SLC - Superloop price action heading towards the $1.10 (again)

As has been the case with Superloop, the Share Price is once again heading towarrds the $1.10 mark.

Although a long term downtrend is still the prevailing sentiment, it will be interesting to observe whether the price can penetrate this $1.10 level on the back of any positive updates coming through.

On no real news this recent rise has been on the back of the last 5 sessions from around the 92c mark, and with a bit of momentumwe could see a ma crossover forming.

SLC - setting up for MA50 / MA200 crossover

It could be that next week's Half Yearly results if they are upbeat, could set up for the SLC share price to switch over into an uptrend by my analysis:

• EMA50 (red) dotted line currently 0.9951
• EMA200 (red) solid line 0.9977

Now I dont usually decide on TA alone, but rather where there's an FA reason to make a decision to take or hold a position, it is always nice where TA is forming to confirm that same view.

So the FA aligned reasons:

• quite significant holding by Chairman and Founder, including purchase on market during Oct for 308K shares
• solid Top20 ownership having increased their holdings on average
• business turn around signalled
• HyperOne possibly a complimentary sales funnel into the INDIGO network over time

This is one I'm looking forward to and have a calendar reminder for the conference call on next Tuesday the 23rd of Feb

But of course should the SLC share price also throw a TA signal then that'll invariably get onto more people's stock screener filters too, or at least be one more tick into their trading strategy.

SLC - recent article about HyperOne - Bevan Slattery

ok this is relvant to SLC in so much as here's another fresh idea from Bevan, who has already registered the company according to the article.

The concept is an "Exclusively for large Companies Domestic Fibre Network" connecting all the main cities in Australia, so a dedicated network free from the impacts of non relevant data users.

HyperOne website

It stands to reason that if this is built and can attract Tier 1 businesses here in Australia to prioritise their inter-city data transfer before it gets delivered out via the public NBNs then similarly there would be scope to have that same dedicated network as a cutomer of Superloop's INDIGO inter-continental network.

Interesting stuff

Unfortunately this is only a partial of the article, but Superloop is mentioned not explicityly but by inference as the "under sea fibre network"

SLC - prior $500m  takeover bid from QIC 2019

"Board unable to agree to a transaction"

one for the archives here, that previoulsy Superloop recived a $1.95 per share take over bid during 2019.

As is my recollection and referred to here, the Board of Superloop at the time did not agree to the takeover offer.

so we have:

• a Founder and Chairman with a very significantly valued holding
• members of the Board who using current day as a litmus test tend to hold reasonably sized portfolios of shares by everyday person standards
• interest from an Investment Company

that the Board effectively did not agree that $1.95 per share was the value to accept the offer for.

Were they correct or incorrect in hidsight ?  only time will tell.

But as I've posted in my Top20 review, nearly everyone since this time has increased the number of shares they hold.

My takeout from this is that at the time the Board saw the company as having a greater future value than the $1.95 per share in hand represented in May 2019.

At the moment with a Share Price of $1.00 with the extra 44% of issued shares, I'm tipping towards the Board as having good insight and look forward to the upcoming Half Yearly results on the 23rd of Feb 2020.

SLC - getting to know the Top 20

I've just done the YoY comparison of Top20 for Superloop and am pretty pleased with what it shows (refer the image below)

In addtion to the Annual Reports, I referenced SimplyWall.st too, for some snippets around insider transactions and validated those back to ASX announcements.

Of course being a tech company that was founded by Bevan Slattery is always going to atract an interesting Top20, but here's the main points:

• the Top 20 is a very sound list of members of the board and Investment Companies in the main part.
• there were Board Member purchases between Feb-April 2020 at prices ranging from $0.70 - $0.88
• both Bevan Slattery and his wife have a combined holding of approx 64m shares (over 17% as a joint holding)
• the Top 10 was very stable from 2019 to 2020
• most of the Top20 increased their holdings during FY2020
• there was however dilution with 44% more shares being on issue 2020 than 2019

The Top 20 have increased their level of ownership to 62.18% up from 47.3% in 2019

Since the annual accounts

• Bevan recently (Oct 2020) topped up with an on market purchase of 308K additional shares at $0.89
• outgoing Director Greg Baynton's final Director's Interest filing (18/11/2020) shows him as being behind Allegro Capital Nominees Pty Ltd and two other Pty Ltds with a total holding size of 971,323
• During November and December 2020 Fund Managers have reported further increases in their holdings too

All in all, this is quite interesting and well supported by smart money.

