stonebridge buy target at $2.61!

Hi there,

Another rosey report:-) Link at bottom.

ASX code | MTU
Last price | $1.77
Fully diluted shares | 110.1m
Market cap | A$194.8m
52 week hi/low | $1.95 / $0.48
12 month price target | $2.61
Valuation | $2.61


KEY POINTS
�� Telecommunications service provider, servicing the SME space, with a
tailored product offering and a business model focused on providing
exceptional service to customers.
�� M2 has approximately 1% of the telecommunications market share in
Australia, and an estimated 3% of the target SME telco market.
�� Strong organic growth potential (10-15%pa based on management
comments.)
�� Acquisition opportunities in the small reseller market, with the potential to
immediately increase margins (through cost synergies and increased buying
power.)
�� Low gearing, with $18m net debt at December 2009 and strong cashflow.
�� Margins to increase in FY2011, as a result of increased buying power,
successful integration of acquisitions and an internal focus on operational
costs and supplier costs.
�� FY2010 management guidance of $380-400m in Revenue, $29-31m in
EBITDA and EPS of 13.3-14.3 cps (StoneBridge forecasts 14.2cps).
COMMENT
M2 management have performed exceptionally well in integrating the recent
Commander and People Telecom acquisitions, creating significant value for
shareholders.
With increasing margins in the short to medium term, strong organic growth, and
potential accretive acquisition opportunities, we see M2 as a quality, well run
company, offering attractive returns to shareholders at the current share price.
M2 is trading on a PE multiple of:
12.5 x FY2010 earnings and 9.3 x FY2011 earnings, versus the ASX 300:
16.0 x FY2010 earnings and 12.6 x FY2011 earnings.
M2 is offering investors a yield of 6.0 % in FY2010 fully franked.
INVESTMENT VIEW
With strong growth potential and a solid dividend yield for investors, we see M2
as a buy at the current share price.
We recommend MTU as a Buy, with a 12 month price target of $2.61, based
on our DCF valuation.

http://m2.com.au/docs/investor/StoneBridge-MTU-overview-20100323.pdf

SD