Diligent shares jump as first-quarter figures show growth slowing less than feared

Wednesday 16th April 2014

Diligent Board Member Services stock rose as much as 12 percent after the governance app developer posted quarterly figures showing sales growth hasn't slowed as much as some investors had expected.

The New York-based, New Zealand-listed company added a net 113 new client agreements in the three months ended March 31, taking its total number of customers to 2,563. That's up 28 percent from the same quarter of 2013, when it added 201 customers.

Diligent shares rose 9.4 percent to $4.43 and earlier touched $4.55 after the figures were released. The stock sank in the second half of 2013 as sales missed targets and the company was distracted by administrative errors that forced it to restate revenue for the 2010 through 2013 financial years. It had previously been forced to revise executive options that exceeded company guidelines.

"They're back to reasonable news, versus the flood of bad news over the last while, this is going back towards more business as usual," said James Lindsay, who holds Diligent among $450 million of equities he helps manage at Tyndall Investment Management.

"Although new additions were a lower number, it probably wasn't as low as some people had thought," Lindsay said. "At some stage it will reach maturity or saturation point in the US market - that hasn't transpired immediately."

The share's 15 percent gain this year is twice the pace of the NZX 50 Index. The company is rated an average of 'buy' according to four analysts surveyed by Reuters, with a median price target of $4.72.

Diligent said it incurred costs of about US$5.1 million for the restatement and re-auditing of its accounts, including US$1.8 million incurred in the latest three months. It also spent US$1.6 million of the estimated US$2.3 million earmarked for building a European data centre, the company said today.

Lindsay said Diligent hasn't reached the same level of saturation in Europe as in its US market.

Diligent is among New Zealand tech stocks caught up in a global sell off over the past month as investors questioned the ability of companies to deliver the profits implied in their high valuations. Big movements in the tech-heavy Nasdaq Composite Index on Wall Street have flowed through to the local stock market.

Still, Diligent's selloff has "mostly been related to its own woes rather than that of the market," Lindsay said.

Xero, the cloud-based accounting software, slipped 0.7 percent to $28.25. Pacific Edge, the Dunedin-based biotech company, was up 5.6 percent to $1.13 while outside the benchmark index security software firm Wynyard Group has risen 4.3 percent to $2.43.

BusinessDesk.co.nz

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