began I would guess the 2 are linked. Its a little harsh but there are and have been very few buyers of late for OPD. In their absence it won't take much selling to trash the share price.

[saucepan] 04/4/2007 14:27

hmnn... I don't understand the negative price movement, when the fundamentals appear so good. However, OPD has now hit my stop levels so I have exited.

[dansjhall] 04/4/2007 14:21

doesnt look very good at all today, support is broken atm but well see how it is at close

[tartan_penguin2] 04/4/2007 13:42

not looking too healthy today......

[saucepan] 03/4/2007 19:59

dansjhall: FWIW, I agree with that interpretation.

[dansjhall] 03/4/2007 17:35

I think this is the bottom atm. Seems to me that there is significant support at 420-30 region. Wedge formation is just over 3 months and they normally last 1-3m. Hopefully this is the bottom. A nice double bottom formation will be produced if it doesnt move any further down aswell.

[crita] 23/3/2007 12:43

I can't understand the logic of the sellers.

[saucepan] 23/3/2007 11:54

Well, today's IC "Buy" recommendation has not had the hoped for effect (yet).

However, I agree with Mike that there are very strong support levels in the 420p-430p area and I shall be surprised if the share does not start bouncing significantly soon.

Arguably, current prices offer an excellent buying opportunity.

[mikehardman] 22/3/2007 21:54

IC has it as a buy tomorrow,
maybe that'll perk it up;
...especially as it is now down at main semilog rising support

[dansjhall] 21/3/2007 16:59

OPD keeps sliding, dont know why, great results?

[dansjhall] 19/3/2007 09:08

looks very cheap at the moment i am tempted to dip my toe in. the 500 resistance worries me however.

[steve133] 16/3/2007 08:59

new forcasts are in


2007 2008
Date Rec Pre-tax (£) EPS (p) DPS (p) Pre-tax (£) EPS (p) DPS (p)
Bridgewell Limited
15-03-07 buy 14.80 37.42 9.00 17.15 43.36 10.25
Investec Securities
09-03-07 BUY 15.00 37.54 10.00 17.20 42.88 12.00



should get a rerating no volume so far

[spooky] 15/3/2007 10:24

2007 forecasts are for 37p,following todays numbers these may be upgraded.Using 37p that puts them on about 12 times prospective compared to 18 times for Michael Page and Robert Walters.

[saucepan] 15/3/2007 08:57

Agreed; excellent results.