@mbry9625

i don’t follow motley fool and there recommendations but if the price was to get whacked based on some sell recommendation that’s a great opportunity for you to top up if you feel confident in your position. I would find this an opportunity rather than a negative.

disc - held

ABB released results today.

Outlook looks positive they did reduce their revenue target from $800-820 mil to $780-$800 mil however have increased EBITDA guidance initially at 10 to 10.5% now guiding for $85-90mil suggesting margins around 11% or thereabouts.

ABB continue to take good market share from others and the OTW acquisition looks to be so far really successful with 6mil run-rate synergies implemented (on track for 8-12 mil by FY25). Gross Margins have improved and they are looking very able to target high gross margin contracts with high enterprise customers which is one of the highlights for me.

Balance sheet still has plenty of cash but they are spending a fair bit and is something that will need to be monitored.

Disc - held IRL + SM

not sure if anyone can answer my following question but I note the article in the AFR today "street talk section" about origin energy looking at acquiring Vocus. It was always my assumption that Origin would eventually acquire ABB given they have a white label contract with them and looked to be moving into the telco space.

Given the white label contract ABB and origin have will acquiring Vocus impact this deal? ABB make a handsome amount out of this white label deal and have about 60,000 connections so far. If they acquire Vocus what happens?

I own shares IRL in ABB and think its a really solid hold but do wonder the impact if this acquisition occurs

4Q trading update

highlights:

• FY22 EBIDTA expected at top end of guidance of $38-39 (note this was the lower end of initial guidance provided)
• residential connections 464,979 (4& QonQ)
• business connections 53,559 (7% QonQ)
• business OTW 5929
• wholesale 60,326 (16% QonQ)
• total = 584,793. Total connections are within guidance but if you take out the OTW additions then it falls below the forecast. increase of 35,882 (QonQ)
• Total Services (including voice, mobile, fetch, managed) = 738,246 (6% QonQ) (40% YoY)
• voted most trsuted telco brand in Australia by Roy Morgan which surely isn't hard given the competition but good nonetheless.

CEO reports that total broadband serices were lower than expected due to the federal election, as advertising costs are inreased therefore reduced advertising occurred. This appears to be improving now.

As anyone that follows ABB is aware a key selling point to them is the customer service they provide. The issues expereienced in Q3 with shortage of staff and wait times increasing appear to be improving and was a key focus for mgmt this Quarter.

white label continues to perform well, the Origin migration appears complete and all growth is organic. Would love to see a new white label partner announced.

The Over The Wire (OTW) acquisition does look solid. There are cross sell opportunities occuring here, with some large clients in a regional health alliance and shire council contract wins occuring this quarter. $5.2 mil annualised syndergy savings have been achieved with $8-12mil of synergies savings targeted. Given this aquisition is new it shows that the integration is going smoothly and managment are working well together.

the Aussie Fibre project is 90% complete and as announced previously will generate $13.5 mil YonY savings. This is the most exciting part for me. Given they will have their own infrastructure and are looking to continue the expansion margins will increase/improve and then they become an infrastructure play. We have seen how private equity love infrastructure plays so does this bring ABB into the sites down the track.

Overall a solid quarter. I am a little disappointed at the number of new connections this quarter. They have added the OTW connections into the total amount to beef up the numbers but having said that do state this in their announcement (they are not trying to hide it). They continue to win maarket share from the big boys and with advertising now back on track I hope to see these numbers continue to improve. The OTW acquisition seems to be tracking along well and I do see it as a really positive acqusiiton in the long term. Will continue to hold for now.

I listened in to the investor call. Some notes to add. Churn appears to be an issue. Actually it was surprising to hear that the CEO was working in the call centre with the purpose trying to identify why people were leaving (good leadership however). Initial assumptions would be to go to 5G or to another telco offering a cheaper price but he said a large chunk of people were either returning to their parents home or to live with a group of friend as expenses have increased, he said landlords were selling homes and again having to return to parents homes. They have not seen as improvement in churn in the month of July and it continues to be an issue.

DISC- held IRL.

@rocket6 very well timed. I wrote up a response yesterday but for whatever reason it didn’t go through. Then couldn’t be bothered trying again.

