Wednesday, November 2nd, 2011
ASX code: DWS
Share price: $1.23
Industry: Software & Services
Forecast 2012 Dividend: 12c (fully franked)
DWS Advanced Business Solutions Limited (ASX Code: DWS) is a provider of end-to-end IT solutions. The company designs, develops, manages and maintains software solutions and information technology environments for both government agencies and large corporate entities.
Despite a more cautious current business environment, DWS recently reported a ‘solid’ first quarter performance at their AGM. Slower state government expenditure has been offset by sound underlying demand for IT services from the federal government, financial services and utilities sectors.
Over time DWS has successfully diversified its revenue base across various sectors including banking and finance, government, communications and utilities. Today no one sector accounts for more than 24% of total revenues.
DWS has maintained a strong balance sheet and as at July 2011 had net cash on hand of $15m. DWS is also a highly profitable business, achieving normalised return on equity in excess of 40% for each of the previous 5 years.
DWS pays out approximately 90% of its annual earnings as a dividend, which has a couple of significant implications. This indicates future growth in underlying business value is likely to be more subdued, whilst DWS will tend to be more attractive to more income focused investors.
DWS recently declared a fully franked dividend of 6 cents per share. This continued their solid history of paying fully franked dividends right through the GFC.
The MyClime valuation for DWS is currently $1.33 and a purchase at the current market price would present an investor with an attractive yield approaching 10% fully franked.