SAI is an information services company with the exclusive license to publish and distribute Australian Standards material.
These rights extend to 2018, with the option to extend until 2023.
SAI has built a number of certification and training businesses, providing compliance and assurance services to complement its Standards material.
SAI’s earnings growth has averaged 14.25%p.a. Current earnings give SAI a P/E of 16.09. The analyst consensus is that earnings will rise +2.73% in 2013 (foreword P/E 15.66) and +14.56% in 2014.
SAI reported a rare annual drop in earnings on the 14th of February 2013 with earnings down 14.9% (below a consensus forecast 3.28% drop) the price promptly dropped 22%.
Behind the headline figure, sales revenue actually increased 6.8%.
The reason for decreased earnings lies in higher costs; costs involved in building new products and revamping the IT infrastructure. Going forward these initiatives should increase profitability.
The CEO has stated that he expects profit growth to commence in 2013.
Ongoing running of the business requires minimal capital expenditure, which allows SAI to maintain a payout ratio of 68%. Historical dividend yield is 4.24% fully franked (6.06% gross). Analysts expect the yield to rise to 4.54% by 2014.
SAI is a sound business with a unique advantage. Growth thus far has been impressive.
The current price weakness has no apparent structural reasoning. SAI still allows for growth at a reasonable price.
Short-term there are no anticipated roadblocks to further growth.
Long-term, losing the Australian Standards License is a hazard.
With a backbone of recurring revenue SAI should continue to provide a decent income stream.
The 14 analysts that cover SAI give it a median 12-month price forecast of $4.00, this represents a 13% upside.
For more information on SAI Group (SAI) please contact us on 07 4771 4577.