What: Shares in tiny IT services firm Empired Ltd (ASX: EPD) surprisingly surged 8% on Wednesday morning after the company released its audited full-year results that offered little news to investors.
Empired's share price had fallen nearly 10% between the August 4 announcement of unaudited results and the market close on Tuesday, but surged back toward 70 cents per share yesterday, apparently due to the announcement of a 1 cent per share dividend.
So what: Empired is looking like one of the best bargains on the sharemarket at the moment, however a general malaise over the state of the local IT services market has resulted in the share price remaining around 70 cents for the last 12 months.
Empired completed two critical acquisitions in the 2014 financial year that helped to boost revenue by 44% to $67 million, net profit after tax by 145% to $3.8 million, and earnings per share by 95% to 4.26 cents. One of the catalysts of the share price surge was the announcement of a 1 cent per share dividend payout (for a 1.4% yield), up from 0.5 cent in 2013.
The acquisitions of rival firms OBS and eSavvy, has increased Empired's exposure to the rapidly growing east-coast IT services market and secures the company's position as Australia's dominant Microsoft Dynamics customer relationship management (CRM) provider and largest Microsoft SharePoint partner.
What now: Empired's relationship with Microsoft is obviously key and remains strong by all accounts. The acquisitions have increased the scale and reach of Empired's services and have resulted in the company recently being awarded two large contracts with a major mining company and Roads WA. Empired now has a presence in all Australian states and has a client list that includes many of Australia's largest companies and government departments.
The $15 million in capital raised via an institutional placement (undesirable usually) has helped to boost the balance sheet to a net cash position of $2.8 million, which will grow thanks to the group's terrific cashflow (93% flow through from EBITDA).
Analysts are predicting a further 70% profit growth over the next 12 months which, if achieved, puts the company on a forward price to earnings ratio of just 10.
