Fund Manager Summary on BSA Ltd (ASX:BSA)
BSA Ltd (ASX:BSA) has encountered significant challenges following NBN Co.'s recent decision to exclude it from the preferred contractors for future Field Module contracts, a major setback as this arrangement accounts for approximately 80% of its revenue. Earlier success, characterized by a successful recapitalization and growth in EBITDA, has been overshadowed by this development, which raises concerns about the company's ability to maintain its revenue and operational stability. Fund managers note that while the company has reduced overheads and is generating positive cash flow, projected declines in work orders and contract volumes may harm profitability moving forward. Future strategic considerations include potential mergers to enhance scalability and leverage BSA's extensive operational history. The upcoming months are critical for determining BSA's path beyond NBN Co., as management seeks to mitigate risks through restructuring and pursuing new growth opportunities.
Commentary From The Managers
There are 5 insights from 2 fund managers regarding their investment in BSA Ltd (ASX:BSA) available on Thesis Tracker.
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Updates are made available to members within 12 hours of being released. 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
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.
Lanyon Investment Fund
31 Mar 2025
$0.06
Summary
- 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.
Naos Asset Management
30 Sept 2024
$1.02
Summary
- 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.
Naos Asset Management
30 June 2024
$0.74
Summary
- 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.
Naos Asset Management
31 Dec 2023
Unknown
Summary
- 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.
The completeness, accuracy or current status of the investments referenced are not guaranteed.
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 invest in BSA Ltd due to its potential for recovery and growth despite recent setbacks. The company has transitioned from a loss-making entity to one showing significant EBITDA growth, driven by valuable contracts, especially in smart metering and EV charging. However, concerns arose when it lost a major NBN Co. contract, which accounted for a large portion of its revenue. This shift raises risks, but fund managers believe in BSA's ability to reallocate resources and adapt its business model for future opportunities.
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.
What is the short interest in BSA Ltd (ASX:BSA)?
According to ASIC filings, there is negligible or no short interest in BSA Ltd (ASX:BSA).
What does BSA Ltd (ASX:BSA) do?
BSA Ltd. provides installation and maintenance solutions to the broadcast and telecommunications industries. It operates through the Communications and Utility Infrastructure (CUI) segment. The CUI segment provides services to the telecommunications, subscription television, and utility industries. The company was founded on July 1, 1999 and is headquartered in Chatswood, Australia.