Early April 2019: That's a price target, not a valuation estimate. I feel that SLC has some issues that haven't fully emerged yet, based on the number of key management personnel (and directors) that have left the company over the past year or so. [I sold out in early July 2018 at $2.45/share].
06-Oct-19. That previous $1.42 PT was reached (from well above) and then well and truly exceeded (to the downside) - my new one is 70 cents (half the old one). I just have the feeling that there's more bad news to emerge from this company. I don't hold, and this is one I'm actively avoiding at this point.
My pic in the Telco sector is currently MAQ, which has done very well for me - having held it from much lower levels.
24-Aug-2020: I've written (typed) a lengthy straw on SLC today - under "Results/Management/Value?" which covers off their FY20 results, further management changes, and whether there might finally be some value emerging there.
My former price target was 70c and they exceeded that (on the downside) in March this year - thanks to Covid, but they got down to around 87 cps before the late Feb panic took hold of the market, so it looked like they were going to go pretty close to hitting 70c even without the pandemic. As it was they bottomed out at 52 cps on March 23rd, and have doubled from there. However they're still well below their 2016-2017 highs. They almost got to $3/share in August 2016.
Correction: At this point, back in August 2020 I wrote, "Bevan Slattery still holds 24% of SLC, and he has not been buying or selling. However, he has now reduced his MP1 position from 13.5% in March to now owning just 8.52% of MP1. It would appear that he agrees with me that MP1 is looking expensive at current levels, but SLC does not."
Correction: In reality that data was wrong. This notice: Change-in-substantial-holding-BS-28July2022.PDF showed that Bevan had sold down his SLC stake to 13.22% by October 2020, and had only held 17.6% back on 05-Nov-2019, so did NOT hold 24% in August 2020 as Commsec was stating at the time, and he was indeed selling down his remaining stake through that period. And he holds 0% now, as I'll explain at the end of this - in the September update.
Bevan was in fact selling down both his MP1 and SLC positions at the time.
I should also mention that he now owns just 3.84% of MP1 (6,104,274 MP1 shares) (as at 18-Sep-2023) and has appointed a new CEO there but retains the non-executive Chairman position at MP1, so is still involved at MP1, but has no role at SLC and owns no SLC shares now.
Back to my 24-August 2020 update:
As I explained in my straw, I think there is a case for getting back into SLC now, however I will probably wait for the new CEO, Paul Tyler, to takeover from Drew Kelton on October 1st, and see how that pans out for Superloop. I didn't rate Kelton very highly. I'll give Tyler the benefit of the doubt - i.e. I'll give him a chance to prove himself. He certainly has a decent pedigree in terms of senior positions held in various key organisations within the telecommunications industry.
22-Feb-2021: I think SLC looks reasonable now, but not what I would personally consider one of the best opportunities on the ASX for my money at this point in time. They bounced back from being coronered in March and then - since August - they've been going sideways or down a little. Not much happening. No obvious positive catalysts. Paul Tyler seems to be doing OK, but not exactly setting the world on fire. His predecessor Drew Kelton is still there as an executive director. Not sure if that helps to be honest. Might be better for SLC's founder and Chairman, Bevan Slattery, to move Drew on and give Paul some clean air to operate in. But I didn't like Drew much when he ran SLC, and nothing much has changed since then.
BS (Slattery) still owns 17.5% of SLC. That's roughly $63m worth. By way of comparrison, he owns 8.5% of Megaport (MP1) which is now worth around $170m. He is no longer a substantial shareholder of NextDC (NXT), another company he either founded or co-founded. [Correction: By Feb 2021 - when I wrote this bit - BS had actually sold down his SLC stake to 13.22% or less, but that notice was not lodged until much later - in July 2022 in fact. As of 18-Sep-2023 BS owned 0% of SLC and 3.84% of MP1 and is the non-exec Chair at MP1 but has no role at SLC.]
