Senetas Corporation maintains its never fails to disappoint reputation with yet another profit downgrade

Published at Feb 6, 2017, in Equities

The reputation of IT services group, Senetas Corporation (ASX: SEN) has never really recovered since it went from hero to zero in the wake of the tech crash. However, with so many stocks affected during that period there was less attention on the company.

After coming into vogue again in 2004 when its shares increased approximately 15-fold, all of that gain was lost in less than 12 months.

In 2015 the company emerged with a new business model and many thought a change in reputation as its shares increased four-fold from 5.4 cents to hit a high of 22 cents.

Since then there has been a smattering of good news offset by the usual below expectations results which have seen its share price halve.

However, the sell-off that is likely to occur in response to today’s announcement that net profit is going to be substantially below expectations could be substantial.

Management had even convinced some brokers that it was back on track, but the announcement today that net profit is likely to be in a range between $3.4 million and $4.2 million is well below Bell Potter’s fiscal 2017 forecast of $5.2 million.

Bear in mind the broker had already downgraded earnings per share forecasts between fiscal years 2017 and 2019 inclusive following the AGM in November.

As trading recommenced following the downgrade, Senetas fell to 10.5 cents – representing an 8.7% decline compared with Friday’s closing price of 11.5 cents.

There is the possibility of further selling, particularly given that investors would be querying the company’s inability to flag the likely first half profitability impact of soft trading in the six months to December 31, 2016 until now – six weeks into 2017.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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