Megaport (MP1) – Major contract win

Megaport provides a cloud-based software-defined network platform that enables users to connect their network to other services, known in the industry as ‘network as a service’ (NaaS), and has customers in Australia, New Zealand, Hong Kong, Singapore, Japan, North America and Europe. The company was founded in 2013 and is headquartered in Fortitude Valley in Brisbane.

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Megaport’s Latitude business has won three contracts with a total value of US$183 million ($255 million), representing approximately US$65 million in annual recurring revenue (ARR). Two of the contracts, accounting for around 90% of the total contract value, have initial terms of 36 months, while the third has a 24‑month term. This materially improves Megaport’s medium‑term earnings outlook and underpins meaningful upgrades to forecasts beyond financial year 2026.

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Ord Minnett’s forecasts for revenue, operating earnings (EBITDA) and EPS for FY26 are unchanged, although capital expenditure assumptions have increased to reflect infrastructure required for the new contracts. Our EBITDA forecasts for FY27 and FY28, however, have been raised by 29% and 34%, respectively, while our EPS estimates have increased by 29% and 55% for FY27 and FY28, respectively. In turn, this has driven an increase in our Megaport target price to $14.50 from $12.00.

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Megaport has indicated a two‑year EBITDA payback on capital expenditure of US$101 million for the new contracts, implying EBITDA of circa US$50 million per annum, or an EBITDA margin of 75% at maturity. We have taken a conservative approach, however, and assume revenue conversion into earnings of about 60% to allow for reinvestment. These changes lifts our FY27 EBITDA to $160 from $124 million, partially offset by higher depreciation and amortisation charges further down the P&L. Despite increased capital requirements, Megaport remains well funded, with strong net cash and an expanded debt facility, providing flexibility to fund earn‑outs, further growth, and additional investment opportunities. We maintain our Accumulate recommendation on Megaport.

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