Slattery has recently invested in three companies that he was not involved with in the past (they were founded by others, not him) and those investments have worked out pretty well so far:
It's early days with RNT, as the investment was only this month, but if we see the SP appreciation with RNT in the coming months that we have seen with 3DP and IHR since Slattery's investments in those companies, then RNT is going to look very cheap at current levels, despite RNT closing today at $0.24 - over 5 times where they were trading just over three weeks ago (at $0.043 on 29-Jan-2021) - i.e. just prior to the announcement of Slattery's $2m investment.
[Update: I wrote that back in Feb, 2021, and a few things have happened since then, including Bevan selling down his 3DP stake at prices ranging from 37.3 cps down to 9.5 cps and now no longer being a "Sub" for 3DP. Don't feel too sorry for him. Despite 3DP going into a steep downtrend Bevan still had 50m 3DP shares in August 2022, and he sold 16.4m of those for $3.06 million and his initial (and only) investment in 3DP was only $2.5m. BS' $3.06 million in sales receipts is from this notice that accounts for 16.4m shares sold: Ceasing-to-be-a-substantial-holder-BS-3DP-13Mar2023.PDF and that doesn't account for the other 33.6m 3DP shares he held in August 2022, or the additional shares he sold prior to August 2022. 3DP is now trading at 9.2 cps. RNT is now trading at 2.1 cps and Bevan's share is now up to 12.9% (66,405,418 shares), currently worth $1.4 million, and he's put in more money since his initial $2m for 10.06% of RNT, so he's down so far on his RNT investment. IntelliHR got taken out (acquired) after a bidding war between Humanforce Holdings and The Access Group (TAG) - see here: How a frenzied bidding war started for a broke HR software firm (AFR). Humanforce emerged victorious after a bruising bout of corporate MMA, paying 24 cps for a company that was trading at 6 cps only two months earlier. That 300% premium is almost certainly an ASX record. Bevan had paid 7.5 cps for his original $2.5m worth, so would have sold that lot for $8m (a 220% profit) if he'd held them through until the eventual takeover conclusion, but it's never that simple. IntelliHR shares tripled within two weeks of Slattery’s initial purchase, and reached a high of 49 cps during the COVID boom five months later valuing his Midas-like investment at $16 million. However he did not sell at those peaks, instead he purchased more IHR shares at 23 cps as the stock slid back down as part of a general tech sell-off. He would have had to settle for a 4.35% profit on that tranche, assuming he sold them into the final takeover at 24 cps. They did trade higher than that briefly in the final weeks of the takeover battle. Bevan's had more winners than losers for sure, and he hasn't really lost anything on RNT yet, because he hasn't sold - he still holds 12.9% of RNT, so those are just paper losses at this stage. Back to my Feb 2021 commentary now...]
Slattery is also busy with his own ideas of course, as he always has been - and it's a BIG project - see here: Bevan Slattery’s HyperOne gears up for $1.5B national fibre network build - link: https://www.arnnet.com.au/article/686224/bevan-slattery-hyperone-gears-up-1-5b-national-fibre-network-build/
The big question - and others have already asked this one here on Strawman.com - is what role does Bevan Slattery see for Superloop (SLC) - if any - in HyperOne?
It is likely there would be a tie up somewhere, just as there is/was with his private company SubPartners - see here: https://subpartners.net/about.html
SubPartners was the company used by Superloop to lay the subsea fibre network cables between Singapore, Hong Kong and Australia.
And unlike NXT (which Slattery also founded), he has not sold out of SLC or moved on - he is still the Executive Chairman at SLC and still personally owns 17.5% of the company. He has not been selling down either. Methinks there may well be a role for SLC with HyperOne - we shall see. [Correction: Wrong again - see my previous corrections above - He owned less than that at the time and was selling down, he now owns no SLC shares and he quit the SLC Board and left the company in October 2021, around 20 months after I wrote that above.] However, at this point, I'm not a shareholder of any of the companies I've mentioned here - including SLC. I have been in the past, but not currently. Just watching from the sidelines with interest at this point. He is always worth watching.
