Aussie Broadband share price stages partial recovery on ‘further market update’

Aussie Broadband shares are sparking a turnaround today…

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Key points

  • Aussie Broadband shares accelerate 10% to $4.40, a strong reversal after falling 28% yesterday 
  • The company provided a further announcement to its trading update yesterday, clarifying that its OTW figures weren't included 
  • Management is predicting a full-year EBITDA of $38 million to $39 million for FY22 

The Aussie Broadband Ltd (ASX: ABB) share price soared during early morning trade before making a quick reversal.

This came after the broadband company provided a further announcement to the market regarding its third quarter trading update. 

At one point, Aussie Broadband shares rose as high as $4.60. But since then, investors have driven the price down to $4.17, up 4.25%.

What did Aussie Broadband announce?

In a statement to the ASX, Aussie Broadband advised that the trading update figures excluded the ‘Over the Wire’ (OTW) business.

The company welcomed the OTW team after completing the acquisition on 15 March 2022.

However, the accounts are still being finalised.

Aussie Broadband purchased 100% of the shareholding in OTW for an implied value of $5.75 apiece. This was either comprised of a $5.75 cash offer, 1.150 ABB shares, or a combination of both.

The total consideration of the deal stood at $344 million with an implied enterprise value of $390.4 million.

Aussie Broadband stated that it remains confident that both two companies will be earnings per share (EPS) accretive on a proforma statutory FY21 basis.

Management is targeting annual cost synergies of between $8 to $12 million within the next three years.

Although with the integration of the two companies already commenced, early synergy wins have so far been achieved.

Aussie Broadband noted that it moved a significant portion of its voice traffic onto the OTW tier 1 voice network. This resulted in roughly “$3 million of annualised EBITDA synergies being actioned.”

Once the accounts are completed, OTW is expected to deliver around $11 million in EBITDA (before transaction costs) for the 3.5 months owned under the Aussie Broadband banner.

When including the contribution from OTW, the company is forecasting full year EBITDA (before transaction costs) to be in the range of $38 million to $39 million.

Aussie Broadband share price snapshot

After falling 28% yesterday, the Aussie Broadband share price has made a remarkable turnaround.

Over the past 12 months, the company’s shares have risen by more than 32%, but year to date is down 15%.

Aussie Broadband has a price-to-earnings (P/E) ratio of 52.08 and commands a market capitalisation of roughly $1.32 billion.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Aussie Broadband Limited. The Motley Fool Australia has recommended Aussie Broadband Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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