Jul 14, 2022

Sentiment: Sideways

Type of Trade: High Growth

Industry: Cloud

Sector: Information Technology

Megaport is the largest global cloud onramps company with over 240 cloud onramps connected to the network. Megaport being a software defined network service provider, allows enterprises customers to connect between data centers. Megaport connect a vast number of data centers in more than 120 cities throughout North America, Europe, Asia and Australia. Most of the firm’s customer connections are to cloud service providers, like Amazon Web Services or Microsoft Azure, nevertheless Megaport also enables customer to connect between their own equipment in different locations and to internet exchanges with a software-defined, rather than traditional, network. Hence, customers have flexibility to adjust connection needs almost instantaneously through a self-serve online portal without long-term commitments.

As per FY22 H1 report:

✅ Monthly Recurring Revenue up +23%

✅ Higher Margins on its services.

✅ Global Revenue UP 42% up by $15.2M, with US being the largest market up by 45 28% in FY22 H1 in Asia Pacific | Up 55% in North America, Up 35% in Europe.

✅ Recurrent revenue continue to increase.

✅ Profit After direct cost up by 69%

✅ Normalised EBITDA up 10% in 1HY22 -this is a critical metric that investors look into the stock. Although Megaport is not yet showing profit, the net loss was trimmed by 47% and we can see a consistent improvement of the key metrics YoY.

✅ Emerging demand for Managing Multi-Cloud infrastructure. Megaport Cloud Router (MCR) is a pioneer technology that provide great performance to move data, less complexity, very quickly with relatively lower network cost.

Technical Analysis

If you have bought MP1 52 weeks ago, you would be sitting at 60% loss on the investment. Mostly due the sell off on tech sector.

Since the company continue to show solid growth and fundamental improvement in every single key metric, we believe that Megaport is fundamentally undervalued and currently trading at technically fair price.

The last SP breakout in April 2022 shows the limit where the stock could recover to the short term offering potential 40-50% return, followed by the bullish intersection level 2 and 1.

We expect the full year report to be in line with FY22H1, if the fundamentals metrics are confirmed then FY22 FY will enhance a potential recover.

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