Iomart (IOM:AIM) 295.5p

Gain to date: 14.3% 

Original entry point: Buy at 258.5p, 23 June 2016

More organic growth at an accelerating pace is the key takeaway for Shares from what is another reliably fine pre-close trading update for Iomart (IOM:AIM) (31 Mar). The company pulled off 17% headline revenue growth, which translates into rough high-single digits on an underlying basis.

Shared hosting arm Easyspace is also back on the growth path, putting up 9% organic expansion, a solid bounce after a period of decline.

The resulting free cash flow (FCF) growth provides justification for its capital deployment strategy of bolting on small, value-adding acquisitions while maintaining infrastructure investment so kit remains at the cutting edge.

It also gives confidence that Iomart’s decision to lift the dividend payout ratio upper cap from 25% to 40% of adjusted diluted earnings is more than merely playing to the cheap seats. We see the move as a real attempt to satisfy shareholder demands regardless of income or capital growth objectives. A ‘pick-and-shovel cloud play’ is how one analyst describes the company. We completely agree and it remains one of the best ways to invest in the wider cloud story on the UK market.

Even at 360p the implied forward earnings multiple of 18.9 would still not be too demanding. Firmly a buy. (SF)

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