Which telcos do you heart? These two have caught the eye of the professionals
5G Networks (ASX:5GN) is everyone’s favourite small cap telco, but yesterday two others popped up over the parapet: Beam Communications (ASX:BCC) and Superloop (ASX:SLC).
Morgans analyst Nick Harris has taken another look at Superloop, a company which builds the pipes that carry internet in Australia, Singapore and Hong Kong.
He says new business segmentation under a fresh CEO, a cap raise and the first guidance ever in Superloop’s four-year history on the ASX are positive signs.
“The last three years were the build phase and now it’s sales execution,” he said in a research note.
“SLC shareholders have needed to be patient over the last 24 months and we acknowledge this has been painful, however it does take time to build new businesses, in new countries.”
By June the company’s submarine cable will be live and it’s the last piece of the puzzle for Superloop to throw off some free cash flow.
In the half-year report Superloop said it expected to make $13-18m in EBITDA in FY19 and $26-30m in FY20.
“SLC is the only on-net provider of communications services in, around and between Hong Kong, Singapore and Australia… If, like us, you believe this strategy creates value then sales should accelerate over the next few years.”
Mr Harris says the upside “risks” now outweigh the downsides.
“If you back the strategy, and we do, then this is the first time they can sell to their competitive advantage,” he said.
Satellite communications provider Beam provides a different kind of comms but still the infrastructure that gets your message delivered.
Harley Grosser, founder of Capital H Management, is a fan and owns Beam in his fund.
“It’s started to hit its strides recently. Its core business of providing satellite communication hardware and air time is growing double digits and is now over $10m per annum. Sat comm is a niche growing market,” he told Stockhead.
“Then on top of that they have the products they developed for two of the global satellite network operators – GO! For Iridium and WE for Thuraya.”
They are also offering guidance — “sustained profitability” and good results this year and next.
The founder of Netcomm David Stewart is also a big shareholder and a director.
“The real upside is new LTE products and a JV with a Tier 1 partner to apparently be announced in the next few months,” Mr Grosser said.
“A $14m market cap doing about $18m revenue and $2m+ EBITDA with bolt on acquisitions a possibility which will help build scale.”