SLC - Superloop Limited

[Miner]

I was hoping some commentary would be posted after SLC's probably less than average result.
https://www.asx.com.au/asxpdf/20200824/pdf/44lsxt33r94nv1.pdf investor presentation
https://www.asx.com.au/asxpdf/20200812/pdf/44lf1wg29s5j2r.pdf - new CEO ex NBN - does it inspire any one after so much of poor result and cost increase on NBN rool out.
DNH

 

[Dona Ferentes]

Yes, suddenly Asia Pacific has an extraordinary new network waiting to be discovered. It is good the focus is on the hubs, the major Aust cities plus Singapore and HK, with linking subsea cables, but a small fish in a big pond (and HK carries a question mark, verging on problematic). Pleasing growth in what is now their core biz has been offset by slowness elsewhere. Covid hasn't helped But at least the business is getting less cluttered and focusing on the higher margin bits.

Core Fibre Connectivity: +28% growth in gross margin as business continues to focus on building recurring revenue through increased utilisation of network assets.
Fixed Wireless Connectivity: +$2.0m gross margin with lower COGS (incl. AASB16 impact of rooftop leases $3.7m) offset by decline driven by lower procurement revenue and customer churn $1.7m.
Subsea & Construction: Prior year included $8.4m margin from one-off development and design & construction.
Guest WiFi: Fewer installs and COVID-19 impact in APAC, coupled with Dec 18 sale of non-core US/UK WiFi customer base.
Home Broadband: Strong margin growth now customers are ‘on-net’, with 64% subscriber growth since Jul 2019.
Services inc. CMS & Cybersecurity: Retirement of non-core cloud managed services offset by growth in CyberHound security.

Still like the story, its infrastructure and may be taken over. Future growth may need to be funded?
(I hold but sold some 60% yesterday.... kept my top-up acquired at 78c in March but sold and took a capital loss on the rest - can offset against gains elsewhere)

 

[Dona Ferentes]

A new deep technology start up that uses telecommunication fibre optic cables to detect vibrations is emerging from so-called "stealth mode" with a suite of big-name enterprise clients and millions of dollars in investment under its belt.FiberSense, started by former sonar research scientist Dr Mark Englund in 2015, created and patented a new wide area sensor system for recording, labelling and visualising objects and events in real-time called VIDAR (vibration detection and ranging).

VIDAR is capable of capturing and analysing the tiny vibrations of nearby objects, such as cars, drills or even pedestrians, across large geographical grids using fibre optic cables. The vibration readings are then analysed and categorised on FiberSense's digital platform SuperSoniQ, which it provides to clients as a subscription cloud based service.

Just like your ears, SuperSoniQ is able to use vibrations to detect and recognise objects and events in real time over wide areas, but it can not see faces or things. It also cannot hear voices.

The technology, Dr Englund said, will transform the way critical infrastructure assets such as power grids, telecommunication cables and sewerage pipes are managed, as well as be used to help enable autonomous vehicles.

If you can access the fibre in the city grids - think of it like a street map - we could detect and then classify what we are seeing across the whole footprint of the CBD in real time. We already own fibre first and foremost, then we have fibre partners and then we have clients in asset protection that provide us the fibre in their assets. We can go to a telco whose pipes have been relegated to limping, impaired assets ... and show them they can take those fibre cables and they're no longer just dumb pipes, but they can be used as a source for real time, relevant data for the operation of cities.

The first focus has been asset protection and it has 10 enterprise clients paying thousands of dollars a month signed up across the Asia Pacific region, including Superloop, Transgrid, Basslink and submarine cable operators Southern Cross Cable Networks.

Unlike internet of things businesses offering a similar service, no specialised equipment such as sensors is needed. Customers use the SuperSoniQ platform to gain real-time intelligence on any event that could damage their assets.....
https://www.afr.com/technology/rich...-play-could-be-bigger-than-5g-20200827-p55pz8

 

[Dona Ferentes]

the AFR article ....
https://www.afr.com/technology/rich...-play-could-be-bigger-than-5g-20200827-p55pz8
... spells out the involvement of Bevan Slattery, sometimes described as a serial entrepreneur (NextDC, Pipe Networks, Megaport, SuperLoop, etc).

Rich Lister's latest tech play could be bigger than 5G

A new Bevan Slattery backed deep technology start up SuperSoniQ, whose creator, Dr Mark Englund, became connected to Mr Slattery.. while working with a submarine cable manufacturer in the US. Having provided angel funding for FiberSense, Mr Slattery is now also the company's chairman.

When I first saw this, I knew it was special, but as we have seen improvements in AI, DSP [digital signal processing] capabilities of advanced GPU [graphics processing unit] and cloud, this whole FiberSense capability envelope keeps lifting to another level, Mr Slattery said. I genuinely don't think I'm exaggerating when I say this is simply the most exciting technology to ever come out of Australia. This will be bigger than 5G, in fact, I'm starting to wonder if this could become as big as the cloud.

 

[peter2]

SLC's annual results in the mid range of guidance. New focus on growing customers. Now that they've built it, will they come?
My chart shows a reversal setup of this weekly HL. That four year down trend is going to offer some resistance. SLC remains a takeover target.

