Huntley has a buy on the stock. Here is preliminary review of...

Huntley has a buy on the stock. Here is preliminary review of the stock which might get you up to speed.

Investment Rating
CDR has successfully demonstrated the transition to a telecommunications hardware and network supplier and at the same time effectively extinguished execution risk concerns whilst building a strong base to accelerate from. Brand strength and management capability combined with the favourable recurring revenue metrics make CDR a strong proposition indeed. Major risks include the lack of credible track record and that the sector is effectively at the mercy of a single dominant, i.e. TLS.


Result Description
CDR acquired an 80% interest in Personal Broadband Australia Ltd (PBA), a mobile broadband carrier, with an option to acquire the remaining 20%.

Consideration was minimal. CDR purchased the issued capital for $5 and has also acquired secured convertible notes worth $18m for $1. CDR will provide PBA with working capital of up to $15m on a staged basis subject to PBA meeting performance targets.

The acquisition will: expand CDR's customer relationship through the provision of broadband access; give customers access to broadband who are otherwise unable to reach traditional xDSL services; allow advancement towards telephony over wireless broadband; and facilitate entering the SME sector with bundled data products and services.
Impact
The structure of the acquisition is quite favourable for CDR. If PBA is to be wound up, CDR has first call over its assets (worth $65m). If after the initial funding the business is performing, CDR can acquire the remaining 20% interest, with PBA's only significant debt - a subordinated, interest free $9m loan from Kyocera.

CDR expects PBA to add revenue of $15m and an EBITDA loss of $1.5m for FY06, though it should be earnings accretive towards the end of FY06.