More deal flow expected in telecoms sector
The smallcap telecommunications sector was very active during April. M2 Group acquired Call Plus (the 3rd largest ISP in New Zealand), creating a 15% boost to EPS. The company followed this soon after with a bid for iiNet, which had recently been bid for by TPG Telecom. We are invested in M2, iiNet, and TPG Telecom, and will monitor closely the outcome of this bidding war. We also hold smaller positions in other telco stocks such as BigAir, My Net Fone, Vocus, which have all proven highly successful acquirers of smaller operators in the past. The rationale for mergers in the sector is very strong given the increased buying power, network efficiencies, and cost savings available. The sector remains highly fragmented hence more deal flow can be expected. Meanwhile, technology changes favour smaller nimble players, and the underlying revenue streams are not reliant on a strong economy. (VIEW LINK)
Pengana Capital Group (ASX: PCG) is an ASX listed diversified funds management group specialising in global and Australian managed funds, with distinct investment strategies that aim to deliver superior risk-adjusted returns to investors.