Macquarie Telecom - MAQ

I'm interested in others thoughts on Macquarie Corporate Telecom (MAQ)

"Macquarie Corporate delivers proven and innovative voice, data, mobile and hosting solutions to corporate and government enterprises throughout Australia and South Asia."

Market Cap of $53 million, currently trading at 26cents

Company looks like it turned the corner late last year reporting EBITDA of 3.7m for the six months ending Dec 03. They issued an earning guidance of 7.4m-8.7m for the full period.

Company has NO DEBT and 33m CASH in the bank. This effectively means the market is valuing their business at 20million

Revenue for FY03 was $234m

In my view the company is primed to make an acquisition (hell they need to use that cash) or could be a target to be taken over if large shareholders brokered a deal.

Last annual report indicates the stock is tightly held with the top 20 owning 82%. The Tedehope brothers (CEO and COO) own 61% of the company.

Company has small but very experienced management team.

Has been some interesting trading going on over the last few weeks with the stock testing recent highs on rising volume.

Would especially be interested to hear comments from some of our esteemed fundies - Alban, Dimebag.

had a quick look David. One worth keeping an eye on, though I would need prefer further progress first.

The cash position is very interesting, would be very easy to miss that on a cursory view. The performance over time is very inconsistent, not sure why the EBITDA plunged to losses of -17.7m and _15.6m in 2001 and 2002. Revenues are declining, due to the reduction in calling revenues (reflecting competitive pressures, though profits in this business are still improving).

Also, note that capex has pretty much been at depreciation levels and is forecast at $8-$10m this year, so they are still burning cash even if they achieve the EBITDA forecasts.

Hard to value a loss-making company. I approached it from what would EBITDA have to improve to, before MAQ achieved a PE of 10 (excluding for cash).

I assumed cash of $26m was free (note that at June 03 current liabilities were greater than current assets, excluding cash, so some of the case should prudently be held for working capital purposes). SO MAQ would need NPAT of $2.6m, and assuming a tax rate of 30% (conservative, since they have some tax losses) and deprecn of $9.1m, would need EBITDA of $12.8m, to get a PE of 10. If they achieved EBITDA of $8m this year (middle of their forecast range), they would need to grow it by 60% next year, to get a PE of 10 next year. That being the case, I'd rather wait to see them achieve (or confidently forecast) those sorts of nunmbers, before buying.

On the other hand, they could use the cash for a good acqisition. A few telcos have been buying iiNet and Optus for starters), not quite sure why MAQ are sitting on their hands. Couple of other things the Singapore story seems a bit weak (not sure why they are trying it; revs declined in the last half) and their are around 6m options in the money.

James

Thanks for your thoughts.

Announcement out on the 26th July confirms position for current year.

"The Company reaffirms its Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA) guidance for full year (FY04) of $7.4 million to $8.7 million."

But as you say still someway to go before they can claim true profitability.

Have been holding these for a while based on positive press statements, tight management, and little to nil debt.

Company is in a strong position to leverage earnings through its telecom markets.

Do not appear to be reinvesting much into loss making parts of the company, hence decreasing sales in these areas. Not always a good long term strategy, and makes things look artifically good short term.

Regards
Firefly

I got out of these around 22cent about 9 months ago.

Price taken a hammering recently.

Now trading at 10.5c and a market cap of 21m

The kicker is they have 23mil in cash and are ebitda positive.

Any comments would be appreciated.

Hi David. I've got a small (now tiny!) holding. I calculate that after investment plans, they would have around 12cps cash. Operating cashflows have been quite good in the past. However, they have disappointed me in that they hover so close to profit..
Price/sales is really low, so even a small margin should make them a good buy. I am just waiting for evidence that the recent investment is going to generate new revenue. If not, I'll give up. If so, I suspect they will be my next "sure thing". Unfortunately, telecoms is an incredibly competitive area with the move to VoIP. History shows that being at the forefront of a tech revolution doesn't tend to do you any favours! Things get very competitive at the front line...

Macquarie inks Queensland Commerce deal
Siobhan McBride
08/04/2005 07:46:38

Commerce Queensland has slashed its carrier costs by as much as 25 percent by outsourcing to Macquarie Telecom.

The deal covers a range of convergent solutions including local, long distance and international telephony, Internet, mobile and an IP virtual private network.

