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GO plc – A stock that investors are proud of

06744 CC Trader Talk V2

Since the end of last year GO plc (“GO”) has been making headlines, when in October 2018 it announced the 49% sale of its previously wholly owned subsidiary BMIT Technologies plc (“BMIT”). The share price performance is a reflection of the success achieved by GO with a year to date performance of 27.7% as at the time of writing (share price €4.98).

The research department at Calamatta Cuschieri acknowledged GO’s potential, where in the beginning of this year we issued a Buy recommendation on the stock with a 12-month price target of €4.70. GO’s upside was largely dependent upon the successful sale of BMIT, which was confirmed in February 2019 with an over subscription of €15.1 million. The recent increase in GO’s share price was sustained when last Friday GO’s management was true to its words and announced a special net interim dividend for 2019 of €0.41 per share, representing around 85% of the total proceeds from the sale of BMIT amounting to €48.9 million.

In addition to the success of BMIT’s IPO, GO’s financial performance for 2018 has outperformed our expectations. As reported in the preliminary results, GO managed to increase its revenue by 3.3% while at the same time decreasing its cost of sales by 0.5%, resulting in the gross profit of 2018 to increase by 8.6% when compared to 2017. The company was able to increase its net profit in 2018 by 13.6% when compared to prior year. This translates to a current earnings yield of 3.8%.

GO has also announced that the final net dividend for 2018 will be of €0.14 per share, representing an increase of 7.7% over last year’s dividend. This translates to a current dividend yield of 2.81% excluding the one off dividend in respect of the sale of BMIT, which if included results in a current dividend yield of 11.0%. This year’s increase in dividends continues the upwards trend experienced during the last five years and management’s perspective to continuously increase shareholders’ return.

GO has continued its capital investment program both in Malta and Cyprus. In 2018, GO’s fibre network coverage was extended to cover an additional 20,000 households, which now add up to 84,000 households representing around 45% of the total Maltese households. Moreover, during 2018 GO continued its multi-year investment programme in the systems and process of Cablenet (GO’s subsidiary that is responsible for the operations in Cyprus), where its network currently covers 52.8% of the households in Cyprus. Cablenet’s broadband client base has increased by 6.6% in 2018, which contributed towards a growth of 7.8% in the revenue of Cablenet on a standalone basis.

GO is an interesting stock to follow, through its investment in the Cypriot subsidiary it has further growth potential when compared to the Maltese segment, whose growth is somewhat restricted given the size of the market and the level of competiveness. There is no doubt that 2018 proved to be a remarkable year for GO and its shareholders.

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