24-Aug-2021: Update: New PT (price target) of 70c for SLC. Bevan Slattery has a fair few different interests now, and I'm not sure that Superloop is anywhere near the top of his list any more, despite owning 17.5% of the company, being its co-founder, and being its non-executive Chairman (and also a non-executive director). The fact that he is now listed as NOT being an executive of SLC shows the extent to which he has stepped back from the management of the company. He did buy another 308,385 SLC shares @ $0.89 each on 20-Oct-2020 (on-market), but he already held over 64 million SLC shares, so another 300,000 shares didn't move the dial much. [Correction: as explained in my other corrections above, BS later disclosed that he was a net seller of SLC shares during this period and his SLC position was reducing - he owned 13.22% or less of SLC at this point - in August 2021 - and he was still selling - and he quit the SLC Board in late October 2021, just two months after I wrote that.]
Louise Bolger, their Company Secretary, has also now left, after their CFO and a number of directors and executives left the company over the last 18 months. Some of those people have turned up at Swoop (SWP) - see here: https://www.swoop.com.au/board-and-management/
I note Swoop's new Company Secretary and General Counsel is one Louise Bolger. Alex West is Swoop's CEO, formerly Head of Integration then Group COO (Chief Operating Officer) at Superloop. Swoop's Head of Sales is Matthew Hollis, who is also a Swoop Executive Director. Matt Hollis held the same two roles at Superloop previously, and before that at Vocus (VOC). Julian Breen is Swoop's COO, and is also ex-Superloop and before that ex-Vocus.
Anyway, I think the market has moved on from SLC now, just like a number of their management have.
Superloop are likely to be involved in further M&A, as in further acquisitions or being taken over themselves at some stage, but there are no guarantees, and after selling out of SLC a few years ago, I've been glad that I made that decision each and every time I have looked at the company again in any detail. Not a fan nowadays.
27-May-2022: Reviewed. No change. Still think they could go lower. Still not one of the best investment ideas at my disposal at this point in time. I usually set PTs (Price Targets) that are higher than the current SP, but with companies like this, I am setting a PT where I think they will get to on the downside. At 70cps, if they get there, I think SLC looks more interesting, but probably not interesting enough for me to buy back in. The KMP exodus over recent years is telling. There's something not quite right at SLC.
18-Sep-2023: Reviewed. No change. They closed just below my 70 cps PT today (at 68.5 cps). Can't see any reason to raise this one. Or to lower it. To be honest I'm just not following this company closely. Still don't like them much and still don't think they are one of the best companies in that sector, let alone one of the best places to invest my hard earned.
ABB on the other hand... See here: https://strawman.com/reports/ABB/Bear77?view-straw=19715
It's important to note that the founder of SLC, Bevan Slattery, no longer has a role at the company and has sold all of his SLC shares:
28 October 2021: Final-Director's-Interest-Notices-BS-SLC.PDF [BS resigns as Executive Chairman of SLC, so resigns from the company and the Board, still holding 60,933,774 fully paid ordinary shares in Superloop Limited (under his own name: Bevan Andrew Slattery). That was around 12.4% of the company at the time.
28 July 2022: Change-in-substantial-holding-BS-28July2022.PDF [Better late than never: BS alerts the ASX that his SLC holdings had reduced from 17.60% on 05-Nov-2019 down to 13.22% on 27-Oct-2020 due to selling at 92 cps and a lesser amount of buying at 89 cps. There was also disclosure that some shares that had been previously listed as indirectly held by BS via Capital B Trust were actually held in his own name rather than by the Trust, and that the Slattery Family Trust had changed their corporate trustee but that the same number of shares were still held by the trust.]
