Daily ShareChat: Diligent Board Member Services

Diligent Board Member Services is becoming increasingly attractive as an acquisition target, says McDouall Stuart analyst Roger Paterson.

"Diligent could potentially hold appeal for bigger companies with a more established global presence, especially if they have existing connections to media and /or board operations, says Paterson, whose firm managed Diligent's 2007 float.

"A suitor looking for a high-quality bolt-on offering to apply to an existing distribution network would likely see merit in Diligent's Boardbooks product," he says.

"The presence of experienced investment firms Spring Street Partners and Carroll Capital Holdings (major shareholders) tends to suggest this is a vision that is shared by important others."

Diligent's results for the three months ended March were in line with expectations although annualised licence fees of $0.59 million were slightly below the $0.6 million to $0.7 million he had expected, Paterson says.

That raises slight concerns, "raising the possibility that licences have been discounted to support sales growth." Average fees steadily declined through 2008 before stabilising between US$24,000 and US$25,000 in 2009. In the latest quarter they averaged below US$22,000.

Diligent has said fees constantly fluctuate depending on the number of users per licence and the size of individual boards. "We have been assured in discussions with Diligent that fee discounting is not taking place," Paterson says.

Diligent is poised to break-even at the cashflow level later this year.

BROKER CALL: buy.

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