MYOB showing its potential
Recommendation
MYOB develops and publishes business software. It has a great brand name and strong customer loyalty. The introduction of the GST was of enormous benefit to it with customer numbers in Australia almost doubling in the year 2000.
Operations are also expanding nicely overseas. MYOB is dominant in New Zealand and has good market positions in America, Canada and the UK. Asia also provides growth potential.
But the recent drastic profit warning took the market by surprise. The share price was cut in half after it was announced that new product sales would be less than 20,000 rather than the 70,000 anticipated.
Catalyst for change
While concerning, this has been a catalyst for the company to change its business model as the company tries to change the way it derives revenue from its customers.
The new business model involves transaction-based revenue which in time could become the company's largest profit centre. If successful, this would be a very powerful, not to mention profitable structure.
We think the long-term outlook for this company is not as bleak as the share price indicates. Sure it doesn't look great for this year but we're long-term value investors and from that standpoint we think MYOB could make a nice contribution to your portfolio. Put this one ON YOUR WATCHLIST.