Australia | Mar 20 2007
By Chris Shaw
Back in July of last year FNArena reported on Intersuisse’s interest in emerging fixed line voice, mobile telecommunications and broadband data services provider M2 Telecommunications (MTU), noting the broker rated the stock as a Buy given the expectation of strong earnings growth.
To date the company has delivered as its latest profit result showed a 42% increase in revenues to $19.9m translated into a 50% increase in net profit after tax to $750,000, which equates to earnings per share of 1.26c.
The improvement in performance came as the company leveraged its position as the exclusive wholesale mobile aggregator for Optus, an appointment made last May. As a result the company’s full year revenue was on track for $40m, compared to $33m at the end of 2005, while margins showed improvement as the company focused on cutting costs.
In the broker’s view the company will exceed this revenue outcome. Intersuisse is forecasting a full year outcome of $43-$46m, though it admits the exact figure depends a little on the timing of additional wholesale contracts.
In addition the broker notes the company has expanded in New Zealand with offices aimed at generating customers for land lines, while negotiations are under way for contracts with another group of telcos. The company is also investigating the potential of turnkey mobile facilities for major corporations.
Assuming the broker’s revenue forecasts are met it expects a profit of $2.4-$2.6m, with upside from additional contracts and intellectual property licensing initiatives. Profit of $2.4m would equate to earnings per share of 4.1c, the broker expecting this to grow to 5.7c in FY08.
Investors chasing yield are unlikely to be disappointed, as on the broker’s estimates there will be dividends of 2.9c this year and 3.7c next year, putting the stock on a FY08 yield of 7.5%, fully franked.
At current levels the stock has a market capitalisation of around $29m, so there is little coverage. Intersuisse has reiterated its Buy rating on the company at current levels.
Shares in M2 today are unchanged at 49c, which is about the middle of its trading range of the past 12 months of 20-61c.