Following the recent rights issue I belive there are now 2.1Bn shares in issue and the share price is now 25p. Thought I'd do a bit of finger in the air arithmetic to see if the shares at this price are worth buying.
Turnover has never really been a problem for DSGi and stands at a whopping £8.1bn but obviously they need to make a profit on this and 2009 consensus is £200m profit falling to £175m by 2010.
Lets assume a 2010 p/e of 5 on earnings of £175m after tax say £125m gives a market cap of £612m or about 30p a share.
But what I find interesting is all that turnover of £8.5Bn. If and it is a big if they can increase margins to say 5% (migth be very hard I know) then this turns into a profit of £425m by say 2010 and assuming a p/e of 5 (and 30% tax rate) gives a market cap of 1.47bn or 70p a share.
So as ever with this stock we need to see operating margins improving. Hemscott gives margins of 1.4% currently against a sector average of 8.64%. So there is hope here and perhaps the new man in the job (who has been there I think just over a year) might be able to pull off this margin improvement now they have funding to see them through.
Thoughts?
Log
