I've been buying in the last few weeks as a potential turn around play.
The main threat is the margin squeeze that the business has been experiencing in recent years. With international outsourcing to places like India a lot of the types of services OKN provides are under pricing pressure. To me this is the main threat.
That said OKN is well positioned to navigate the threat with the right management decisions. No debt, as Lodiac posted and a large existing position in the market means that they are well positioned to finance growth if they wish to do so. To me they can
Yield is solid but may be under pressure per my initial comment yet still should be good over the next couple of years even if dividends dropped 10% or so. If they can keep it at historic/forecast levels then the yield opportunity will attract further support as the yield buying reduces the value in the traditional opportunities (banks, TLS etc).
Recently has been getting solid fund interest although that may be mostly a position changing hands from one fund to another. However the long term institutional interest is there which bodes well as the IT sector continues to recover due to the historic market darling status.
Technically my reading is that it seems to have bottomed out and commenced a bull run but this needs confirmation. Confirmation requires a solid break through the two peaks of the last year of 1.59 and 1.50 and then a consolidation of it. It seems to be steadily approaching the 1.50 mark with regular support. There is not a lot of selling in the queue at the moment, an unreliable indicator but it's always encouraging to see small number of sellers and stretched apart.
Target wise, the chart has a significant gap down to close at 3.09 in Nov 2011. Fundamentally, if dividends hold at forecast 10/11 cents range over next couple of years then at 5% (which is the average of the last 5 years) that would imply a range of $2 to $2.20. Between the 2 approaches I could see the stock doubling from here in the next 12-18 months.
OKN Price at posting:
$1.44 Sentiment: Buy Disclosure: Held