Joe Barnewall, CEO of Commerce Queensland (previously the state's Chamber of Commerce and Industry), the project's goal was to lower total cost of ownership and improve billing processes.

"We wanted a flexible and innovative business partner rather than just another supplier," Barnewall said.

"Macquarie Telecom was willing to negotiate on terms and conditions where others weren't. It was also prepared to address both Commerce Queensland's needs and members' needs."

The companies have also formed a strategic partnership whereby Macquarie Telecom is the recommended provider of telecommunications services to Commerce Queensland's member base.

The organization's membership network represents Queensland companies of all sizes including both commercial and not-for-profit organizations such as Anglicare Central Queensland.

"Many of our members are small businesses that would not normally be able to realize such significant savings on their telecommunications and IP costs," Barnewall said.

"The partnership with Macquarie Telecom guarantees them a minimum 5 percent saving as well as access to services, such as consolidated billing, that help them better manage these costs."

Just going to update this thread - I posted this analysis on another forum in September when the result came out:

Some notes on MAQ following FY result:

1. Big attraction of MAQ is that at 10cps, it is very undervalued on both an asset and revenue basis. Net current assets are 8.6cps, net cash is 11.2cps, NTA is 27cps. Revenue per share net of carrier costs = 35cps. (NB: net cash is higher than expected as capex seems to have been slower than company predicted at HY)

2. However, excepting revenue, these have all reduced over the past year, as has the share price, and it is possible this trend could continue indefinitely (it has already continued far longer than investors might have thought possible).

3. Underlying share value is probably around 50cps, but in order to recognise this, need margins to improve. Actually, gross margins are okay, so probably need a reduction in corporate costs. However, at the moment, these are increasing rapidly, particularly employment costs.

4. From searching the web, it appears MAQ is fairly active and achieving many things that (unlike some companies) are not reported regularly to the ASX. However, it also seems that these activities are largely being expended just to replace traditional voice revenues and that a high level of (expensive) customer service is being proffered in order to achieve business. It is unclear to me at this stage how MAQ will translate new business gains into profits.

5. Looking ahead, once again 2006 is likely to disappoint holders. The first check will be HY result where I forecast revenue of $116m, EBITDA of $1.5m and NPAT loss of ($2m). For FY, revenue of $234m, EBITDA of $4.3m and NPAT loss of ($3.1m). FCF likely to be close to zero across the year as further one off investment in the Metro Access Network.

6. These results are worth watching closely though. An improvement against them would be positive. However, there is little point in investing in MAQ until early signs of future profitability become apparent. MAQ will almost certainly not be profitable in 2006. But, given the potential for a re-rate of the shares on even a small profit in 2007, it is useful to keep these shares under watch for early signs.

7. The current pressures facing TLS probably do have the potential to be beneficial to MAQ. But degree is uncertain.

Might be a Hold, but not yet a Buy.

Also, would note the following article which appeared on Friday in The Australian and contained some items of interest:

http://www.theaustralian.news.com.au...55E643,00.html

Points of note:

MAQ looking to raise $20m for investment - this seems a little odd given that MAQ appear to have on hand more than enough cash to complete the announced expenditure plans.

Suggestions that other companies would be interested in buying MAQ, but that majority shareholder and Chief Executive, David Tudehope, has no intention of selling.

Further expansion planned into South East Asia

Plans to be unveiled at Tuesday agm...

While pretty much range trading between 10-11cps, the sp has looked a little firmer of late, with OBV starting to turn up. The agm presentation should prove interesting.

Quote:

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quote:Originally posted by Lizard
There is little point in investing in MAQ until early signs of future profitability become apparent. MAQ will almost certainly not be profitable in 2006. But, given the potential for a re-rate of the shares on even a small profit in 2007, it is useful to keep these shares under watch for early signs.

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Wrote the above back in November last year. Since then, MAQ consolidated 10:1. I bought a few more at 83cps a few months ago, but the shares have been pretty much sunk in an illiquid and depressed hole.

The full year result was pretty much as expected. Growing revenues, good margins, but another loss ($6.4m) due to growing corporate costs. They so far appear a well-presented and popular charity for corporate telecommunications users. I have waited patiently for them to announce their intention to one day book a profit, but so far patience has been unrewarded. It is also hard to get excited about a company that is investing hard cash into assets which they then depreciate faster than the average life of a mobile phone.

