http://www.psl.com.au/research/your-market-daily#DWSDWS Advanced...

http://www.psl.com.au/research/your-market-daily#DWS

DWS Advanced Business Solutions Limited (DWS) - BUY

Tightly run IT company moving up the value chain

* DWS Advanced Business Solutions was established in 1991 and designs, develops, manages and maintains software solutions and IT environments for its clients
* The company has provided services to blue chip organisations for more than 20 years in major sectors such as ICT (27% of 1H11 revenue), Government (22%), Utilities (19%) and Banking & Finance (15%)
* In October 2010, the company commenced its strategy to broaden its traditional software delivery services to include a greater focus on consulting services
* DWS currently has no debt and indicated that it may look at acquisitions to execute its strategy of adding 4 - 5 new specialist practice areas
* Acquisition areas are expected to include Business Intelligence, Cloud Computing and Enterprise Application Integration
* We believe the key driver of DWS' short-term earnings performance will be improving margins from the low FY11 base which has been impacted by a number of one-off issues
* We expect longer term earnings performance to be underpinned by the success of DWS' strategy to broaden its traditional delivery-orientated services lines to include a greater focus on high-end consulting services
* We view DWS as a tightly run IT services company which is looking to leverage its strong brand and Balance Sheet to move into high-end consulting services
* The share price has been impacted by a number of one-off issues during FY11 and we expect the recommencement of earnings growth in FY12 to provide a re-rating catalyst
* We are forecasting a 12-month total return of 26% and initiate coverage with a Buy recommendation