Microcap asset manager Microequities recently upgraded their recommendation on BGL in response to the recent upgrade to earnings guidance (this report is freely available to registered users and there is no cost for registration). While last traded at 22c, Microequities have set a price objective of 30c, rating the stock a Strong Buy. This upgrade coincided with my own decision to double my holdings in the niche telco.
The $5.2M EBITDA for FY11 is anticipated to double to $10.5M in FY12 which is not an unreasonable forecast, given the current EBITDA run rate of $7.5M and BGL’s anticipated $1.6M reduction in costs over the next 12-18 months. BigAir would only need to bring on another $1.4M worth of EBITDA through new orders, which should not be difficult if they maintain current revenue CAGR of 50%.
Interestingly, Microequities also anticipate a 1c dividend for FY12, based on the completion of recent acquisitions and lower Capex requirements for FY12. A steady payday from a business with such strong sector dominance, high margins, and impressive top line growth means I would have no plans to sell unless BigAir’s stock price rose to excessive levels: well above 20 times current earnings assuming revenue CAGR and EBITDA margins are maintained.
Because of my day job in the B2B Telecommunications industry I can confirm that BigAir are the only operator filling this sizeable niche for the business market, my original article outlining BigAir’s competitive advantages is located here.