Interquest – Time to call bank profits and sell

PUBLISHED: 30 Mar 2013 @ 10:30 | Comments (0) | More info about Tom Winnifrith

My July 2006 recommendation on t1ps.com (the site I founded in 2000 and edited until this September) of shares in specialist IT recruitment group, InterQuest (LSE:ITQ) is not one which has covered me in glory. Having tipped the shares at 67.5p, they traded above 80p until economic conditions darkened in the second quarter of 2008. A low of 30.5p was hit in February 2009 and the shares again traded at sub 35p in August of last year.

But to be fair to me I did suggest an aggressive average down at 45.5p and again in a detailed fashion at 49p as you can read here on 22 November.

I said then that my target price was 64p. Results came out earlier this month and the shares are now 67p. Well I am a man of my word.

For what it is in worth in calendar 2012 EBITDA before one-offs came in at £1.8 million ( below forecast by £400,000), the headline ,loss for the year was £100,000. Basic earnings per share were 3.5p and the total dividend was unchanged at 2.5p. Net debt fell by a fifth to £4.4 million at the year end.

I am sure that this year will be better. Earnings could well be 6-8p but on the other hand macro headwinds could see Interquest miss its targets yet again. Even if it hits 8p a PE of 8 looks more than enough for this sector. And a yield of sub 4% is not enough to justify the risks.

And so I would say sell Interquest.

If you want to stay in the same sector – a larger play with more earnings visibility yet which trades on a far lower multiple is Impellam (LSE:IPEL). For a full analysis of its potential click HERE

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