Adept Telecom's fundamentals demonstrate strong growth profile
12 Jul 2016 • About Adept Telecom (
$ADT) • By InTwits
Pay attention to Adept Telecom as a growth stock. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Adept Telecom showed growth in the last financial year. Adept Telecom's revenue surged on 30.9% in FY2016. EBITDA also increased considerably: 25.7% for the same period.
If we look for the longer period Adept Telecom showed fast revenue growth of 11.2% from FY2013 to FY2016 annually. EBITDA surged on 10.2% from FY2013 to FY2016 annually.
Adept Telecom ($ADT) financials for the last 5 years
| mln. £ | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Revenue | 22 | 21 | 21 | 22 | 29 |
|---|
| Revenue growth, % | | -4.1% | -0.8% | 5.8% | 30.9% |
|---|
| Gross margin, % | 32.2% | 34.5% | 36.4% | 37.6% | 40.3% |
|---|
| SG&A, % | | | | 26.9% | 28.6% |
|---|
| EBITDA | 4 | 4 | 4 | 5 | 6 |
|---|
| EBITDA growth, % | | 15.1% | -6.4% | 13.6% | 25.7% |
|---|
| EBITDA margin, % | 17.1% | 20.5% | 19.4% | 20.8% | 20.0% |
|---|
| Net Income | 1 | 1 | 1 | 2 | 2 |
|---|
| Net Income margin, % | 2.68% | 4.68% | 6.38% | 6.95% | 6.80% |
|---|
| |
| CAPEX | 0 | 0 | 0 | 0 | 1 |
|---|
| CAPEX/Revenue, % | 0.443% | 0.190% | 0.302% | 0.236% | 1.84% |
|---|
| Debt | 7 | 5 | 7 | 4 | 12 |
|---|
| Cash | 2 | 2 | 4 | 2 | 6 |
|---|
| Net Debt/EBITDA | 1.4x | 0.8x | 0.7x | 0.3x | 1.0x |
|---|
| |
| ROIC, % | 11.6% | 15.5% | 13.2% | 14.3% | 16.4% |
|---|
| ROE, % | 6.7% | 10.5% | 13.0% | 13.4% | 15.4% |
|---|
Profitability and return on investment
Despite revenue growth EBITDA margin declined slightly from 20.8% in FY2015 to 20% in FY2016. In the longer period EBITDA margin decreased slightly on 0.500 pp from 20.5% in FY2013 to 20% in FY2016.
We call Adept Telecom an attractive growth stock as together with the growth it delivers high ROIC at 16.4%. Three years ago it was a bit lower at 15.5%. Average ROIC for the last three years was 14.6%.
The company showed small Net Income margin decline of 0.200 pp from 7% to 6.80% in FY2016. If we look for the longer period Net Income margin surged on 2.10 pp from 4.70% in FY2013 to 6.80% in FY2016.
Adept Telecom operates at ROE of 15.4%. It's average ROE for the last three years was 13.9%.
Capital expenditures (CAPEX)
In FY2016 the company had CAPEX/Revenue of 1.84%. CAPEX/Revenue surged on 1.65 pp from 0.190% in FY2013 to 1.84% in FY2016. It's average level of CAPEX/Revenue for the last three years was 0.793%.
Leverage (Debt)
The company has medium debt level at 1.0x Net Debt/EBITDA to maintain high growth. In the longer period leverage surged on 0.28x from 0.76x in FY2013 to 1.04x in FY2016.
Valuation vs. comparable companies
The market closed today at 10.2x EV/EBITDA for Adept Telecom which is 58.5% lower than 24.5x Fixed Line Telecommunications peer group avearge calculated on the basis of 22 companies. The company trades at 26.9x P/E which is not surprisingly 287% higher than 7.0x Fixed Line Telecommunications industry avearge calculated based on 7 companies.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The market closed today at 11.2x EV/(EBITDA-CAPEX) for Adept Telecom which is 150% higher than 4.5x Fixed Line Telecommunications peer group avearge calculated on the basis of 7 companies.