24 October 2022: Change-in-substantial-holding-BS-24Oct2022.PDF [BS discloses that his 13.22% of SLC had now reduced to 8.45% due to sells at prices ranging from 85 cps down to 70 cps, with the biggest trade being 20 million SLC shares sold by Bevan on 24-Oct-2022 (on-market) @ 73 cps. There were 17 different trades detailed, and they were all sells. That 8.45% of SLC that he ended up owning as at close of trade on 24-Oct-2022 was 40,839,582 SLC shares.]
04 November 2022: Ceasing-to-be-a-substantial-holder-BS-04Nov2022.PDF [BS discloses that he has sold all 40,839,582 SLC shares that he held at that date - being 8.45% of SLC - at 70 cps "under a structured option and loan facility" - leaving him with zero SLC shares and no role at the company he founded.]
It's not the only company he's founded of course. Bevan also founded iSeek, PIPE Networks, NextDC, Asia Pacific Data Centre Trust, SubPartners, and Cloudscene); Bevan left NextDC (NXT) 10 years ago (in late 2013) and no longer holds any NXT shares either.
Coincidentally, on that same day (04-Nov-2022) that Bevan sold all of his remaining 40.84m SLC shares, ARGO Investments (ARG) bought $3,600,000 SLC shares at 70 cps (5,142,857 SLC shares) - Becoming-a-substantial-holder-from-ARG-04Nov2022.PDF and Regal Funds Management bought another 13,045,831 SLC shares at 70 cps - Change-in-substantial-holding-Regal-04Nov2022.PDF increasing their position from 9.15% to 11.55% of SLC.
70 cps. Where have I heard that before?
So Bevan is out of SLC. According to Commsec, the largest shareholders in SLC currently are:
J P Morgan Nominees Australia Pty Limited (86,019,908 shares) 17.73%
National Nominees Limited (59,100,419) 12.18%
Regal Funds Management Pty Ltd (13,045,831) 11.55%
Perennial Value Management Limited (6,002,149) 10.59%
Citicorp Nominees Pty Limited (49,486,392) 10.20%
HSBC Custody Nominees (Australia) Limited (28,740,119) 5.92%
Argo Investments Limited (27,684,033) 5.59%
Bank of America Corporation and its related bodies corporate (5,941,329) 5.44%
Of those 8 Subs, the most recent notices from JPM, Perennial and BoA were "Sells", and the most recent notices from Argo and Regal were "Buys". The remaining 3, being HSBC Custody Nominees, Citicorp Nominees and National Nominees are longer term holders and all three are custodians of the shares for other parties.
"Investopedia" says that a nominee is a person or firm whose name is titled on securities or other property to facilitate certain transactions or transfers while leaving the original customer as the actual or legal owner. In this way, a nominee can serve as a custodian. A nominee account is a type of account in which a stockbroker holds shares belonging to clients, making buying and selling those shares easier and for safekeeping. In such an arrangement, shares are said to be held in street name. HSBC, Citicorp and National could all be holding those shares for a single person or entity, or more likely for a number of parties, and they are only required to notify the ASX when the percentage of SLC that they hold changes by 1% or more.
There is no evidence of any decent "insider ownership" at Superloop.
The current Board at Superloop hold very few SLC shares:
One (Peter O'Connell) holds none, and the rest hold bugger all. Remember that this company has a sub-$1 share price. Sub-70 cps today.
The director who holds the most shares, Vivian Stewart, with 599,243 shares (when you add her direct and indirect holdings together) holds 0.12% of the company (worth just $410,481 at today's closing price), so just over one tenth of 1% of the company.
The personal direct and indirect holdings of the entire SLC Board all added together (1,690,315 SLC shares) represents 0.34% of the company, so around one third of 1% of Superloop. The company's founder, Bevan Slattery, has sold out and has no economic interest in the company any more, as detailed above.
There's bugger-all in the way of shareholder alignment there in my opinion.
And that's just one of the reasons I don't like them.
Hi @Bear77 have you been following Superloop lately. I see the latest info released by the ACCC shows…
Aussie Broadband Ltd (ASX: ABB) and Vocus gained almost 62,000 services in the June 2023 quarter, while the total number of residential broadband services on the NBN remained steady.
