Aussie Broadband drops out of favour

Company News

by Glenn Dyer

From market darling in 2021 to market pariah so far in 2021 – a familiar experience for tech stocks these days as Aussie Broadband (ASX:ABB) grapples with the vagaries of investor appeal.

ABB added to 2022’s stockmarket losses with a quarterly report that failed to inspire investors, so down went the shares 16% to $3.01, taking the year’s losses to more than 34% – a much larger fall than the 6% slide in the ASX 200 or the 9% drop in the All Ordinaries.

On the face of it there was nothing in the quarterly report that shouldn’t have upset investors – the company reported total broadband services increased by 7% during the June quarter and as a result it expects EBITDA for the year to June 30 to come in towards the higher end of guidance.

That would see EBITDA closer to the top end of the $38- to $39-million range.

The 7% rise in broadband services in the June quarter too the total number of broadband services 584,793, up 46%.

Residential broadband services increased 28% to 464,979 while business broadband services were up 68% to reach 59,488. That includes services provided by Over the Wire which Aussie Broadband acquired earlier this year.

ABB also reported a “significant” boost in its wholesale and white label broadband services, which hit 60,326. Excluding satellite, Aussie Broadband also increased its share of NBN services to 6.46% from 4.74% in the final quarter of 2020-21.

ABB cofounder Phillip Britt said in Monday’s release: “We are pleased with this result given the third quarter challenges we faced, and have been very focused on addressing over the past three months.”

The acquisition of Over the Wire has bolstered Aussie Broadband’s business segment product and skills capability. It added 16,000 business, enterprise, government and wholesale customers. The integration is progressing as planned and we have already started generating revenue synergies from the combination of the two businesses, including two large regional health alliance and shire council deals recently signed.

“Synergies relating to the migration of Aussie voice traffic onto the Over the Wire tier 1 voice network have yielded $2.9 million in annualised savings, higher than our original investment case. A further annualised $2.3 million in other run rate synergies have been achieved, taking the total cost synergies achieved to date to $5.2 million annualised.” he said.

On top of all of this, ABB said its Aussie Fibre Project is now 90% complete and remains on budget. This is forecast to generate $13.5 million of year-on-year savings. The project was facing delays from adverse weather and is now scheduled to be finished in the current quarter (September quarter).

But for some reason this all fell on deaf ears in the market on Monday.

That saw the shares touch a low of $2.97 on the day and they ended a little higher at $3.05 for a loss of 16% for the session.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.