-1x Square Discussion Threads

[nurdin] 06/9/2011 13:51

Exited this morning at 180p....bit of a relief to be honest.

[aishah] 06/9/2011 13:32

Downgraded today by Panmure Gordon.

[daz] 06/9/2011 09:01

With revenues forecast to be the same in H2 as H1, they clearly are not expecting to replace contracts coming to a close and this must also be a greater concern for 2012, so you can see why there is a hiring freeze. It seems fairly clear, they are not going to be able to fully utilise the extra staff they've taken on recently, so I'd expect the average billed days per consultant to fall and I think it's also likely that cash flow will be weaker than normal in H2.

Though the growth in managed services provides some insulation from the economic backdrop, with concerns over 2012 trading, I can't see the shares doing much in the near term.

[shuisky] 06/9/2011 08:20

'not the best update by a long shot... profits at lower end and receivables up.... very weak... still was lowly rated to start with.... but if they aren't getting paid in cash that is a bad sign..... shows weak bargaining power and competitive position..... effectively a second profits warning??? '


Not at all.

They signed a lot of new contracts in the half and they won't get paid for them immediately. So it is ridiculous to argue that 'they aren't getting paid in cash'. Moreover, cash flow is always stronger in the second half for them, just read the results properly and you will see.

With regards 'weak bargaining power' the EBIT margins are actually higher. Gross margins are lower but that is because they hired more staff in the first half, so the underlying picture is much better.

Even if you go back to the earnings lows (in the middle of a deep recession) they generated 21c or around 18p. This would put them on a current PE of 175/18=9.7 even in a bad case scenario.

This stock is very undervalued.

Please research the facts before commenting.

[shuisky] 06/9/2011 08:09

'Although investments made in staff during the first half resulted in increased costs, these consultants are fully billable in the third quarter and are expected to continue to be so going forward, resulting in improved margins. However, given the outlook for the global economy we prudently forecast revenues to remain flat in the second half and consequently expect profits to be at the lower end of expectations'

Markets are not going to like the last line. However, even given that, the stock trades on a forward PE in single digits and they are about to generate a bundle of cash flow. The divi is likely to see the yield get close to 4% The shift in revenues to Managed Services will help reduce cyclicality.

If the market continues to rate this stock so ridiculously lowly than I can only conclude that it wont remain listed for much longer.

[simon gordon] 06/9/2011 08:07

Serious bit of insider trading yesterday.

[slapdash] 06/9/2011 08:05

not the best update by a long shot... profits at lower end and receivables up.... very weak... still was lowly rated to start with.... but if they aren't getting paid in cash that is a bad sign..... shows weak bargaining power and competitive position..... effectively a second profits warning???

Slap

[tole] 18/8/2011 11:39

Arbuthnot
SQS Software Quality Systems* Strong Buy
SQS.L / 191p / £53.3m / TP: 305p


SQS has announced a series of new contract wins worth €22m in total. These include a contract to provide software testing services to a large European logistics company, worth €10m over 2 years; a contract to provide testing services to the French operations of a global insurance provider, worth €5m over the next three years; contracts with four leading retail companies (including a global UK supermarket chain) worth a total of €3.3m; and contracts with three Public Services sector organisations worth a total of €2.5m; a contract with a multi-national media company worth €0.5m; and a contract with a major UK utilities company, worth €0.3m. In order to service the French contract, SQS is in the process of setting up its first operations in France, which will initially comprise 25 employees.

These deals are a useful reminder to the market that, despite broader economic concerns, SQS continues to enjoy healthy underlying trading across multiple geographies and vertical markets. As we highlighted earlier this month, the shares now look distinctly inexpensive on a current year (12/2011) P/E multiple of 7.7x and EV/EBITDA multiple of 4.7x. The prospective dividend yield is also now up to 4.3%. We are making no changes to our forecasts ahead of interim results, which are due out on 6 September.

[spaceparallax] 18/8/2011 10:14

Great contract wins - the fact that they've revealed them in advance of results suggests to me that the results will stand well alone, without the need for a sweetener.

[davidosh] 18/8/2011 10:11

I could have done that with 75% of my portfolio so nothing specific to SQS there !! I am a long term investor so you have to sit tight through thick and thin maybe trading a little of ones holding on spikes up (often fuelled by newspaper tips etc) and then buying on dips. Real traders would not be attracted to small caps like this anyway and hindsight is something we all have when it is too late...lol

[daz] 18/8/2011 10:04

Agree, it's just a little frustrating that I could have increased my stake by around 20% in just over a month but that's hindsight for you.

[davidosh] 18/8/2011 09:18

How can anyone feel confident trying to trade out of a stock on a p/e of 7 and then buy back ? Surely better to buy the dips and build a decent size holding as this company gets stronger every year.

[daz] 18/8/2011 09:09

Yes, well overdue.

At least it's the type of stock you can hold in relative comfort. In hindsight I wish I had traded these at the 220 level but at the time I thought they were still cheap at that level, never expected them to get to under 200

[shuisky] 18/8/2011 08:38

slapdash- an increase in receivabls is perfectly normal in a growing business. They've signed new contracts so there will always be a need for additional working capital. Its something to keep an eye on but remember that the underlying cash flow generation is good and they are 'de-risking' the business with new service type agreements.

Very good contract wins announced today.

Can we have a market re-rating now please?

[tole] 18/8/2011 08:12

Good contract wins today.
Altium reiterate BUY rating and 275p Target Price.

Forecasting for 2011E ($)
Sales - 180.3
Adj PBT - 11.4
Adj EPS - 32.4
PER - 6.8
DIV - 9.0

[slapdash] 16/8/2011 09:33

only negative I see in last statement was increase in receivables which increased net debt.... i.e. customers taking longer to pay..... overall the business should be sound... slap

[spaceparallax] 16/8/2011 09:14

roll-on 6 Sept

[mcgrath00] 01/8/2011 16:27

surprising drop but simple reason imo. theres no action/rns....historically they tend to wait to tie in with bigger announcements...the general market has also been hammered lately, esp. today....tree shake by market makers + probably some fear sellers now...usual story, shake them all out and its onwards and upwards...

[nurdin] 01/8/2011 12:34

just dont understand why the sentiment is so bad here.They bhave already said they will meet..so whats the problem?

[mcgrath00] 27/7/2011 00:23

technically at very strong support here.

[spaceparallax] 26/7/2011 12:44

I suppose it's of little consequence providing they don't need to raise money through placing.

[mcgrath00] 26/7/2011 12:33

it'll soon rerate, look at the long term chart, it shoots up on slightest bit of news....gave me a chance to top up just now...very comfortable with my holding.

[shuisky] 26/7/2011 11:20

The management must be getting right royally fed up at this lowly rating

[mcgrath00] 22/6/2011 13:49

either a lot of buying going on or insider dealing on news due soon.