Sharechat Logo

Diligent shares surge after broker upgrades rating, saying 34 percent fall 'overcooked'

Thursday 8th August 2013

Text too small?

Shares in Diligent Board Member Services, the governance app maker hit by a slew of administrative mis-steps, surged after brokerage Craigs Investment Partners upgraded its recommendation to 'buy' from 'hold', saying a slump in the share price was overdone.

Shares in New York-based Diligent jumped 11 percent to $6, making it the best performer on the New Zealand stock exchange today. The shares have slumped following a series of accounting errors by the company, which said on Tuesday it would have to restate how it recognised revenue over the past three financial years, delaying publication of second-quarter trading.

"While the recent corporate governance oversights and revenue recognition errors are deeply disappointing, we believe the 34 percent sell off in Diligent's share price since late June is overcooked and provides investors with an attractive opportunity to buy into a fast growing business with a clear market leadership position and attractive, scalable business model at a discounted price," Craigs research analyst Stephen Ridgewell said in an Aug. 7 report.

"At present, Diligent appears to be trading at a 20-30 percent discount to both our discounted cash flow and peer multiples," Ridgewell said.

Underpinning the company's earnings, its Boardbooks product has a 97 percent retention rate and its profit margins are likely to continue to increase as it reaches scale, Ridgewell said.

The company will need to develop new products to maintain growth and has indicated that several products are under development, Ridgewell said.

The brokerage lowered its 12-month price target for the stock to $7.20 from $8, citing a 20 cent discount to reflect risks surrounding its restatement and a more conservative view on margins in later years.

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

SML - Synlait Milk Limited - Trading Halt of Securities
AIA - Auckland Airport announces board chair changes
AIA - Auckland Airport announces board chair changes
CEN - Tauhara commissioning progress update
FPH initiates voluntary limited recall
March 28th Morning Report
KFL Celebrates 20 Years of Excellence in Investment Mgmt.
SVR - Savor FY24 Earnings Guidance & Change in Banking Partner
NZK - NZ King Salmon Investments Limited FY24 Results
March 27th Morning Report