Anybody who tried, or continues to try, to get on with their life while receiving Centrelink (especially during the COVID years) is probably rejoicing the news APM Human Services (ASX:APM) is facing a massacre on the share market.
On Thursday, the company lost half a billion in value, bringing its market cap today down to the $700 million range.
The major catalyst was a downgrade from UBS, and the company’s own admission market conditions aren’t ideal. Jefferies and Euroz Hartleys also issued downgrades.
The company, which has in recent years described itself as a provider of job services for those on disability assistance – but which also does normal Centrelink placements through Workforce Australia – may be better known to many as the major third-party labour services provider for Australia’s welfare system.
The company has since moved into the NDIS, a sector that has never once been the subject of government inquiry, public scepticism, nor a cash cow for criminals.
UBS downgrade starts a landslide
Earlier this week, UBS downgraded the company’s stock price target.
That downgrade had much to do with the company issuing its own caution on guidance; the fact that its main revenue model – jobs provision – can’t work in a sub-four per cent unemployment society, and allegedly, that NDIS reforms were going to hurt the bottom lines.
UBS was a proponent behind the original ASX float in 2021 of the government-contract-beneficiary formerly-billion dollar market cap human services giant.
As of 11:55 am AEDT today, APM retains eight broker recommendations for a ‘Buy’ – but the company’s other metrics don’t look great right now.
Clearly, given the recent fall in stock price, that perception isn’t a rare one.
Consider the following:
- APM 1-week returns are down 40 per cent
- APM 1-month returns are down 30.87 per cent
- 2024 YTD returns are down 35 per cent
- APM 1 year returns are down 68 per cent
Before lunchtime today, more than 3.2 million shares had been turned over – higher than the four-week volume average – with shares bouncing up 1.27pc to 79.5 cents.
The market cap has been decimated to $0.73 billion – ‘decimated’ might be a strange word to use here, but, you get my point.
All-star cast
Part of the reason APM’s decline is causing such a stir is because of the fact it retains a C-suite packed with people like former WA Premier Mark McGowan.
Founder Megan Wynne has seen her financial net worth slide from billionaire status to millionaire status – around $250 million to be exact if that’s the kind of thing you’re into.
Former WA politician Ben Wyatt is also a director. So too are former bank chiefs; international funds, and other global players since Ms Wynne’s husband sold a 60 per cent stake.
The truth is, though, Thursday’s write-off isn’t really the whole story. APM has been in decline for years.
The last time the share price was worth more than $3.00 was in December of 2022.
With some snakes and ladders since then, the price has been on a steady decline since.
This may be interesting for a company that is the beneficiary of Federal contracts from Canberra, and which operates in 11 countries internationally.
At any rate, there is some merit to APM’s guidance caution and UBS analysts’ downgrade on the stock.
The answer is somewhat simple: as a jobs provider, the company has a small addressable market in a society where the unemployment rate is under four per cent.
The participation rate continues to fluctuate – meaning those who are looking for jobs – but Australia’s aging population also continues to shift around the nature of Australia’s labour market.