buying opportunity?, page-15

re: buying opportunity? todays ssb review Todays SSB client research notes about yesterdays AGM:

Company Update
AGM comments a mixed bag
† The AGM provided little relief for investors with the group deciding it was "far too early to make any firm commitments" with regards to maintaining dividends. Rather than representing a lack of confidence in the medium-term outlook or funding capacity (net cash), we suspect this could be due to the group's limited retained earnings balance ($0.5m).

† Importantly, however, the group's services business was confirmed as tracking at 15%-20% above the pcp and will likely grow to represent c60% of gross profit in FY06e (FY05: 51%). Additionally, a further $3.5m of cost savings have been identified, following the recent $3m cost cutting program implemented in 1Q06.

† With management now targeting FY06e EBITDA of $30m, we have made mild adjustments to EPS with core EPS -5.6%, -0.9% and -0.7% over FY06e-FY08e, respectively. Our FY06e DPS has also been cut to 7.0¢ps.

† While the execution to-date has been disappointing and management credibility has suffered as a result, we do think the strategy towards a greater mix of services revenue is right and, looking through the near-term uncertainty, valuations appear very undemanding with a FY06e EV/EBITDA of 3x and reduced dividend yield of 8%.

† Negative sentiment is likely to preside until evidence of a turnaround in earnings, but we retain our Buy rating for longer-term investors. Our target price has been cut 2% to $1.22.