On the 19th of February, BigAir released their half year results for FY15. Let’s check it out:
Revenue $26.2M up 55%
EBITDA $8.5M up 28%
NPAT $3.5M up 22%
At current price of 0.795, BGL is selling for 20 times earnings. At these rates of growth, that’s a pretty good deal. Microequities have released a new report rating BigAir a Strong Buy with a price target of $1.06. However this is a reduction of their earlier price target of $1.12 off the back of lower Wimax revenues.
I am expecting BigAir to realise more earnings accretion from their acquisitions over the next couple of years, and will continue to hold unless the business experiences a major change to its fundamentals, or it becomes grossly overvalued, in the order of $1.50 per share.
BPF released their HY15 results this week, showing the following results on PCP:
- Revenue $11.9M (up 46%)
- Underlying EBITDA $1.2M (up 20%)
- NPAT $808k (HY14 $95.7k loss)
- Underlying NPAT $567k loss (Due to performance share revaluations)
So the business is now making money, having doubled staff in 12 months, and are growing revenues at a good rate. What’s going to create additional earnings upside is the following:
- Contract optimisation and automation reducing back-end cost
- Re-signing annuity revenue which lowers cost of sale
- Building out product portfolio to include PaaS (Platform as a Service)
It’s difficult to forecast where BPF will be in HY16, but I would expect revenues to grow another 50%, with improved profitability. As the business matures later this decade, we will see more of the annuity contracts enter a steady state, and get a good picture of new business growth vs continuing operations. I also anticipate seeing more acquisitions of other MSPs to either build scale or complement the existing business.
Every year when it comes out, I read Warren Buffett’s annual letter to shareholders. I’ve come to know the key businesses within Berkshire Hathaway, and it inspires me to think long-term as Buffett reflects on the performance of his own investment decisions over many decades.
The letter reflecting on 2014 celebrates 50 years of management, so there is more interesting commentary than usual. As always, it’s a recommended read for long-term investors.
Reverse Corp provided an earnings update for HY15 this week, and confirmed things were still moving in the right direction:
Revenue $4.51M (up 4%)
EBITDA $1.84M (up 16%)
NPAT $1.05M (up 56%)
So revenue nearly flat, with increased profitability thanks to more efficient operations at 1800 Reverse. OzContacts is now breakeven, so we can anticipate some earnings accretion from this in FY15.
Of note: Recievables have blown out from $658k to $900k (up 37%)
Current cash in bank sits at $6M though, meaning at a market cap of $14M, REF is generating $2M a year cash off a business valued at $8M, a P/E ratio of 4.
There is still the risk of revenues falling off a cliff, but as I said earlier, this is definitely in the cigar butt territory.
The upside is for improved profitability of OzContacts.com.au, and revenue growth from 1800-Reverse to remain flat at least, allowing REF to continue generating cash.