Current price: $1.66 FY05 yield: 6.6% 100% franked
HPX provides outsourced essential mail and imaging services to Australian companies and government agencies. We recommend income-oriented portfolios have a modest holding in HPX because the dividend yield at current prices is above-average, secure and fully franked. The effective dividend yield is likely to rise over time, reflecting strong cashflows, negligible or negative net debt and a previously lower payout ratio. There is also share price upside from organic growth, potential industry rationalisation and takeover potential. Rising volumes, uptake of new services and new imaging contracts are likely to outweigh the challenges ahead in FY05 and FY06. These include union demands for wage increases, price deflation as essential mail contracts come up for tender, and the sudden declines in revenue which follow the end of large imaging contracts. Whether HPX will post consecutive years of double-digit growth will depend on how soon companies and government agencies adopt the concept. The imaging industry is vulnerable to fluctuations in sentiment on technology spending.
HPX Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
