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UWL, Uniti Group Limted
nipper
post Posted: Feb 23 2021, 03:46 PM
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An acquisition spree through the back half of 2020 has weighed heavily on rapidly rising revenue and earnings at challenger telco Uniti Group.
QUOTE
Uniti has transformed into a core infrastructure owner and operator, enjoying scale and relevance in our chosen markets & with the unique advantage of having ‘locked-in’ organic growth, thanks to our large and growing contracted fibre order book.
We are today a core infrastructure business, generating operating free cash flow exceeding 60% of our earnings, after investing in the further expansion of our fibre telecommunications infrastructure.
We are privileged to be operating in a segment of the telecommunications industry experiencing once-in-a-lifetime favourable market and economic conditions and investing in fibre infrastructure, which delivers a highly demanded essential commodity to consumers and business, which is able to accommodate very long term demand growth with minimal incremental capital or operating expenditure.
The fact that 75% of our existing fully funded, contracted fibre order book will be deployed in the coming 5 years , and is continuing to grow at improving rates, assures our shareholders of continued steep earnings growth and free cash generation over both the near and longer





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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jan 19 2021, 10:38 AM
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A fund managers view.


: What is your most underrated stock at the moment?

HT: I'd probably say Uniti Group Ltd (ASX: UWL), as it is now called.

It is a fibre network provider. Over the last 18 months it transitioned from providing fibre network services to residential, greenfield residential developments to become much more a fibre infrastructure company. It has recently just bought OptiComm Ltd, and also bought the Telstra Corporation Ltd (ASX: TLS) Velocity business.

I think COVID has highlighted the importance of digital technology and also fibre connectivity.

What we found interesting and one of the observations we have made is that these assets are increasingly being appreciated as social infrastructure assets. The utility type assets, much like toll roads and airports, but I do not think they have been historically thought of in that way.

COVID has helped really shift that focus and show that these businesses have strong annuity earnings and, in some ways, aren't as volatile or… impacted by things like economic activity such as passenger movements and car traffic and so forth.

The one thing that struck us is that during the bid they made for OptiComm, Aware Super, which is the old First State Super, made a rival bid. In our mind, this reinforces the point that these assets are starting to be viewed in a different light, [as] the social infrastructure type assets.

Our view is that Unity is now the number 2 player in what is essentially a duopoly market with NBN. And they are the only player that has got the ability to sell in the wholesale and retail channels, through having recently won structural separation approval from the ACCC.

It is a business that… has probably emerged stronger from COVID to become really what we think will be a social or a fibre infrastructure business going forward.



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Dec 16 2020, 09:10 AM
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and the ambition is showing
UNITI ACQUIRES TELSTRA VELOCITY® & SOUTH BRISBANE EXCHANGE ASSETS
Adds ~50,000 Active FTTP Services.
Telstra to become a RSP of Uniti.
Highly Accretive.



Telstra Velocity® & South Brisbane Exchange is Australia's second largest private FTTP network

~ 68,000 premises passed , ~ 65,000 FTTP connected premises, ~ 50,000 active premises

Telstra to become a RSP on Uniti's national FTTP network ( including OptiComm )

Purchase Price of $140M, $85M payable on completion, $55M deferred with $20M payable over 3 years and $35M on completion of migration of the assets and services, with an ability to adjust the total purchase price subject to the size of the customer base at the time of migration

Uniti commits to $70M spend for a 10 year term with Telstra Wholesale for essential backhaul, duct and exchange access to support delivery of services following customer migration being completed

Forecast annual EBITDA contribution to Uniti of $ 21M, commencing from early January 2021 and potentially increasing post migration of assets and services

~ 13 % EPS accretive and increases FY21 pro forma EBITDA by more than 20% to $116M

Acquisition funded by mix of debt, underwritten equity placement and share purchase plan

Uniti net debt to FY21 pro forma EBITDA ~2.3 times ratio at completion



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Nov 17 2020, 09:34 AM
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In Reply To: nipper's post @ Sep 8 2020, 01:11 PM

fresh from seeing off the Aware Super tilt for OptiComm (but having to lift the offer to match)
QUOTE
The securities of OptiComm Ltd will be suspended from quotation at the close of trading today, Friday, 13 November 2020, in accordance with Listing Rule 17.2, following lodgement of the Federal Court of Australia orders with the Australian Securities and Investments Commission approving the scheme of arrangement by which Uniti Group Limited will acquire all of the issued shares in OPC

and now, a further acquisition
QUOTE
... Uniti acquires 100% of fast growing, specialist Retail Service Provider, Harbour ISP , which specialises in delivery of superfast retail broadband services in greenfield developments
.... Preferred broadband RSP with leading Australian greenfield property developers, including Mirvac
.... More than 30,000 retail broadband customers, doubling the Uniti current retail customer portfolio
.... Purchase consideration of $9.25M + 1M options (at exercise price of $1.54) to acquire UWL shares
.... Forecast earnings contribution, including synergies, of $3M+, a purchase multiple of ~3x EBITDA
.... Highly strategic & accretive acquisition, enabling greater penetration & revenue expansion on Uniti owned fibre networks, including those added via the OptiComm acquisition
probably a good business would be to set up a localised ISP and wait to be acquired?



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Sep 8 2020, 01:11 PM
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In Reply To: nipper's post @ Aug 24 2020, 11:54 AM

the transformation that FY20 was aimed to be is not complete... The bid for OptiComm OPC at $5.20 has been beaten by a Super Fund coming in at $5.85.

..So, OPC up 10% and UWL down 10% ($1.28 now)



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Aug 24 2020, 11:54 AM
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Posts: 8,280
Thanks: 2668


QUOTE
FY20 was wholly transformational for Uniti, having completed three substantial acquisitions in the first half, namely LBNCo, OPENetworks and 1300 Australia, each of which therefore contributed to Uniti’s FY20 earnings for part of the year.

The organic growth achieved in the second half of FY20 by the now substantially enlarged Uniti business, combined with an effective integration program, resulted in the Company upgrading its underlying EBITDA0 guidance for the second half of FY20 and its forecast June 2020 underlying EBITDA runrate on three separate occasions, twice in February and again in June.


Uniti finished FY20 with an annualised underlying EBITDA exit runrate of approximately $41M, a 24% increase in the second half of FY20 on the same measure as at December 2019, generated entirely organically.

Very pleasingly, Uniti continued to convert operating earnings into free cash flow with Net Operating Cash Flow in Q4 FY20 of $10.1M providing Uniti with the ability to fund any growth capital expenditure out of operating cash flow. Capex as a percentage of underlying EBITDA for FY20 was 31%, and for Q4 of FY20 was 38%.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 


nipper
post Posted: Aug 18 2020, 12:06 PM
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Small cap darlings' merger challenge
QUOTE
Each time telco entrepreneur Vaughan Bowen fronts institutional investors, he can usually count on one question: what will you do differently this time around?
Bowen is well known to investors after founding M2 Communications, a company that delivered strong returns for investors, mainly by growing through scrip fuelled acquisitions, until it ultimately merged with Vocus deal that quickly went sour.
That regular question is particularly pressing right now as Bowen's $790 million Uniti Group, which lays fibre in new developments and then charges internet providers access to the networks, finalises its cash deal to buy Opticomm, a smaller $500 million rival that has gradually been moving into Uniti's space of laying fibre to apartments and high rise buildings rather than its traditional housing estates market.

It's a deal that both critics and supporters say is right on form for Bowen, a Uniti executive director.

The critics see it as proof that he's a deal junkie, who knows how to ride a hot market and ask how long the run can last.

His supporters say he has a track record of creating value through acquisitions in the telecommunications space by identifying trends ahead of the pack and this is bang on target.

Uniti Group listed in 2019, attracting plenty of backing from institutional small cap investors, after its management was replaced by Bowen and Mick Simmons, who had also worked with Bowen at M2.

The investors liked the segment, and hoped the new team would repeat their earlier success.

Uniti has delivered ... its share price has risen from 18˘ back in February 2019 to closer to $1.60. Opticomm has been a similar success ... it also listed in 2019, and its shares have grown from $2 a share to $5.20, largely through organic growth.

So how does Bowen answer that persistent question?