 

[Dona Ferentes]

SLC's annual results in the mid range of guidance. New focus on growing customers. Now that they've built it, will they come?

SLC remains a takeover target.

there was what I thought to be a general and ambiguous comment on slide 8 wrt Growth in Home Broadband

“Superloop aspires to achieve a step change to market share by June 2021..."

which can realistically be achieved by corporate action rather than internal growth ("$3mill in new growth initiatives driving the accelerated monetisation of existing assets"). And so many player out there, attracted by the new NBN pricing.

 

[Dona Ferentes]

back above where I entered (8/09) Finally.

I was nervous about topping up in the sub 90c because one of the key assets is HK ... and I think in terms of business activity, let alone the political risk of Hong Kong, there continues to be an element of worry. (Not one for the SL brigade, though)

 

[Dona Ferentes]

Still only bouncing around the $1.00 mark. Nice to see Mirrabooka add some commentary in their Half Yearly, Portfolio Changes, as they took on a holding ; acquisition cost $3,729,000.

We have also followed progress at Superloop (fibre telecommunications provider) and saw an opportunity to invest with the arrival of a well credentialed management team which has a focus on extracting greater returns from a valuable asset base.

 

[Dona Ferentes]

Superloop 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.

 

[peter2]

Good to see. I'll take the opportunity and use the news to exit my position that has gone nowhere for quite some time.

The price chart is slowly building a bullish look. A break-out above 1.08 would start the move to the main resistance level at 1.25. This level tops a two year base pattern.

 

[Dona Ferentes]

In Trading Halt, for material acquisition and a capital raising by Superloop

interesting; I saw them more as a Target

 

[Dona Ferentes]

• Superloop to acquire Exetel Pty Ltd, Australia's largest independent internet service provider, for A$110 million, comprising A$100 million in cash consideration and A$10 million in Superloop shares.
• The acquisition accelerates the utilisation of Superloop's infrastructure assets via acquisition of Exetel’s 110,000+ consumer and business customers.
• Estimated cost synergies of ~A$5 million per annum, related to the increased Superloop network utilisation, with all synergies expected to be realised within the first 12 months.
• Transaction represents an implied FY21 EV / FY21 Forecast EBITDA multiple of 10.0x (before synergies) and 6.9x (post-synergies) on an FY21 pro-forma basis.
• Transaction is materially accretive to key financial metrics including EPS, EBITDA and FCF on a FY21 pro-forma basis. Acquisition is to be primarily funded by a fully underwritten institutional placement of ~A$49 million and a pro-rata accelerated non-renounceable entitlement offer of ~A$51 million to raise gross proceeds of ~A$100 million.
• Superloop confirms FY21 EBITDA guidance at a tightened range of A$18 million – A$18.5 million (excluding one-off transaction costs), within the previously stated guidance range.

Entitlement at 1 for 6.67 at 93c, top up facility available

 

[Dona Ferentes]

Entitlement at 1 for 6.67 at 93c, top up facility available

The entitlement issue is still open, and will be until Tues 29 June. With BPay, the ability to delay until the last minute has some attraction, especially as SLC has traded below that level, on Tuesday (down to 90.0c) and today (hitting 90.5c).

It is frequently the case that during the time of the raise, trading will weaken and sometimes get below. Then the response must be; is this selling because the offer is a dud, or just the usual conniptions, of market and of the stock.

Anyway, I decided to buy a parcel on market today at 90.5c, for approx what I could in the offer. I don't think I will add to it before or on 29/06 (though still have that option to top up)

 

[Dona Ferentes]

Retail Entitlement Offer closed on 29 June 2021, raising ~A$21.2 million. Approximately 22.8 million New Shares will be issued under the Retail Entitlement Offer on 06 July 2021.

Eligible retail shareholders applied for ~A$6.3 million in New Shares (including applications under the top-up facility). There was a shortfall of approximately 16.0 million New Shares (~A$14.9 million) between the number of New Shares subscribed for by eligible retail shareholders and the number of New Shares offered under the Retail Entitlement Offer, which have been allocated to sub-underwriters of the Retail Entitlement Offer in accordance with the terms of sub-underwriting agreements.

low participation by retail of around 30%.

 

[Dona Ferentes]

It's been hard for SLC to get away from that 93c level the entitlement was priced at. There's been a bit of buying to get to 97c recently but today's FY saw it ease back.

Highlights:
● Achieved EBITDA of $18.2 million excluding acquisition costs ($13.5 million in FY20) and $110.7million of total Group revenues ($107.6 million in FY20).
● Underlying revenue growth of 14%, with underlying EBITDA more than doubling at 108%.
● Core fibre connectivity revenues (excluding design & construction revenue) up 22% year on year to $46.0 million.
● Continued strong fibre connectivity recurring revenue sales trajectory, with 27% yoy growth.
● Consumer Home Broadband subscriber growth of 62% year on year.
● Operating expense reduced 17% yoy, capital expenditure stable at $14.6m (excluding leases & IRUs).
● Enhanced balance sheet strength, with the Group achieving Free Cash Flow breakeven for the year.

