A fund manager has singled out one small cap ASX-listed telecommunications business as capable of a 40% rise in share price to match its valuation.
Montgomery Investment Management founder Roger Montgomery told his subscribers that Macquarie Telecom Group Ltd (ASX: MAQ) is a structural winner.
“Structural winners might be part of a global megatrend, have long runways for growth, are disruptive and/or market share takers with a long-term total addressable market that is theirs to lose.”
The Macquarie share price has dipped in recent times. It started the year above $52 but was trading at $50.75 at the market close on Monday.
Priced as yesterday’s hero
Montgomery said the market seems to perceive Macquarie as a winner only during COVID-19 when demand for telco services was at a peak.
“Experience tells us the patient will be rewarded,” he said.
“Our valuation estimate is currently circa $70.”
If the share price rose to match Montgomery’s valuation estimate, it will have grown almost 40% from current levels.
The fund manager explained that Macquarie recently separated its cloud services/government (CSG) and data centres (DC) into distinct divisions to help investors see the growth in each.
The company also has a telecom arm, which sells data, voice and mobile.
“Data centres’ revenue and earnings are what we see as the crown jewels,” said Montgomery.
“The wholesale customer at [data centre] IC3 East is expected to commission its contracted capacity next financial year and billings, and therefore earnings from it will emerge the year after.”
He isn’t the only analyst bullish on Macquarie. Just a few weeks ago, Canaccord Genuity rated the stock as a buy while slapping on a price target of $68.
About Macquarie Telecom
Just last month, Macquarie terminated its mobile wholesale supply deal with Telstra Corporation Ltd (ASX: TLS) to switch to rival Optus.
Macquarie was founded in 1992 upon the deregulation of the telecommunications industry in Australia.
The company listed on the ASX in October 1999 and currently has a market capitalisation of just over $1 billion.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
More reading
- These ASX dividend shares have attractive fully franked yields
- 2 fantastic ASX 200 dividend shares rated as buys
- Is the Telstra (ASX:TLS) share price going to keep rising?
- Is the Telstra (ASX:TLS) share price better value than the TPG (ASX:TPG) share price?
- What’s next for the Telstra (ASX:TLS) share price?
Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post Here’s an ASX telco share tipped to rise 40% appeared first on The Motley Fool Australia.
from The Motley Fool Australia https://ift.tt/3tUZ1UC
Leave a Reply