Ferret's Stock to Watch: PIPE NETWORKS LIMITED08:49, Thursday,...

Ferret's Stock to Watch: PIPE NETWORKS LIMITED
08:49, Thursday, 30 March 2006

Sydney - Thursday - March 30: (RWE Aust Business News)
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OVERVIEW
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It's hard to ignore a headline that says Great Story -
Upgrade to Buy.

Researchers Tanya Solomon and Scott Power of ABN AMRO Morgans
spread the word among the clients that PIPE Networks Ltd (PWK) was the
target stock.

Ferret, ever watchful for a good story too, decided to have a
look as well.

Bevan Slattery, managing director of PIPE Networks, outlined
the company's prospects at the broking firm's morning meeting one day
this week.

According to the researchers it was an upbeat story against
general industry confusion.

The company is delivering solid growth driven by network
expansion and sizeable contract wins.

The PWK share price has softened since the recent capital
raising and the researchers said they see this as an opportunity to
upgrade their recommendation to Buy from Hold.

Risks facing the company include network construction delays
and customer acquisition.

Key points from Mr Slattery's presentation included the point
that since listing last may PIPE has expanded its network from 40,000
metres of fibre to 170,000 metres in December and is expected to have
over 400,000 metres of fibre by the end of this calendar year.

A total of $25 million of sales have been closed in the first
quarter of 2006, which underpins forecasts.

The Sydney and Melbourne network is expected to be larger than
the Brisbane network by end of April.

No changes to forecasts now but numbers look conservative and the
company has reiterated its FY06 guidance of $1.78 million NPAT, a 110 per
cent increase over the previous corresponding period.

This is in-line with ABN AMRO's forecast of $1.8 million.

In February PIPE Networks reported a profit after tax of
$702,349 for the December half, representing a 107.42 per cent increase
over the previous half-year result of $338,618.

This growth was attributed to the growth in revenue-generating
assets as well as improved utilisation of existing assets which has
driven strong revenue growth in areas of investment.

Total revenue growth of 86.27 per cent from operating activities
for the half year was $4,043,128, up from $2,170,584 in 2004.

The company continued to see strong growth in its dark fibre
revenue in line with expectations over the period.

SHARE PRICE MOVEMENTS
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Shares of PIPE Networks yesterday rose 8c to $2.30. Rolling
high has been $2.80 and low $2.28c. The company has 35.14 million shares
on issue with a market cap of $78 million.

PWK recently raised $6.6 million, which are being used to expand
the reach of its Brisbane, Sydney and Melbourne networks to meet customer
demand.

PIPE has been successful in securing a number of contracts.

Of most note was the recently announced contract with iiNet,
which will invest $15 million to introduce ADSL2+ broadband nationally as
well a similar sum invested in an alternative dark fibre backhaul
infrastructure with PWK.

The contract with iiNet covers execution over 10 years.

PIPE Networks has also been successful in securing contracts with
the Queensland State Government Premier's department and is on the
smartnet panel, enabling it to deal more efficiently with various
government departments.

Meanwhile IPTV company Reeltime Media Ltd has signed an
interconnect agreement with PIPE which will provide a direct feed of
Reeltime's premium movie, TV series and library content into PIPE's
network.

About 80 ISPs which are interconnected via PIPE's network
will have direct access to Reeltime's content.

The arrangement between PIPE and ReelTime creates high-speed,
secure and closed network/intranet environment between Reeltime
and each interconnected ISP, delivering the latest Hollywood arthouse,
foreign language movies, children's programs and educational, TV series
and other content.

Reeltime has three of the major Motion Picture of America
member studios already signed for its Australian TV service, including
Sony Pictures, 20th Century Fox and Metro Goldwyn Mayer (MGM) which
together supply the majority of Hollywood movies, in addition to
independents which include Granada, Palace, IFM, Playboy, World Cinema
Online, and Hopscotch.

Technical Director and Co-Founder of PIPE Networks, Stephen
Baxter, said "the addition of Reeltime to the broadband exchange points
is further evidence that PIPE Networks is the place for on-line
operations to do business in Australia.

"With over two million downstream connected users at our
peering points any business using PIPE Networks for internet
distribution has a positive advantage in the market," Mr Baxter added.

BACKGROUND
**********

PIPE Networks was incorporated as IX Services Australia Pty
Ltd (trading as PIPE Networks)in December 2001, and formally commenced
operations in May 2002.

It was listed on the Australian Stock Exchange on May 17,
2005.

Since launching its first peering/IX point in May 2002, PIPE
Networks is now recognised as Australia's largest peering provider and
operates 16 IX points in six cities with over 130 active connections.

The company's peering customers include some of Australia's
largest content and internet service providers including WebCentral, The
Australian Broadcasting Corporation, iiNet, Primus, TPGi and AsiaNetcom.

In July 2002, PIPE Networks was granted a Telecommunications
Carrier Licence by the Australian Communications Authority as part of
the company's plans to interconnect each of its IX locations in the
same city via its own fibre optic network.

Upon constructing the fibre optic network between its Brisbane IX
locations, PIPE Networks recognised there was substantial demand from
corporate and government organisations seeking direct access to dark
fibre.

PIPE networks currently operates a fibre optic-based network
servicing the CBDs and certain metropolitan areas of Sydney and Brisbane
with over 140 buildings "on-net".

The company also plans to further expand its fibre network
in Brisbane and Sydney and expected to commence fibre rollouts in
Melbourne late last year.

ENDS