Spirit Telecom - the silver lining on NBN's cloud

Dean Fergie

Cyan Investment Management

Spirit Telecom appears to be emerging as a major beneficiary of the NBN's underwhelming high-speed internet deployment. As professional investors, we're always looking for an angle to make a dollar. And one company's misstep is often another's opportunity. 

 

Spirit Telecom (ASX:ST1) is a niche telecommunications company that wirelessly connects commercial and residential customers wanting a reliable and fast internet connection. 

Spirit concentrates its residential offering to multi-dwelling users (MDUs - because the telco industry loves an acronym!) - think apartment blocks with 30-300 individual dwellings - offering a competitive and fast alternative to an NBN connection.

 

Unlike NBN's wired offering, Spirit uses predominantly line-of sight wireless technology to connect customer buildings. So effective is the technology, that almost 2/3 of Spirit's customers enjoy speeds above 25Mbps, compared to just 17% of NBN customers (VIEW LINK)

Clearly internet speed is a huge drawcard for customers (just ask my kids!) and ST1's connected footprint, that now includes 439 buildings and 21,000 apartments (up 27% on pcp), reflects that demand.

 

Importantly for investors, ST1’s compelling product offering is being translated into attractive financial metrics. 

 

Helped by last year's acquisition of Queensland based World Without Wires, ST1 has seen their 1H18 revenue increase by 54% to $8.1m and shareholders have enjoyed EPS growth of 83% to 0.23cps.

 

We see the medium-term dynamics most supportive for ST1.  High-density housing continues to increase (helping ST1's MDU deployment), internet speed remains a critical sales factor and the perception of NBN offering sub-par service remains top of mind for consumers.

 

With a current market capitalisation of just $50m (even after the recent 60% rise in the share-price this year) ST1 remains an under-researched gem taking advantage of the opportunity created from a giant's stumble.

 

Cyan is making meaningful investments in some of the most promising (and often overlooked) smaller companies listed on the ASX today. Find out how.


1 topic

Dean Fergie
Director & Portfolio Manager
Cyan Investment Management

Dean has over 25 years experience in the funds management industry covering all major asset classes. He holds as Master of Applied Finance and is a Graduate of the Australian Institute of Company Directors.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment