Fund Manager Summary
The fund managers believe that BSA Ltd presents a promising outlook, driven by its return to stable profitability and positive cash flow. In their opinion, the company has effectively transformed under new management, positioning itself as a key partner for the NBN, which remains its largest customer. The fund managers note that with all major financial liabilities expected to be resolved by the end of FY24, BSA will gain flexibility for new business development opportunities. They also highlight the potential for adjacent markets, such as EV charging installations, leveraging its decentralized field operations. While risks remain, particularly in maintaining service standards for NBN, the fund managers view BSA as being at a critical juncture with substantial opportunities ahead.
Source: Trading View
Commentary From The Managers
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Naos Asset Management
31 Mar 2025
$0.06
Summary
- Naos Asset Management led a recapitalisation of BSA in early 2022 due to legacy mismanagement issues.
- BSA secured a four-year maintenance contract with NBN Co. in early 2021, aiding its recovery.
- Successful initiatives included the divestment of non-core businesses and securing smart metering contracts.
- EBITDA growth from $4.1 million in FY2022 to expected >$20 million run rate in FY2025.
- Despite a trading success, Naos Asset Management sold 20% of their holding in December 2024 at a favorable price.
- In February 2025, BSA was not selected for NBN Co.'s future Field Module contracts, creating uncertainties.
- Contract with NBN Co. represents approximately 80% of BSA’s revenue, raising concerns post-2025.
- BSA’s volume levels with NBN Co. are expected to decline around mid-July 2025.
- Post-NBN Co. revenue projected at $20-$30 million from other contracts, though margin profiles will likely decrease.
- Future growth may involve scaling operations or merging with similar private companies to maximize efficiency.
- BSA currently maintains $2.2 million in net cash and generates $1.5 million of free cash flow monthly.
- The next six months are critical for BSA to determine its path and restore shareholder value.
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Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Managers
Naos Asset Management
31 Mar 2025
$0.06
- Naos Asset Management led a recapitalisation of BSA in early 2022 due to legacy mismanagement issues.
- BSA secured a four-year maintenance contract with NBN Co. in early 2021, aiding its recovery.
- Successful initiatives included the divestment of non-core businesses and securing smart metering contracts.
- EBITDA growth from $4.1 million in FY2022 to expected >$20 million run rate in FY2025.
- Despite a trading success, Naos Asset Management sold 20% of their holding in December 2024 at a favorable price.
- In February 2025, BSA was not selected for NBN Co.'s future Field Module contracts, creating uncertainties.
- Contract with NBN Co. represents approximately 80% of BSA’s revenue, raising concerns post-2025.
- BSA’s volume levels with NBN Co. are expected to decline around mid-July 2025.
- Post-NBN Co. revenue projected at $20-$30 million from other contracts, though margin profiles will likely decrease.
- Future growth may involve scaling operations or merging with similar private companies to maximize efficiency.
- BSA currently maintains $2.2 million in net cash and generates $1.5 million of free cash flow monthly.
- The next six months are critical for BSA to determine its path and restore shareholder value.
Summary
Lanyon Investment Fund
31 Mar 2025
$0.06
- Lanyon Investment Fund expresses frustration over NBN Co's decision not to renew its contract with BSA Limited.
- The fund is perplexed by the awarding of a new contract to Ventia, given its ongoing legal issues with the ACCC.
- Ventia is currently facing allegations of operating a price fixing cartel, raising concerns about its suitability for such contracts.
- Lanyon Investment Fund highlights the negative impact of this decision on BSA Limited, jeopardizing over 250 full-time employees and 1,100 contractors.
- The fund questions the appropriateness of the Federal Government's decision, considering the serious allegations against Ventia.
Summary
Naos Asset Management
30 Sept 2024
$1.02
- Naos Asset Management recognizes BSA Ltd’s record results for FY24, with EBITDA of $22.2 million and NPAT of $18.9 million.
