Supernet is one of Pakistan’s leading B2B telecommunications service providers, offering a full portfolio of local-to-global integrated communications infrastructure solutions to their non-consumer clients. Supernet is a fully owned subsidiary of Telecard Limited that offers a wide range of telecommunication and ICT/technology products and solutions mainly to their enterprise customers.
The company is offering 21,111,121 shares (18.81% of the paid-up capital) at a floor price of Rs22.5/ share, whereas the ceiling price band will not be more than 40% of the Floor Price.
The company’s market capitalisation would be Rs2.5bn at a floor price. The company requires funding to upgrade their technology segment by purchasing fixed assets, Investment in Subsidiaries, and managing its working capital.
Our liking for the stock emanates from (1) an increase in demand for affordable internet connectivity, (2) Growth in e-commerce and IT adoption solutions, (3) expertise in domains beyond telecommunication, and (4) one-stop-shop for all IT and Communication needs.
After the Covid, we have seen the surge in rising demand for the E-commerce business and IT adoption solutions due to lockdowns and an increase in remote working, leading to the rise in demand for technology-based solutions, expanding the addressable market for Supernet.
The company diversifies itself from a traditional telecommunication service provider to a one-stop shop of all IT and Communication solutions. Currently, nonservice revenues account for 35% of SNL’s total revenue, and the company has maintained a robust revenue stream evidenced by a 50% CAGR over the last five years (FY17-FY21).
At a floor price, the company will have a P/E and P/S ratio of 10.82x and 0.93x against an industry average of 29.38x and 2.64x, respectively. Therefore, we recommend investors to subscribe to the Gem board IPO at a floor price of Rs22.5/share Key Risks: (1) slowdown in economic activity, (2) delays in project commissioning, (3) higher than expected currency devaluation, and (4) higher than expected inflation and unable to pass to final consumers.
Courtesy – AHCML Research