BigBlu Broadband – losses will soon turn into profits and investors will see their rewards
When this company came to the AIM market, just 4 years ago, it had 10,000 members – today it has over 120,000.
Of that number, some 80% subscribe to the BigBlu Broadband (LON:BBB) satellite service, whilst the balance 20% take its wireless solution. That growth has been enabled through both organic development and through timely acquisition.
Predominantly BBB is a broadband provider, it specialises in delivering alternative high-speed technologies to businesses and homes that are either unserved or underserved by fibre. It delivers a total last-mile, rural or last-resort broadband solution using either satellite or fixed wireless technology.
An EU Directive demands that all its citizens have the right to 30Mb speed coverage for all European countries by 2020 and 100Mb by 2025. Some 27m of the EU total population have broadband speeds of 4Mb, or even less. Particularly affected are the rural communities and areas where the laying of fibre is too expensive.
That offers a massive market potential for BBB and its satellite broadband services. It is the only player of scale in Europe delivering those technologies, offering a 50Mb unlimited data consumer service in many countries.
The group has customers in some 30 countries, and is operating regional business units in the UK, France, Poland, Germany, Spain, Italy, Austria, Portugal, Ireland, and in Norway from where it serves the whole of Scandinavia. It also operates in Australia, serving the whole of Australasia.
Today BBB is the largest satellite broadband ISP outside of North America and is the 4th largest in the world – yet it is only capitalised at less than £70m.
Apart from BigBlu, which serves the UK and Ireland, the company’s global brands include: Bordernet, which is Australia’s rural and outback specialist ISP; Breiband, for Norway and the Nordic region; Europasat, a dynamic pan European satellite broadband ISP; Open Sky, super-fast fixed wireless and also satellite broadband ISP in Italy; Quickline Communications, which is the UK’s leading ultra-fast wireless broadband ISP; satinternet.com, which is the foremost satellite ISP in Germany; and finally, SkyMesh, a prolific connector in Australia.
BBB’s customers range from domestic homes to multi-national corporations, the military and Governments. It has installed both satellite broadband and fixed wireless installations into some of the most hostile and complex environments in the world.
It harnesses satellite capacity in space to deliver a super-fast broadband solution for those businesses and homes, using a small dish on the outside of the customer’s premises.
The company has developed a range of satellite broadband products for SME businesses and Enterprise customers. It is a provider of choice for several well-known broadcasters – like the BBC, SkyNews, and CNN. It has also serviced mission critical sites for the UK Ministry of Defence, as well as many police forces in the UK.
Importantly, it has not tied itself to any one satellite owner or operator, currently using 5 satellite platforms across 10 different satellites. The company is developing its own services as the technology and efficiency of space satellite operations increases, some in partnership with the operators.
Satellite operators need service providers like BBB to be the ‘meat in the sandwich’ between the satellite and the end user, providing all the customer facing aspects of the service.
Over the last 10 years consumer satellite broadband speeds in Europe have risen over 10 fold from 4 Mbps in 2008 to their current 50 Mb (4G services) speeds, but in the next year we will see an exponential jump to 100 Mb speeds (5G services) with a further jump to 200 Mb and 300 Mb and more in 2021/2022.
The launch of 50 Mb consumer services in the last year has generated a big upswing in demand for satellite broadband. It is ideal for streaming, as is proven by the thousands of satellite TV channels across the globe.
IP traffic is forecast to grow some 3 times over the next 5 years. Consumer video-on-demand traffic is expected to have doubled by 2022. Such demand will stretch the feeble wired broadband services – that is where BigBlu looks to meet thousands more customers.
About 3 weeks ago the group announced its results for the year to end November 2018 – they showed revenue up 26.1% to £55.4m (helped by acquisitions) and a pre-tax loss of £9.5m. The loss does not bother me, however net debt at £11.9m compares with net assets of just £10.1m.
Those concerns are easily coped with. Current year research estimates sales of £62.5m could produce a much smaller loss, of just £1.3m pre-tax. Whilst a £67m revenue in 2020 should push BBB in to profits of around £2.5m, worth 5.2p per share in earnings.
Active investor Christopher Mills, the billionaire boss of Harford Capital, is the biggest holder and controls 22.6% of the BigBlu equity. Other professional investors include: BGF, with 8.1%; Herald with 6.7%; Hargreave Hale with 6%; and Livingbridge with 4.3% of the 56.3m shares in issue.
The shares of BigBlu Broadband, now 122p, have some very strong upside as it expands its reach.
Currently it is the fastest growing communications company in Europe - but tomorrow where else?
I set a Target Price of 175p within the year.