Communication Services

Superloop to buyback up to 10% of shares

Mon 04 Jul 22, 1:35pm (AEST)
Fibre network

Stocks in article

slc
MktCap:
-
wes
MktCap:
-

Share article

Key Points

  • Today’s announced buyback is the result of the company being in an extremely strong net cash position
  • Year-to-date Superloop's share price has fallen 39%
  • At full year, the company expects to generate earnings of between $23m and $25m

Superloop (ASX: SLC) was up 3.86% at the open after the fibre network provider announced an on-market share buy-back for a maximum of 48,680,748 ordinary shares, representing 10% of the company's issued share capital.

Superloop reserves the right to vary, suspend or terminate the buy-back at any time and the ultimate number of shares to be purchased will depend on business and market conditions, the prevailing share price, market volumes and other considerations.

Strong cash position

CEO Paul Tyler notes today’s announced buyback is the result of the company being in an extremely strong net cash position following the disposal of assets from its Hong Kong and Singapore operations for $140m last Oct.

“Whilst we continue to pursue growth through organic and inorganic avenues, the recent movement in the trading price for Superloop shares represents an opportunity to also make a highly accretive investment in our own business," Tyler noted.

Superloop’s share price is down -21.20% over the past year, and year-to-date has fallen 39% from $2.21 to $0.73.

What does Superloop do?

Superloop designs, develops, constructs and operates independent telecommunications infrastructure within three segments of the market: Consumer connectivity, business connectivity and wholesale connectivity.

Superloop’s investments in physical infrastructure assets include fibre, subsea cables and fixed wireless, as well as Superloop’s software platforms.

Strong half year

At the half year Superloop’s revenue was up 125% year-on-year to $119.8m off, after acquiring Exetel for $110m, which added 110,000 consumer and business customers to its existing base. 

The company’s consumer business saw the strongest growth from the acquisition, with revenue growing by 303.4% to almost $60m, while the business unit's revenue grew by 124.5% to $35m. 

Then there was the wholesale business which grew revenue 12.8% on the back of the Superloop Connect automated migration and management platform.

Underlying earnings (EBITDA) of $9.1m compared to $8.2m in the previous period.

At full year, the company expects to generate earnings (EBITDA) of between $23m and $25m, up from $18.2m in FY21.

Recent developments

In order to expand its broadband relationships and grow its subscriber base, late May Superloop acquired Melbourne-based technology firm Acurus for $15m.

A white label and technology business, Acurus provides technology services to businesses such as Energy AustraliaWesfarmers Ltd (ASX: WES), Officeworks, and Bakers delight.

image

Superloop share price over 12 months.

What brokers think

Consensus on Superloop is Strong Buy.

Based on Morningstar’s fair value of $1.54 the stock appears to be undervalued.

Based on the three brokers that cover Superloop (as reported on by FN Arena) the stock is currently trading with 74.5% upside to the target price of $1.257.

Following Superloop’s recent trading update, Morgans (26/05/22) notes strong organic sales momentum in the core business and expects the Acurus acquisition to be accretive in FY23.

The broker retains an Add rating and target price of $1.37.

After removing earnings associated with the Hong Hong/Singapore divestments and allowing for higher reinvestment, Morgan Stanley decreases its target to $1.15 from $1.25, and retains its Overweight rating.

However, the broker can see the base case for a bull valuation of $1.50 based in the use of proceeds and additional gearing for M&A purposes.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

Get the latest news and media direct to your inbox

Sign up FREE