On top of the below article, CDR is added to ASX300 in the next March rebalance - check out their company announcement a few days ago...... Here is further positive feel on Commander.....
AFR 8/3/05
From tech wrecks to fat cheques
Three years ago, Melbourne IT had gone from a dotcom favourite to a nightmare for its shareholders.
The company was burning cash, still to declare a maiden dividend and about to lose its exclusive right to distribute company domain addresses in Australia.
Its share price had fallen from a high of $16.37 to just 74¢.
How times have changed. Last month, Melbourne IT posted an 82per cent lift in full-year profit and its share price has rallied, with a fully franked dividend payable next month. The shares closed yesterday at $1.20.
Melbourne IT is not alone. Other tech companies that have posted standout results include Commander Communications, which lifted revenue by 25 per cent and reinstated an interim dividend.
Computer memory specialist Legend also brought in a strong result, announcing a 58 per cent increase in revenue and boosting its interim profit from $490,308 to $2,036,497.
Fund managers believe the tech sector is looking better than it has for five years, and Melbourne IT is among those leading the charge.
"They had a good result, they're going ahead, and they're not expensive," said Matthew Kidman, portfolio manager at Wilson Asset Management, one of those sitting up and taking notice.
"There's a weight of money moving towards the tech sector at the moment because there is earnings security. Tech stocks are currently safer than a lot of other sectors when you've got a market that's run very hard."
Other upbeat results from companies such as Oakton and Objective Corporation helped lift interim revenues across the sector to $2.8billion, up from $2.2billion reported in the first half of 2003-04. A lack of red ink saw net profit across the sector jump from $28.3million to $162.7million. And the outlook is positive, with most tech companies focused on corporate sales and so less prone to pressure from interest rates than consumer-focused offerings.
"There's a lot of momentum in the business service space," said Rob Hopkins, portfolio manager of Smallco Investment Manager. "Corporates are spending and that spending is a lot less sensitive to interest rate changes. Oakton, which is focused squarely on tech services, had a superb result, and the outlook is very strong."
Oakton increased its staff by 10per cent in the six months to December. Technology-focused consultants who would have found it hard to get a job a few years ago are now being snapped up. SMS has indicated it is on track to add an extra 100 people to its payroll this year.
Another Smallco favourite is Commander, which specialises in sales of business telco equipment. "It was a super result," Mr Hopkins said. "The company's management are fairly new to the listed sector and are being very cautious. The way I interpret their comments is that, if everything goes badly, they will beat their forecast. If everything goes OK, they will thrash forecasts."
Overall, there was more good news than bad in the sector, which had taken a long time to come back from the dotcom bust of April 2000, he said.
Peter Mouatt, managing director of Adam Smith Asset Management, likes the look of Objective Corporation, CPT Global, Senetas and Integrated Research.
"Spending on information technology has picked up, which means the sector's a bit more buoyant than it has been for several years," he said. "Secondly, there's been a drought from the capital markets to fund the IT companies. And that drought has forced the IT companies to clean up their act and get their cost structures in order to cut out the ill-considered diversifications.
"All of this means the sector is in pretty good shape - the best shape it's been in probably since 2000."
But there was some concern about a looming skills shortage. It was not urgent, "but everyone realises they need to start thinking about strategies to cope with it", Mr Mouatt said
CDR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
