S&P/ASX 200 Index (ASX: XJO) share IPH Ltd (ASX: IPH) recently hit a 52-week low, as we can see on the chart below. It's down 36% from October 2022.
For readers that haven't heard of this business before, it's an international intellectual property services group that has businesses working in 10 IP jurisdictions and servicing more than countries/markets, including Australia, Canada, China, Hong Kong, Indonesia, Malaysia, New Zealand, Philippines, Singapore and Thailand.
Cyber incident
In March 2023, the business detected a "portion" of its IT environment had been subject to unauthorised access.
IPH said an investigation revealed a "limited set of data was downloaded" from the Spruson & Ferguson Australia business and "primarily contained data relating to a small number of clients of Spruson & Ferguson Lawyers and certain historical financial and corporation information".
The company said it hadn't experienced any known loss of client relationships as a result of this incident.
The ASX 200 share has strengthened its cyber security measures and controls.
Solid financial performance
FY23 was a solid year for the company, with diluted earnings per share (EPS) increasing by 19% to 28.4 cents. Underlying net profit after tax (NPAT) increased by 20% to $99 million and underlying diluted EPS grew by 16% to 43.6 cents.
The business has used acquisitions to expand, including buying Canadian IP outfits in the last year or so, expanding its reach beyond Asia Pacific. It's looking at other opportunities in Canada and "elsewhere". Its latest buy was Canadian IP outfit ROBIC for A$124 million.
In the first four months of FY24, IPH's underlying revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) were up year over year. Excluding acquisitions and foreign currency, total revenue was up, while like-for-like underlying EBITDA was "broadly in line".
However, in Australia in the first four FY24 months, the overall patent filing market declined by 2.8%, while IPH's Australia filings were down 5.3%. That is not ideal, but the industry won't necessarily see growth every single month, or even every year.
The ASX 200 share said the Canadian acquisitions have strengthened and diversified its earnings base and bolstered its client service offering.
IPH is focused on delivering organic growth, not just acquiring growth.
As a bonus for shareholders, the IPH dividend has increased each year since 2015.
Is the IPH share price good value?
I'm not particularly concerned by the recent sale by CEO and managing director Andrew Blattman, who sold 60,000 IPH shares. He still owns 2.15 million shares, as well as 0.4 million performance rights.
According to the projections on Commsec, IPH's EPS is expected to rise in 2024 to 44.1 cents and could rise to 51 cents in FY26. This would put the IPH share price at 15 times FY24's estimated earnings and under 13 times FY26's estimated earnings.
The dividend is also expected to keep rising – by FY26 IPH could have a partially franked dividend yield of 6.2%.
If the profit can keep growing, then this stock could produce good returns over the long term, however, the decline in its market share in Australia isn't a positive and I'd want to see that stabilise. Yet, the IPH share price has fallen so much that I think investors are compensated for this risk at the lower valuation. It's possible the ASX 200 share could keep falling in the short term though.
