Valuation and future NTC?

NTC
Let’s open a can of worms – The half and yearly result for NTC... Cash flows!

I’d be interested in everyone’s projections for the half and full year in 2018. Yes, we all have some frustrations with management. Is it arrogance or is it confidence???

I have the opinion that too many people pumped this before it was even ready to fly. I also believe a lot of us got caught up in this hype and were complacent and jumped on the band wagon! Go back through the announcements, there’s a lot of honest information there.

There were numerous analysts covering NTC back in 13-16 with very strong extrapolations i.e. the AT&T deal in USA was thru the roof! But for a moment can we focus on what they can really do in 2018... Ok they have some pretty cool products in a space that is continually expanding.

What’s been happening...

• Share appreciation rights 1.76.
• Corning DPU legal issue.
• Ericsson /nbn fixed wireless.
• DPU’s 28m June, July, Aug 2017.
• Fixed wireless ramp up USA in FY18 – 400k premises / 18 states. Slight delay likely to see rev in 2^nd half of FY18. 1.1m by 2020.
• R & D facility established in the USA.
• 700k premises for FTTC nbn. (DPUs)
• Nokia fastmile
• Bespoke
• Europe?

Straight from the 2016 annual “The FY17 year will be another year of revenue growth as well as substantial investment in capability, both in terms of people and resources for future growth and delivery. The FY17 should be regarded as an investment year, where the substantial revenue flow will be in FY18.

Straight from the 2017 annual “The group anticipates FY18 to be a year of strong growth both in terms of revenues as well as EBITDA. Substantial investments were made during FY17 in line with our strategy. FY17 should be regarded as an “investment year”, after which substantial revenue growth will flow in FY18.”

Let’s look at the cash flows of the business... cash is king!
FY17 was an investment year... ½ FY16 was 47m, FY16 was 108m. Growth was 18% on the year 16 to 17. What about 2018, so we have 22m in cash, no debt! Great! If you crunch the numbers below From 14 to 17 cash flow growth was 18% each and every year on annual basis. It’s not bad growth for a company that’s expanding and spending on R&D.

My big question is M2M, it’s the majority of the revenue. How much of this is recurring from customer A & B?
So does that mean we will see another 18% growth which would bring to 129.1k for FY18. Surely not, time for some fruit?!?

Let’s say it’s 30% growth on the back of the investments made in FTTC/DPU, Fixed wireless & M2M. Cash flowing in would be 142.2k and if we went to 50% it would be 164.1k.

So will we see rev of 65-80+m for the half...?
M2M 107m + NBN 25M + DPU 20m + USA 5m
Probably 65m 1H18 and then 85-95m 2H18.
My best estimate is around the 150-160m in 2018 based off the information above. Meaning EPS of 15ish, Valuation around $2.50 – 2.80.
EOFY 2019 IMO we will see NTC grow to $3.50+

Patience people, it’s still a business that has lots of global upside!


Forecast 2018?

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8
0	Major items $000​	2014​	2015​	2016​	2017​	18% in 2018​	30% in 18​	50% in 18​
1	Receipts	64385​	78402​	92630​	109430​	129127.4​	142259​	164145​
2	Payments	57895​	71165​	90957​	99867​	115000​	115000​	115000​
3	Investments	3860​	5872​	10678​	22612​	12000​	12000​	12000​
4	Cash flows	2630​	1365​	-9005​	-13049​	2127.4​	15259​	37145​

AS ALWAYS - DO YOUR OWN RESEARCH!

Please contribute your research here and make this a constructive post for all holders