By Jenny Ruth
Sunday 1st May 2011 1 Comment
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Start-up software company Diligent Board Member Services should break even during the current quarter, says Gina Meo, an analyst at First NZ Capital.
"We continue to hold a very positive view on Diligent's prospects with breakeven appearing to be close and sales continuing to show the strength of demand for the product," Meo says.
Her report was written ahead of Diligent's annual shareholders' meeting last week where it revealed its earnings before interest, tax, depreciation and amortisation (EBITDA) were US$4,553 (NZ$5,653) in the March quarter compared with a US$164,918 EBITDA loss in the December quarter of 2010, the first quarter in which it was cashflow positive.
"Beyond breakeven, the focus will fall on whether Diligent is able (to) post margins that mirrow other companies which follow the SaaS (software as a service) model," Meo says. "At this stage, we can see little evidence that this is not a realistic assumption with Diligent proving that it can boost sales without gross margins being compromised."
Meo has raised her valuation of the stock to $1.33 a share from $1.07 previously. She is now forecasting Diligent will post a US$1.2 million profit for calendar 2011, up from her previous breakeven forecast. She is forecasting a US$5.2 million profit in 2012 and a US$9.6 million profit in 2013.
Investment view: Positive.
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