Bigblu Broadband Share Discussion Threads

[value hound] 03/9/2024 21:32

Write-up by Simon Thompson.

FWIW, I decided to hang on to the ones I have - but wasn't feeling courageous enough to average down; will let it play out. Here's the article:

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Investors could double their money with this break-up

An alternative broadband services provider has reined in guidance, but could this be the bottom?

Aim-traded alternative broadband services provider Bigblu Broadband (BBB:28p) has released a mixed set of interim results.

In May 2024, the group exited its Nordic business for a nominal sum, albeit the buyer assumed £1.3mn of net working capital creditors and liabilities and there is a contingent earn-out agreement. The disposal led to a £0.73mn below-the-line loss on discontinued operations.

In addition, BigBlu incurred £1mn of exceptional charges relating to corporate activity, restructuring and the write-off of some development costs on a new fully integrated cloud-based Microsoft IT system for its Australian subsidiary, SkyMesh. The reported pre-tax loss of £2mn also included a £0.15mn foreign exchange currency hit. Adjust for these items and the group just about operated at break-even at the pre-tax level.

Building a platform for SkyMesh to grow

As previously reported, competition from Starlink, a wholly-owned subsidiary of American aerospace company SpaceX, has impacted SkyMesh's churn rates.

In the six months to 31 May 2024, SkyMesh reported an underlying annualised churn rate of 32 per cent and only increased its customer base by 700 to 52,300 customers. So, to boost customer retention rates, SkyMesh has been working closely with its major satellite provider, NBN Co, to bring more affordable uncapped data packages to market. It’s working as a quarter of the customer base has now migrated to new deals, but it has led to lower average revenue per user, which impacts the gross margin SkyMesh earns.

Sensibly, SkyMesh secured a distribution package with Starlink in December 2023 to provide high-speed internet to businesses and small office customers in Australia. BigBlu invested £2.1mn in Starlink stock to support future orders as it looks to scale this side of the business. Combined with reseller agreements with Optus for 4G/5G fixed wireless (launched in July 2024), Vocus for fibre and OneWeb, SkyMesh has doubled its total addressable market to more than 2mn potential customers.

However, SkyMesh’s cash profits have been under pressure, falling from £2.2mn to £1.7mn (pre-central overheads of £0.6mn) in the latest six-month period. This explains why house broker Cavendish cut its full-year group cash profit estimate by 25 per cent to £3mn and now expects adjusted pre-tax profit of £2mn and earnings per share (EPS) of 2.8p, down from £3.6mn and 7.1p, in 2023. Also, BigBlu’s net debt has risen sharply from £0.3mn to £4.9mn due to the hefty investment in working capital and IT systems as well as the cash cost of the one-off charges.

Share price at a nadir?

The positive for shareholders is that the Australian business is now positioned to deliver growth. Cavendish's downgraded forecasts still point to SkyMesh’s annual cash profit rising 25 per cent to £4.5mn in the next financial year, an outcome that should drive pre-tax profit and earnings per share (EPS) up two-thirds to £3.2mn and 4.6p.

BigBlu’s directors are also committed to maximising shareholder value, either through an IPO, trade sale, management buyout or private equity transaction of the business. It would undoubtedly release value as SkyMesh is in the price for only £15mn (25.6p) on a sum-of-the-parts basis, or 4.2 times depressed current-year cash profit estimates and only 3.3 times 2025 forecasts. Telco peers are rated on a multiple of 8-10 times cash profit. I have taken account of group net debt of £4.9mn (8.4p) and BigBlu's £6mn (10p) stake in Quickline, a company that is building fixed wireless access networks to address the ‘UK digital divide’, in my calculations.

So, although BigBlu’s share price has fallen from 38.5p since I rated the shares a hold (‘Bigblu disappoints, but a break-up is highly likely 20 May 2024), the potential to more than double your money on a break-up makes them worth holding onto. Hold.

[p1nkfish] 30/8/2024 08:15

Cavendish TP remains at 70p.

Mine would be lower but even so a double potential if management realise value through some transaction for the remainder of the business.

[p1nkfish] 30/8/2024 07:45

H1 report out.

"........the Board continues to assess all options to realise value and returns for shareholders, including a private equity transaction, an MBO, trade sale or an ASX listing of SkyMesh, as previously announced."

[p1nkfish] 16/7/2024 01:19

Objections to Stalink were kicked out last Friday.

"The US Court of Appeals for the District of Columbia rejected a challenge last Friday from DISH Network and the nonprofit DarkSky, which sought to halt the deployment of SpaceX's second-generation Starlink network in low Earth orbit."

