ASX Watch: Is OptiComm the NBN’s biggest competitor?

Melbourne, Australia - October 22, 2016: NBN wording on a new roadside pit of the Australian National Broadband Network hybrid coaxial fiber network augmentation.

Serving 106,000 lots in 245 estates across Australia, this telecommunications wholesaler may just be the threat the NBN has been fearing.

Chances are you’ve never heard of this company.

So, let me properly introduce you to OptiComm Limited [ASX:OPC].

OPC went public on the ASX less than a week ago. But don’t let that put you off.

It could just be the next big tech stock.

Before I explain why, let’s find out exactly what it does.

Who is OptiComm?

OptiComm is Australia’s largest privately owned Fibre-to-the-Premises (FTTP) wholesale operator.

Since 2007, it has been servicing new residential housing, apartments and commercial buildings.

It has over 60,000 active connections, which span across 106,000 lots.

Customers with active connections pay a fee to be on the OptiComm network.

While OptiComm is a major competitor to the NBN, it cannot replace the NBN, simply because it cannot and will not be available everywhere to everyone.

However, consumers who end up in an OptiComm location won’t get the NBN.

This monopoly-like setup could benefit OptiComm.

That’s why the company is aiming to obtain anther 100,000 lots by 2029.

After all, the more lots it controls, the more it can capitalise on those lots.

If you think an additional 100,000 lots by 2029 seems like a stretch, consider this: OPC has listed 18,000 lots to be connected within this financial year alone.

What’s next for OptiComm?

One of the reasons a company goes public is to access funding.

Typically, the company will use the funds to expand its business and grow revenue. OptiComm is no different here.

Before going public, it raised $42.3 million via its IPO. This was done through the issuance of 7.04 million shares at $2.00 each, as well as $28.27 million in existing shares, which were sold off by existing shareholders.

OPC listed on the ASX on 22 August 2019 at $3.10 per share.

That was a 55% gain from the IPO price. Clearly, investors are excited by this story.

I want to point out to you that, although the company raised $42.3 million, it only has $21.4 million in cash after the completion of the offer.

And $10.68 million of that is classified as ‘working capital’. While this isn’t a large amount, the company is debt free.

This means it can set its sights on expansion.

For now, there is no clear investment angle on OptiComm. However, you should place this stock on your watch list.

This is not a recommendation to buy or sell OPC. It is an update only. I hope you found it useful.

Until next time,

Jonathan Evans,

Analyst, Profit Watch