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Iomart - Very eps enhancing acquisition

December 2010

Investing in shares may lose you all or some of your money. Past performance is no indication of future performance. Some of the shares recommended here may be small company shares, which can be relatively illiquid and hard to trade and this makes such shares more risky than other investments.

Iomart has announced the acquisition of a managed hosting business, Titan, for up to Â£4.2m cash of which Â£3.6m is upfront with the rest based on future performance. Titan has net cash of c. Â£0.5m so on the basis the maximum earnout is paid, Iomart has therefore acquired Titan for 5.7x EV/EBITDA. In addition to this, Iomart expects to extract significant synergies with broker Finncap suggesting that the exit ratio will fall to just 2.6x. The deal is therefore very eps enhancing from day one. Tipped at 44.5p this time last year; strong hold. ...

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With small companies there is an above average degree of risk compared to buying blue chips. Please be aware that we have not assessed the suitability of any of these investments for you. The newsletter simply states a personal view and diarises the editor’s investment decisions. Please speak to your stockbroker or other qualified individual to ascertain whether any of these companies mentioned would form useful additions to your own portfolios. Past performance is no indication of future success.

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