Globo announced their Dec 2011 results yesterday. They were excellent but the market marked them down a tad; its hard to see why. My initial take on their current position is extremely positive, particularly for those who have some risk appetite where the upside is massive.
This is not completely risk free but the underlying business looks to be of such quality the risk is limited. Having said that the opportunity looks massive, its currently my favourite 'the next ASOS' punt.
I was fortunate to attend a couple of investor presentations a little over a year ago and bought then for potential international growth in their existing business lines and the GO Enterprise Server potential. I had the strong feeling the board saw GO ES as the 'big one' for them. Looking at the state of RIM, the easier deployment of their technologies as well as the benefit of integration onto an existing smart (or feature) phone I could only agree. In fact my company tried to evaluate the GO ES service but the lines were so busy we could not get a response (hopefully this has been dealt with now).
The accounts paint an awesome picture:
1. if the international growth continues through the year at the same rate the Greek business will be almost irrelevant; 246% for goodness sake. It does not rely on rich markets either, so the potential for continued growth remains intact.
2. margin growth when they are launching a new project the size of ES GO is impressive - I would have expected a one year reduction.
3. EPS grew at 14%. On the face of it modest but again think of the time lag from receipt of the new capital to a ramp up in GO ES sales. I expect next year the earnings growth to increase faster.
4. the other financial stats are more impressive and are well flagged in the results.
5. An achilles heel in these companies can be debtors as many customers are large telecoms co's. These have increased just 15% against the turnover increase of 46% presumably back end loaded.
I don't actually know what their brokers have predicted for next year (anyone?) my money says they will beat it!
Brokers are showing a consensus estimate of €13.8m for 2012 which would equate to a 48% increase in eps. I believe Globo were presenting at the proactive event on Thursday, but I've not had time to check out any of the other boards - don't know if you were there?
Last time I looked at Globo my bugbear was the fact that it hadn't generated any free cashflow in the last 6 years - which is certainly the one black mark on its copybook from a Zulu Principle perspective. It may also be that the whole Greek association has been holding Globo back considerably in investors minds. A lot of AIM investors are more skeptical about investing in foreign domiciled companies than they used to be, given the amount of trouble some of them have given AIM / Nasdaq investors over the years - so there's naturally a discount being applied here. Globo is on an 18% discount to the average PE ratio in the market - certainly from the projected growth perspective there's many who think that's too steep.