- The business is projected to be debt free by the end of 1H FY25.
- The last of the class action payments was completed at the end of FY24, improving financial stability.
- FY24 group revenue grew by over 6%, with EBITDA increasing by over 37% due to improved margins.
- BSA's focus on profitable work has ensured strong client satisfaction and execution.
- FY25 is anticipated to follow a similar trajectory, benefiting from a clean year devoid of legacy issues.
- BSA is targeting a 10% group EBITDA margin moving forward.
- A partnership with UGL Group for the upcoming nbn Field Services Contract aims to strengthen BSA's tender submission.
- The tender decision is expected in mid CY25, with success critical to BSA's sustained relationship with NBN Co.
- UGL’s expertise in construction enhances BSA’s proficiency in activation and assurance services.
Summary
Naos Asset Management
30 June 2024
$0.74
- Naos Asset Management highlights BSA Ltd's significant momentum following years of effort.
- Q3 FY24 showed an EBITDA of $5.8 million, with an annualised run rate exceeding $23 million.
- Given BSA's substantial tax losses, the EBITDA to NPAT conversion is expected to be relatively high.
- BSA is in a strong position to internally fund the final payment related to a class action settlement from three years ago.
- After this payment, BSA will have increased free cash flow, enhancing its capacity for M&A, capital management, and other strategic initiatives.
Summary
Naos Asset Management
31 Dec 2023
Unknown
- BSA Limited has been an ASX listed business since 1999, previously struggling with ill-advised acquisitions and poor strategic execution.
- Specializes in assurance and maintenance services for telecommunication and associated infrastructure.
- Key competitive advantage lies in a decentralized field team capable of managing numerous small jobs across Australia.
- Long-term partnership with NBN for residential service activations.
- NAOS has held shares in BSA for approximately 10 years, drawn to the leadership of Nick Yates.
- BSA faced significant challenges around COVID-related contract volume issues and a $20m class action settlement.
- NAOS appointed Brendan York to the BSA Board to assist in stabilizing the business.
- Transformation included divestments and a new management team leading to improved margins.
- Current financial status includes $57 million in revenue and $4.4 million in EBITDA.
- BSA's market capitalization is $43 million.
- Optimistic points:
- Return to stable profitability and positive cash flow.
- NBN's ongoing network upgrades are crucial for BSA's future.
- Expect no major financial liabilities post-FY24, providing flexibility for growth.
- Potential for adjacent opportunities in EV charging and other energy markets.
- BSA is poised for future opportunities despite some risks, with the potential for value creation in the upcoming 18 months.
Summary
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
ANALYST INSIGHT
Equity Research Analyst
"Emerging from a tumultuous past, BSA Ltd seems poised to capitalize on a revitalized strategy and a stable balance sheet. With NBN as a key ally and new opportunities in EV charging, the next 18 months could redefine its value proposition in a competitive landscape."
Last Updated: 31 Mar 2025
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Frequently Asked Questions
Who is investing in BSA Ltd (ASX:BSA)?
Fund managers including Naos Asset Management and Lanyon Investment Fund have invested in BSA Ltd (ASX:BSA).
Why do fund managers invest in BSA Ltd?
Fund managers are investing in BSA Ltd due to its recent transformation under new management, which has stabilized profitability and improved the balance sheet. BSA's key competitive advantage lies in its decentralized field team, enabling it to efficiently handle numerous small jobs across Australia, particularly in telecommunications. Its strong relationship with NBN, the largest customer, positions BSA favorably for future growth as demand for network upgrades increases. With all major financial liabilities expected to be resolved by FY25, the company is poised for further business development and potential expansion into adjacent markets like EV charging installations. This combination of operational improvement and strategic partnerships makes BSA an attractive investment opportunity.
What happened to BSA Ltd (ASX:BSA)?
There have been no recent updates from fund managers regarding BSA Ltd although fund managers including Naos Asset Management and Lanyon Investment Fund have previously commented.