BGL - BigAir Group

[yogi-in-oz]

Hi folks,

Firstly, some general thoughts on trading IPOs, but
please note, this is NOT ADVICE, simply a discussion
and some time cycle analysis for BGL, listing tomorrow.

..... see file, attached below.

happy days

yogi

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[xinyu09]

I just finished reading the report on this company, and bought a bit of the shares.

Imo, it's an exciting company and chart looks good. Increased volumes recently, it looks like someone is accumulating.

 

[xinyu09]

Interesting things happening at the moment, maybe the stock gets a re-rating to the 20s. I hope I am not dreaming

 

[BigLeon]

Hey folks BGL obviously aren't getting a lot of airplay here on Aussie Stock Forums but they have just announced a 30% upgrade to earnings guidance for FY11, from $4m to $5.2m.

They are the clear leader in their niche and I expect their growth to continue.

Some of the key points about BigAir's business

 

[So_Cynical]

Hey folks BGL obviously aren't getting a lot of airplay here on Aussie Stock Forums but they have just announced a 30% upgrade to earnings guidance for FY11, from $4m to $5.2m.

They are the clear leader in their niche and I expect their growth to continue.

Some of the key points about BigAir's business

Leon i would appreciate it if you kept your thoughts about BGL to your self until after June 30 so i can free up some capital and get me a position.

 

[kingcarmleo]

Have been watching these guys very closely. Unfortunately the share price is still pretty stagnant. Will look for an entry level below 16c

 

[skc]

Hey folks BGL obviously aren't getting a lot of airplay here on Aussie Stock Forums but they have just announced a 30% upgrade to earnings guidance for FY11, from $4m to $5.2m.

They are the clear leader in their niche and I expect their growth to continue.

Some of the key points about BigAir's business

Just to clarify the guidance refers to EBITDA, not NPAT.

My NPAT guesstimate would be ~$2.3m so ~1.5c EPS, and PE ~12.5. Relatively cheap compared to IIN and TPM.

 

[FrontRunner]

up 22% today...

no announcements? Any thoughts on this? Large trading volume

 

[VSntchr]

up 22% today...

no announcements? Any thoughts on this? Large trading volume

One of Roger Montgomerys bloggers gave it a big spin..and so the bunch of "ill do whatever you say"ers are buying in droves...
they really are not value investors...

 

[FrontRunner]

do you have a link to the blog entry?

Just quickly how did you find this entry? I did a google search for BGL posts this morning which turned up with nothing of significance, hence my post here.

If I had known I would have placed a market sell, instead I place a limit order that didn't hit market.

 

[Risk Chaser]

here's the post i think VSntchr was refering to, hard to imagine people would buy based on this.

Hi Roger and Everyone,

First of all I would like to apologize for being secretive in the last few weeks. The reason is I have found several interesting opportunities! In this post I will talk about one of them which is presenting huge value. For those of you who remember, this is not my mystery company I have mentioned before – it’s actually BETTER!

So, did you know you can make money from air? Apparently you can!

It’s called BigAir Group (BGL)

BGL owns and operates Australia’s largest metropolitan fixed wireless broadband network. The Australian business market comprises nearly one million businesses and BGL’s network provides near blanket coverage across 7 metropolitan areas. BGL sells broadband and data services directly to business customers and also partners with other IT service companies who have existing relationships with business customers in order to deliver BGL’s high speed, cost effective fixed wireless broadband solutions. Additionally with its recent acquisition of Access point it has entered the student accommodation broadband market.

The CEO and co-founder, James Ashton, is as entrepreneurial and as energetic as they come. At the age of 27 he already managed to co-found and sell an Internet business for $20million. 10 years on and he has delivered on his promises, launching BGL by organic growth and some smart acquisitions.

This year BGL is forecasted to earn $5.2million in EBITDA or about 2cents per share. By fy12 this company is forecasted to earn between $7.5 – $10.5 million EBITDA or about $4 – $5millon NPAT on revenue of approximately $23million. Quoting from the company’s latest guidance:

“In addition the company is pleased to announce that consolidated underlying EBITDA exceeded $625,000 for March with $485,000 contribution from the Fixed Wireless division and $140,000 contribution from the Student Accommodation division. This represents an annualized “run rate” of $7.5 million for underlying EBITDA which represents an increase of 134% versus the $3.2 million EBITDA earned in FY2010.”

In order to produce these profits the company will employ about $15million of shareholders equity. That’s about 30% ROE. In contrast, Vocus, which wil benefit from BGL’s growth, is forecasted to earn $15million in EBITDA for this year and its market cap is $140million. BGL’s current market cap is only $30million!
They are currently debt free and have recently acquired their biggest competitor clever communications and access point in the student accommodation sector. The increasing focus by universities to provide on campus student accommodation provides BGL with significant scope to increase its user base.

Balance sheet wise, this company will produce tremendous cash-flow going forward from fy12 and is forecasted to pay a dividend. Now I am no Roger, but I believe this company is currently a B1 (small chance of short term borrowing to cover their trade payables) and I am quite certain it will be an A1 come fy12. (I hope Roger can confirm this). Now don’t be alarmed by this, remember Matrix needed 3 capital raisings to get to where they are now, and all were in the space of about a year!

