citibank vagg research, page-2

here is the summary from morgan stanley (citigroup) dated
27/8. Dont ask me for full details, i dont want any copyright problems.
Its the latest report:
Lower Sales but Profit Inline - Sales of $522m and underlying EBITDA of $27m compared to CIRA at $546m/$27m. Operating cash flow of $16.8m was ahead of our $13.9m estimate due to lower costs. FY11 guidance is EBITDA growth as SSM benefits from end-market demand strengthening and lower cost base. Risks remain however and we are cautious on significant revenue recovery in the near term with uncertainty around NBN and Government environmental programs. Strategy for Growth - Focus has shifted to Field Services given lower cost base and recent contract momentum has been positive. This year SSM has secured four environmental/metering contracts and extended the AAS contract with Telstra where expansion in scope to WA and SA should deliver ~10% increase in annual revenues to $250m. Demand for environmental services, smart meters and mobile infrastructure is strengthening but some risk remains given extent of Telstra exposure and political uncertainty post election. Cash Flow Focus - This has paid off with operating cash flow doubling to $16.8m in FY10. Combined with $30m from earlier capital raising has seen reduction in net debt to $59m or 2.2x EBITDA which is well within the likely covenants at ~4x. This provides company with both operational flexibility (to strategically invest in new business opportunities where appropriate) and capacity for capital returns. We forecast a recommencement of dividend payments with a modest 25% payout ratio in FY11 rising to 50% by FY13. Tweak Estimates and Retain Buy - We make minor estimate changes with lower revenue and EBITDA offset by lower interest charge from higher operating cash flow expectations. Maintain Buy rating and 50cps target price (DCF and PE based) as company has successfully lowered cost base and balance sheet risk and should benefit long term from broadband regardless of election outcome.