Still, there is the possibility that 2007 will be the year of the profit - or at least a reduction in loss - or even an announcement that one day they might make a profit...

In the meantime, they do occasionally provide some entertainment. Yesterday, one buyer with two 50k bids on the board moved them up from 80cps to 95cps, collecting a mere 12k shares on the way and only drawing one new offer at $1.09. For once, they aren't being sold down.

Well the clumsy buyer looking for 100k of these shares has nearly got there - only 8.5k left to get by my count. Managed to create enough movement in the shareprice for a few more traders to take an interest. The big question is whether this is the end or the beginning of the price movement?!?

MAQ now moving steadily in the right direction, with price at $1.30, though on low volume. With P/S of 0.10 and Pr/NTA of 0.6, there's plenty of value still in this one - they just have to make it profitable before they depreciate all those assets away again...

A great example of how apparently under-valued shares can take a long time to get a re-rate - especially when large management holdings make a takeover unlikely and the controlling management puts re-investment for growth ahead of profits/dividends.

Time to drag this one out for an annual review.

MAQ are finally forecasting positive NPAT in current period! Maybe at this weeks agm they'll give some indication on quantum for first half.

Net cash now $19m, market cap $16m and in second half last year they had over $5m of free cashflow, so it's hard to imagine there can be much downside from 80cps. Then again, go back to the start of the thread and it becomes apparent that it has nearly always looked this way and yet still lost two-thirds of market cap since 2004.

Very illiquid but I've picked up a few in recent months anyway.

Hi Liz.
I'd love to enter this discussion but got compulsorily bought out of MAQ a few years ago after the price crashed. ( Actually, I think I could have elected to keep my miserable holding but was so disillusioned by then that I let em go!)
I'd originally bought in the excitement of the tech boom when it was thought that a number of smart new telcos were going to give Telstra a bit of a hurry up. Our old friend Telecom had similar ideas!
So sorry, havn't followed their fortunes since but wish you all the best with MAQ.

Cheers

:)

The problem is all TEL stocks around the world is now very cheap trading at low PEs and with a good div yield. Can MAQ compete when comparing the numbers with other telcos?

Quote:

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Originally Posted by Lizard

Time to drag this one out for an annual review.

MAQ are finally forecasting positive NPAT in current period! Maybe at this weeks agm they'll give some indication on quantum for first half.

Net cash now $19m, market cap $16m and in second half last year they had over $5m of free cashflow, so it's hard to imagine there can be much downside from 80cps. Then again, go back to the start of the thread and it becomes apparent that it has nearly always looked this way and yet still lost two-thirds of market cap since 2004.

Very illiquid but I've picked up a few in recent months anyway.

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Well one year on from my last review and time to give it another whirl.

Been a great year for MAQ and, with sp having gone from 80cps to $4.10, directors will finally have been able to face some happy shareholders at the agm.

Net cash has risen from $19m last year to $49m - amazing to think what a giveaway it was at a market cap of $16m last year. Turned a profit of $7.5m in FY09 and currently running a little ahead this year.

Still cheap with a market cap of just $85m considering cash, though not quite as cheap as it was. Unlikely to be a multi-bagger the next 12 months, so will probably ease some funds back out at some stage.

Most of the smaller telcos did well this year I think - though SOT might have been the one to beat, with a 52 week range of 11cps to $1.78!

http://www.sharetrader.co.nz/picture...2&pictureid=80

Hit $5.00 today. A lonely trade.

Fwiw, this company is not related to Macquarie Bank and never has been.

No takers after yesterday's profit upgrade - probably because no one wants to jump a 5% spread to buy and definitely no keen sellers at below $5.

Pretty easy to come up with a valuation that justifies $9+ given over $2.70 per share of cash, forward PE about 9.5 at current $4.71 bid and general earnings growth trend... Might be more likely to get there if they opted to pay a dividend though (and they've given no sign that they are likely to do so). I guess the lack of liquidity means this will probably always look cheap.

Looks like MAQ selling for a discount.

You need it for a small cap.

Market cap just short of $100m and EV/EBIT around 2.8 with NPAT growth forecast - still a hard combo to find.

