Servcorp Future Promising but Not without Stiff Competition, Price Says

Servcorp has been recommended as a top company with a promising future for growth in the US and UK.

Finance Editor Jonathan Price shares his thoughts on a piece in The Sydney Morning Herald by David Potts. You can view the original column at The Sydney Morning Herald site.

The Sydney Morning Herald newspaper's share tipster David Potts has chosen business centre company Servcorp as one of his 10 tips of 2010.

"It's not quite blue chip but then Servcorp is safer than a speccy," he says in the newspaper's Business Day column.

"After all, it doubled its profits and revenues in the past four years from its business of supplying serviced and virtual offices to small businesses in Australia, China, Japan, France, the Middle East and South-East Asia and is expanding into Britain and the US.

Potts points out that Servcorp is cashed up after a recent capital raising and has been grabbing office space in the US at rock-bottom rents and quotes Steve Johnson of Intelligent Investor as saying, "It has an extremely large rollout program at attractive rates."

Australian broker Intersuisse points out its virtual office rollout is even more profitable than its serviced offices and it gains from more work being done online and the likely rise in travel costs when carbon emission controls start.

While not disagreeing with the underlying logic, I would point out that the UK and the US are the two most competitive markets in the world for serviced office space and Servcorp may find it harder to succeed than it anticipates.