By all means DYOR and validations

disclosure: I have been buying the dips in my Super account for some time now

Superloop Annual Report 2020 - Cash Flow Statement

• positive Operating Cash Flow $12.8m  up $7.5m
• net reduction of borrowings (debt)  reduced $37m
• proceeds from issue of shares $92m dilution
• net reduction from Financing Cash Flow total $40m  down $11m
• overall reduction in Cash Equivalents total on hand $17m  down $1.8m

good to see a reduction of debt, an increase in Operating cash flow and to an extent a decrease in cash sourced from  Financing.

FY2021 it will be interesting to note whether the borrowings are heavily relied upon (drawn down beyond the extent of repayments) or whether the scale up of the Core sales bumps up the Operating Cash Flow enough to ease that reliance on borrowings. from a health of balance sheet perspective.

However borrowings are very cheap at this point in time and a smart use of borrowed funds would be prudent if channelled directly into scaling growth.

Superloop Financial Performance 2020 Annual Accounts

Despite the impacts of COVID durign the FY2020 perrormance year, Superloop managed to post a +$5m improvement in EBITDA

EBITDA:        2020 $13.47m    v    2019 $8.5m  up $5m

Revenue:      2020 $107.5m    v    2019 $119.8m  down $12m

OpEx:           2020 $94.1m      v    2019 $111.3m  down $17m

So in a year that had challenges with COVID and isolation, the company has pro-actively managed its Operating Expenditure in a greater magnitude than the impact of downturn in Earnings, so as to yield a $5m improvement in EBITDA

When coupled with the Half Yearly FY2021H1 guidance notes where Core sales of fibre network revenue is being targeted for 100% YoY growth, this prudence over cost control in the face of adversity bears very well for a positive result as the business can hopefully execute their scale up.

Feb 23rd 2021 is the presentation date of the FY2021H1 results, investors can dial into the presentation if they pre-book the intention to.

The Board of Superloop consists of a number of incumbents with very broad experience including other Directorships.  Recently commenced CEO  Paul Tyler is also an Executive Board Member.

Each Board member has reasonable skin in the game in the vicinity of around $100K and upwards of interest in the company's stock (most if not all being fully paid ordinary shares)

This is a positive situation IMO as they're much more than simply attending Board Meetings to provide expertise and governance, as they have a vested interest in their decisions being good ones that have a positive impact upon the share price.

Also of particular interest is a statement in the Annual Report whereby non-Executive Board Members are precluded from particpating in Performance Linked Incentive Plans, this exclusion seen as a mechanism to ensure a degree of impartiality in their roles as Board members.

Bevan Slattery remains at the helm as Non-Executive Chairman, with a very significant holding.

Superloop is a company founded by Bevan Slattery in 2014

Bevan Slattery who recently invested in dream stock RNT (rent.com.au) remains as one of the largest shareholders in the Top 20 with a holding valued at over $60m

Superloop has built high speed fibre optic inter-continental cable network connecting Australia to Europe, Asia and North America as shown in the diagram below.

Domestically the Superloop network has been built out in the same loop design (hence the name suggests Superloop) that provides redundancy over the high speed connectivity for domestic NBN customers

• FY20 EBITDA was $13.5m - $10m from Core fibre network sales
• FY21 EBITDA (guidance) is $22m - targeting a 100% YoY growth in Core fibre network sales of $20m

Superloop will announce its FY21H1 results to the market on 23rd Feb 2021 via a conference call that investors can join into  (Feb 2021 announcmeent has details)

Bevan Slattery remains involved in the company and is non-Executive Chairman