The Insider: Meet the Fund Manager sessions are a great way to hear directly from leading fund managers. They share their approach to investing, favourite companies and their market view for the year ahead.
Australian share markets lost $74 billion in February when Russia invaded Ukraine, leaving many strong companies lost or forgotten in the flurry of the sell-off.
One such company, says Andrew Smith from Perennial Partners, is Superloop – a telco founded in 2014 and listed a year later, and a prospect that now finds itself in a position to challenge industry big guns after COVID changed the way data is consumed.
The non-traditional telco – which provides a suite of fibre, fixed wireless and software services that are faster, cheaper and easier to access – believes the benefits of its services are well understood in the market.
Seeing market share grow from 8.1% to 11.8% in the two years to March 2022, challenger telcos like Superloop are expecting to claim a 30% share of Australia’s $11.5 billion telco market.
Speaking at Reach Markets’ Meet the CEOs event in May, Superloop CEO Paul Tyler said the company’s recent asset sale and acquisition activity will enable it to target a 4-5% share in the aforementioned market – a roughly $500 million segment.
“The assets that we have are already capable of supporting our ambition,” Mr Tyler said. “The simplicity of how you can consume our product is what sets us apart from other infrastructure-based telcos.
“Our advantage is a combination of having our own physical network, no IT legacy systems, automated provisions for fast connectivity and flexibility because of our relatively small size.”
On the company’s sale and acquisition activity, he added: “A lot of synergy was created through lifting Exotel from its wholesale agreements with Optus and transferring it to our network.
“We’re in a strong net cash position as a result of the sale of underperforming assets and the Acurus acquisition allows us to service larger telcos and other big brands such as CBA, AGL and Origin who are moving into the telco space.”
Mr Smith, head of smaller companies and microcaps at Perennial Partners, said Superloop’s decision to sell its assets simplifies the business and tells a better story to investors.
“Superloop is a stock that sold off a lot in February  and a business with past takeover activity with a bid for a much higher price by an infrastructure fund,” he said.
“It’s a good example of what can happen with microcaps when they aren’t researched enough by enough people.”
Mr Smith views the company as a case of the market reacting to the start of the Russia-Ukraine war and ignoring the company’s coinciding cash flow conversion from 20% to 97% during the time.
At the end of March, Superloop’s network was only being utilised at 31%. “When the next ~70% gets filled up, with not much capex, the result is mainly cash flow.”
Meet the Fund Manager
Joseph ConstablePortfolio ManagerHancock & Gore
Meet the Manager
Get access to some of Australia’s leading fund managers who share their 3 favourite stocks, investment approach and insights on the market.
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- Market views for the year ahead
- Investment strategy and approaches
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Hancock & Gore is one of Australia’s oldest listed companies with a 100-plus year history of delivering shareholders long term investment returns. The company operates a wholly owned funds management business called H&G Investment Management Ltd and invests in small to medium-sized businesses with strong growth prospects and a sustainable competitive advantage. Joseph Constable is a portfolio manager with more than eight years’ experience across capital markets and is a former investment manager at Supervised Investments Australia with previous funds management experience at Smith and Williamson (UK) and Hunter Hall International. Joseph is currently a non-executive director of Po Valley Energy Limited (ASX: PVE).
The CEOs of all the companies chosen as Fund Manager favourite stocks are invited to present at our Meet the CEO series. Reach does not assume responsibility for the accuracy or completeness of any information provided, and the views expressed are not reflective of Reach Markets position.
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