##{"id":58773,"date":"2011-09-01T10:41:42","date_gmt":"2011-09-01T00:41:42","guid":{"rendered":"http:\/\/www.fnarena.com\/index.php\/2011\/09\/01\/bigair-offers-big-value\/"},"modified":"2011-09-01T10:41:42","modified_gmt":"2011-09-01T00:41:42","slug":"bigair-offers-big-value","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2011\/09\/01\/bigair-offers-big-value\/","title":{"rendered":"BigAir Offers Big Value"},"content":{"rendered":"

\n\t– BigAir<\/span> result showed strong growth
\n\t– Microequities<\/span> expects further gains from acquisitions and margin improvement
\n\t– Reiterates Strong Buy rating, lifts price target<\/strong><\/p>\n

\n\tBy Chris Shaw<\/p>\n

\n\tHaving guided to full year EBITDA (earnings before interest, tax, depreciation and amortisation<\/span>) of $5.2 million, the $5.4 million result achieved by junior IT play BigAir<\/span> Group ((BGL<\/span>)) was very well regarded by asset manager Microequities<\/span>.<\/p>\n

\n\tThe result was an increase of 69% relative to FY10<\/span> EBITDA and was achieved on a 105% increase in revenue to $15.5 million. In the view of Microequities<\/span> the increase was driven by recent acquisitions and solid organic revenue growth.<\/p>\n

\n\tThis trend is expected to continue, as Microequities<\/span> is forecasting revenue growth in FY12<\/span> of 55% to $24.1 million and a further 94% jump in EBITDA to $10.5 million. This should translate to a 233% increase in net profit to $5.1 million. The increase will be helped by a full year contribution from the recent acquisitions of Clever and Access Plus.<\/p>\n

\n\tWhat will also help earnings growth is additional operating cost savings, Microequities<\/span> noting of $2.1 million in total annual operating cost savings, only $1.1 million has to date been extracted.<\/p>\n

\n\tFactoring in lower costs should assist growth in margins for BigAir<\/span>, Microequities<\/span> taking the view guidance of 40% EBITDA margin for FY12<\/span> is conservative and could well come in as high as 44%. The long-term target of management is for an EBITDA margin of 50%.<\/p>\n

\n\tFactoring all this in, Microequities<\/span> has lifted net profit forecasts for BigAir<\/span> to $5.1 million in FY12<\/span> from $4.97 million previously. Net profit is forecast to grow to $6.94 million in FY13<\/span>, which supports an increase in price target by Microequities<\/span> to $0.44 from $0.30 previously.<\/p>\n

\n\tGiven its revised price target stands at a premium of around 70% to the last sale price of BigAir<\/span>, Microequities<\/span> retains a Strong Buy rating on the stock. Valuation supports the call, as Microequities<\/span> notes at current levels BigAir<\/span> is trading on a FY12<\/span> EV<\/span> (enterprise value)\/EBITDA multiple of just 3.4 times. <\/p>\n

\n\tThis is seen as very low given the earnings growth outlook and reinforces the view of Microequities<\/span> the market is currently underpricing<\/span> BigAir<\/span>. <\/p>\n

\n\tGiven a market capitalisation<\/span> of less than $40 million there is little other coverage of BigAir<\/span> on the market. The FNArena<\/span> database shows none of the eight brokers in the database provide research on the company.<\/p>\n

\n\tShares in BigAir<\/span> today are little changed, trading down 0.5c<\/span> at $0.275 as at 1.00pm<\/span>. Over the past year the trading range has been $0.16 to $0.345.
\n\t <\/p>\n

\n\tFind out why FNArena<\/span> subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"