BLUF: Swoop is a small Australian internet and mobile service provider. They build and run their own fibre and fixed-wireless network covering mainly underserved rural and regional areas, and then sell internet services to homes and businesses. It's a nice little niche that the bigger telcos are too big and clunky to address as efficiently as Swoop. We think fair value sits around 47c a share, whereas it is currently trading at 17c. That's ~175% upside. And it's a healthy, growing business, so the intrinsic value should grow over time. It is however still quite small and exposed to competition from the big players, should they decide to pay attention.
Why it looks undervalued
Book value gap (P/B): The market values the whole company at ~A$27m, while the net assets on the balance sheet are ~A$59.5m → that’s a price-to-book of ~0.45× (you’re paying 45 cents for a dollar of book equity).
Cash payback math: Last year SWP generated A$10.7m in operating cash flow (before interest) and A$9.1m after interest. Against a ~A$27m market value, that’s roughly 2.5–3.0 years of last year’s cash flow to “pay back” today’s price. That's unusually short for a going concern, and indicates the market is pricing the stock irrationally as though it was destined for the scrap heap. We don't think that will stay the case for long. You might say it's 'swooping' under the radar.
Misleading negative earnings: Over the past five years they've reported net losses every year. But their EBITDA has been steadily positive since 2022. The reason is that they're running high on-book asset depreciation, because they keep building new network assets. But the assets they've built are only depreciating in accrual accounting terms. Their economic value is rising - in the sense that the cashflows they generate are increasing every year. That's why SWP's revenue has been rising so steadily.
Earnings power vs. enterprise value (EV/EBITDA): SWP’s underlying EBITDA is ~A$16.4m FY24 (core business A$15.2m) and A$7.3m in 1H FY25 (tracking ~A$15m run-rate). Using June-24 debt/cash, EV sits around A$39m, or ~2.6× EBITDA; including the A$8–9m cash from the voice sale that landed in July-24, EV/EBITDA is closer to ~2.1×. To frame apples against apples, Aussie Broadband trades at an EV/EBITDA ratio of ~12×, and Superloop trades at ~36×. Even allowing for size and risk, SWP screens far cheaper than comparable businesses.
Why the P/E looks “wrong”: FY24 showed a small accounting loss (non-cash depreciation/amortisation of ~A$15.5m), so a simple P/E ratio understates the stock's value. Cash metrics (above) better reflect the economics of owning network assets.
Sales multiple also looks cheap. SWP trades around 0.3× revenue, while Aussie Broadband sits near ~1.1×. This is another data point indicating that the market price is low relative to what the business is really worth.
On a peer multiples valuation using EV/EBITDA, the company is probably worth ~$101.5m, or 47c a share. Our reasoning is:
FY24 continuing/core underlying EBITDA: A$15.2m (FY24 EBITDA A$16.4m; their voice business was divested in July 24).
1H FY25 underlying EBITDA was A$7.3m, which supports ~A$15m FY25 run-rate.
Balance sheet at 30-Jun-24: cash A$10.9m; borrowings A$23.26m (ex-leases). Voice sale proceeds ~A$9m received in July-24 (pro-forma net debt low-single-digit millions thereafter). So as of July 24 they had net debt of ~$10.9m + 9m - 23.26m = $3.36m.
Shares on issue (after early-Apr & mid-May 2025 issues): ~214.5m.
Peer multiples: As noted before, ABB trades at around 9–10× TTM EV/EBITDA; Macquarie Telecom Group trades around 17×. Small-caps typically sit at a discount, so we use 7× as a base.
EV = 7 × A$15.0m = A$105m
Less net debt: fair equity value A$101.64m
Per-share = A$101.64m / 214.5m = A$0.47
At ~A$0.13, the market implies ~2.5–3.0× FY25e EV/EBITDA. To us, that looks temporarily depressed on account of the company being too small for super/hedge funds to bother with.
Why it can grow reasonably from here
Swoop's recurring revenue base is rising. Management reported ~15% organic growth in recurring revenue in 1H FY25—good proof that customer income is trending the right way.
Network effects mean that as they grow, their rate of growth increases too. Every new fibre segment or tower can serve multiple customers. So owning more of your own network tends to lift margins over time. (The Melbourne fibre build is a clear example.)
Simpler to execute: Divesting their less lucrative wholesale voice business in FY24 has reduced distractions. This frees up capital and management time to concentrate on broadband and fibre builds, which have better economics.
We expect Swoop to continue reinvesting its earnings and compounding the business' intrinsic value at a rate of about 8% over the next five years. Not heroic, but it beats inflation. That's based on their track record of organic subscriber growth and enterprise/fiber projects like the recent $36m fibre network contract they are delivering down in Melbourne. So even if they stay as undervalued as they are today (unlikely), you're still looking at a reasonable rate of growth.
Low Likelihood of failure
The business is already profitable, has recurring subscribers, and added cash from the voice sale—those all reduce failure risk.
Real risks remain: it’s a small company competing with big players, and it must deliver projects on time and budget. Obviously that presents some risks. But they're performing well so far.
Our best estimate: There's probably about a ~15% chance of a major failure over the next five years. But that's just because it's a growing small-cap with some execution risk from the larger network build contracts they occasionally take on. It's not a house-of-cards.
Disclaimer: The information in this email is provided as general information only. It is not personal financial advice and should not be relied upon as such. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider its appropriateness to your circumstances and, if necessary, seek advice from a licensed financial adviser.
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Great write up! Personally not investing in ASX but I really liked the analysis.
Highly disruptable by starlink today and amazon when the company will have its satellite running to provide telco/internet