[weatherman] 20/5/2024 16:35

The rump is essentially Skymesh, with a small stake in Quickline - good news they are beginning to work with Starlink. Yes, looking for a sale of Skymesh and return of capital - 70p per share would do. dyor.

[value hound] 20/5/2024 13:45

Simon Thompson's take on the results under the title:

"Bigblu disappoints, but a break-up is highly likely"

The alternative broadband services provider has lowered guidance, and the shares trade on a near 50 per cent discount to sum-of-the-parts valuations

which concludes...

So, although the material earnings downgrade is disappointing, and Cavendish lowered its sum-of-the-parts valuation from 90p to 70p, a break-up of the group is a real possibility. Indeed, with the Australian business effectively in the price at four times depressed current year cash profit estimates, a potential MBO of SkyMesh supported by private equity, trade sale or an IPO should realise material value for shareholders. Hold.

[weatherman] 09/5/2024 12:26

Another rise today - a more likely outcome is a sale of Skymesh (hopefully for £50m +). The Nordic and Oz businesses are not a natural fit imo - but without an announcement it is mere speculation or wishful thinking.

[value hound] 08/5/2024 15:29

D Day you mean, for a huge takeover announcement? :-)

[dogwalker] 08/5/2024 14:45

Maybe 6th June?

[value hound] 08/5/2024 13:14

Why are the finals so late this year? Last year they were on 20th March, Morningstar's estimate is for today, and there's nothing on the website AFAICS.

[varies] 11/4/2024 12:21

the results for the year to 30 November 2023 should be out soon

[strollingmolby] 19/1/2024 12:50

Christopher Mills keeps buying, now at 25.48%. What is his end game here ?

[value hound] 04/1/2024 07:58

To parody the Marks and Sparks ad,... this isn't just any old NED, this is a Chris Mills NED.

[weatherman] 04/1/2024 07:34

A NED has been buying at these levels, controlling over 25%.

[weatherman] 20/12/2023 21:44

hxxps://simplywall.st/stocks/gb/telecom/aim-bbb/bigblu-broadband-shares/news/bigblu-broadband-plc-lonbbb-doing-what-it-can-to-lift-shares

[value hound] 30/8/2023 16:29

"BigBlu offers compelling value and bumper free cash flow" - acc to Simon Thompson this pm

[weatherman] 29/8/2023 10:40

I can see a sale of Quickline stake, and possibly Norway, to fund acquisitions in Oz imo. - 'all options' including a ASX listing.

[value hound] 29/8/2023 08:19

Yes - solid is the word. Comfortably worth £30-40m as it stands IMO, but the crucial bit is: "[Re Skymesh...] the Board continues to assess all options to realise value for shareholders, including a potential spin out ASX listing, as previously announced."

[paulisi] 29/8/2023 07:51

Solid results, but not much happening other than cost savings.

[value hound] 04/8/2023 14:08

Yes, I did what was intended to be a small dummy trade to check the price. The ask was 44p, but I got quoted 41.1p so just let the small top-up go through as it's v slightly less than previously

[catabrit] 04/8/2023 11:56

I love buying the Simon Thompson fade.

[value hound] 13/6/2023 16:34

Sorry, didn't realise the rise had been caused by Simon Thompson's re-tip today.

FWIW, he concludes with:

"Expect the share price fall to reverse quickly when the penny drops with investors. A likely IPO of SkyMesh could well bring FinnCap’s 90p target into play. Buy."

[value hound] 13/6/2023 15:27

Encouraging move up today. Obviously, it could be worth a lot more if and when it spins out its Skymesh subsidiary operation in Australia. Chris Mills topped up at 48.5p in March to go to over 25% and he's infinitely smarter (and richer...) than me so I was happy to buy at 42p.

According to Simon Thompson, when he tipped it on 1st March at 54pps, they're forecast by FinnCap to make £5.6m on revenue of £31.9m this year. He thinks a realistic valuation for Skymesh is something around 95p a share. I'd be a lot more pessimistic - but still..! In addition, there's BBB's Nordic business which is said to be recovering - so as and when the listing does happen, BBB should comfortably double and will still be undervalued and Chris Mills has a great track record of making sure this kind of thing does come to pass. He did a Vox markets podcast earlier this week in which BBB wasn't mentioned at all - so it made me wonder if he couldn't say anything about it as he's on the BoD and there's imminent news? That said, I don't think he mentioned them on the last Vox Markets interview either.