Only ones I have on watch or hold with cheaper EV/EBIT are all either micro's (under $20m market cap) and/or not likely to grow profits next 12 months.

(Lowest ratio micro on my watchlist is LRG at EV/EBIT 1.5, market cap $8.9m and probable NPAT growth - though I'm still unsure where the longer term growth comes from)

Quote:

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Originally Posted by Lizard

Fwiw, this company is not related to Macquarie Bank and never has been.

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Presumably Macquarie Bank floated MAQ originally as an autonomous entity, hence the name?

Which is the Macquarie entity that has been trading Telecom NZ shares? SSH notice on 1st March indicates 'Macquarie Group' has sold down their holding to an 'unsubstantial' 4.93%. From memory they only disclosed themselves as substantial holders in the latter half of 2009. So it looks like it was a losing trade. I always assumed this was MAQ, but maybe not?

SNOOPY

Me to. Can't assume anything in this market...lol

The Macquarie that was trading in TEL shares had nothing to do with MAQ - that was MQG - i.e the Macquarie Bank related entity. Macquarie Telecom was formed in 1992 - before Macquarie Bank was listed. I don't think they were ever related in any capacity - David Tudehope and related entity seemed to be majority owners when floated in 1999 from what I can find.

Just to confuse you further, TEL actually has shares in MAQ - about 10% I think - held through PowerTel which held them prior to being acquired. So, indirectly Snoopy, you are already an investor in MAQ!

Quote:

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Originally Posted by Lizard

Just to confuse you further, TEL actually has shares in MAQ - about 10% I think - held through PowerTel which held them prior to being acquired. So, indirectly Snoopy, you are already an investor in MAQ!

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Thanks, I think! Perhaps I had better find out a bit more about my new indirect investment. Small telcos are tolerated by the larger ones, for as long as they exist there is the pretence of competition. However, if MAQ were to get a little to successful for their own good is there anything to stop Telstra and/or Optus simply squashing them like an unwanted parasitic ant?

SNOOPY

discl: indirect shareholder

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Originally Posted by KW

Small telcos succeed in areas where big telcos fail. On things like service, price, personal relationships, etc. So pretty difficult to put them down. But they can always buy them and then suffocate them slowly

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Agreed, except for the bit about one upmanship by price. If a small telco has to rent connectivity to a network, and if they want to offer something bigger than an intranet they will have to do just that, they can be crippled by the access price to the externally controlled outside loop at any time. I was wondering how MAQ overcomes this issue.

Here in NZ, Telecom suffocated one of their privatised service companies to death by demanding lower and lower prices from them for their work. Could not Telstra/Optus just put the choker on MAQ if they were taking too much business away from them?

SNOOPY

Quote:

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Originally Posted by Snoopy

Thanks, I think! Perhaps I had better find out a bit more about my new indirect investment. Small telcos are tolerated by the larger ones, for as long as they exist there is the pretence of competition. However, if MAQ were to get a little to successful for their own good is there anything to stop Telstra and/or Optus simply squashing them like an unwanted parasitic ant?

SNOOPY

discl: indirect shareholder

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Whilst MAQ do provide standard "telco" services such as voice/mobile etc which competes with the likes of Telstra/Optus their focus is on hosting and managed IT services. That's where they are getting their growth and where their future lies.

MAQ has way more in common with MLB than TLS

Well TEL have now sold their shares for a low $4.80 - Sydney Morning Herald says they gave away a bargain. Price now $5.40 and looking likely to hit new highs shortly, so they may be right. I'd certainly agree with the view expressed in the article that the share price should at least have an "8" in front of it.

Article (dated 30 July)

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AAPT fire sale

THE piecemeal break-up of AAPT by Telecom New Zealand kicked off yesterday, with the New Zealanders freeing up $10 million through the sale of a 10 per cent interest in Macquarie Telecom.

With iiNet in a trading halt pending a material acquisition, a sale of the AAPT consumer business looks to be just days away.

At this stage it smells like a fire sale. The handful of institutions and Bell Potter retail clients that put up their hands for the Macquarie stake have secured the telco bargain of the year.

The shares were crossed at $4.80 yesterday morning, putting Macquarie on a multiple of just 1.6 times EBITDA guidance for the June 2010 year. Not bad for a business that's grown 22 per cent this year as the company builds momentum in its higher-margin hosting business.