Vocus grew by over 33,000 services, taking its market share to 7.9%, whereas Aussie Broadband gained over 28,000 services to a 7.5% share.
Superloop Ltd (ASX: SLC) and Southern Phone increased their market shares to 3.1% and 1.4%, respectively.
Telstra and TPG Telecom Ltd (ASX: TPG) saw their collective services decline by almost 76,000 in total during the June quarter. This reduces their respective market shares to 41.5% and 21.7%. Optus' market share was steady at 13.1%.
ACCC Commissioner Anna Brakey
This has burnt a lot of investors in the past but this does seem like it could be a takeover target at some point given the defensive nature of the assets.
Having sold the HK assets and some Singapore assets for $140M with proceeds to be recieved soon. Expected to be $50M net cash following completion equating to an EV of about $400M. Guidance for $25M Underlying EBITDA (6.25% cash yield) this year which is only a partial year contribution from Exetel acqusition and synergies not fully realised. Increased utilisaiton of other cable assets. As a result can see it being attractive to some purchaser.
Superloop has sold the underpeforming Hong Kong connection for a sizeable premium to book and signed a right of use and will recieve and ongoing management fee. All up this is positive and shows managment taking the right steps for capital allocation.
I subscribe to Spaceship's emails as I like to keep track of their investment decisions (buy and sells) over a period of time. Last week they sold Superloop - who I like to keep an eye on due to Aussie Broadband being my largest holding and Superloop being competitors.
Spaceship sold Superloop, noting the following:
'Superloop is another company that has been on our watchlist, as we believe it continues to underperform in the industry. Given businesses have been forced to digitalise due to the working-from-home trend, we’ve been surprised Superloop has had trouble finding buyers.
To help solve this problem, Superloop acquired Exetel in August 2021, and this sealed the “sell” deal for us, as we believe buying a company to get customers and traction isn’t a positive sign for the business.'
When I looked at ABB initially, I looked at Superloop. The companies have similarities, but the issue with Superloop is that they have demonstrated an ability to destroy shareholder value over a 5-year period and are still no closer to profitability. I am unsure why Spaceship initially bought Superloop, but their reason to sell highlights my current thoughts on the business. I think their decision to acquire Exetel was a desperate one, driven by struggling membership numbers and issues with cash flow.
These guys don't appear to have the goodwill of ABB, but with this aquisition and the fact that they've already developed their own fibre network (which ABB is just looking at now), I wonder if they might be a good idea. I understand that a bunch of people left ABB for Superloop within the last 12 months due to the ABB price increases.
Superloop (ASX:SLC) is pleased to announce it has been awarded a major, multi-year contract with Symbio (MNF Group Limited) (ASX:MNF) to become its exclusive supplier of wholesale nbn aggregation services. The contract, signed today, has an expected value in excess of $25m and is Superloop’s largest single contract win to date. Under the contract, Symbio will migrate its existing and future supply arrangements from various providers of nbn aggregation services onto the Superloop Connect platform. The contract also anticipates Superloop expanding its existing use of Symbio’s range of voice offerings and including elements within its own portfolio of offerings.
Superloop’s nbn aggregation services are delivered on its recently launched, in-house developed Superloop Connect platform. Superloop Connect is a frictionless, API driven platform that allows customers of any size to access Superloop’s market leading nbn backhaul and virtual nni capabilities in a cost competitive way. These capabilities have been deployed nationwide, allowing Superloop’s customers a completely digital mechanism to order, provision and assure nbn business and consumer services anywhere on nbn’s fixed line and wireless footprint, with delivery of those services to any of the mainstream data centres in Australia. The Superloop Connect platform will continue to be developed in the future enabling further products and services from its APAC and Global offerings to be available via the platform.
