The report’s focus on the AT&T contract does help explain the recent share price rise so thanks for the post. My comments on the report are:
- I agree that we should know about the AT&T contract by the end of the year.
- I don’t agree with the number of houses in the estimate. AT&T have only taken on CAF commitments to service 1.1million premises. Whilst they did promise to roll-out rural broadband to 13 million premises there is no legal requirement that they do so and it is very difficult for the FCC to punish them for failing to do so. AT&T’s track record of keeping promises is not great. AT&T will use whatever technology is appropriate for the location with cost the major consideration, hence not all the premises will use a fixed-wireless solution. The CAF requirement is for a 10Mbps/1Mbps minimum so this opens the door to wired technologies.
- “NTC is the only company in the world to have supplied the devices for a rural NBN”. I am not sure how Eureka can make this statement. There are plenty of fixed wireless devices in service in many countries.
- “Therefore a win with AT&T would just about guarantee other global opportunities.” Another stupid statement to make. These devices are standard off-the-shelf products. The NBN customized their fixed wireless terminals so NTC would be selling a different device to AT&T and potentially other customers.
- “…market cap of about $175 million and is trading on a price-earnings ratio of 15 times FY16” So Eureka expects NTC to post earnings of $11-12M. My optimistic earnings estimate is closer to $8M. Taking FY14/15 of 2M + 2M of R&D that shouldn’t need to spent in FY15/16 (I am not even sure if this was expensed or capitalized in FY14/15) + $3M from additional NBN revenue + 1M additional traditional and M2M revenue, so 2 + 2 + 3 + 1 = 8M.
NTC Price at posting:
$1.60 Sentiment: None Disclosure: Held