Bigblu Broadband PLC

Bigblu Broadband PLC (LON: BBB) is an FTSE AIM All-Share listed provider of ultra-fast broadband services.

Rationale for Valuation – SPECULATIVE BUY at GBX 50.50

• Improved GDP: Britain’s economy surged more than anticipated with 0.8% month-on-month growth in January 2022.
• Stronger Balance Sheet: Following the disposal of its majority stake in Quickline Communications for around £48.6 million, the Group ended FY21 with a net cash position of £5.0 million.
• Well-Positioned for Continued Growth: BBB affirmed that it was trading comfortably above market expectations and positioned well for continued growth in FY22. It reported growth across all key metrics – customer base, revenue, EBITDA, and free cash flow. Moreover, it has a solid net cash position to deliver incremental value for its shareholders.
• Operational and Financial Progress: During FY21, SkyMesh became the Best Satellite NBN Provider for three years in a row. Moreover, Bigblu Norge entered the distribution agreement with Telenor.
• Technical Indicator: From a technical standpoint, the momentum oscillator 14-day RSI (~28.30) is in the oversold zone, while the stock price is hovering close to the lower Bollinger Band.
• Undervalued Multiples: On a forward 12-month basis – EV/EBITDA, EV/Sales, and Price/Earnings valuation multiples are undervalued against the median of the Telecommunications Services sector.

Key Risks

• Interest Rate Hike: The Federal Reserve announced a first interest rate hike (by 0.25%) in over three years and indicated seven rate hikes in 2022.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.

Trading Update (for the 12-month period ended 30 November 2021, as of 2 December 2021)

• Financial Growth: During FY21, revenue and adjusted EBITDA grew around 15% and 10% year-on-year, respectively.
• Customer Base: At the end of FY21, BBB reported 60,000 (FY20: 57,200) of customer base, reflecting robust organic growth in customer numbers in Australia.

One Year Share Price Chart

 (Source: Refinitiv, Analysis conducted by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

*Peers: Gamma Communications PLC, AdEPT Technology Group PLC, and Zegona Communications PLC.

*All selected peers are LSE-listed Companies from the Telecommunications sector.

Conclusion

Please note, markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Based on the net cash position, resilient financial performance, digital transformation, and support from the valuation as done using the above method, we have given a “SPECULATIVE BUY” recommendation on Bigblu Broadband PLC at the closing market price of GBX 50.50 (as on 18 March 2022), with lower double-digit upside potential based on 13.63x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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