Peers in Fixed Line Telecommunications
Below we provide Adept Telecom benchmarking against other companies in Fixed Line Telecommunications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Telefonica Sa ($TDE) | -0.8% | -8.5% | -23.8% | 26.4% | |
| Alternative Networks ($AN.) | -2.1% | -0.4% | 17.5% | 9.2% | |
| Verizon Communications Inc ($VZC) | 4.5% | 4.1% | 5.4% | 3.6% | |
| Telecom Egypt ($TEEG) | 1.6% | 11.0% | 9.2% | 0.2% | |
| O2 Czech Republic As ($O2CZ) | -3.5% | -5.2% | -22.0% | 0.0% | |
| |
|---|
| Median (12 companies) | -0.5% | -1.6% | -1.6% | -0.5% | 5.9% |
|---|
| Adept Telecom ($ADT) | | -4.1% | -0.8% | 5.8% | 30.9% |
Top companies by Gross margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top |
|---|
| Kt Corp ($KTCD) | 75.5% | 76.0% | 77.9% | 77.9% | |
| Verizon Communications Inc ($VZC) | 60.1% | 62.8% | 60.7% | 60.1% | |
| Telecom Egypt ($TEEG) | 41.4% | 41.9% | 44.2% | 41.6% | |
| Alternative Networks ($AN.) | 39.0% | 39.2% | 41.2% | 41.3% | |
| |
|---|
| Median (4 companies) | 57.3% | 59.9% | 44.2% | 50.8% | |
|---|
| Adept Telecom ($ADT) | 32.2% | 34.5% | 36.4% | 37.6% | 40.3% |
Top companies by EBITDA margin, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Ooredoo Qsc ($ORDS) | 46.0% | 42.4% | 37.6% | 39.2% | |
| Verizon Communications Inc ($VZC) | 25.6% | 40.3% | 28.4% | 37.3% | |
| BT Group ($BT.A) | 31.2% | 32.0% | 31.9% | 33.5% | 33.4% |
| Rostelekom ($RKMD) | 39.7% | 39.0% | 33.0% | 33.4% | |
| Koninklijke Kpn Nv ($0O8F) | 35.9% | 34.1% | 39.1% | 33.2% | |
| |
|---|
| Median (12 companies) | 34.0% | 33.1% | 31.9% | 30.6% | 33.4% |
|---|
| Adept Telecom ($ADT) | 17.1% | 20.5% | 19.4% | 20.8% | 20.0% |
Top companies by CAPEX/Revenue, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Ooredoo Qsc ($ORDS) | 21.9% | 27.5% | 25.3% | 26.5% | |
| Telecom Egypt ($TEEG) | 5.1% | 6.8% | 13.0% | 21.4% | |
| Rostelekom ($RKMD) | 31.7% | 23.6% | 19.3% | 21.1% | |
| Telefonica Sa ($TDE) | 15.2% | 17.0% | 19.1% | 18.7% | |
| Orange Polska Sa ($OPLD) | 16.6% | 16.9% | 17.6% | 16.9% | |
| |
|---|
| Median (12 companies) | 13.6% | 13.8% | 13.0% | 15.7% | 13.0% |
|---|
| Adept Telecom ($ADT) | 0.4% | 0.2% | 0.3% | 0.2% | 1.8% |
Top companies by ROIC, %
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| BT Group ($BT.A) | 23.6% | 27.0% | 34.7% | 37.5% | 21.6% |
| Alternative Networks ($AN.) | 35.2% | 33.7% | 28.5% | 20.2% | |
| Verizon Communications Inc ($VZC) | 8.0% | 16.7% | 10.1% | 19.3% | |
| O2 Czech Republic As ($O2CZ) | 11.8% | 11.7% | 7.2% | 14.5% | |
| Rostelekom ($RKMD) | 11.2% | 9.7% | 8.7% | 8.2% | |
| |
|---|
| Median (12 companies) | 9.6% | 8.5% | 7.7% | 6.7% | 21.6% |
|---|
| Adept Telecom ($ADT) | 11.6% | 15.5% | 13.2% | 14.3% | 16.4% |
Top companies by Net Debt / EBITDA
| FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Top 5 |
|---|
| Telefonica Sa ($TDE) | 2.5x | 2.5x | 3.6x | 4.2x | |
| Koninklijke Kpn Nv ($0O8F) | 3.8x | 3.4x | 3.0x | 3.6x | |
| Verizon Communications Inc ($VZC) | 1.7x | 0.8x | 2.8x | 2.1x | |
| Ooredoo Qsc ($ORDS) | 1.6x | 1.7x | 2.0x | 2.0x | |
| Rostelekom ($RKMD) | 1.7x | 1.8x | 1.8x | 1.8x | |
| |
|---|
| Median (12 companies) | 1.7x | 1.3x | 1.6x | 1.4x | 2.2x |
|---|
| Adept Telecom ($ADT) | 1.4x | 0.8x | 0.7x | 0.3x | 1.0x |