He tells investors that he is more focused on integration. It's undoubtedly the right answer, as it was the integration with M2 and Vocus Group that turned things sour. But it will be put to the test with the Opticomm deal, which is Uniti's biggest acquisition to date and has a distinctly different culture.

Bowen, who declined to be interviewed, is right alongside the investors with this Opticomm deal ... he bought $3.7 million worth of shares in the latest Uniti capital raising to fund its Opticomm deal.

Like M2, Uniti has grown through acquisitions, funded by regular capital raisings.

Last May, it raised $15 million at $1 a share to buy inbound voice services business Call Dynamics. By August, it had agreed a $100 million deal to buy private fibre networks company LBNCo and raised another $100 million at $1.20 a share to help fund it.

In October it acquired OPENetworks for $27.5 million in cash and shares and raised another $85 million to buy 1300 Holdings Pty Ltd, which owns priority phone numbers and is affiliated with Telstra, in December. That raising was at $1.62 a share.

The Opticomm deal – for which the company has raised $270 million – is its biggest yet, and is expected to catapult this small cap favourite into the S&P/ASX200, a move that tends to bring index buying along with it.

Uniti has been in talks with Opticomm, a company that has had equally impressive growth from IPO – though it has relied on organic growth, rather than acquisitions – for more than a year, sources said.

But Opticomm finally agreed to a deal as COVID-19 hit, negotiating a cash deal without any face-to-face meetings, including the due diligence phase.

COVID is regularly offered up as the reason that Opticom's board was willing to strike a deal on little premium and not scrip based, although there are options for investors to take some scrip.

Others see it as a sign the board was happy to take the money and run.

Much of Uniti's register owns shares in Opticomm ... roughly 30 per cent ... and those investors were prioritised in the latest Uniti capital raising, in order for them to increase their scrip holding if they chose, in some cases by selling down shares in Opticomm. There are plenty of reasons that investors like the deal, including that it will limit the two players moving in on the other's territory.

It is effectively them and the NBN... and they were both [Opticomm and Uniti] starting to compete a little bit more head to head, which had the potential to impact returns," says Tribeca Investment Partners portfolio manager Simon Brown.

"This was manifesting itself in developer contributions with some price pressure in green field agreements and multi-apartment market, where in some cases contributions had been cut to zero.

Ultimately, Brown says, the real focus should be on customer activation and utilisation, rather than developer contributions which were not the core earnings base.

Opticomm and Uniti both provide an alternative to the NBN .... and, while they don't offer Telstra or Optus on their platforms, they do provide more than a standard NBN option. They can provide developers with pay TV so there's no need for dishes, lay out Wifi stations around new developments and other options, often at no extra cost.

One of the bigger concerns is whether a COVID-19 recession will impact housing development and slow new builds.

There were some early concerns about this, that have now abated to a degree. Another factor that is soothing investors is the gap between the combined business' connected and activated lots. In other words, the houses that have been built but not connected, either because they are still under construction or the owners have opted not to get broadband yet.

Reporting season updates from developers will be an important data point.

It's a significant number because the increase in activated units is where the earnings come from, the per month fee per household. It makes money by charging internet providers to access the networks and the customers, and by providing support and maintenance services to the networks.

The combined group will have 109,500 active connections, and an additional 78,000 connected premises. Then there's another 188,000 contracted lots ... the ones that could be considered at risk if either developments slow or developers go under, though both companies say they work with the major players.

This deal will deliver the scale for both in other areas apart from connections. For example, using one another's facilities. Opticomm has a new control centre in Melbourne, and that can roll through the Uniti systems, reducing capital expenditure. There's also been talk about stranded assets in Queensland the new group might buy together.

There are smaller issues as well, including weaning both groups off China's Huawei ... referred to in the scheme documents as the country of origin issues relating to network equipment. It is a process that has already begun, and one that does not really concern investors who point out there are plenty of rival offerings.

Ultimately, the big challenge is putting the two businesses together. The acquisition is due to complete in September.

After that, the real work integrating the two businesses will begin.


https://www.afr.com/companies/telecommunica...20200812-p55kzk



--------------------
"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
 



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