012 Smile.Communications Ltd.

Company Description

012 Smile.net offers broadband and voice services in Israel. Additionally, the company also provides hosting, data, and WiFi networks.

Double Expectations

The utility company reported earnings per share of 41 cents, more than double the 18 cents expected, on May 19. 012 Smile reported record net income of $12 million, as revenue rose 8%, to $68 million. The record-setting results were driven by a 15% boost in the broadband segment.

In the same press release Ms. Stella Handler, CEO, said "For the first quarter, we have delivered excellent results that demonstrate the strength of the 012 Smile brand in the Israeli communications market. The growth that we have achieved in our ongoing activities, together with our strong cash flow, are enabling us to carry out a significant expansion of our business, and positioning us to become one of the Israeli communications markets' leading players."

Forecasts, Growth Spikes

Following the excellent results analysts drastically increase their outlook. The full-year consensus for 2009 is now $1.03, up from 87 cents prior to the report. Estimates for next year are now averaging $1.19 up from $1.01.

If met these levels would yield annual growth rates of 78% and 15%, respectively.

Great Value to Boot

Shares of SMLC continue to trade at excellent valuations. The P/E ratio is just 11.3 times and the PEG ratio only 0.6. The forward P/E is just above 8 times next year's earnings.

The Chart

The thinly traded stock has settled into a nice trading range. Given the low volume don't expect a huge move until the next earnings announcement, which is on Aug 5.

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