Major subsidy win drives further FY21 & FY22 upgrades
Quickline has today won a £12.3m subsidy to provide 15.8k premises with superfast (>30 Mbps), ultrafast (>100 Mbps), and in some cases gigabit-capable broadband on behalf of the North Yorkshire Local Authority. This almost doubles the amount of cash subsidies that Quickline has won since September 2020 to £27.4m, almost doubles the related network investment to £33.5m, and almost doubles the premises covered by these grants to 32.0k. The tender win today will see total investment of £14.5m in fibre-backed fixed wireless networks over the next two years, with the £12.3m subsidy funded by the Authority in partnership with BDUK, and Quickline investing £2.2m. As we explain from p17 of our 1 December 2020 report, this leads to upgrades to our Quickline revenue and EBITDA, which drives an upgrade to group revenue forecasts of +1% in FY21 and +3% in FY22, and an upgrade to group EBITDA of +6% in FY21 and +12% in FY22. As BBB focuses on creating shareholder value across all of its three core assets, we are now forecasting group FY21 organic revenue growth of +22% (+13% excluding grants), and +15% (+10% exc grants) in FY22. Our next 12-month group EBITDA growth of +28% then compares with peers with +8-10%, and this makes BBB look undervalued on 10x 12-month forward EV/EBITDA with peers on 12-17x. We upgrade our price target to 180p based on 12x FY22 EV/EBITDA..
Quickline has now won four tenders to provide fibre-backed network coverage to 32k premises in the next 2 years – This is the fourth BDUK Superfast Broadband Programme contract that Quickline has won since September, and when combined with Quickline’s existing network footprint and Rural Gigabit Vouchers, Quickline will be able to target over 100k premises in the next 2 years, and quickly build from its current subscriber base of c7k. In 2021, we expect Quickline will be focused on a fast, diligent deployment of its network to release grant funding, connecting subscribers in grant premises or using Rural Gigabit Voucher, and engaging i nfuture tenders after Quickline’s successes in the past four months.
Momentum is building strongly for BBB’s investment case – Today’s win reflects the focus of BBB’s management and board to drive growth and create value in its three core assets, where we expect: Australia can deliver organic revenue growth of +10-20% pa and generate OpFCF of over £3.5m pa; Quickline’s investment in gigabit-capable rural networks is creating an infrastructure asset that could generate over £10m of EBITDA pa in the long term; focused investment in the Nordic business can enhance the subscriber base and deliver a return to organic growth in FY22.
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