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Why WAM Microcap Limited owns Swift Networks Group Ltd shares

There are few managers on the ASX who have generated returns as strong as WAM Microcap Limited (ASX: WMI) over the past eight months. Wilson Asset Management has grown the WAM Microcap portfolio by 28.4% since the start of FY18.

It’s fair to say that the WAM investment team know what they’re doing. Sometimes studying a high-performing portfolio’s top holdings can lead to finding shares that are going to perform strongly.

One of WAM Microcap’s largest holdings at 31 January 2017 is Swift Networks Group Ltd (ASX: SW1)

Swift Networks describes itself as a diversified telecommunications and content solutions provider, entertaining guests and connecting them to the world.

The company operates in more than 300 sites across mining, oil, gas, aged care, retirement village and hospitality sectors.

The company’s services include free-to-air television, pay television, telecommunications, internet data, wireless networks and streaming video on demand. Swift Networks says that its fully integrated platform is deployed in some of the world’s harshest regions, where reliability, flexibility and scalability are ‘critical success factors’.

In its half-year report for the six months to 31 December 2017 the company delivered operating revenue growth of 32% compared to last year.

‘Underlying’ earnings before interest, tax, depreciation and amortisation (EBITDA) reached $1 million. The company said this represented like-for-like year-on-year growth of more than 100%.

The company generated $1.25 million of cash flows from operating activities in the half-year. It ended with $4.1 million cash in the bank, meaning the business is well positioned to drive further growth in the coming months.

Management believe that the second half of the year will show further improvement, driven by new contract wins through reseller agreements, revenue growth from additional content deployment and a continued expansion of Swift Network’s presence across its target markets.

Foolish takeaway

Data and entertainment demand is growing rapidly. Australia’s ageing population means that its aged living segment could have a strong future over the coming years. Swift Networks could be one to watch over the coming years.

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Motley Fool contributor Tristan Harrison owns shares of WAM MICRO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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