Why so cheap? While there are plenty of institutional investors that reckon Macquarie is worth as much as $8 a share, which would still only be about four times 2010 EBITDA, the path to unlocking full value may not be easy.

For starters, companies with a large and lazy cash backing tend not to be fully valued by the market, and Macquarie holds more than $2.50 a share in cash, with no debt. If it started paying a dividend instead of hoarding cash, a rapid re-rating would be almost assured.

There's also an issue that the free float is small and trading illiquid as Macquarie is 60 per cent owned by the Tudehope family.

Still, Macquarie management has shown increased interest in improving the company's market profile in recent months, and the sell-down by Telecom New Zealand may encourage a few more investors to take a closer look.

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The only problem I see is that MAQ has never looked inclined to want to pay dividends, so it is possible directors will continue to frustrate analysts by stockpiling cash for future investment opportunities that seem slow to emerge.

One happy holder, here.

Result out - quick look, all as forecast. 40cps div is a nice surprise though!

Only caution on next year is that looks like being another investment-hungry year and, in the past, I think they've tended to expense what they can against operations in the investment process. But still forecasting continued growth. Will have a deeper look later.

AGM today and forecasting $15-$17m EBITDA for 1H - about $4m ahead of last agm forecast.

Share price now at $8.70, so has been a good earner and, after making it to 10-bags, is now finally getting closer to "fair value" territory - though perhaps still another 30%+ on that front. Looks like the next-stage investment is going to be pretty significant, with $49m to be spent at North Ryde faciity (Intellicentre 2). Going to see some of that cash eroded by year end - maybe back to $36m ish? But will provide the much-needed base for growth in 2012.

Expecting some consolidation soon, but maybe will run up into next All Ords re-jig in March? Presumably it has liquidity for that, though I don't think it can make ASX300 in December review.

Another earnings upgrade for MAQ, with HY EBITDA forecast of $20m (including a $1.5m one-off). Forecast for $37-$39m EBITDA for FY, which I think should give NPAT around $16m (plus one-off), so around 60% up on last year. Cash not down too dramatically yet with Intellicentre 2 investment - currently over $45m cash remaining. Market cap $195m.

May have kicked off another run and possible entry to All Ords in March.

Hi Liz, I tried to get into this after the annoucement but my internet connection got the wobblies and my order screen wouldn't work. Must admit I don't know the story very well but the listing of NXT has got me a bit interested in the sector

Hi Lizard / Mark100,

Update on MAQ.

I believe MAQ is at inflection point in terms of its growth and profitability. Future growth will come from the new data centre Intellicentre II (IC2) as well as the higher margins that Intellicentre I (IC1) will continue to earn as it improves and increased the portion of IC1 that operates under managed hosting solution rather than co-location. Macquarie has recently announced a new initiative to
improve how managed hosting service is billed by offering monthly rates for access to additional computing capacity. This initiative should further enhance growth.

Although IC1 has been in existence since 2001, it has only been in the past two years where increased profitability from the hosting segment has resulted from the shift up the value chain from managed hosting from co-location.

IC2 will be financed completely out of internal resources so there will be no share dilution. This should significantly improve ROE as cash resources are deployed into a high margin business. The fixed line segment of the business is declining but is complementary to the other service offerings as they
form an integrated package.

MAQ’s competitive advantage
This stems from three factors:
1. The ability to offer a managed hosting service. This requires extensive experience which MAQ have built up over the last decade whereas its competitors largely only offer the space (co-location offering) to run their own equipment. A managed hosting service is higher up the value chain than co-location.

2. Providing a mission critical service. MAQ offers the highest levels of accreditation of any data centre in Australia. It is a Tier 4 Data Centre which is the highest level and most suitable data centre for providing a mission critical service. Clients which cannot afford for their hosting to be offline at all, and are willing to pay a premium for this service use MAQ’s solutions. This gives MAQ important pricing power.

3. Strong reputation. MAQ’s strong reputation in the mission critical space is a great draw card to attract other clients and acts as a barrier to entry for unproven new competitors.

Strong economic fundamentals
Data centre demand is expected to increase from increased use of internet applications such as cloud computing as connections speeds increase.

The supply side is also improving. Although more data centres are coming online Macquarie is able to differentiate itself with its reputation and expertise.

