m Boreham From: The Australian August 27, 2013 12:00AM M2...

m Boreham
From: The Australian
August 27, 2013 12:00AM


M2 Telecommunications (MTU) $6.72

FOR those seeking an alternative exposure to the (arguably) overloved Telstra, M2 is becoming a telco of scale as it beds down the $250m acquisitions of internet service providers Dodo and Eftel.

There's still time for a snafu, but M2's previous purchases have been seamless and it's hard to argue with six years of successive earnings growth.

M2's earnings surged 33 per cent to $43.8m, although earnings per share rose only 6 per cent to 27.4c a share, reflecting the 19 million shares issued to fund the cash-scrip purchases.

Excluding $16m of acquisition costs relating to Dodo and Eftel and $5m for the previous year's Primus Telecom purchase, net profit and EPS rose 44 per cent and 14 per cent, respectively.

The results also show how far M2 has evolved from its original remit of being a "carrier-agnostic" reseller to small business. In a more detailed breakdown than in the past, M2 disclosed total "services in operation" of 1.452 million, 932,000 consumer and only 353,000 business. This year, just over half of M2's revenue will be derived from retail.

Via Dodo, M2 inherited a base of 56,000 energy customers. That's modest compared with the established utilities, but with average monthly revenue of $121 per customer compared under $50 for the telco lines, it's a business M2 is keen to grow.

Despite forecasting 48c-53c a share for the current year, M2 shares yesterday declined 34c.

RBS Morgans analyst Nick Harris -- who thought the results hit the mark on all measures -- attributes the sell-off to Friday's anticipatory 36c, 5 per cent surge.

To us, this pull-back is an opportunity to renew our buy call.

http://www.theaustralian.com.au/business/opinion/deep-debts-could-send-boart-down-the-shaft/story-e6frg9lo-1226704606130