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ABB - AUSSIE BROADBAND LIMITED


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Ally Selby (LiveWire): . Next up we have Aussie Broadband, which provides NBN services to residential homes and businesses. Is it a buy, hold or sell?

Nick Guidera: (Eley Griffiths Group):

It is a buy for us. This is one of those emerging telcos that have come onto the market in the back half of last calendar year. They are taking a significant amount of share from the majors.

Ally Selby (LiveWire): It is still quite small though, isn't it like 3.5 per cent?

 

Nick Guidera: (Eley Griffiths Group):

Yeah, 3.5 per cent. but I think they're taking north of 10 per cent of all subscribers to NBN and they're largely doing that on the back of really strong customer service and a really strong internet service experience as well. And I think customers are demanding that significantly. These guys are also spending a lot on their network, which will ultimately drive the operating leverage in their business and we like what management are about.

 

Ally Selby: James, over to you. Its share price is up around 50 per cent since it listed in October; is it a buy, hold or sell?

 

James Dougherty: (Lennox Capital Partners) :

It is a buy for us as well, largely because of the points that Nick made. We really like the management team, importantly the management team did not sell a share in the IPO, they have dripped a little bit out since, but they are still large shareholders in the business. If you take that number that Nick quoted you ... around 10 per cent of NBN churn ... if they do nothing else but just maintain that share and let the natural operating leverage that exists in this business playout, this business will be making in excess of $50 million EBITDA in the next couple of years.
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Over the quarter, Aussie Broadband has grown connections and revenue and expects EBITDA for the year excluding IPO costs to be at the upper end of the guidance provided on 28 May 2021 ($17 million to $20 million).

 

Overall broadband connections were 400,848, an increase of 27,790 or 7.4% QoQ. At the end of the quarter business broadband connections were 35,354, an increase of 3,825 or 12% QoQ, and mobile services were 22,454, an increase of 3,770 or 20% QoQ.

 

At the end of the quarter, Aussie Broadband had increased its market share of NBN services to 4.9%, up from 4.4% the previous quarter. Revenue for the quarter was $100.1 million, an increase of $7.42 million or 8% QoQ1.

 

We are extremely pleased with performance across all segments for the quarter, said Managing Director, Phillip Britt. Residential connections are continuing to grow despite strong competition in a high churn market, displaying the appeal for our high quality network with award winning customer service.

The increasing focus on our business segment is showing good returns and growing at a high rate. We believe there is huge potential, particularly for businesses looking for the same excellent customer experience that we offer our residential customers, and the ability to have more control over their network using the Carbon portal.

The fourth quarter also saw significant work to launch our first white label customer in early FY22, and we also launched mobile services under our new agreement with Optus. All these segments provide avenues for further growth for the company.
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Aussie Broadband has beat its prospectus forecasts for both revenue and earnings during the 2021 financial year, with services growing sharply through the year.

 

Company revenue rose 84 per cent to $350.3 million, 3.6 per cent ahead of forecasts, while EBITDA climbed 433 per cent to $19.1 million, 55 per cent ahead of forecasts.

 

Total broadband services grew by 53 per cent to 400,848 during the year.

 

The pandemic has highlighted the importance of reliable internet in our daily lives, said Aussie Broadband managing director Phillip Britt.Despite the challenges, our team has continued to deliver great network performance and great customer service to our customers, which are critical factors underpinning our growth. We are in business to change the telco game, and our staff are doing that each and every day with our high quality network, clever technology and a focus on being good to our customers.
Due to the dynamic and changing nature of the retail telecommunications market, ongoing lockdowns and the impact on CVC expense, the company said it would not provide guidance for FY22.
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and, as is often the case, the enthusiasm is followed by a trading halt, to bring about a Capital Raising :

Less than a year after listing, local telco Aussie Broadband is raising $120 million to accelerate product development and support new opportunities.

 

The raising will take the form of a $110 million placement to institutional investors and a $10 million share purchase plan.

 

Priced at $4.00 per share, it comes at a 13.6 per cent discount to its last closing price.... .

 

 

On Monday ABB announced a 10year deal (with two extension options) with Victorian Rail Track, to swap access to their respective fibre networks. The swap significantly increased the reach of the Aussie Broadband network in Victoria.

 

The company is also in the process of deploying a 1200 kilometre dark fibre network connecting into 78 of the National Broadband Network points of interconnect. This is expected to be completed in the 2022 financial year. This network is expected to generate $15 million of earnings before interest, tax, depreciation and amortisation improvement from the 2023 financial year.

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ABB has raised $20 million through a heavily oversubscribed Share Purchase Plan (SPP).

 

As announced to ASX on 8 September 2021, the company offered each eligible shareholder the opportunity to participate in the SPP offer to raise $10 million.

 

The details of the SPP were distributed to eligible shareholders on 15 September 2021 and closed on 01 October 2021. As set out in the SPP Booklet, the company reserved the right to accept oversubscriptions and as a consequence of the high demand it has been decided to accept a total of approximately $20 million.

 

Even at this higher level a significant scale back is required. In implementing the scale back the company has applied the general principle that scale back will be undertaken on a pro rata basis, subject to a minimum allocation of $500 worth of shares (for eligible applications) and having regard to participant’s applications under the SPP.

 

Shareholders that applied for an ineligible parcel of shares were rounded down to the nearest eligible parcel, as outlined in the original offer, and the pro rata was applied to the eligible parcel of shares.

 

....if applied for $30k, received $5,400

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Aussie Broadband 1Q FY22 trading update  
 
Highlights:

  • 1Q overall broadband connections increased 11% and business broadband connections increased 13% on the previous quarter.
  • 1Q mobile services increased 15% from the previous quarter, from 25,606 to 29,447 services.
  • 1Q FY22 revenue grew 11.3% quarter on quarter (QoQ)1.
  • Signed strategic fibre swap agreement with VicTrack.
  • Commenced connecting services for our first white label customer.
  • QoQ NBN CVC charges up 137% due to lockdowns, supporting the industry’s view that retailers are bearing an unfair share of the cost.
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