I am really happy about the potential acquisition of OTW. Seems like a really well run business, tightly held by insiders with good recurring revenue, the recurring revenue for me is the key thing. This indicates users are happy with the service and as ABB is all about customer service I feel this fits the mould of a good addition that maintains the values of ABB. Given the SP has floated around $5 or less for a long time now I believe that it will be approved/recommended by OTW management and will make ABB a seriously large player.

in regards to the analyst saying it’s a odd acquisition option I cannot agree. I do agree however that ST1 is the obvious option. I might be bias as I hold ST1 IRL and SM. Having said that OTW seems a much more stable business with years of execution behind it. ST1 is certainly developing into a solid business. The SP popped a little due to the Australian article where the analyst suggested it was the obvious target. The results released by ST1 the day before for me were really “meh”. However I believe the SP is extremely undervalued for a profitable telco that offers security, cloud, mobile and voice in addition to high speed internet with contracts with mainly SMBs and corporates and government sectors like education. ST1 has struggled due to their biggest markets in VIC and NSW being locked down and SMBs and schools being closed. Management have said they are already seeing improvements as we open up. In addition ST1 has divested its consumer assets for $5.1mil and are getting bids for their fixed wireless towers. With this additional capital they will look to do their own acquisitions. Although not my thesis for owning ST1 I do believe it is an ideal takeover and could see ABB doing so. But for now OTW is a much better business and IMO an ideal option.

Disc I own ABB IRL

I own ST1 IRL & SM

reports out that ABB are looking to acquire Over the Wire (OTW). Speculation at the moment but OTW are currently in a trading halt until next Thursday. ABB have released a note stating it’s speculation and nothing is certain.

OTW is a cloud and voice company. They are profitable and have 90% recurring revenue. Recently did there own CR and purchased a number of smaller companies which they are currently integrating. I think it’s a fantastic addition if it goes through for ABB. More info to come I guess. Market so far likes.

@rocket6

great overview. I'm very happy with the results. Good growth in all areas.

business and white label absolutely the growth areas due to larger contracts.

Residential looks like they will attempt to up-sell mobile services to these customers for further growth.

acquisitions should occur in the quarters coming as they employed someone to analyse options to consider. Any thoughts on which area they will look to grow in to? My assumption is cyber security but I really don't know.

Another fantastic result from this well managed company.

a few really key parts to the presentation and to add to @rocket6 earlier straw.

the business has 2 divisions

1) Residentual

• revenue $305 mil up 84%
• Ebitda 12.5 mil
• customers 362,260
• APRU $78.19 per month
• includes the mobile services they offer which has seen strong growth and an improvement since the Optus agreement as it is a more competitive offering. We saw a doubling in customer numberws
• CAGR 91% since 2018

2) Business

• Revenue $45.2 mil up 83%
• EBITDA 6.7mil
• customers 24,152
• APRU $129.67 per month
• will look for M&A in this segment. Should see strong growth if FY22 within this area.
• CAGR 56% since 2018 (future growth lies here)

Additional info:

Churn of 1.6% mgmt said this should stabilise here

FY22:

• Increased marketing towards the end of the last financial year across the entire sector. ABB were forced to market more aggressively which saw a strong increase in NBN volume. Last quarter was ABB record month with 23,000 additional customers in July. Already in August they have had 24,000 and a record month. This bodes well for FY22 results.
• Inventory levels of 4-5 months to deal with any chip shortages. Company is in a strong position.
• business is debt free
• complete fibre build this year. Currently have 35 completed and should have 55-59 completed by end of September. This is a huge project and will be one of the largest fibre networks in Australia (1200kms). This enables the comoay to turn up capacity easily as they are not relying on wavelenghts. 
  • enhances customer experience
  • more suitable for business segment
  • massive saving ~15% each year.
• Carbon platform: I need to do more work on this and they are due to provide a presentation to better understand it. However simply it is a single platform that enables businesses and parters to quote, service qualify, connect, modify and manage NBN services in mins. Interestingly they have signed 400 partners including a major corporate with over 3000 services, so it must be an exciting product. 
• White Label is the most exciting area currently. Already they have seen 32000 clients opt for this without any promotional activity. Majority of clients should be connected by FY22 2nd qtr.
• NBN should see an uptick of services and so far the 1st qtr has started strongly. ABB are winning a large chunk of these customers compared to customers. 
• No FY22 guidance was provided which some people found as a disappointment however mgmt are very transparent and plan to do regular trading updates. 

Unfortunately I do not own in my strawman portfolio but it is one of my larger holdings in real life. 

DISC Held.