Superloop has had a checked past. It was founded in 2014 by Bevan Slattery. He was essentially trying to recreate the success of his first business hit, PIPE Networks. This time it wasn't just fibre connectivity for Australia, but spanning the wider and booming Asia Pacific region.
In time the company built out fibre connectivity in Australia, Singapore and Hong Kong. In order to leverage the demand of the underlying infrastructure, management went on an acquisition spree of companies that required fibre connectivity - an attempt at vertical integration if you will. This included companies involved with fixed wireless broadband, guest wifi (e.g. uni accomodation internet), professional film network solutions and managed services. They also expanded into a few areas more organically, including retail NBN broadband. More on this later.
In short, all the non-core businesses only just muddled along. And the core fibre business in Australia, Singapore and Hong Kong remained largely under-utilised. The company IPO-ed in 2015 at $1, popped on open at quickly ran to $3. Today it's back to where it began, highlighting the lack of success the company has experienced over that time span.
There are 3 things why this might be worth another look.
One. New CEO.
Paul Tyler, former C-level at the NBN responsible for enterprise and government customers, joined in October 2020 with a key focus on addressing the company's biggest need - sell fibre capacity to enterprise level clients. He's well incentivised to make it a success having been issued with 250k options with an exercise price of $1.11 and another 1m options at $2.00.
Two. HyperOne.
Mr Slattery has announced his plans to build the grandest private fibre backbone in Australia's history - labelled HyperOne (https://www.itnews.com.au/news/hyperone-to-deploy-15bn-20000km-fibre-backbone-across-australia-560909). Being a 17.5% Founder/Chairman of Superloop, one shouldn't rule out corporate action in this space with regard to SLC's Australian fibre assets. The observant may have noticed HyperOne borrowed the same graphics template and colour palette as well.
Three. Superloop NBN.
The Superloop NBN business only launched a mere 2 years ago and is gaining traction rapidly. Aussie Broadband is a good comparison - they're essentially after the same target market of premium, tech-savvy users. ABB currently trades at a 5.5x gross profit multiple. If this was applied to SLC's NBN business it would be valued at around $80m on FY21e numbers.
As a Superloop NBN customer, I've been tracking invoices as a proxy for subscriber numbers (https://twitter.com/mushroompanda/status/1346975330347610114?s=21). I have them ending 1H FY21 at 40k subscribers, with around 44k subscribers currently in mid-late Feb. Not too far off a 100% yoy growth rate. SLC NBN is currently growing faster than ABB, albeit off a smaller base.
The traction in the NBN space could really change the investment narrative for Superloop. Especially if confidence develops that it can follow the same trajectory of Aussie Broadband and continue to take share off the sleepy majors. Should they continue to execute, and grow to ABB's size in 3-4 years - one could make the case of getting all the other divisions (fibre, guest wifi, fixed wireless, etc) for free at the current share price.
Note: I've attached a table detailing the market share in the NBN retail space. Yellow cells are guestimates. Numbers could be wrong, please DYOR. Sourced from ACCC, ABB and SLC reports, and my own projections.
1H FY21 Results on the 23rd Feb
I'm looking out for 3 key things:
- Traction in selling fibre capacity.
- Mr Slattery's comments on HyperOne and whether he sees a role for Superloop.
- The continued booming growth in NBN subscriber numbers.
