iiNet (IIN) is the second largest Internet Service Provider (ISP) in Australia.

IIN has built its own network (the iiNetwork), boasts the largest Voice over IP network in the country, abolished monthly phone line rental with Naked DSL and has released wireless modem-and-phone-in-one BoB to the world.

The firm was included in the ASX 200 in 1999 and employs about 2,000 people at present.

The group’s strategy to increase its value is to grow organically and inorganically. IIN recently acquired TransACT in 2011 and Internode in 2012. These acquisitions are expected to deliver considerable synergies to the firm in the coming years.

Recent Results

In its 1H13 report, the firm’s NPAT increased to $31.9 million, 122% higher compared to the prior corresponding period.

Aside from the aforementioned, one of the main highlights of the recent report is the significant 73% increase in the firm’s EBITDA compared to the 1H12. This translates to a 35% improvement in the firm’s EBITDA margin from the prior corresponding period. The solid results were primarily due to the strong organic growth and synergies realized from its acquisitions.

Below are charts of the firm’s reported EBITDA and reported NPAT performance in its 1H13 results. One can easily see the vast improvement from the 1H13 results compared to the 1H12.

Peer Comparison

Despite the recent rally IIN’ share price, the company stacks up rather well when compared to its peers.

IIN is trading on a forward P/E of 16.8x.

This compare to peers Amcom (AMM) and TPG Telcom (TPM) which are trading 22.1x and 19.6x next year’s earnings.

IIN’s forecast dividend yield is around 3.8% more or less in line with AMM’s and higher than the 2.5% forecast for TPM.

Outlook

As previously mentioned, the firm’s recent acquisitions are expected to deliver synergies to the firm.

More importantly, both TransACT and Internode has a solid customer base, which will translate to higher potential earnings growth in the coming financial years.

Some of the benefits from the acquisitions have already manifested in the firm’s recent 1H13 results. We expect the firm to realize the full benefits from the aforementioned in the medium to long term.

Moreover, the firm has been successful with increasing its market share on the back of competitive rates, attractive combination of services, and its acquisitions.

Iinet was listed in the traders report as a buy share for our members on May 13th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.

   Written by: admin   Other posts from: admin

iiNet (IIN) is the third largest Internet Service Provider (ISP) in Australia.

IIN has built its own network (the iiNetwork), boasts the largest Voice over IP network in the country, abolished monthly phone line rental with Naked DSL and has released wireless modem-and-phone-in-one BoB to the world.

Acquisitions driving growth

A large part of IIN’s growth has come from acquisitions and evidence suggests the group is effectively managing their integration into the current business structure.

In late 2011, IIN purchased TransACT, an ISP provider in regional Victoria and the ACT. Early this year, it acquired South Australian-based ISP Internode.

The acquisitions helped lift FY12 revenue by 19%. IIN was able to report another blockbuster earnings result, with full year operating profit rising 47% to $145 million.

The group expanded its profit margins thanks to revenue increases, efficiency gains and operational cost-outs. The robust growth in profit also helped deliver a 17% jump in the full year dividend, to 14 cents (8 cent final dividend).

Cross selling benefits

A key benefit of IIN’s growth strategy is the cross selling opportunities available to it.

IIN offers a range of products and services to both residential and business customers. In addition to providing internet access, the company offers hardware (modems, routers, etc.), television (fetchtv), NBN, and phone services.

The complementary nature of these products, and the recent growth of IIN’s client base, sees it well placed to deliver on its aim of increasing the average product per customer from 2 to 3.

Outlook

A large part of IIN’s earnings growth has come from acquisitions, and the group is on track to achieve cost synergies from TransACT and Internode in FY13. The synergies are expected to drive cash flow and net profit growth this financial year.

Longer-term, the growth in IIN’s customer base, coupled with its expanded product offering, should provide the company with more cross selling opportunities.

We are confident in IIN’s ability to continue its strong growth path, helping to boost dividends and the return to shareholders.

   Written by: admin   Other posts from: admin

Current Australian shares to buy are iiNet Ltd.

iiNet Limited (IIN) has announced it will buy out fellow ISP Netspace for $40 million. The deal appears to be a smart move by IIN, making it one of the shares to buy.

The acquisition will be 100% debt funded, and is expected to be completed by the end of next month.

The acquisition will increase IIN’s exposure in its key markets of Victoria, NSW, and Tasmania. Adding Netspace will grow IIN by about 20%, and boost its market share from 12.4% to 15%.

IIN expects the acquisition to generate over $70 million in revenue, and to add to earnings from next financial year.

This doesn’t even take into account the potential for synergies to boost the bottom line. Given the similarities between the businesses, synergies should be significant.

In terms of shares to buy, IIN soared 7% on the day the deal was announced.  Such a strong rise likely means the market has given the deal a tick of approval.

   Written by: admin   Other posts from: admin