Enough has changed at Axia, that we thought an updated analysis of the idea posted by Rearden in Jan 2012 is warranted. After a number of strategic transactions accomplished over the last few months, Axia has emerged as a much simpler story with a well defined growth trajectory and a strong balance sheet. Its two main assets, one in Alberta and the other in France enjoy protected competitive positions, high level of operating leverage and secular embedded growth emanating from broadband adoption. Using, what we consider to be, fairly conservative set of assumptions, the shares are worth over twice their current value and we expect them to trade north of $6.5 per share over the next 4 years as they execute only on the growth initiatives currently on the table. There are multiple catlaysts along the way to drive shares to a more fair value. In an inflationary environment, the cash flow leverage balloons profitability to silly levels that provides an optionality we have not incorporated in our valuation. The success of a third network in rural Western Mass, currently not a driver of valuation, provides additional optionality if the success of Google and AT&T in metro areas like Kansas and Austin drives public/private partnerships currently pursued in France to become popular in the U.S. as a way to drive broadband ubiquity in rural U.S. Our high level of confidence in the growth prospects of the Company, stability of its existing cash flow streams, protected competitive positioning, strong balance sheet and undemanding valuation, has made it one of our core long term holdings.

 

The attached slide presentation, outlines an overview of the Company, value drivers and our valuation analysis:

 

Link: https://www.dropbox.com/s/ymebhif79e7os1a/Axia%20Investment%20Overview_October%202013.pdf