Futurenow
“cheap” is obviously subjective, but my definition of “cheap” for NTC is when the Price/Earnings ratio (current/18 months into the future) is 10 or less. I would consider a share price less than $0.80 to be cheap, i.e. a market cap of ~$120M. I am assuming the AT&T deal is for:
- ~1.1M units (based on Connect America Fund funding),
- Take-up rate an optimistic 50%,
- Gross margin A$75/unit (A$0.75=USD$1)
- ~$40M gross profit spread over 4 years, $10M gross profit per year average.
I expect all other parts of the business to remain fairly constant barring any major announcements. So with a bit of luck, NTC should be able to achieve a $12M net profit by FY18/19.
I am aware that AT&T could extend the scope of the project from 1.1M to 13M units. I am not aware of any such intention and I am guessing AT&T will only extend the project if it can overcome the struggle to make it economically viable without government funding.
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