ASX-listed integrator Powerlan has bucked the trend of investors flogging off tech stocks in the lead up to the end of the financial year, thanks largely to the Commonwealth Bank (CBA) and ING (formerly Mercantile Mutual).
Both financial houses upped their stakes in the integrator with a series of investments over the past month. Powerlan also received a vote of confidence from its chief financial officer, Chris Voukidis, who purchased an additional 50,000 shares off his own bat last week. This takes Voukidis' share options to 1,051,988.
ING has upped its investment three times since April, from owning 11.24 per cent of all Powerlan shares to 13.75 per cent of the company, or 49,179,135 shares.
CBA followed suit, purchasing a further 26,098,097 shares to increase its stake to 8.93 per cent of the company. This marks a turnaround for the bank, which sold a 2.19 per cent stake in Powerlan in March this year.
Despite this institutional support, Powerlan's share price has more than halved in the past 12 months, going from a high of around $1.80 in June last year to below 70 cents as of last week.
"Powerlan has not been immune to the tech stock share slump but, unlike many other companies, it has delivered above forecast revenues and profits," says Theo Baker, Powerlan managing director.
The share slide continues for Powerlan, even after announcing to the ASX it met profit expectations of $9.81 million for fiscal 2000-2001 on the back of $178.2 million in revenues. Powerlan's shares also lost the endorsement of analysts at financial broker BNP Paribis after the integrator excluded it from a capital-raising drive it conducted with boutique investment firm KTM.
While it could be safe to say a large number of listed tech companies are suffering under the current economic pressures, Powerlan's situation is shared by some other companies that are watching their share price disintegrate while the company itself remains profitable.
John Pethers, client dealer for stockbroking company Andrew West & Co, claims a number of factors have arisen that have led to the mass exodus of investors from tech stocks. He says the share price fall of some of the major US IT vendors filtering over here, coupled with the collapse of One.Tel, has left the market very unstable.
"When people see this, it's very hard for them to open their wallets," says Pethers.
While Pethers believes the tech slide is not limited to a specific sector of the IT market, telcos have been hardest hit. "The telecommunications industry is being smashed," says Pethers.
Ross McMillan, senior equity analyst for tech stocks at Commonwealth Securities, claims one of the biggest factors hurting tech stocks is the "tax-loss selling" occurring before the end of the financial year. He says companies are looking to crystallise their losses for the year by selling poorly performing tech stocks to reduce capital gains tax commitments.