Australia | May 10 2007
By Rudi Filapek-Vandyck
Victoria based telecommunications minnow M2 Telecommunications Group (MTU) carries all the hallmarks of a micro cap stock: average daily trading volume is about 110,000 shares representing a monetary value somewhere between $60,000 and $70,000. And on some days there simply is no volume at all.
Ask Yahoo! Finance to draw up a chart of the past five trading days and what appears resembles more of a four year old’s attempt to draw the Queensland rainforest. Such are the dangers of investing in the bottom quartile of the local share market.
However, where M2 Telecom differs from most of the other co-bottom dwellers, is that it has successfully attracted the attention of (some) of the local media, including FNArena, and the broking community with (to our knowledge) Intersuisse and MicroEquities actively covering the stock. This is something many a company of a much larger size can only dream of.
M2 Telecom listed at the end of 2004 and almost immediately saw its share price surge to above $0.50. It had fallen back to $0.20 in the first quarter of 2006 though. Since then the shares have embarked on a pretty steep climb towards $0.60, only to fall back to below $0.50, and climb again to above $0.70.
The company announced this week it would acquire 100% of Wholesale Communications Group Pty Ltd, Australia’s largest independent wholesaler of telecommunications services, and Intersuisse analyst Peter Russell is very positive about this.
Not only will the transaction fill a void in M2’s operations thus far –increasing the company’s presence in the data segment- but it is also estimated to boost M2’s EPS figure for FY08 by over 30%.
Peter Russell therefore shows no hesitation: “Given M2’s management’s track record and focus on profitable and sustainable growth, and the further initiatives in train to build substantially through FY08, we have no hesitation in recommending M2 as a Buy at current price levels and up to 75c.”
However, trading volume this morning is dismal. We assume few of the existing shareholders wants to separate from their shares. At last trade M2 shares were up 2c at $0.70 but in extremely low volume (we dare not to include the actual figure in this story).