There seems to be no end to people's demands for telecommunication services. People are spending more and more of their time online and this is creating significant pipelines of growth for providers of all sorts of telco services including in 'the cloud', mobile, and wireless coverage, particularly high bandwidth services such as 4G and 5G. There's also demand for ever faster fixed broadband. The following four companies have all just reported solid half-year earnings results and are well placed to continue to benefit from this trend for more data, faster speeds and higher services.
Telstra Corporation Ltd (ASX: TLS) put in a decent performance considering the company's size and the level of competition in the industry. Revenues grew 3.6%, net profit was up a healthy 9.7%, earnings per share (EPS) grew 8.7% and the all-important dividend was raised 3.6% to 14.5 cents per share (cps).
M2 Group Ltd (ASX: MTU) saw half-year revenue jump 66% thanks to the recent acquisitions of Dodo and iPrimus. Underlying net profit after tax also increased a healthy 38%, however an increase in the number of shares on issue saw underlying EPS rise a more muted 21%. The interim dividend was boosted 15%.
iiNet Limited (ASX: IIN) grew revenue just 4%. However this didn't stop the firm producing another record profit. Underlying profit and EPS were up 19% and the dividend increased 13%.
Amcom Telecommunications Limited (ASX: AMM) achieved a 26% increase to its top line revenue and an 18% increase in its bottom line profit result. EPS (before significant items) were up 14% and a 10% increase in the interim dividend to 2.2 cps was announced.
Foolish takeaway
In terms of which telco stock reported the best results – M2 Group stands out albeit helped along by acquisitions.
For which one to buy – it all comes down to the margin of safety between price and value. Telstra has provided full-year (FY) guidance for low-single digit growth. Amcom is forecasting FY double-digit growth in profit. iiNet failed to provide a specific FY target at its half-year results presentation; while M2 Group has provided guidance for a 39% increase in EPS for the FY. Based on the growth outlooks and current multiples each firm is trading on, M2 looks appealing on this score too.
