At last Friday's close of 39.5c, that's a PE of 10 times, which for a growth stock in an exciting rapidly growing and constantly transforming telecommunications industry is fairly reasonable. Some may argue its still cheap as PE of 15 to 18 times is normally par for course for the Telco industry across the region. That would translate in to a price range of 58c to 68c.
This has not even factored in the earnings contribution from the RM205m as highlighted in the STAR or EDGE today yet. Potentially Instacom can be a GEM as a valued investment stock. You do the calculations and derive your own conclusion based on your risk averse outlook and your balanced portfolio considerations.
If you assume that it yields just 15% net margins over 3 years, that is RM30.75m or roughly an additional RM10m net a year.
Current number of 20 sen shares: 702.25m
For argument's sake, lets just take RM6m net per quarter, annualised = RM24m
Plus the new project = RM10m = RM34m
Net EPS = 4.8 sen
40 sen 8.3x
45 sen 9.3x
50 sen 10.4x
55 sen 11.4x
60 sen 12.5x
The other question is whether the project is a one off. If you look into the telcos' plans, there are nearly every single telco (Celcom, Maxis, DIGI, etc..) plans to spend an additional RM300m -RM1bn each over the next 12 months. It would be silly to think they would not be getting some of these as the company is heads and shoulders above the rest in its sub-industry in terms of time execution and delivery of projects.
The company could very well be the new darling stock for the rest of the year.
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