Disc: I hold MNF & have previously held SLC
01-Jul-19. While FY20 got off to a reasonable start today - for most ASX-listed companies, there were exceptions, and two of those were Adacel Technologies (ADA) who dropped a bee's whisker below 32% on an FY19 guidance downgrade that left us in no doubt that they have very sub-par management there (their guidance is now for a FY19 loss) - and Superloop (SLC) who had an interesting FY19 Earnings Guidance "Update" of their own:
Superloop Announces Updated FY2019 Earnings Guidance
Superloop Limited (ASX: SLC) (Company) refers to its “H1FY19 Investor Presentation” (Presentation) which was released to the market on 25 February 2019 and included guidance for the 2019 financial year of statutory EBITDA of between $13 million and $18 million. This guidance was predicated on a number of factors, including that certain transactions were expected to complete and be recognised this financial year.
Despite its expectations to do so, the Company has not completed negotiations before 30 June 2019 to secure a significant commercial agreement which would have contributed the anticipated EBITDA to achieve its guidance for this financial year. Accordingly, the expected EBITDA for FY2019 is now likely to be lower than that set out in the Presentation, and subject to the finalisation of June’s trading figures and completion of its audited full year results, in the range of approximately $7 million to $8 million (including approximately $1 million of restructuring costs from February 2019).
Negotiations with parties will continue and if successfully concluded will be reflected in future earnings.
The Company notes that throughout the financial year it has continued, and expects to continue, to monetise its extensive Asia Pacific assets in a number of ways including long term indefeasible rights of use agreements, whereby the cash is often received upfront, but revenue recognised over the life of the contract. In addition, the Company has also reduced a minority equity stake it held in a non-core asset which further strengthens its balance sheet.
With respect to the Company’s secured debt facility, the Company advises that it has actively engaged with its lenders to ensure that its revised guidance is within the terms of the debt agreements.
The Company anticipates releasing its full year results for FY2019 in the week commencing 26 August 2019 and will continue to keep the market informed with any further developments in accordance with its continuous disclosure obligations.
--- ends ---
Disclosure: I don't hold SLC shares - as explained in my 3 "Bear Case" straws and also in my "Risks" straw. Too many red flags, including a number of key personnel leaving the company throughout 2018, the founder (Bevan Slattery) stepping back from the controls, and the new CEO/MD, Drew Kelton, being a bit of a prick.
They also increased their debt profile last year (took on 50% more debt), and without the expected profits to service and reduce that debt, they now have to worry about the possibility of breaching lending covenants (which would be included in those "debt agreements" that SLC refer to in this "update"). They may not have breached any yet, but it does highlight how easily you can lose control of your own destiny when you're a relatively small company and have significant debt.
In closing, does this ring true to you? They were unable to close the deal on one significant commercial agreement before June 30th, and as a result of that, they have gone from guidance of statutory EBITDA of between $13 million and $18 million to now being $7 million to $8 million (including approximately $1 million of restructuring costs from February 2019). Really?? That must have been a VERY significant agreement, because that profit guidance has just halved!
I would suggest that what ADA and SLC currently have in common is management that you just can't trust. I'm not saying they're incompetent, although that is probably a strong possibility. What I'm saying is that when they promise something, or provide guidance, you just can't trust them. And it's often best to avoid companies that are in a downgrade cycle. There are often at least three consecutive downgrades before the tide turns positive, and that's IF the tide does turn. It sometimes doesn't.
Additional: That's why I tend to sell out immediately when a management team does anything that makes me think I can't trust them any more. It happened with Dacian Gold (DCN) last month, a massive production guidance downgrade for both the June quarter & for FY20; I sold out immediately - at $1, where they opened when they resumed trading after the downgrade. They finished that day down 67% at 51.5 cents. In a further omen, and an ominous one, DCN fell 66.6% in June on the back of that downgrade.
Today (Tues 2nd July 2019) we have another big earnings guidance downgrade - this time from SDA - Speedcast International (see here) and they finished at $2.06 - down -40.8% from their $3.48 close yesterday.