The company recently announced that it is expanding managed services by acquisition of Applaud IT.  Applaud is expected to generate revenues between $6 million and $7 million and EBITDA of at least $700,000 in FY16. Revenues and earnings generated from the Applaud customer base are expected to improve further in the coming years through the cross selling of Bigair service offerings into Applaud customer base including its market leading communications offering. Applaud has a leading managed services and cloud services capability bolstered by its 10.5 years service desk experience which will further enhance Bigair’s existing capability in these areas. Bigair will acquire Applaud for all cash consideration of $1.2 million payable on completion, which will be funded through existing debt facilities.


Double Digit Growth EBITDA (Source - Company Reports)

In a recent presentation by Jason Ashton (CEO of Bigair) the company elaborated its strategy of building comprehensive ICT solutions not just ICT services. The company will be building high speed data networks using own national wireless fixed network – a unique asset; a wholesale access to all major fixed line networks plus its own wireless network provides unmatched flexibility and a unique value proposition. The company will be proving cloud infrastructure and managed IT Services using own national private cloud infrastructure that leverages its data networks, strong in house capability for on boarding mid sized enterprise customers, and specialised high value managed service capabilities targeted at mid market.


Company Acquisitions (Source - Company Reports)
 
The company has increased its EBITDA approximately 80 times over the period of last 8 years. The company has also made many strategic acquisitions in the areas- fixed wireless, community broadband and cloud and managed services. The company has expanded range of products and services in these three domain areas (for instance managed applications, managed servers, virtual data centres, hosted desktops, hosted voice/PABX etc).


Financial Highlights (Source - Company Reports)
 
The company recently won a $3.6 million contract to deploy a managed data and hosted voice solution for a leading mental health provider. The company recently established a relationship with brand new student accommodation provider. The initial contracts were for the provision of Internet and managed WiFI for two new student residential sites with an aggregate capacity of 1,000 beds and initial estimated contract value of $1.4 million. The company also recently won a $2.5 million outsourcing contract desktop management and cloud for a publically listed Australian wealth management company.


BGL Daily Chart (Source - Company Reports)
 
In the first half of FY15 the company did revenues of $26 million and underlying EBITDA of $8.5 million (an increase of 28%). The underlying NPAT of the company was $3.5 million (an increase of 22%) and the underlying EPS was 2 cents (an increase of 18%). The company registered a growth in fixed wireless signed order of 9% and a 28% organic growth in community broadband. The company’s revenue has grown at a CAGR of 51% over the last five-year period from 1^st half of 2011 to 1^st half of 2015. The company’s underlying EBITDA has grown at a CAGR of 45% over the last five-year period from 1^st half of 2011 to 1^st half of 2015. The company’s underlying NPAT has grown at a CAGR of 53% over the last five-year period from 1^st half of 2011 to 1^st half of 2015.  The company’s underlying EPS has grown at a CAGR of 32% over the last five-year period from 1^st half of 2011 to 1^st half of 2015.
 
The company has a strong balance sheet with a net debt to equity ratio of 28% and net debt to EBITDA ratio of 79%. Property, plant and equipment increase is mainly due to installation of new services and infrastructure. Goodwill increased due to acquisition of Oriel Technologies Pty Ltd. The company negotiated approval during 1H!5 to increase debt facility up to $25 million out of which $17 million was drawn at 19 Dec 2014 on completion of Oriel acquisition.
 The company maintained strong operating cash flows, which increased by 20% during the first half of FY15 over the first half of FY14. The company made significant new investments in 1H15 to support new growth. Community broadband Capex includes some large scale WiFi deployments rolled out in 1H15 to support new projects. Investments in cloud and managed services include new data centre infrastructure to support hosting and IaaS service growth.

The company is currently trading at a stock price of $0.680. The company has a market capitalization of 125 million and 174.83 million shares of the company are currently trading in the market. The company is currently trading at a Price to earnings ratio of 24.6 and a dividend yield of 1.54%.
 
Given the strong growth rate of the company over the last five-year period from 1^st half of 2011 to 1^st half of 2015, strong balance sheet position and strong cash flow; we believe that the stock is a buy at the current price of $0.675.

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