As human beings, we naturally have a negativity bias. It had been amazing for survival when the environments had been physically dangerous, because it allowed us to experience, learn, recognise, simulate, and respond to painful experiences, which was much more valuable than pleasant experiences during those times. However, this can be detrimental when investing in the share market, where temporary financial loss and pain hits much harder than incremental gains.
There are many investors who had owned shares in SDA when the company released their 1H 2018 results on the 28th of August 2018, and saw their shares lose 32% in one day, and of course, it had only gotten more painful since then. This has placed disappointment and fear at the fore, and has almost completely overshadowed the remarkable journey it has had since it first listed on the ASX on 12/08/2014.
Taking a look back, prior to trading on the market the offer price for an SDA share had been $1.96, implying a market capitalisation of AUD$235.5m. Prior to 26/08/2019, the share price had never fallen lower than $1.547.
When Speedcast provided their first Financial Report (2014) on 25/02/2015, it had been wonderfully received, paving the way for a 126% increase in the share price to $4.751 over the following 8 months (26/10/2015). In this financial report, the company had achieved a revenue of US$121.5m and an EBITDA of US$20.7, boasting having customers in over 60 countries.
Over the following years, Speedcast has made the following acquisitions:
·Hermes Datacommunications (March 2015)
·Geolink Satellite Services (May 2015)
·NewSat Teleport & Satellite Services (July 2015)
·SAIT Communications (July 2015)
·ST Teleport (November 2015)
·NewCom International (December 2015)
·WINS (August 2016)
·Harris CapRock (January 2017)
·UltiSat (November 2017)
·Globecomm (December 2018)
All of these contributed to Speedcast solidifying their position as the largest provider of remote communications and IT services in the world. Speedcast’s revenue had grown from US$121.5m (2014), US$167.6m (2015), US$218m (2016), US$514m (2017), and US$623.1m (2018). Speedcast reported the first half of 2019 as achieving US$357.6m. Let’s give SDA the benefit of the doubt, and say they at least match their 1H 2019 results, they’d be reporting a record US$715.2m (AUD$1,042.2m) for 2019.
Speedcast’s EBITDA had grown from US$20.7m (2014), US$29.3m (2015), US$41.5m (2016), US$122.6m (2017), and US$132.03m (2018). Once again, giving benefit of the doubt, Speedcast would set another EBITDA record if they are able to deliver on their reaffirmed guidance of US$150m-$160m (AUD$218.5m-$233m).
So fun fact, Speedcast has never failed to grow either their revenue or EBITDA even before their time in the ASX, since 2011. Also, I like the fact that Speedcast has had the same CEO, Pierre-Jean Beylier for the past 16 years, and has grown from having customers from 60 countries in 2014, to now 140+ in 2019.
So, what does this all mean? I’m not implying that anyone should base their decisions on whether to buy or sell their shares in a company based solely on their acquisition, revenue, and EBITDA record, because there are many more factors to consider. However, considering where it had started,to what it has achieved since then, does it truly deserve to be priced as “less”now than when it had begun?
