Why Spirit Telecom Ltd shares lifted on its profit report

Spirit Telecom Ltd (ASX:ST1) is a micro-cap company trying to steal market share from the NBN.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This morning junior telco Spirit Telecom Ltd (ASX: ST1) reported a net profit of $0.6 million on revenue of $16.2 million for the financial year ending June 30, 2018. The profit and revenue were up 22% and 41% over the prior corresponding period.

The net profit translated in 0.26 cents of earnings per share over the period, with the group declining to declare a dividend.

Spirit also reported an underlying EBITDA (operating income total that excludes acquisition related costs) of $3 million, which is an amount almost 50% above the prior corresponding period. The group had a net cash position of $4.6 million at the end of the financial year after raising around $7.6 million from the issue of new shares over the year.

Spirit describes itself as a wireless alternative to the national broadband network (nbn) in delivering "super fast broadband" to residential apartment blocks or business customers. It reports that this business plan has helped it now record 12 consecutive quarters of organic revenue growth as new clients sign up to its unlimited data plans alongside what it calls flexible contract options.

Over the year the group invested $2.7 million in network expansions and upgrades, with a total of 510 buildings now on-net.

Investors appeared to like the result sending the stock up 2.6% to 20 cents today, with the group's tiny market cap of not much more than $50 million meaning this is still a speculative business that could offer investors big upside or downside from here.

Spirit remains vulnerable to technological disruption itself, while there's also the prospect of the government writing down the value of the nbn which may allow the nbn to drop charges in a move that could make Spirit's 'nbn alternative' business plan less attractive.

Management declined to provide any specific profit or sales guidance for the year ahead, although shareholders should expect more investment in growth via network expansion.

Other innovative junior internet service providers to watch include MNF Group Ltd (ASX: MNF) and Over The Wire Holdings Ltd (ASX: OTW).

Motley Fool contributor Tom Richardson owns shares of MNF Group Limited. The Motley Fool Australia owns shares of and has recommended MNF Group Limited. The Motley Fool Australia has recommended SPIRIT TC FPO. 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.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »