Merrill Lynch: Lipman sell-off overdone
"The problems at the company appear to be largely isolated to Dione."
Globes correspondent 29 Sep 05 11:56
Following the profit warning issued by payment technology company Lipman Electronics Engineering (Nasdaq: LPMA ; TASE: LPMA) and the plunge in the company's share price, US investment house Merrill Lynch issued a calming note on the company yesterday.
"This morning, Lipman substantially lowered its earnings guidance for FY05 blaming a large shortfall at its recently acquired Dione subsidiary in the UK. Although we are clearly surprised at the magnitude of the shortfall, we think the sell-off in the stock is overdone. We are maintaining our Buy rating, but lowering our price objective to $25 from $36," analysts Gregory Smith and David Parker write.
"New 2005 guidance calls for a rev. range of $230-240 million and pro forma diluted EPS of $1.08 to $1.18. This compares to previous guidance of revenue.of $273-285 million and EPS of $1.59-1.62
"We are lowering our 2005 revenue and EPS to $230.0 million and $1.12, respectively. We are lowering our 2006 revenue and EPS to $248.5 million (+8%) and $1.40, respectively. We think our 2006 estimates are now very conservative and only assume roughly $25million in Dione for the full year.
"Lipman acquired Dione in 2004 and had expected $80 million in revenues in 2005. Instead, Dione should do only around $40 million as a number of expected client signings have not materialized.
"The main silver lining we see is that Lipman ex-Dione should still grow 20% this year. The problems at the company appear to be largely isolated to Dione. We think the company will remain highly focused on its core opportunities and we still think the long-term growth outlook is well intact given favorable market conditions.
"We assume Lipman will not do any significant acquisitions in 2006 and that the company repurchases around $30-40mn of its shares over the next few quarters."
Lipman shares fell 21% in New York yesterday to $20.48. In this morning's trading on the Tel Aviv Stock Exchange, the shares are up 1.37%, at NIS 97.45.
Published by Globes [online], Israel business news - www.globes.co.il - on September 29, 2005
Dubi
