Byron Capital’s Rob Goff raises target on Peer 1 Networks again

They’re on a boat! Employees of Peer 1 and NetBenefit enjoy some team building aboard the Princess Caroline this past July in Southampton. On Monday, Peer 1 Networks (TSX:PIX) released its 2012 fourth quarter and year end results. For the year, the company lost $5.7-million on revenue of $133.6-million, which was 18% better than 2011.

Peer 1 CEO Fabio Banducci said the company made several forward bets: “In fiscal 2012 we continued to invest heavily in growth, particularly in the EMEA [Europe, Middle East and Africa] region, as we opened our new flagship U.K. data centre, and completed an acquisition that established us as a clear leader and will offer numerous synergies in this market,” he said, adding: “In parallel with the NetBenefit acquisition, we also secured syndicated credit facilities that will provide us with considerable flexibility in funding growth.”

Byron Capital analyst Rob Goff says investors are growing weary waiting for one project that was first proposed in 2009; the opening of a facility in the Pacific Northwest. Management, he points out, says they will make a decision on site selection for the project sometime in fiscal 2013, bit they might not break ground until the following year. Goff says that while he is disappointed by the lack of progress on that project, he remains bullish on the company’s growth prospects and underlying economics. In a research update to clients yesterday, Goff maintained his BUY rating but raised his price target slightly, to $3.15 from his previous target of $3.

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Vancouver-based Peer 1 Networks, which was founded in 1999, provides Internet hosting services such as managed hosting, dedicated servers, and cloud computing. The company boasts more than ten-thousand customers with seventeen data centers located in Canada, the U.S. and the U.K. Peer 1 customers include household names such as Plenty of Fish, Virgin Gaming and WordPress.com. The company’s revenue has grown steadily, from $89.3-million in fiscal 2008 to the $133.6-million it reported Monday.

Goff says Peer 1 has an opportunity to realize significant cost synergies around recent acquisitions, particularly the $39.6-million pickup of NetBenefit (U.K.) Ltd., a division of London-based Group NBT Ltd, which was completed this past summer. The Byron Capital analyst says he is a proponent of the acquisition because it could give Peer 1 an important foothold in continental Europe.

At press time, shares of Peer 1 Networks were up 7.8% to $2.75.

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