ASX:BSA
BSA Ltd
Investment Summary
The fund managers believe BSA Ltd has experienced a significant transformation, moving from a troubled past characterized by poor management and financial distress to a more promising future. In their opinion, BSA is now focusing on stable profitability and generating positive cash flow, which positions it well for strategic opportunities going forward. With approximately $22.2 million in EBITDA for FY24 and expected debt-free status by mid-FY25, they see improved operational efficiency as a critical factor. While NBN remains a key customer, the recent unsuccessful tender for the new Field Module contract raises concerns about future revenue. They acknowledge that BSA faces considerable risks, particularly with the potential decline in volumes from NBN, accounting for a dominant share of its revenue. Nonetheless, the fund managers remain cautiously optimistic, highlighting adjacent opportunities in smart metering and EV charging installations, which could provide new revenue streams despite the challenges ahead.
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.
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.
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.
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.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.