OptiComm lists on ASX, promises faster internet connectivity to new residential estates

Australian broadband network builder OptiComm (ASX: OPC) has enjoyed a share price surge of more than 50% in the few hours since making its ASX debut today.

The listing comes after the Melbourne-based company raised $42.3 million from an initial public offering of 21.18 million shares at $2.00 each, promising to provide faster internet services to new residential estates.

Launched in July and underwritten by Morgans Corporate Limited, the IPO proposed the issue of 7,040,000 new OptiComm shares for gross cash proceeds of $14.08 million.

Proceeds were boosted by a $28.27 million sell-down of shares by existing shareholders to total $42.3 million.

Funds raised through the IPO will give OptiComm access to capital markets for “additional financial flexibility” to enable the pursuit of future growth opportunities.

Consumer appetite

Chairman Allan Brackin said the exercise would help maintain OptiComm’s profile as one of the largest privately-owned, builder-owner-operators of fibre-to-the-premises (FTTP) networks to some of the country’s newest residential developments.

“Our business is driven by the ever-increasing consumer appetite for internet connectivity which requires fast and reliable bandwidth services within residential, commercial and retail market segments,” he said.

“We understand network connectivity and the revolutionary impact a fully-connected ‘smart’ world can offer, and we are focused on ensuring all of our communities – specifically those in new estates – have access to a reliable, fixed-line fibre broadband service.”

Fibre-based network

OptiComm works with developers to design and install fibre-based network infrastructure in new broadacre (or single dwelling) estates, lifestyle villages and multi-dwelling unit blocks in compliance with Australian National Broadband Network regulations.

At the end of June, the company had installed fibre network infrastructure to over 106,000 lots in 245 estates and buildings across the country.

Over 76,000 dwellings built on these lots are now connected to OptiComm, and over 60,000 receive active internet, telephone and other telecommunications services via third-party retailers who pay a monthly recurring wholesale fee for access to the network.

Organic growth

OptiComm has estimated it will install fibre network infrastructure to approximately 18,000 lots in the next financial year.

It also has a contracted pipeline of over 100,000 lots for delivery between now and 2029.

“[We expect our] organic growth to continue, supported by growing consumer demand for high-speed internet connectivity and ongoing demand for fixed-line fibre telecommunications infrastructure,” Mr Brackin said.

He said the company generates its growth from recurring payments from third-party retailers, construction revenue received from property developers for the delivery of network infrastructure, and one-off fees from first-time connections.

While 2019 full year results are yet to be released, the company’s recurring network revenue has been forecast to exceed network construction revenue and become OptiComm’s single largest revenue stream.

Usage patterns

Australian Bureau of Statistics research shows consumer data usage has increased dramatically over the past few years, with average monthly consumption of fixed broadband data per fixed-line subscriber up by over 60% in the two years from June 2016 and June 2018.

This number is expected to grow in line with increased and ongoing usage of video streaming and cloud services by consumers and businesses alike.

Internet traffic is also expected to boom as the ‘Internet of Things’ and the number of internet-connected devices used on a daily basis grows rapidly across the board.