Didata's Datacraft seen posting first-ever year loss

Singapore network specialist Datacraft Asia Ltd is expected to post its first full-year loss on Thursday, as it takes the full force of its bad debt and restructuring charges while customer orders remain dismal.

A survey of five analysts showed the region’s largest network systems integrator was expected to record a net loss of $25-million to $31,5-million for the extended 15-month period ended September 30, after one-off charges.

The average expectation in a Multex Global Estimates survey, is for Datacraft, a unit of South African information technology (IT) group Dimension Data, to post a net loss of $46,49-million for the period.

Datacraft, which is under investigation by Singapore’s white-collar crime unit, the Commercial Affairs Department (CAD), recently changed its financial year end to September from June, to align with that of its parent.

Datacraft reported a net loss of $1,6-million for the six months to December 31, 2001, and a net profit of $44,2-million for the year to June 30, 2001.

In August, the firm, which warned of a small operating loss for the September quarter, said it faced a one-off charge of about $3-million owed by a unit of bankrupt telco WorldCom Group Inc, and an undisclosed sum for potential asset impairment from the rationalisation of its “i-commerce” companies.

This comes on top of $23-million in bad debt provisions for its China operations, a restructuring cost of $7-million and goodwill amortisation of $5-million announced previously.

“The order backlog across the industry has fallen, and the operating environment for IT is still very, very tough,” said Gregory Yap, research manager with OCBC Investment Research, who has pencilled in a full-year net loss of $31,5-million.

“In the September quarter, Datacraft was probably operating below the $100-million revenue needed to break even—their monthly orders are still very volatile.”

Datacraft shares have lost nearly three-quarters of their value since the start of the year, after the company issued its second profit warning in May and CAD started investigating the former market darling in August.

While CAD has remained quiet on the target of the probe, it is widely believed to be related to share trades by company directors.

At midday on Monday, Datacraft was down one and a half cents to $0,645.

Even at current levels, analysts say Datacraft still looks expensive, trading at 17-20 times its earnings for the year ending September 30, 2003, against the average of about 12 times for local tech stocks.

“We see no catalysts in the near term for the share price to outperform, and we maintain our target price of $0,60,” Deutsche Bank said in a company report. - Reuters

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