I think you make some valid points here Morley. Yet I can understand why onlookers and investors may be questioning MAQ's strategy and ability to deliver. I admit that I am, and that my patience with MAQ is running a little thin.
Yes the company is depreciating the data centres rapidly, and they get the cashflow benefit of this, paying lower taxes - which they are reinvesting in extending the data centres. It seems to me that the company is at an inflexion point now. It appears that MAQ are allowing the voice, mobile and data businesses to bleed while putting their full focus and attention on managed hosting. This is ultimately where they are headed and they will be judged accordingly.
Concerns for me are: 1. Despite the company today saying that the Balance Sheet is 'robust', MAQ has gone from a net cash position of $53m at 30/6/11 to a net cash position of less than $1m at 30/6/13. 2.The Federal Government contracts announced to date have not been significant in size. 3. Hosting revenue only grew by 3% in FY13, despite the focus on this division. 4. Hosting margins are under pressure.
Operating cashflow has held up reasonably well at this point.
What I find interesting is that capital expenditure in the last two years has been $103m. FY14 capex is expected to be $36m. Hence we will see $139m spent by the company over FY12, FY13 and FY14. With a market capitalisation of about $170m, we can see what a large investment has been made by this company in its quest to be a major player in the managed hosting and cloud computing arena.
So it is now make or break time for MAQ, they need to show us that they can indeed earn a reasonable return on these substantial investments.
MAQ Price at posting:
$8.20 Sentiment: None Disclosure: Held
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