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Macquarie Telecom (ASX:MAQ) share price in focus after investor day update

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The Macquarie Telecom Group Ltd (ASX: MAQ) share price was a particularly poor performer on Monday.

In the last minutes of trade, the data centre and telecom company’s shares tumbled 6% to $49.02.

Shareholders will no doubt be hoping for a better day of trade on Tuesday, especially after the release of its investor day update this evening.

What was in the update?

As well as providing a summary on its strong performance in FY 2020, management gave investors an idea on its expectations for the year ahead.

In respect to FY 2020, Macquarie Telecom delivered an 8% increase in revenue to $266.2 million.

Things were even better for its earnings thanks to margin expansion. Macquarie Telecom reported a 25% lift in earnings before interest, tax, depreciation, and amortisation (EBITDA) to $65.2 million. 

This has become the norm for Macquarie Telecom in recent years due to a positive shift in its earnings mix. Over the last three years its revenue has grown by a compound annual growth rate (CAGR) of 6.8%, whereas EBITDA has grown by a CAGR of 16.8%.

Pleasingly, management is expecting its EBITDA to grow again in FY 2021.

Today’s update reveals that it is expecting first half EBITDA in the range of $36 million to $37 million. This will be a 13.9% to 17.1% increase on the $31.6 million it achieved in the prior corresponding period.

And while management is expecting its second half EBITDA to be flat compared to the first half, due to its investment in sales and operational resources to support continued growth, this should still mean solid year on year growth.

After which, the company expects its FY 2022 results to be boosted by the construction of capacity which is under a new contract. This will occur through calendar year 2021, ready for billing to commence in the third quarter of FY 2022.

Looking further ahead, management is very positive on the future and expects the company to benefit from increasing demand for data centre capacity and the adoption of cloud cyber security.

And with the Macquarie Telecom share price up 104% year to date, it appears as though many investors agree with this view.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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