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Structural growth and limited competition could see its share price surge in time
Thursday 21 Feb 2019 Author: Steven Frazer

Consumers want reliable, superfast broadband. That’s no problem if you live in towns and cities but what about the thousands who live in the relative backwoods?

Bigblu Broadband (BBB:AIM) is part of the solution, not just in the UK but across mainland Europe, Scandinavia and Australia as well. From just £24.99 a month customers can jump onto the internet superhighway at average 12mbps with a 10Gb download cap.

Faster speeds and more data allowances are available on packages costing up to £69.99 a month, while it can connect you to any fixed line infrastructure that is available, and connect mobile phones to 4G networks.

The company buys satellite broadband and airtime from a selection of major partners, such as Eutelsat, SES and Viasat, and plugs homes, businesses, broadcasters, construction sites, even parts of the military, into its network.

With 113,000 subscribers, the company already claims to be the largest satellite broadband provider outside North America and the fourth largest in the world.

It believes 15% of homes in Europe alone can’t plug into copper or fibre networks and across its entire estate it believes 500,000 people are potential customers.

Like many start-up businesses the breakthrough into profit has taken longer than planned as management concentrated on rapid expansion, including 20 acquisitions. But the focus is now very much on organic growth, margin improvement and turning profit into cash.

The business is still consuming cash at the moment but this should change over the next 12 to 24 months.

Analysts at stockbroker Numis anticipate a maiden £5.6m pre-tax profit in the financial year to 30 November 2020, and it is not out of the question for a small profit this year, if things go well. Numis currently forecasts a £700,000 loss.

Readers may be interested to note that respected hands-on activist investor Christopher Mills has a major interest. Mills has a long track record of shaking up poorly performing smaller businesses through his Harwood Capital vehicle. Harwood is Bigblu’s largest single shareholder with a 23.3% stake.

With no listed peers getting a handle on valuation is tricky. Numis uses a complicated discounted cash flow calculation and analyst John Karidis estimates a 230p per share underlying share price valuation.

Bigblu is still unproven and that makes it a riskier investment. But this looks to us like a structural growth opportunity with little or limited competition at present, making it one that could reward  early investors.

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