Well said @jwrostagno27.
Hi @Trancer, I am one of Strawman’s more ‘vocal’ members re: Aussie Broadband. DISC: they are my largest holding IRL and on Strawman. I posted my thesis a few months ago, a thesis update a few weeks ago and more recently a summary of their most recent 4Q report. Feel free to have a read of these if you haven’t already.
As one of ABB’s competitors, I try and maintain a decent understanding of Superloop. I will share a few considerations below, noting that a few others on this site will almost certainly have a better understanding of the business:
- Superloop IPOd in 2015. 5/6 years later and the company is still unprofitable. In your position, I would be asking myself why? The residential NBN market is a tight margins game – I believe this isn’t sustainable for an NBN providers over the long-term; profit needs to be obtained from other avenues with better margins and reduced needs to constantly market/offer discounts. It is also why ABB is targeting business, white label, and mobile services. What is Superloop doing to ensure it can make a profit for shareholders?
- They might seem attractive at this price, but they have also been on a downwards trend since their IPO listing. Past performance is never reflective of the future, but this is something to keep in mind. In your circumstance, I would be searching far and wide to see why market confidence has dwindled over the years. Are they a value play now?
- They have maintained revenue growth of around 25-30% YoY over the last five years. This is respectable. But recent reporting shows revenue increases of approx. 4% between FY20 and HY21. Go back another year and you will see that revenue decreased between 2018 and 2019 (HY). As a shareholder, I would be questioning this. I think these figures are partly why Superloop made the decision to acquire Exetel (more on this below).
- Shareholders were recently diluted to fund the acquisition. The company has typically recorded losses of around the 20 million mark in each HY period. It is likely additional capital raisings will be required over the short-medium term. What is the company’s plan to start making some profits for shareholders? This is my biggest concern with Superloop.
- Several substantial holders have come on board in the last six months. It also looks like some insider trading (buying) has also occurred. This is positive news.
- As noted above, Superloop recently acquired Exetel (which should add 110,000 consumers and business customers). The financials associated with this seem quite reasonable on first glance – 110 million in total (100 million in cash and 10 million in Superloop shares). I would be keeping an eye on the selling market. I am not sure what the conditions are with the purchase, but should they exit their position of 10 million shares, this will almost certainly create a downward trend to Superloop's share price. This also might create an opportunity.
- I will speak for myself as a computer nerd in my 30s – I am happy to pay extra for high-quality connection speeds, reliability, and service. I am typically who ABB target in the residential market. That said, if ABB didn’t exist, Superloop would be next on my list. Their service and speeds are well regarded.
- “I understand that a bunch of people left ABB for Superloop within the last 12 months due to the ABB price increases” – My first counter argument would be that the NBN market will always have customers that NBN shop and look for the best deals on offer. Superloop consistently run discounts for new customers. The thing I would be cautious of with these customers is they are typically the ones that will also leave for new providers when new deals are offered elsewhere. So, in short, I would be careful with this view. With respect to what we know, in ABB’s HY update, they reported over 310,000 residential customers. Skip forward to ABB’s recent 4Q update and you will note they recorded continued growth to residential broadband connections of 7.4%. All providers will experience turnover to some extent, but part of my thesis is actually how 'sticky' ABB customers are (for various reasons). They are a unique point of difference in the market.
- Risks with ABB – they are being spoken about quite a bit of late (Ausbiz etc.) There can be positives associated with this – more people becoming aware of them for e.g. – but also some negatives. I wouldn’t suggest there is ‘hype’ though – I think the market has rewarded a business that has performed very well post-IPO and has a solid runway for further growth. But at the same time, I think this is factored into the share price.
Hope this helps :-)