APM Human Services International Limited (ASX: APM)

APM provides human resources consulting services with operations in over 10 countries. Some of its services include employment services, work care, aged care support services, health and wellbeing, and several others.

Recent Business Updates: APM was awarded 44 contracts under the New Employment Services Model tender spanning over 27 employment regions in Australia. APM was added to S&P/ASX 300 Index effective on March 22, 2022. For the period H1FY22, APM posted a 29% uptick in revenue to $613.7 million underpinned by decent growth in employment services and new acquisitions. Its pro forma EBIT jumped 22% to $81.1 million from a surge in topline and benefits of Restart Contract. However, it had posted a statutory net loss of $16.6 million as compared to a net profit of $24.9 million in the prior year.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of APM delivered 3-month gains of ~+8.25%. It is trading closer to its 52-week high price of $3.50. The stock has been valued using the P/E-based illustrative relative valuation method and arrived at a target price with a correction of mid-single-digit (in % terms). The company might trade at a slight premium than its peers, considering the recent contract wins from Workforce Australia. For this purpose of valuation, a few peers like PeopleIn Ltd. (ASX: PPE), Mcmillan Shakespeare Ltd. (ASX: MMS), IDP Education Ltd. (ASX: IEL) have been considered. Considering the recent rally in share price, valuation indicating downside, statutory net loss in H1FY22, and associated key business risks, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $3.190 as on 30 March 2022, 01:53 PM (GMT+10), Sydney, Eastern Australia.

APM Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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