Competitive advantages and NBN risk?
BGL’s competitive advantage includes its state-of-the-art WiMAX and proprietary network which allows it to install business-grade symmetric broadband services at speeds up to 1 Giga Byte per second and distances up to 30km from its base stations with installation taking just a few hours. Most of BGL’s competitors rely on access to Telstra’s copper network which can take weeks to install a service and often does not deliver fast symmetric speeds.BGL like other ISPs is in an essence not so much of a technology company but rather a customer services company that uses technology as the competitive vehicle to deploy those customer services.
Since BGL uses its own network it does not rely on the NBN and the access costs associated with it. Considering the fact it will take many years and to build the NBN (they can’t even get a contractor to competitively tender for it), there is enough time for BGL to grow and entrench itself in its industry.
The verdict?

There is not doubt that internet and data demand will grow exponentially into the future where businesses and students will require fast, efficient and quality internet services. The great advantage of BGL is no matter what happens to commodity prices, the Aussie dollar or china, BGL will continue to experience demand for its services.

At 22cents (last price) BGL is trading at just under its intrinsic value (IV) for this year, BUT looking ahead to fy12 I have their IV at between 35cents – 45cents. If you remember I have always emphasized on this Blog buying at BIG margins of safety, well this is as BIG as they get!

To me it reminds me of Matrix at $3.50 when we all knew their order book was at $180million for the next year. Sometimes it’s just a no brainer. Apparently some other people think the same (Eureka report article on last Friday and AFR article last week).
Finally, I will never forget something Roger once said during one of his presentations in Sydney last year:

He said “When you see value, it smacks you right in the face!”

Well… my cheeks are very sore!

BGL has been added to my portfolio alongside other quality businesses such as MCE, FGE, VOC and MTU.

Good luck!

(Side note)
This is a small and sometimes illiquid stock that may be volatile in the short term. I urge you to do your own research and seek and take personal financial advice. The reason is that if the share price falls in the short term, you can at least blame your financial advisor and not me. ;-)

 

[FrontRunner]

Thanks RC.

Hard to imagine that would have instigated this mornings rally, considering this will be the highest trading volume day for BGL. Somethings missing here. Maybe institutional block trade..

Sp has settled at 25 cents

 

[titus]

It doesn't look like the RM blog herd drove the price up today. The poster on the blog posted the comment at around 11.53am. At that time the price was already around 24.5c after coming off a 27c high. It was more to do I think from the Eureka Report from last Friday.

 

[VSntchr]

It doesn't look like the RM blog herd drove the price up today. The poster on the blog posted the comment at around 11.53am. At that time the price was already around 24.5c after coming off a 27c high. It was more to do I think from the Eureka Report from last Friday.

I read his post before the market opened yesterday, so I dont think that is correct...

Your right though, it was also mentioned in the eureka report which would have had an effect...15,000 subscribers means illiquid stocks will get impacted!

 

[tinhat]

Mentioned here:
http://www.eurekareport.com.au/iis/iis.nsf/ak/AKmcDG?opendocument

 

[titus]

I read his post before the market opened yesterday, so I dont think that is correct...

Your right though, it was also mentioned in the eureka report which would have had an effect...15,000 subscribers means illiquid stocks will get impacted!

Ah yes, I had the dates wrong. This company looks promising but I want to do a heck of lot more investigating before I commit.

 

[Intrinsic Value]

Ah yes, I had the dates wrong. This company looks promising but I want to do a heck of lot more investigating before I commit.

I took a look at Big Air after reading about it on Eureka but it is still too early in my opinion to make an informed decision.

It could do well but without any history and being so small I would prefer to wait.

I would rather lower the risk and take less profit than jump in too early.

 

[VSntchr]

I took a look at Big Air after reading about it on Eureka but it is still too early in my opinion to make an informed decision.

It could do well but without any history and being so small I would prefer to wait.

I would rather lower the risk and take less profit than jump in too early.

Yeah agreed. I cant see how people are forecasting it to earn 3-4mil next year. Revenue is up 60% this half but profit only up 1%???

This full year profit probably wont exceed last year by much assuming that trend continues...so for FY12 to be 3-4mil would imply an increase in NPAT of minimum 100%...its a big call to base you investment on that....

I can't see the logic for so many people jumping in and paying any old price on Monday when there really is many companies offering just as much in such a risk v reward play...

 

[Intrinsic Value]

Yeah agreed. I cant see how people are forecasting it to earn 3-4mil next year. Revenue is up 60% this half but profit only up 1%???

This full year profit probably wont exceed last year by much assuming that trend continues...so for FY12 to be 3-4mil would imply an increase in NPAT of minimum 100%...its a big call to base you investment on that....

I can't see the logic for so many people jumping in and paying any old price on Monday when there really is many companies offering just as much in such a risk v reward play...

Just to add a bit of fuel to the fire on this one and this is a quote from RM from his blog

"Less liquid than ZGL…A Eureka report article helped too perhaps. Only one analyst covering the stock. I believe that analyst may own 7% of the company."

 

[FrontRunner]

up a further 13% this morning due to a positive Macquarie review:

https://www.macquarie.com.au/edge/article/SECTOR/50/d45e6ca233f70310VgnVCM100000c502890aRCRD/