Competitors
MAQ focuses on the niche market avoding small and medium enterprise market like Telstra and Optus but also avoiding the very large corporations.

NextDC (NXT) is a listed competitor but they focus on co-location rather than managed services.

Future growth
The hosting business sales and EBITDA has been growing at a CAGR of 23.5% and 35% respectively from 2007-2010. Recently the MD of the hosting division predicted that the enterprise cloud services would help its hosting division maintain annual profit growth of 30 percent.

Risks
- Decline in Telco business
- Outages and loss of reputation in hosting
- Change in market dynamics in hosting and consequent decrease in demand
- Offshore hosting. However, government agencies require hosting to be held in Australia for security purposes.
- Esatblished competitors entering managed hosting market

Valuation
I have them on a FY11 doing $42.9m EBITDA. The company has guided $37-$39m EBITDA but I think this will prove to be conservative as they have a history of beating guidance.

Although the share price has had a strong run since the sell down from AAPT in July 10 and I am not usually a fan of stocks that have appreciated significantly, I believe the future growth potential is unrecognised by the market. I can see $13 in the near term with $16-$18 target in medium term once IC2 ramps up operations.

Thanks Mamos! I seem to be in chaos again and with little time for analysis, so really appreciate your thoughts... my response to lack of time is always to diversify and sell-down winners to a less risky level! As time has proved before, this isn't always the best strategy... so very grateful for your update.

My only thought on MAQ is that there may be a bit of sideways while the Intellicentre 2 depreciation hits the accounts before the revenue scales up. Also, I have no idea what "virtualisation" means in regards to hosting and whether that poses a threat. So I'm out of my depth technologically... and I thought MLB might be good diversification on this (at $2.12), which has so far turned out to be quite wrong!

Congrats to those who are holding and doing well

MAQ came to my attention last year when the SP was trading round $5

The turnover was simply too low for me to consider buying any at the time and nothing seems to have changed re:turnover however the SP is now up 100% !

Did you guys factor the low trading volumes into your investment decisions or was low trading vol not an area of concern in your analysis?

Disl: indirect holding

Obi, you must be a heavy hitter if you are worried about liquidity.

Free float is quite low in this stock as management own a large portion and dont want to sell down as I think they know the potential of the business.

Quote:

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Originally Posted by ob1kinobi

Congrats to those who are holding and doing well

MAQ came to my attention last year when the SP was trading round $5

The turnover was simply too low for me to consider buying any at the time and nothing seems to have changed re:turnover however the SP is now up 100% !

Did you guys factor the low trading volumes into your investment decisions or was low trading vol not an area of concern in your analysis?

Disl: indirect holding

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Also interested. How do you have an indirect holding? Are you a beneficiary of a trust that holds MAQ?

Hey Mamos im def no heavy hitter, still in the little leagues

The guy who got me into investing/trading won't enter anything without a 500K daily t/o so I tend do the same.

Hence my reluctance.

My indirect exposure is through a few units I bought in a small cap fund which covers that end of the market on my behalf.

Interested what's that fund? Is it Australian based?

Just sent you a PM

I am guessing PIE Funds. Excellent choice, Ob1kinobi! :)

Great guess Liz, I thought Mike.T would have a higher profile on ST but not at the mo at least.

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Originally Posted by ob1kinobi

Great guess Liz, I thought Mike.T would have a higher profile on ST but not at the mo at least.

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Yes, he certainly deserves it. I've been tempted to start a thread on the progress of the fund, but not sure it would help his investing style to have too many traders watching his picks!

Nice analysis mamos. I managed to pick a few up at $10.31 this morning, not as many as I would have liked though

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Originally Posted by mark100

Nice analysis mamos. I managed to pick a few up at $10.31 this morning, not as many as I would have liked though

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You have a habit of picking up the intraday lows Mark. Well done.

This is one of my favourites along with Zicom, however ZGL is a lot closer to fair value now than it was a month ago.

Quote:

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Originally Posted by mamos

You have a habit of picking up the intraday lows Mark. Well done.

This is one of my favourites along with Zicom, however ZGL is a lot closer to fair value now than it was a month ago.

