A niche little earner in tight telco market

What's new Amcom has once again delivered 20 per cent-plus growth in underlying earnings in fiscal 2013. Revenues grew 16 per cent during the year to $158 million, while, on a normalised basis, net profit and earnings per share jumped more than 20 per cent to $21 million and 8.5¢, respectively.

The company's balance sheet remains robust, with gearing at only 9 per cent. This provides ample capacity to fund the continuing growth of the business. In the meantime, the board of directors declared a final dividend of 3.5¢ a share.

Outlook What impressed us most about the result was it was almost entirely driven by organic growth. This is a testament to the company's strong niche position in the competitive telecommunications market. Management has sufficient confidence to project another double-digit increase in underlying net profit in fiscal 2014 - a growth rate we expect will continue for the medium term.

Price Amcom's share price has been performing exceptionally well on the stock exchange, appreciating by 17 per cent and 66 per cent in the past six months and 12 months, respectively. We believe this reflects investors' increasing recognition of Amcom's impressive earnings track record.

Worth buying? For the 11th consecutive year, Amcom has delivered 20 per cent-plus growth in underlying earnings. The company is also successfully fortifying its earnings profile with expanding annuity-type revenue streams. However, these strong fundamentals are beginning to be reflected in the price. Consequently, we believe it is prudent for those without exposure to wait for a pull back in price.

Brian Han is senior research analyst at Fat Prophets sharemarket research. To receive a recent Fat Prophets Report, call 1300 881 177 or email info@fatprophets.com.au.

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