Melbourne IT: One Enticingly Attractive ASX Stock

Melbourne IT (ASX: MLB) was once a dot-com darling. Now thrown on the scrap heap, Motley Fool Investment Analyst Dean …

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Melbourne IT (ASX: MLB) was once a dot-com darling. Now thrown on the scrap heap, Motley Fool Investment Analyst Dean Morel sees it as an enticing turnaround prospect.

Melbourne IT was Australia’s first internet domain name registration company.

From those humble beginnings, it has grown into a world leader in assisting companies do business online via its domain name, web hosting, online brand management, video content delivery and managed IT services.

The business has stalled since revenue and earnings peaked in 2009. Consequently its shares have been tossed on the scrap heap, falling from over $4 to around $1.40 just prior to the 2011 full year results announcement in February.

Green shoots: A Healthy Sign of New Growth
Business appears to have bottomed in the first half of 2011, and the green shoots now sprouting should deliver growth this year. The company is still only firing on three cylinders, but with strong industry tailwinds and experienced management, its transformation project should deliver further results this year.

The current fully franked yield of 8.6% is based on Melbourne IT’s stable 15 cent dividend. The dividend is unchanged from 2008 and it appears sustainable. That’s a fantastic yield to collect while we wait for further signs of growth to emerge.

The company has a healthy balance sheet with only $21 million in net debt. It has consistently paid down the $57 million in debt it took on to finance 2008 acquisition of VeriSign’s Digital Brand Management Services business (DBMS).

Enticingly attractive
At the current price of $1.75 Melbourne IT is an attractive business, offering an excellent yield and undemanding trailing price multiples.

Long-term investors should take a closer look at this enticing turnaround opportunity.

If you are looking for more ASX investing ideas, look no further than “The Motley Fool’s Top Stock for 2012.” In this free report, Investment Analyst Dean Morel names his top pick for 2012…and beyond. Click here now to find out the name of this small but growing telecommunications company. But hurry – the report is free for only a limited period of time.

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