What: Shares in small-cap law firm Shine Corporate Ltd (ASX: SHJ) have fallen 2% today upon the release of its 2014 full-year results. However the results are, in my opinion, very promising.
Highlights
- Revenue up 10% to $115.5 million and ahead of prospectus forecasts
- EBITDA of $34.2 million, up 24% and ahead of prospectus forecasts
- EBITDA margin up to 29.6%, ahead of prospectus forecasts
- NPAT up 27% to $22.2 million
- Net operating cash flow up 128%
- Revenue from emerging practice areas was up 48% to $18 million
- Earnings per share of 14.3 cents, up 16.2%
- Final dividend of 1.75 cents per share (taking the full-year payout to 3.50 cents)
So what: Today's share price movement could be the result of slightly lower earnings per share growth than some analysts had anticipated. However, the results bode well for future growth as Shine pursues a stronger push into emerging practice areas as well as continued consolidation of the plaintiff litigation sector. Business process improvement and further IT spend will enable the company to continue keeping costs low when growing its top line.
Now what: Perhaps after rival Slater & Gordon Limited's (ASX: SGH) spectacular result earlier this month investors were expecting more from Shine. However, like its larger peer, I think Shine remains an excellent long-term buy for investors chasing income and capital gains.
Currently shares trade on a good valuation and with management targeting an EBITDA result of $41 million to $45 million in FY15 coupled with a gearing ratio of only 5%, the short and long term is looking bright for Shine shareholders.
