The Macquarie Telecom Group Ltd. (ASX: MAQ) share price is up after holding an investor day and giving a presentation.
Macquarie Telecom is a telecommunications with three distinct segments. It has telecommunications, cloud services & government and data centres.
Its telecommunications division provides data, voice, mobile and colocation services for business customers, it made 49% of FY20 revenue and 29% of EBITDA (EBITDA explained).
In cloud and government services, where it provides cloud services and cyber security, it made 38% of its FY20 revenue and 45% of its EBITDA.
Macquarie Telecom Data Centres are developers and operators of data centres for wholesale customers.
Macquarie Telecom’s investor day
Whilst the telecommunications business is relatively flat, its other segments are growing quickly.
Its total IT load of all data centres is 21MW, of which 19MW has been sold, including 10MW to a new leading customer. The remaining floor at IC3 East will be sold to its three business units and some wholesale customers.
In cloud services and government, sales orders were up 60%. Approximately 81% of the cloud services and government revenue is recurring. It says it has a high quality government customer base, spread across 42% of federal government agencies.
Outlook
Macquarie Telecom is expecting its EBITDA to continue to grow in FY21, with HY21 EBITDA in the range of $36 million to $37 million. However, the second half is expected to relatively flat compared to the first half with investments in its sales and operational resources.
Construction of capacity under contract will occur through the 2021 calendar year. Billing will start shortly after completion, in the third quarter of FY22. FY23 will have the full year impact of the contract.
There was no change to the guidance of depreciation and amortisation, and FY21 total capital expenditure is expected to total $180 million to $200 million.
Summary thoughts
Macquarie Telecom actually seems like a great business in my opinion, I wish it had come onto my radar earlier. The telecommunications business may not be growing, but it’s still generating decent profit.
Meanwhile, the two other segments look very promising. The cloud and government segment can deliver high growth and profit margins, whilst data centres are in high demand and can assist.
The Macquarie Telecom share price has fallen over the past couple of weeks, so this time could be an opportunistic period to buy a small parcel of shares to start with. I also like other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH).