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When the buy depth is thin I pick a spot where there is a few buy orders of a size that may be supportive. I then put buy order just ahead of them. If there is a dump, I find my order (or part of it anyway) sometimes gets hit and then sometimes you get a nice bounce. SIV was similar earlier this week. I also do a similar thing when looking to sell as well.

But I like MAQ longer term as well, not just for a trade.

Quote:

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Originally Posted by mark100

When the buy depth is thin I pick a spot where there is a few buy orders of a size that may be supportive. I then put buy order just ahead of them. If there is a dump, I find my order (or part of it anyway) sometimes gets hit and then sometimes you get a nice bounce. SIV was similar earlier this week. I also do a similar thing when looking to sell as well.

But I like MAQ longer term as well, not just for a trade.

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That's interesting mark100. Looking at the depth now, where would you place a buy or sell order.?

I wouldn't now. But this morning it opened at $10.80 and there were virtually no buyers above $10.30. So my order went in at $10.31.

And if you were selling how does that work?

No different. Illiquid stocks often spike high or low and I like to take advantage of such movements on both sides.

Fair enough. Thanks mark.

MAQ result out. EBITDA is nearer the lower end of guidance, I think, so some might be disappointed, although MAQ is already well off its highs.

Op cashflow remains strong and looks as though they have most of the cash in hand for their Intellicentre II development next year, plus can probably fund remaining $22m capex needs from op cashflows. Despite expecting a $6m hit to EBITDA for the coming year as a result of the Intellicentre development, they are still forecasting EBITDA to increase.

However, suspect it will be a bit of a go-nowhere year for the MAQ share price and perhaps 18 months of sloshing around until they can start to generate returns (and not just wear the chunky depreciation) on this investment.

Hi KW, I think it is too soon for MAQ to do much - they probably need to get the next couple of results out of the way.... but it seems cheap enough down here, so I'm hoping they have another leg up in them at some stage - though more likely not until they start turning more profits from recent investment.

Maybe one better left until next year, as first half NPAT could be noticeably down on pcp with increased depreciation.

Results announcement a little better than I'd expected - thought they would have drawn down more of that cash and upped expenditure and depreciation, with maybe lower NPAT, so good to see an increase. Seems to me they are well on track to beat the FY $19.5m NPAT I've allowed for (eps of 93cps). After that, either count the excess cash or count the future growth they'll get from investing it in the Intellicentre. Either way, valuations should be well north of $11.

I bought back the shares I sold at $12.20...

Forecast for $40.6m EBITDA which probably comes in at around $20.3m NPAT. Intellicentre 2 now commissioned, so good capacity for growth in 2013 and they have managed a good part of the investment from cashflows, as still have $30.8m in cash.

I'm not sure why the price is flagging at around $8.20 (below the $8.90 I bought at in Feb), as I figure they should be well north of $11 - probably more like $14+. Perhaps with the investment phase behind them, for now, they will raise their baseline dividend.

Liz, I picked up a few of these again last month so the upgrade was a nice surprise. The half year commentary says the EBITDA for the FY would be weighed down by approx $6m of one-off establishment costs associated with the IC2 and cloud computing.

I wonder if the upgrade was due to these costs being lower than expected or as a result of the underlying business performing better? If it is the latter, then the FY result on an underlying basis is even better. Possibly an underlying NPAT of around $24m

Since MAQ is effectively a controlled company and has no need for additional capital, they also have no reason to impress minority shareholders, analysts or fund managers other than as it reflects on personal status. They've always seemed to depreciate assets as fast as possible and write down a lot of spend that some might class as investment. It has always seemed to me that they report profit and asset values conservatively.

Mind you, in a controlled company, profits and assets mean little if the majority shareholders choose never share... so willingness to pay dividends becomes an important factor in underpinning share price.

Thought for a minute that they were going to sell down MAQ on what I thought was a good result - if well flagged. A bit more div would have been nice, but seems there is still more investment to go with the Intellicentre 2 next year, so they are taking it slowly and keeping cash holdings high.

Currently at $9.60, with $1.47 ps in net cash and paying final 12cps div for total of 24cps.

I still think they're worth somewhere north of $15 per share, but it might take some revenues from IC2 and a larger dividend to get it there - with another $5m per year added to the depreciation bill, the market will want to see good increases in hosting revenue.

