Buy Pennant International (PEN) says Luke Heron of Watshot
"Next year, I cannot see why earnings won't be up to 2.5p, which buoyed by the proceeds from its Southampton site, together with profits from continuing operations, will see cash up to at least £1 million, equating to 3p per share in cash. Strip the 3p net cash out, and the shares trade on a prospective 2008 enterprise value to earnings multiple of 10.2.
Towards the end of this year, the market will be looking towards 2008, during which the 2.5p earnings that I expect should really be attracting a forward multiple of 15, in turn suggesting a target price of 37.5p. Add the conservatively calculated 3p in cash and we have a starting point of 40.5p. This should be comfortably reached by the end of April 2008. Buy."
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