Macquarie Telecom - MAQ

[h2so4]

Fair enough. Thanks mark.

[Lizard]

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.

[Lizard]

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.

[Lizard]

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...

[Lizard]

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.

[mark100]

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

[Lizard]

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.

[Lizard]

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.

[Lizard]

AFR - Macquarie Telecom Impresses Ahead of Data Centre Scrap

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.

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.

[mark100]

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