The Aussie Broadband Pty Ltd (ASX: ABB) share price has soared 90% on its ASX debut at the time of writing.
Aussie Broadband is an Australian-owned and operated internet service provider (ISP) offering plans on the NBN and OptiComm Ltd (ASX: OPC) networks.
Aussie Broadband was awarded the 2020 Canstar Blue Award for Most Satisfied Customers, beating out telco giants such as Telstra Corporation Ltd (ASX: TLS) and TPG Telecom Ltd (ASX: TPG). It also won the prestigious award in 2019.
Aussie Broadband goes public
Aussie Broadband successfully completed a $40 million dollar IPO (Initial Public Offering), giving the company an initial market capitalisation of approximately $190 million. However, the Aussie Broadband market capitalisation is 90% higher now, meaning a market capitalisation of around $361 million.
$10 million of the IPO was reserved for Aussie Broadband’s customers, which was fully subscribed in about 75 minutes! This is a clear reflection of how its customers value the business.
As at FY20, Aussie Broadband had provided about 243,000 connections to the NBN. Aussie Broadband added 112,000 new customers in FY20 and revenue was up 91% on the prior year to $190.49 million.
Funds from the IPO will be used to expand its marketing efforts, with the expectation it will lead to 126,000 net new customers. Funds will also support the roll-out of its own dark fibre (fibre optic cable) network. The dark fibre will reduce its current dark fibre leasing costs from the NBN.
My personal experience with Aussie Broadband
I personally became a customer of Aussie Broadband last month, and I cannot speak more highly of the customer experience. I was experiencing severe connection issues which I raised with my former ISP. The ISP informed me they were waiting on the OptiComm network to resolve it, but after about a week of following up with them, I decided I had to switch my ISP.
The customer service team at Aussie Broadband were very polite and well versed. I advised them of my connection issues which they raised with OptiComm. Within a few hours, the connection issues were gone! They also continued to follow up with me in the days following to see if I had any issues. Very refreshing given my prior dealings with telcos.
Please note, I do not currently own shares in OptiComm nor Aussie Broadband. I am simply very impressed with the level of customer service provided.
Valuation
Aussie Broadband made a loss of $12.3 million in FY20, so it has a negative P/E ratio at present. However, looking to the consolidated statement of cash flows, the company generated net cash from operating activities of $6.9 million. Subtracting $3.9 million of capital expenditure, free cash flow generated is about $3 million.
Assuming a current market capitalisation of around $361 million, Aussie Broadband trades at over 100x FY20 free cash flow. While this looks very pricy, this ratio will fall quickly if Aussie Broadband continues its rapid growth.
