M2 beats expectations

The telco should see broker upgrades after beating estimates and posting a strong outlook for 2013-14.

M2 Telecommunications Group (MTU) is likely to see a raft of broker earnings upgrades on the back of its solid full-year result and outlook that sent its share jumping to a record high this morning.

The second-tier telecommunications services provider delivered an 83% surge in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $119.1 million as revenue jumped 73% to $681 million for the year ended June 30, 2013.

The margin expansion and figures were ahead of consensus expectations with analysts pencilling in a top-line figure of $655.7 million and EBITDA of $110.9 million. The good result had been flagged in the article Big expectations for small caps back on July 10.

What is also significant is the group’s outlook for the current financial year. Management is tipping around a 47% uplift in sales to between $970 million and $1.03 billion and around a 48% increase in EBITDA to $150 million to $170 million.

This will put the stock on a price-earnings multiple of 14 times for 2013-14 with a gross up yield of 7.1%.

M2, which is part of the Uncapped 100, jumped 1.4% to $7.16 this morning.

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