being revalued..., page-6

re: up 25% today Hi extralite,

Your points are taken, however, by the same token, the following are DFT's primary business figures for the December half (recently completed):

REVENUE = $7.35M (1H-FY03 = $5.85M)

COMMUNICATIONS' COSTS = $3.65M ($2.4M)
EMPLOYEE COSTS = $1.85M ($1.05M)
OTHER EXPENSES = $1.30M ($2.85M)

EBITDA = $0.55M (LOSS = $0.60M)
NET LOSS = $0.30M (LOSS = $1.65M)

COMMS COSTS rose 52% over the PCP. EMPLOYEE COSTS rose 76% when compared PCP.
REVENUE rose 26% when compared PCP.

DFT is improving, however, why is it that their cost /OPEX profile is deteriorating (not improving) and their margins are falling (not increasing)?

As for ARPU values (pure, or blended), why is it that these are not appropriate for consideration? After all, they are used on a recognised basis throughout the telco industry and, indeed, in all industries, as an appropriate metric calculation (ie: revenue to a defined base, etc).

The point is, DFT's ARPU values have:
1)
fallen on a PCP basis (not increased);
2)
are very low when considered even on a comparative basis to SWT;
3)
seem to have been an appropriate measurement tool for upticking PTL's revenues on a comparable PTL /SWT basis; and
4)
would be used as a basis of calculation by DFT in terms of either acquiring new ISP "active" customer accounts, or in selling its own business to a competitor.

But to say it again, 12 months ago, DFT was generating $30 per customer per month. Now it is generating $22 per month. Going forward, it needs to be generating a lot more than this (double, to triple, in fact). But, to do this, DFT will need to offer a compelling proposition, either based on price, or based on content.

Price, it will be able to compete with, provided that it controls its communications' costs and switches traffic via its own backhaul network. Trouble is, it uses Testra's backhaul network and, going forward, thata will costs more, not less.

Content, it will have to acquire and pay for. Telstra, however, is acquiring, developing, buying, licensing and switching content and is building a compelling proposition in this sector. So too is HTA (from a "3" perspective), and Optus. But, less so, Vodafone.

To have a growth premium built in, DFT has to grow the business, grow its average customer revenue, reduce its costs, and become profitable. However, too many people keep confusing EBITDA with NET PROFIT. EBITDA is a proxy for cash flow. So, whilst DFT may secure upwards of $1.6M EBITDA in the 2nd Half, its likely net profit will still be sub-$1.0M.

Measured on a market cap basis, DFT tonight traded @2c, for a market cap of ~$25M. That places DFT on:
1)
a prospective p/e of 12.5x (based on my suggestions of $1.6M EBITDA and $1.0M NPBT, annualised);
2)
an EV of ~$25.5M (MC+interest bearing debt only);
3)
an EV of ~$29.8M (MC+interest bearing debt and payables /trade creditors);
4)
a prospective EBITDA/EV multiple of ~8.5 (based on EV+DEBT);
5)
a prospective EBITDA/EV multiple of ~10 (based on EV+DEBT+PAYABLES);
5)
an NTA ratio of 0.12c, for a 17x NTA multiple (compared to 0.88c when compared PCP, for a 2.3x NTA multiple).

Take this through to 4c and, by any comparable measure, a very substantial growth premium will have been built into the price.

Better then for a share consolidation to occur and then to take things from there.