Service Stream Limited (ASX: SSM) is a public listed company which specializes in wireless, and fixed and provider of broadband telecommunications service. It announced that it has signed a new contract with Telstra Corporation Limited (ASX: TLS) for providing design and construction services which would be supporting the wireless infrastructure network of TLS. This contract is secured for an initial term until June 2021, followed by a one-year extension at Telstra’s election. The inking of this fresh agreement has replaced the earlier, and now expired agreement.
The announcement also highlighted, that the new contract signed by SSM does not provide guaranteed volumes. Also, the company noted that revenue for similar services under the precedent contract was approximately $80 million per annum over the past three years.
On the new contract signed between SSM and TLS, the Managing Director of SSM, Mr Leigh Mackender stated that the company was pleased with the provided opportunity to continue its partnership with Telstra. SSM will be supporting Telstra in their national wireless network infrastructure programs, wherein the demand for telecommunication products and services continues to experience strong growth. The company is ready to help the T22 strategy of Telstra, as it would begin its expanded deployment of 5G infrastructure throughout the country.
On Tuesday, 12 March 2019, the company also secured a two years extension for its Wireless Design and Construction services Agreement with Vodafone Hutchison Australia (Vodafone). This contract was re-signed in March 2017 for two years term presently, which was followed by two-year extension at the election of Vodafone company.
With the signing of this agreement, Service Stream will continue its partnership with Vodafone, as a national provider of services linked with the design and construction of existing as well as new wireless infrastructure across Australia. Further, the agreement signed between SSM and Vodafone does not guarantee the volumes. However, based on the historical revenues, the company estimates the revenue to be in the order of $40 million over additional two years term.
On 6 February 2019, the company declared its half-yearly results for the period ended 31 December 2018. During the period, the company’s revenue was up by 18% to $348 million as compared to the previous corresponding period (pcp). There was an increase in the EBITDA from operations by 21% to $38.6 million on pcp. The operating cash flow declined by 58% to $17.9 million. The company declared a dividend of 3.50 cents, an increase of 17% on pcp.
These two recent achievements of the re-securing wireless design and construction agreement with Telstra, and a two-year extension to its contract with Vodafone Hutchison Australia for the provision of wireless design and construction services shows the confidence of TLS and Vodafone on the services provided by SSM. Apart from these achievements, the positive half-yearly results of the company have also created confidence for SSM amongst the investors.
Also, if we look at the stock price movement of the company, in the previous six months, the stock has generated a return of 28.25%. Improvement was seen in its YTD performance where the stock has generated a return of 30.09%. By the end of the trading period on 15 March 2019, the closing price of the shares of SSM was A$2.230. The company has a market capitalization of A$911.19 million with approximately 401.41 million shares and a PE ratio of 18.13x.
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