This Small and Focused Telco is an Outstanding Performer

M2 Telecom offers Business Phone, mobile and internet services in Australia and New Zealand, and has focused on tailoring solutions for small businesses for over 10 years. Its accent on the customer is deeply embedded in MT's culture and no doubt a cornerstone of its very rapid and continuous growth path.

Since listing in October 2004 its EBITDA has grown over 12 times and EPS and dividend have each grown over seven times. Investors have been well rewarded and the journey is far from ended.

Expansion has been organic and through a steady flow of acquisitions, each on sensible terma and rapidly integrated, with gains to the management team, to core capabilities and to customer numbers.

MTU does not own any cable, fibre or mobile infrastructure and the NBN is no threat: in fact, as an experienced reseller to Telstra and Optus it is an ideal customer for NBN.

In FY11, MTU focused on making substantial operational cost rationalisation and business efficiency gains following its largest acquisitions to date. It completed customisation and training for a new Business Support System (“Ninja”); saw across-the-board improvements in customer satisfaction levels; and made new customer base acquisitions including Clear Telecom and Austar Mobile. Its NBN trial sites went “live” and the CEO transition plan was implemented on schedule with founder CEO and MD Vaughan Bowen passing the 'organic growth' baton to Geoff Horth. This frees Vaughan as Executive Director to focus on strategic activities including new acquisitions - a proven competency as MTU has done 12 since mid 2007.

Half-year Performance & Estimates - MTU

Year-end June	1H12A	FY12A	1H13A	FY13A	1H14A	FY14E	FY15E
Sales, $m	185.1	392.7	304.8	680.3	505.2	1,021	1,058
EBITDA, $m	27.6	59.2	54.7	107.4	87.9	159.4	175.0
EBIT, $m	23.5	49.0	40.1	76.0	65.3	115.2	129.8
Report NPAT, $m	16.8	33.0	24.5	43.8	43.9
Adj. NPAT, $m					43.9	84.0	93.9
Reported EPS, ¢	13.00	25.00	15.00	27.00	24.00
Adjusted EPS, ¢					24.00	48.25	54.00
EPS %FY/Growth	52%		56%	8%	60%	79%	12%
Dividend, ¢	9.0	18.0	10.0	20.0	11.5	25.00	30.00
Franking, %	100%	100%	100%	100%	100%	100%	100%
EBITDA Margin	0	15%	18%	16%	17%	15.6%	16.5%
NPAT Margin	0	8%	8%	6%	9%	8.2%	8.9%
ROE, %	0	17%	12%	15%	14%
EBIT/Interest	0.0	24.7	7.8	7.0	7.26
Net Debt / Equity	0	0.66	0.57	0.93	0.92
CashFlow/Sh, ¢	17.8	32.5	23.0	38.7	12.6	50.4	64.4
Y/E Shares, m	124.5	156.6	158.0	178.4	179.4

Notes

Data sourced from IRESS Market Technology Limited. EPS Growth compared with the pcp is shown in most columns except the first half years which show their percentage of full year EPS. In a handful of cases, unadjusted share splits, or changes between positive and negative values, may give strange changes in ratios.

Recent News Highlights

As at 31/12/2012 : see details at www.m2.com.au   (new window? Shift+Click)

15/11/2012      Investor Day Presentation

26/10/2012      AGM, Chairman's Address & CEO's Presentation

18/09/2012      2012 Annual Report to Shareholders

27/08/2012      FY12 - Full Year Results & Presentation

13/12/2011     Cornish reduces holding in MTU from 8.34% to 6.56%

28/10/2011      AGM - Chairman's Address & CEO's Presentation

Russell Research in the media

Stock Picks for The Bull.com.au -  11 March 2013

BUY M2 Telecommunications Group (MTU)

It bought Primus Telecom in June last year. It virtually doubled EBITDA to $55 million in the December half on revenue up 65 per cent. Underlying earnings per share rose 32 per cent to 20 cents. Integration and synergies are on track with extra customer services, including IP, Commander and Cloud. M2 is set for its eighth EPS growth year and pays a 5 per cent franked yield.

Stock Picks for The Bull.com.au -  16 April 2012

Buy:    M2 Telecommunications Group (MTU)

M2 provides fixed line, mobile and data services to small and medium sized business. We expect it to acquire more businesses and to prosper from the National Broadband Network. In the ASX 300 Index, it’s been an outstanding performer in the past ten years, but strong management is set to ramp up further.

Stock Picks for Sunday Herald Sun - 18 March 2012

BUY: M2 Telecommunications Group Limited, MTU, $3.39

Focused on smaller business, now in the ASX 300 Index and showing outstanding performance, yield and prospects.

Wave Chart

Company Overview

A general background is given above, MTU's brand names, emanating from key acquisitions, are quite widely known, including Commander, Southern Cross Telco, M2 Wholesale, and Black & White in New Zealand.

MTU is focused on the SME (small and medium enterprise) market, of which it estimates its share is around or not much more than 5%. This allows room for growth!