Superloop Ltd (ASX: SLC) shares have fallen sharply over the last year (about 50%), but could this provide a buying opportunity?
What Does Superloop Do?
Superloop is an independent provider of connectivity services within the Asia Pacific metro region. It operates a network of fibre and wireless assets in Australia, Hong Kong and Singapore and aims to benefit from the exponential growth in data consumption.
2 Reasons To Like Superloop Shares
1. Track record of company founder
Superloop was founded by entrepreneur Bevan Slattery, who is perhaps best known for founding PIPE Networks in 2001, which was sold to TPG Telecom (ASX: TPG) in 2011 for $373 million. PIPE was the third largest metropolitan fibre optic network at the time of acquisition.
Although Bevan stepped down as CEO in March 2018, he remains as Superloop executive director and will continue to drive business strategy.
Amongst other successes, Bevan also founded NEXTDC Ltd (ASX:NXT), a company with a current market capitalisation of about $2.3 billion.
2. Incredible growth
Superloop reported significant growth in financial year 2018 with revenue up 109.3% to $125.2 million, underling EBITDA rising 240% to $30.6 million and a profit of $7.1 million.
Growth has been achieved both organically and via multiple acquisitions, including:
- BigAir Group Limited in December 2016 – one of Australia’s largest metropolitan fixed wireless broadband networks.
- SubPartners in April 2017 – developer of high performance international subsea cable systems.
- NuSkope Pty Ltd. in October 2017 – the leading fixed wireless service provider in South Australia.
- GX2 Holdings Pty Ltd in November 2017 – a comprehensive Wi-Fi network management platform.
- SkyMesh, a company with 10,000+ NBN customers in June 2018.
Are Superloop Shares Worth Buying?
Aside from the track record of the company’s founder and growth achieved to date, we must determine if shares in Superloop offer value.
Superloop shares currently trade at $1.50, which is less than it’s net asset value per share (book value) of $1.70 (click here to learn how ratio analysis works). Therefore Superloop’s current Price to book ratio is just 0.80. This calculation is based upon 2018 reported Net Assets of $389.39 million and shares outstanding of 228.6 million.
Companies that may be considered its ‘peers’ have Price/Book ratios that are more than three times higher. According to Yahoo Finance, Chorus Limited (ASX: CNU) and SpeedCast International Limited (ASX: SDA) had Price/Book ratios of 2.9 and 2.47, respectively.
Therefore in my view, it is not difficult to envision Superloops share price at significantly higher levels, and is the reason why I bought shares this week.
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Disclosure: At the time of writing, Will owns shares of Superloop.