AFR - Macquarie Telecom Impresses Ahead of Data Centre Scrap

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DAVID RAMLI

Sydney-based data centre and telecommunications provider Macquarie Telecom has pleased analysts and the market with a 10.6 per cent increase in net profits, who said the company will face increased competition for data centre customers.

In results announced to the Australia Securities Exchange on Thursday, Macquarie Telecom said net profit would rise to $19.6 million year on year. It also confirmed an earnings guidance upgrade issued in late July.

The result was welcomed by analysts. In a note issued by RBS Morgans its analyst Nick Harris said Macquarie Telecom’s results were ahead of initial forecasts.

But he also said the second half dividend of 12¢ per share was 1¢ below his expectations and that the market was hoping for a bigger payout given the company’s strong cash position.

“It was a high quality result with strong operating cash flow,” he said. “The FY12 payout ratio was 25% and ... at 25% prompts the question of what MAQ’s plans to do with the remaining cash balance.

“MAQ remains a high quality value investment, trading on just 3.4x FY13 EV/EBITDA, yielding 3.5% fully franked.”

While Macquarie Telecom is well-positioned to capitalise on its latest data centre in Sydney, Intellicentre 2, it is also facing rising competition from rivals that include the US-based firm Rackspace which formally launched a local facility yesterday.

Its country manager said he was looking to go head to head with local players like Macquarie Telecom and that the Australian market was less competitive than overseas markets.

Rival listed data centre provider NextDC is also rapidly expanding its footprint in capital cities around the country, but it provides raw space for customers to store their equipment whereas Macquarie Telecom operates infrastructure as a service.

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By my calc, his forward EBITDA ratio, after allowing for extra $5m depreciation, probably translates to about $22.5m NPAT - or a forward PE of 8.9 at $9.50.

Not a good forecast looks like another year of waiting. Out in the first few minutes

Rev down 6.9%

PAT down 33% to $7,376,000

Div same @ 12c

Alot more spending ahead

Looks like the good times are still a year away.

Yes, they weren't forecasting a brilliant result, so not a total surprise. I reduced on the earlier forecast, but still hold some. Haven't had time to pick the announcement apart yet and decide whether to jump.

Oh great, another after-hours earnings downgrade. Expect they'll get savaged tomorrow given low liquidity. :(

Down re 8.2% Guidance was $38 to $42 mill now $35 to $36 mill." It is important to recognize that the delays in realising rev from these larger corporate and Fed gov customer deals have a short term impact on earnings, specifically in calendar 2013. Our servicing of the fed gov lead agency gateway program and intellicentre 2 are on track to deliver long term profitable growth"

A pretty depressing result out of MAQ - they have returned to the old days of prolonged "investing for growth" as their margins get undermined by competitors and their cash gets spent on rapidly depreciating assets. It could have been another "watershed" year, with growth to come, but looking at the likely increases in depreciation and the fact that 1H forecast EBITDA is lower than the pcp, it could be a real crumbler.

One day, this will be a good investment again as they finally extract value from all those assets, but I see no rush here.

Times up Maq, Ive taken the Knife to you .

Relieved not to be holding MAQ following current half year - not much to show for their past few years of investment yet. Maybe one day they will, but would need to get a lot cheaper to be worth taking another punt on. Currently $8.37, but would think they would fall tomorrow.

Rather than spend all this cash on data centres it looks like they would have been better off just sticking with the Telco division, let it gradually decline and pay all the cash flows out as dividends (or sell it to a bigger player).

Instead all the cash is gone, they now have net debt and all the op cash flow is being pumped into the hosting division that then creates a huge depreciation charge.

I wonder what the final ROE will actually be?

$8.30 to $5.50 now
Guidance in June EBITDA reducing from previous to afloat on half to $25-$27 million. Significant progress blah blah. Sold in the $8 's

Now $23.20 DOH!

A case of time in, not timing in

Download Document 688.02KB

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Originally Posted by Joshuatree

Now $23.20 DOH!

A case of time in, not timing in

Download Document 688.02KB

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EPS falling, dividend cut and yet it trades on a PE of 30.

Interesting/odd trading goes on in this stock. Look back to July - it went up around 14% in one day on one small trade although there was no news, and kept rising on tiny volume. After falling back in August it jumped again late in the month despite announcing a year of flat/declining EPS and NPAT.