"The Superloop networks are strategically positioned to capitalise on market dynamics, driven by strong data growth, growth in data centre demand and the need for connectivity services with a focus on the Asia Pacific region.

"Network coverage across the Asia Pacific region, combined with the INDIGO subsea cable system, along with a standardised and scalable suite of connectivity solutions including broadband and cybersecurity, provide trusted and reliable services to a broad range of customer segments.

"The Group is focused on monetising these assets and increasing utilisation to deliver a return on investment to shareholders. The Group will continue to invest in connectivity solutions in markets where the Board and Management believe the demand for services will deliver an attractive return for Shareholders."

- and I notice both ARG and MIR have taken positions in SLC, probably noticing the improving balance sheet.

 

[Dona Ferentes]

Superloop announces the retirement of current Chair Bevan Slattery from the Board, at the conclusion of the forthcoming AGM.
Bevan Slattery said,

"I'm delighted that Peter [O'Connell] has agreed to join the Superloop Board and to take over as Chair. Peter is an entrepreneur in his own right, co-founding Amaysim, and has deep experience in branding, marketing, legal, regulatory, corporate governance and culture over his 30 years in our industry.

“Having the opportunity to pick when and how you take a step back from a business you founded is always an important decision. As with previous listed companies, I don’t think I’ve been more sure than I am now. Since stepping in as Chair from the beginning of the pandemic in March last year, we have removed significant cost from the business, put in place a first class management team led by our new CEO Paul Tyler, recapitalised the business, delivered on guidance given two years in a row, and made a transformational acquisition with Exetel.

"Our recent full-year results for FY2021 saw us go cash flow break even, with strong revenue growth across all three market segments of consumer, business and wholesale, a robust balance sheet, and strong EBITDA.

"Superloop is primed and ready for more growth and Peter's appointment is key to Superloop’s strategy.”

Mr Slattery owns just under 18 per cent of Superloop worth $66 million, and his exit marks the end of a leadership transition that began with Mr Paul Tyler's appointment as CEO a year ago

"The business is in a fundamentally different shape than what it was even as recently as a year ago, Mr Tyler said. "The build phase is largely completed, and we are seeing strong organic growth in our segments."

 

[Dona Ferentes]

maybe this is what is needed.... shrinking to greatness. up 15%.

The uptake or utilisation numbers for HK network were only about 5% and Singapore not that much better. Now I know capacity can't be run at 100% but maybe its better to concentrate on Oz market (or even get taken over?)

Superloop today announced it has entered into a binding agreement with funds affiliated with Columbia Capital and DigitalBridge Investment Management, the investment management arm of DigitalBridge Group, Inc. (NYSEBRG) to sell Superloop (Hong Kong) Limited and certain select assets from Superloop (Singapore) Pte Ltd for A$140 million. The sale price represents a 30% premium, or A$32 million above the A$108 million carrying value of the assets today.

In connection with the sale, Superloop will maintain operations in Singapore and Hong Kong and enter into a 15 year Indefeasible Right of Use (IRU) on the existing or future expanded Singapore and Hong Kong networks. This allows the company to continue to participate in these markets and provide end-to-end connectivity services to Superloop’s INDIGO submarine cable (INDIGO) customers in the region. Under the terms

 

[Dona Ferentes]

Morgan Stanley says a leadership renewal, divestment of non-core assets, balance sheet repair and the acquisition of Exetel have laid the groundwork for a turnaround story at Superloop.

The broker upgraded its rating on the communications company to overweight and increased its price target by nearly 40 per cent, to $1.45, from $1.05.

Morgan Stanley’s analysts said the company was gaining market share in the telco space and its medium term target of doubling revenue share to 4 to 5 per cent, from 2 per cent today, was highly achievable.

“Superloop has the potential to be a fast-growing telco challenger by taking share from incumbents,” said Morgan Stanley analyst Joseph Michael.

“The path to balance sheet repair is clear after divesting assets in Hong Kong and Singapore. A net cash position gives Superloop optionality to accelerate organic growth, pursue further highly accretive M&A or return cash to shareholders.”

The broker said it believed Superloop could generate EBITDA margins of 20 per cent on revenue of $500 million, supported by gross margin expansion and fixed cost leverage. In 2022 it’s expected to deliver EBITDA margin of 10 per cent.

Morgan Stanley said the company’s new leadership team would also offer a clearer strategy on increasing shareholder value. Under its previous management teams, the company had a history of missing market expectations on organic growth and M&A.

 

[bk1]

I will settle for the possibility of Net Profit this FY. It should happen now that those assets in HK and Singapore have been sold, or make it a more realistic goal.

 

[Dona Ferentes]

maybe this is what is needed.... shrinking to greatness. up 15%.

but hasn't held the thrill, nor shown much reason to get excited. .... back down recently and giving up the gains.

A big slab changed hands today
3:01:14 PM ... @1.050 ... Vol 13,565,489 .... Amount $14,243,763.450 .... ASX ... S3 XT